Reporting Trends and Insights: Are Palm Oil Companies Leaders or Laggards in Reporting on Human Rights?

This article is one in a series designed to highlight trends and key insights from corporate human rights disclosures found in the UNGP Reporting Database.

A Common and Complex Commodity

Whether or not we know it, average consumers come into contact with palm oil every single day. This cheaply and efficiently produced agricultural commodity is the most widely consumed vegetable oil on the planet. It is currently used in 50 percent of all consumer goods and is found in everything from margarine and chocolate to soaps and fuel for cars.

Yet this booming industry’s growth has come with some significant costs. It has long faced criticism for its deforestation of tropical rainforests, which in turn destroys critical habitats for endangered animals and contributes to climate change. More recently, its human rights impacts have come into equally sharp focus as the sector has been linked to forced and child labor, as well as the displacement of indigenous peoples.

Given the serious human rights impacts associated with this industry, and based on increasing interest from investors, stock exchanges, and companies themselves, we have begun to analyze what palm oil companies say they are doing on human rights in order to cast light on where improvements need to be made. To do this, we have mapped top palm oil companies against the expectation that companies know and show how they are demonstrating respect for human rights. This expectation is set out in the UN Guiding Principles on Business and Human Rights (UNGPs) and is further elaborated in the UNGP Reporting Framework, the world’s first comprehensive guidance for companies to report on how they respect human rights.

To date, we have mapped the top five palm oil companies, by market capitalization, from the FTSE Bursa Malaysia Asian Palm Oil Index: Sime Darby Bhd, Wilmar International Limited, IOI Group, Kuala Lumpur Kepong (KLK), and Golden Agri-Resources (GAR). The full breakdown of these companies’ human rights disclosures can be explored in Shift’s UNGP Reporting Database. This first round of review already offers various insights into where palm oil companies may be leading the way, and where they are likely lagging, in terms of both their human rights disclosure and performance. We will be analyzing more palm oil companies’ disclosures in the future. In doing so, we hope to further support conversations with and within companies that lead to improvements in their respect for human rights.

Overall, our analysis shows that the largest palm oil companies have mature reporting in only one element of respect for human rights: the human rights policy commitment. In all other areas, there is significant work to be done.

Leading the Way

Within this initial set of companies, we see mature disclosure in only one area of reporting:

  • Setting out a clear human rights policy commitment: The strength of a company’s human rights policy commitment is a starting point for robust human rights performance. A commitment that conveys which human rights the policy covers and how far along the company’s supply chain it applies gives additional comfort that the commitment is not merely lip service, but instead reflects some maturity in understanding the human rights that the company may impact and real intent to address those risks. In this area, the group of analyzed companies reflects mature disclosure. All but one of the five companies disclose a policy commitment that explicitly covers all internationally recognized human rights and extends across the company’s value chain. Two of the companies also share information about the development of the policy and how the company communicates the policy to employees, business partners and other stakeholders.

Lagging Behind

Unfortunately, we see lagging disclosure across top palm oil companies when it comes to the following four elements of the responsibility to respect human rights:

  • Lack of prioritization of the most severe potential impacts on people: To meet the expectations of the UNGPs, companies need to focus their actions and disclosure on their salient human rights issues: those human rights at risk of the most severe negative impact through the company’s activities and business relationships. Here, the five analyzed companies’ disclosure is lagging behind. None of the companies use the salience lens to prioritize human rights for action or reporting. Furthermore, only two of the companies provide any explanation of how they determine their priority human rights issues. For more trends and insights on prioritization, see the third article in this analysis series.
  • Very limited information about assessing risks: Companies need a clear and comprehensive process for assessing their human rights risks and impacts in order to mitigate those risks and remedy any impacts. Only one of the analyzed companies provides specific information about their assessment processes and how they have worked in practice.
  • Failure to provide specific information about mitigation measures: Disclosure around what action the company is taking to address the risks it identifies gives important insight into its human rights performance. None of the analyzed companies provide more than general descriptions of their actions to mitigate human rights risks. Two companies do go a bit further by providing relatively more detail about traditional human rights-related issues, such as workplace health and safety.
  • Very limited information about outcomes of the actions taken: Tracking the efficacy of a company’s efforts to address human rights risks and impacts is essential in improving this aspect of its performance. Yet this is the least mature area of reporting across the analyzed companies. Four of the five companies fail to provide information about whether or not their management of human rights issues is working, instead offering only basic data on issues like health and safety, diversity and inclusion, and working and living conditions. One of the companies stands out as disclosing data about additional human rights issues and providing a narrative about its overall approach to tracking its performance.

To summarize: palm oil companies are demonstrating relatively strong policy commitments to respect human rights. However, according to these companies’ own disclosure, they have much work to do with regard to focusing their efforts on salient human rights issues, explaining how they are preventing and addressing them, and providing information about the extent to which those measures are working.

As attention grows around the human rights impacts of this complex industry, we will continue to share our analysis and insights, with the aim of fostering improved performance.

Stay tuned for more reporting trends and insights drawn from the UNGP Reporting Database. In the next few weeks, we will publish a research report analyzing the maturity of human rights reporting by 74 global companies in the UNGP Reporting Database.