Palm Oil Sourcing

Palm oil is used in select products and has distinctive characteristics that other edible oils cannot provide, such as containing no trans fat.

Sustainably grown palm oil can also reduce pressure on forests and biodiversity, support smallholder farmer livelihoods and improve economic development in palm-growing regions. However, Hershey recognizes that palm oil has impacts to forests, biodiversity and producer communities when not grown or sourced responsibly. While we buy a relatively small amount of palm oil, since 2014 we have committed to sourcing 100 percent responsibly grown palm oil.

Our Approach to Responsibly Sourced Palm Oil

Hershey is committed to achieving a traceable and sustainable palm oil supply chain with no deforestation, no peatland development and no exploitation of workers (NDPE) in line with our Responsible Palm Oil Sourcing Policy. Hershey employs a comprehensive and multifaceted approach that includes supply chain traceability, purchases of certified palm oil, and robust sourcing policies and codes of conduct. We also work with Earthworm Foundation, a nonprofit organization, and our supplier partners to assess and address the associated environmental and human rights issues in our supply chain, as we contribute to the responsible and sustainable transformation of the palm sector. 

Our Palm Oil Supply Chain

We currently source from seven direct suppliers: AAK, Cargill, Fuji Oil, Gemini, Bunge, ISF and Wilmar. 100 percent of the palm oil we source globally is Roundtable on Sustainable Palm Oil (RSPO) Mass Balance certified. These palm volumes have originated from mills in 10 countries—though most of the palm we source is from Indonesia and Malaysia.

As members of the RSPO, we annually report our palm oil volumes in our Annual Communication on Progress report.

Through our partnership with Earthworm Foundation, we are focused on four strategic areas:

  • Traceability: Map our palm oil sources at the mill and plantation level to understand high-risk sourcing areas in our palm supply chain and inform where in our palm supply chain we can make the biggest impact
  • Supplier Engagement: Engage with suppliers to communicate our expectations and strengthen NDPE policies, commitments and performance throughout our palm supply chain
  • Transformation: Invest in on-the-ground programs in our palm supply chain with a focus on protection and restoration of forests and biodiversity, smallholder inclusion, NDPE capacity building, and resilience and livelihoods of local palm-growing communities
  • Monitoring and Verification: Implement satellite monitoring and verification as we work toward a verified deforestation-free palm supply chain

Traceability and Risk Mitigation

Palm oil supply chains are complex and often involve multiple tiers of suppliers as well as intermediaries and smallholder suppliers. Supply chain traceability and purchasing certified palm oil enable us to prioritize our due diligence efforts in monitoring and verifying our palm suppliers’ compliance with our NDPE commitments. 

Supply Chain Traceability

On a biannual basis, Hershey conducts a traceability exercise with our palm oil suppliers to understand the universe of potential mills and plantations from where the palm we source could have been produced. In this context, traceability is not a chain of custody concept, and does not alone allow the company to identify the specific source of palm oil used in a given Hershey product.  Rather, the list of mills and plantations provided by our suppliers – collected in accordance with industry practice and principles adopted by the Palm Oil Traceability Working Group (TWG) of IDH, The Sustainable Trade Initiative – helps us understand the origin of the palm we purchase (including sources that may be considered high-risk), so that we may direct our resources to the locations where they are most needed.

In the second half of 2021, our direct suppliers reported 100% traceability to the mill level – in other words, our direct suppliers could identify all of the mills from which they directly or indirectly purchased palm oil products during that six-month period, both for Hershey and other purchasers. The 1,130 mills in the lists provided by our suppliers therefore include mills outside Hershey’s physical supply chain. Our direct suppliers also reported 89% traceability to the plantation level, similarly including plantations both within and without Hershey’s specific supply chain. Our partner, Earthworm Foundation, supports us in collating and analyzing these traceability submissions from our suppliers.

We remain committed to achieving 100% traceability, through our suppliers, to the plantation level – that is, identification of all plantations from which the reported mills purchase – and expect this to occur by 2025.  We recognize the pathway to this goal is complex due to the realities of the palm supply chain, including challenges associated with mapping smallholders.

