One of the most traded agricultural commodities, palm oil plays a pivotal role in deforestation and habitat conversion. Overhauling global palm oil supply chains to be deforestation and conversion-free (DCF) is an urgent challenge businesses must confront if they hope to maintain their social license and ensure operational resilience.
Why DCF matters for palm oil
From food to cosmetics, palm oil is present in as much as 50% of packaged goods found in supermarkets, as well as biofuel. But the rapid demand for this versatile oil has meant that its unsustainable production has for decades been a key driver of deforestation. Dense, richly biodiverse forests are cut down to make way for monoculture plantations, threatening wildlife and local communities while destroying carbon stocks.
The links between palm oil and deforestation are firmly planted in the public consciousness. As such, companies that can't credibly assert DCF supply chains will face severe reputational risks.
While DCF is fast becoming the standard expectation for responsible operators, traders, and manufacturers, moving from commitment to credibility poses operational challenges.
Progress on commitments to DCF palm oil
NDPE pledges
No Deforestation, No Peat and No Exploitation (NDPE) commitments pertaining to palm oil supply chains were first introduced by the agricultural industry in 2013. However, despite these pledges, and the aims of the NDPE Implementation Reporting Framework to standardise reporting and accelerate action, progress is slow. The gap between promises on paper and the reality on the ground is fuelled by opaque and dynamic supply chains, under-resourced smallholders, and the technical difficulty of verifying deforestation.
Sector-wide initiatives
The Roundtable on Sustainable Palm Oil (RSPO), formed in 2004, is a global coalition of industry stakeholders across the palm oil supply chain, from producers to processors to manufacturers, as well as NGOs. Its certification demonstrates that palm oil meets a set of criteria encompassing human rights, biodiversity, and deforestation, with the majority of retailers in Europe having pledged to only use RSPO-certified palm oil. Both Indonesia (ISPO) and Malaysia (MSPO) also have their own national schemes.
However, the RSPO certification has been criticised by environmental organisations such as Greenpeace for failing to adequately audit the companies making these commitments, with analyses finding that even those committed to both NDPE and RSPO are linked to forest clearing and exploitation of communities.
What stands in the way of achieving DCF palm oil
Smallholder inclusion and data availability
Smallholders produce 30% of the world’s palm oil, but are often the most vulnerable link in DCF supply chains. Ensuring these farmers are sufficiently informed and resourced in order to produce palm oil sustainably is a major hurdle, as many lack the technical ability needed to supply land-use data proving they have not committed deforestation or conversion. As well as capacity, entrenched economic structures can also mean the financial incentive for deforestation is an overwhelming motivator.
Mill-level traceability and blended supply
Palm fruit bunches pass through many hands before they reach mills or buyers, posing severe challenges for tracing their origin and spurring the risk of deforestation-linked palm oil entering a supply chain without a company’s knowledge. This problem is compounded by the fact that palm oil is routinely blended at the mill level, as well as broken down and recombined many times over the supply chain. Preserving data about its true source is therefore a complicated technical and logistical hurdle.
Peatland identification and protection
Around 20% of palm oil plantations in Southeast Asia are on peatlands. Draining peatlands spurs the release of billions of tons of carbon dioxide to the atmosphere every year, but these wetland ecosystems do not receive an adequate level of attention in global policies and are consequently being lost at a faster rate than forests.
The challenge of protecting peatlands is heightened by the fact that their locations are often remote and require soil sampling to identify, while different countries use contradictory methodologies to confirm the presence of these diverse ecosystems. Without an accurate and coordinated approach to mapping the world’s peatlands, the monitoring and policy-making required to ensure their protection will remain out of reach.
Best practices and solutions for DCF palm oil
Aligning with existing and emerging policies
Companies should align their NDPE, RSPO, and DCF commitments with the standardised definitions, targets, and cut-off dates of the Accountability Framework initiative, which will create a strong foundation for credible reporting. Doing so will also help them understand where gaps in visibility exist and where data needs to be collected, supporting stronger implementation of their DCF commitments.
Using cutting-edge tools
Companies should use supply shed modelling to assess geographically-defined deforestation risk; geolocation to map precise farm boundaries; and digital verification platforms to create watertight audit trails. These commodity-agnostic systems provide the transparency and documentation now expected by buyers, NGOs, and regulators alike.
Supporting smallholders
Simply excluding smallholders risks exacerbating social inequities by stripping them of a source of income. Instead, companies should support suppliers to meet data and compliance thresholds around sustainable standards of palm oil production, and harness technology as a means of adequately monitoring progress.
What’s next for DCF palm oil?
With deep structural challenges embedded in palm oil supply chains, achieving DCF is a highly complex task for businesses. But with incoming regulation and reputations at stake, bridging the gap between pledge and proof is not only urgent, but possible. Digital traceability solutions, guidance from frameworks such as the Accountability Framework, and the potential for inclusive smallholder engagement make achieving transparent, equitable, and compliant palm oil supply chains a tangible operational goal.
A key stepping stone: IRF Version 6.0
The newest version of the NDPE Implementation Reporting Framework – 6.0. – has been designed to improve granularity and accuracy to help companies better meet their DCF commitments under the AFI. From 2026, companies must use Version 6.0 to report on their 2025 volumes.
The updated version requires companies to split their supply base into three distinct categories: directly managed areas, independent plantations, and independent smallholders. This shift demands a stronger data foundation via Traceability to Plantation (TTP) for each category, creating a more credible and nuanced picture of compliance while spotlighting urgent data gaps.
Meridia Verify for DCF
If you’re looking to strengthen your DCF strategy, Meridia Verify helps reveal hidden risks in your DCF data.
