Swedish-Danish developer of plant-based oil products AAK buys palm oil originating from illegal plantations located inside an Indonesian protected nature reserve. While Swedish asset management firms appear to be aware of the issue, they let the practice continue unchecked.
Swedish-Danish enterprise AAK is Sweden’s largest producer of plant-based oils and fats for use in consumer goods. AAK produces large quantities of these ingredients for use in foodstuffs, cosmetics and other everyday commodities sold all over the globe.
In a major exposé, Sveriges Natur reveals how AAK buys palm oil originating from illegal plantations located inside Tesso Nilo National Park on the Indonesian island of Sumatra. Despite the fact that plantations inside the park were formally banned in 2016 to protect the rain forest and local biodiversity, AAK has business dealings with at least 20 palm oil mills that buy their palm fruit from this area.
AAK’s investors include the Swedish asset management firms Alecta, Lannebo Fonder, Nordea, SEB, Skandia Fonder and Öhman Fonder. In a number of cases, these investors are active owners who maintain a running dialogue with AAK concerning responsible production practices.
“Monitoring & supporting”
In an e-mail to Sveriges Natur, Alecta’s Head of Corporate Governance and Sustainability, Carina Silberg, writes: “… we know that AAK has worked to increase traceability in [its] palm oil [supply] chain and the relative share of certified palm oil [it purchases] for a number of years, which is something we’re monitoring and supporting”.
Efforts to increase traceability at the supplier level was a topic that AAK’s President of Global Sourcing & Trading and Sustainability, Tim Stephenson, also raised when speaking with Sveriges Natur.
Noble ambitions notwithstanding, it is an undeniable fact that the destruction of the rain forest in Indonesia continues. In the protected Tesso Nilo National Park alone, deforestation has increased greatly during the past two years. Last year, 2,700 hectares (10.4 sq mi) of the park’s rain forest were destroyed, which, according to the organisation Global Forest Watch, is more than five times the annual average for the period 2017–2020.
One major factor contributing to this problem is the increased demand for palm oil. In AAK’s case, Indonesia is its primary source of palm oil – including oil from crops grown inside and around Tesso Nilo – where 85 per cent of the rain forest has disappeared since 2002.
As early as 2020, Swedish daily Expressen exposed how AAK buys illegal palm oil from mills around this national park. When Sveriges Natur followed up on the situation this year, it found that the company is still using the same mills today – mills that continue to buy palm fruit whose cultivation contributes to the destruction of the rain forest.
“Remains some work to be done”
Asset management firm Öhman Fonder wrote in its impact report for February 2023 that it is conducting a dialogue with AAK, since there “remains some work to be done when it comes to detailing the methods used to measure the share of deforestation-free palm oil […] AAK has committed itself to using 100-per-cent sustainable palm oil in its production by 2025. This means that the oil AAK buys must be 100-per-cent-certified deforestation-free and 100-per-cent traceable to the plantation and that human rights must be respected.”
Sveriges Natur contacted Öhman Fonder for comment on the new information that has come to light concerning AAK’s business dealings in Indonesia, but received no response.
SEB Investment Management writes in its Active Ownership Report, July 2021–June 2022 that it “engaged in dialogue with [AAK] in 2019, to address the sustainability challenge concerning palm oil”. At that time, SEB requested “more granular traceability reporting” from AAK.
According to SEB, AAK “initialised [sic] satellite monitoring of [its] plantations and mills” in 2019. Sustainability Specialist at SEB Investment Management Alfred Askeljung says that his company is aware of “the problems and challenges that have existed in the past – and still exist – in connection with palm oil production”.
Askeljung wrote in an e-mail that SEB has set itself ambitious goals regarding climate change, biodiversity and similar issues. “In this instance, two crucial issues are deforestation and the traceability of the palm oil purchased, and not just to third-party mills, but back to the original plantation,” he explains.
This particular level of traceability is not something that AAK can provide when it comes to palm oil from the Tesso Nilo area, as is evidenced by Sveriges Natur’s investigation. And this despite the fact that AAK itself claims that it maintains 100-per-cent traceability in this particular area. SEB replied that it plans to raise this issue with AAK.
Room for improved monitoring
In its Sustainability Report for 2021, Skandia Fonder makes it clear that AAK faces a number of sustainability challenges linked to the production of various oils for use in foodstuffs, including deforestation connected with the cultivation of palm fruit. Skandia wrote at that time that there was “still room for [AAK] to further improve [its] policies, routines, monitoring and reporting regarding climate and environmental risks”. In contrast, in its 2022 report, Skandia writes that AAK has stepped up its efforts with “faster monitoring aimed at verifying that no illegal deforestation is taking place”.
Skandia’s Press Officer, Jonatan Ohlin, wrote to Sveriges Natur that “palm oil production cannot be considered sustainable as long as it results in large-scale deforestation, biodiversity loss and human rights violations”. He wrote further that “on the whole, deforestation has decreased in Indonesia, in part thanks to the fact that companies who use palm oil now have stricter requirements and oversight, but this is no guarantee that illegal felling isn’t occurring”.
Although forest clearing in Indonesia has declined in recent years, it continues on a large scale and – in Tesso Nilo National Park in particular – where AAK has business interests, it has increased. Ohlin commented that Skandia’s impression is that AAK has made progress over the past few years, but that the company needs to “get to the bottom of matters in following up on any indication of possible non-compliance or wrongdoing”.
Maria Nordqvist, Head of Responsible Investments at Lannebo Fonder, also responded to Sveriges Natur via e-mail regarding our findings. She wrote:
“We plan to hold a dialogue with AAK concerning this matter and expect that they will take the situation seriously, demonstrate a desire to find solutions and adopt a constructive strategy to improve the situation. Our impression of the company is that they have some deficiencies, since they operate in a complex environment, but that they aim to maintain high standards and conduct themselves in a responsible manner.”
All 20 palm oil mills investigated by Sveriges Natur in the Tesso Nilo area are also used by international snack-maker Mondelēz International (owner of Cadbury, Philadelphia, Ritz, Oreo and other brands). Global consumer goods company Unilever (owner of Ben & Jerry’s, Magnum, Dove, Vaseline, Rexona, Domestos and other brands), uses 19 of the 20 mills investigated, and Colgate-Palmolive 13 mills.
Although Sveriges Natur’s efforts to reach Mondelēz and Colgate-Palmolive for comment proved unsuccessful (Mondelez have since the first publication provided a response), Unilever did respond. Like AAK, Unilever’s ambition is to use deforestation-free palm oil – in its case already by the end of 2023. AAK’s goal is to be able to offer 100-per-cent deforestation-free palm oil products by 2025.
Translated to English by: Tanya Henriksson
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