We provide bi-annual updates on these palm oil tracing efforts on this website and through our annual sustainability report to give stakeholders visibility into our ongoing progress.

Certified Palm Oil

Hershey has been a member of the Roundtable on Sustainable Palm Oil (RSPO) since 2011. By the end of 2014, all of our palm oil purchases for our operations in the U.S. and Canada were 100 percent RSPO Mass Balance-certified palm oil. By the end of 2017, all of our palm oil purchases for Global operations were 100 percent RSPO Mass Balance-certified palm oil and we remain committed to purchasing 100 percent RSPO Mass Balance-certified palm oil (for additional details, please visit www.rspo.org).

Furthermore, since 2020, Hershey has been a member of the  North America Sustainable Palm Oil Network (NASPON), which works to accelerate the uptake of certified sustainable palm oil in North America.

Supplier Engagement and Collective Action

We expect all of our palm oil sourcing partners (including subcontractors) to be compliant with our Supplier Code of Conduct, uphold our Responsible Palm Oil Sourcing Policy and No Deforestation Policy, and remain compliant to our NDPE position at the corporate-group level.

Palm Oil Grievance Procedure and Log

As outlined in our Palm Oil Grievance Procedure, Hershey takes any reported grievances regarding deforestation, peatland development and exploitation in our palm oil supply chain seriously. If our direct suppliers and their parent and sister companies at the corporate-group level fail to uphold our commitments, they may be removed or suspended from our supply chain in accordance with our sourcing policy.

Listings of grievances and suspended palm companies are disclosed in our Palm Oil Grievance Log, updated on a monthly basis.

We bi-annually map our supply chain and monitor and ensure these suspensions are effectively implemented. Suspensions remain in place until we see acceptable, timebound corrective action plans with proven progress that leads to a resolution. We also encourage our suppliers to remain engaged with these suspended parties to push for meaningful and decisive correction action plans and establishment of a timeline and progress report.

Engagement for Policy Implementation

Starting in 2019, Hershey began using Earthworm Foundation’s Engagement for Policy Implementation (EPI) tool with six of our  direct suppliers. Our suppliers complete a self-assessment questionnaire focused on their palm and NDPE policies, commitments, traceability status, grievance procedure, social and environmental program investments, and monitoring and verification activities.

Through EPI, Hershey gains deeper insights on our suppliers’ practices, activities, performance and opportunities for improvement to achieve a responsible palm oil supply chain. We use this data to structure how we engage with our suppliers in order to identify gaps related to their NDPE policies and commitments. We support our suppliers to develop action plans to close these gaps.

In 2021, we requested four of our seven direct suppliers to complete EPI assessments and will engage with them to develop action plans based on the results.  

Tools for Transformation

In 2020, we have sponsored a Malaysia refiner to participate in Earthworm Foundation’s Tools for Transformation (T4T) system in order to scale best practices at the mill and plantation level. T4T’s online platform which includes a self-assessment questionnaire, practical action planning, and step-by-step tools to support mills and plantations to implement NDPE.

Through this sponsorship, 90 additional Malaysian mills linked to the refiner are expected to be enrolled and understand how they can strengthen their compliance to and implementation of NDPE.

Monitoring and Verification

Hershey is investing in Starling satellite monitoring and on-the-ground programs to help us achieve a verified deforestation-free palm supply chain. In addition, we are working in coordination with our suppliers and other Earthworm Foundation members to accelerate efforts. With aligned NDPE commitments and shared suppliers, we are working together to share knowledge and understanding of the industry-wide challenges and exploring potential solutions together in a practical way. We also engage with NGOs with eyes on the ground who proactively monitor landscape changes.

Monitoring―Starling

In 2020, with Airbus and Earthworm Foundation’s Starling satellite-based service, we began monitoring the supply chains of our highest volume direct suppliers, covering about 70% of our palm supply chain (based on 2020 volumes). Our objective is to move our palm supply chain to 100% verified deforestation free.

On a quarterly basis, we receive reports of deforestation and land clearing events captured by Starling. The report identifies:

  • Mills that have the highest deforestation alerts (by hectares) occurring within a five-kilometer radius, and
  • Concessions that have the highest deforestation alerts (by hectares) found within the concession boundaries

We engage with our suppliers around these deforestation events and request they investigate these findings in their supply chain in line with our Palm Oil Grievance Procedure. Our suppliers help us to verify whether the deforestation is known or new and any actions taken, progress made to date or need for further investigation. They also help us obtain sourcing information, including traceability to the plantation data and concession boundaries, and any other evidence to de-link deforestation from our palm supply chain.

Verifying—Kumacaya

In 2020/21, Hershey funded Earthworm Foundation’s Kumacaya program in the biodiverse Rawa Singkil Wildlife Reserve, located in the Leuser Ecosystem.

Kumacaya enables independent monitoring and verifying of social and environmental issues by local people and civil society organizations (CSOs).  It aims to ensure that the views of those impacted by global supply chains are heard, they are part of the discussion on how best to serve people and nature and they are given the opportunity to shape the future of the communities and environments in which they live.

Hershey contributed to the funding of signal socialization programs ensuring local CSOs and community members are aware of and have access to Kumacaya’s online platform which allows for anonymous reporting (signals) of impacts observed on the ground. The information from these signals is consolidated and anonymized into reports which allow Hershey to ensure that their strategic decisions and actions are informed by the experiences of the people most impacted by sourcing supply chains.

Transformation

Leuser Ecosystem

We are deeply concerned about the continued reports of deforestation and peatland development by palm oil companies in Indonesia’s Leuser Ecosystem, which is one of the most biodiverse places on earth and is home to many unique landscapes and fauna. As part of Hershey’s commitment to a responsible palm oil supply chain, the environment and human rights, the protection of the Leuser Ecosystem is a priority.

These supply chains are complex and regional structural issues, such as poverty, also mean that embedding solutions takes time. Hershey will continue:

  • Working with our direct suppliers to trace our palm oil supply chain to the mill and to the plantation levels that are located near the Leuser Ecosystem
  • Engaging our supply chain in the Leuser Ecosystem to strengthen NDPE implementation
  • Engaging our suppliers through our grievance procedure when we receive allegations of violators in the Leuser Ecosystem that are not in compliance with our Palm Policy
  • Co-funding Earthworm Foundation’s Area for Priority Transformation project in Aceh Tamiang and Southern Aceh, where it overlaps with the Leuser Ecosystem to address deforestation within the two Aceh regions and build NDPE capacity for local actors
  • Co-funding Kumacaya in the Rawa Singkil Wildlife Reserve within the Leuser Ecosystem
  • Exploring additional opportunities with Earthworm Foundation and suppliers around satellite monitoring systems and deeper engagement with nearby mills and plantations

Landscape Program

In 2021, we increased our financial support for landscape transformations led by Earthworm Foundation in key palm oil sourcing regions, including providing additional support for the Aceh Landscape in Indonesia and committing new support for the Southern Central Forest Spine Landscape in Malaysia. Landscape programs utilize a holistic approach to balance sustainable production, forest conservation, resilient livelihoods and good labor practices, leveraging supply chains and cross-sector partnerships to drive improvements at scale.

The Aceh Landscape is home to the biodiverse Leuser Ecosystem and the Rawa Singkil Wildlife Reserve and is also one of the poorest areas in Indonesia. Between 2016 and 2019, the Aceh Landscape has seen a 60% reduction in deforestation and has directly impacted the livelihoods of 2,095 households through development of Participatory Conservation Plans in five forest-frontier communities.

The Southern Central Forest Spine (SCFS) Landscape in Malaysia is host to critical wildlife corridors for tigers, elephants, and other flora and fauna species. Palm oil production in the region poses risks to biodiversity and forest conservation and also relies heavily on migrant labor, which makes up 70% of the workforce. The SCFS landscape is working to find solutions to these challenges. To date through this program, 16 out of 19 refineries in the landscape have adopted NDPE policies and 26% of mills are traceable to plantation, with the objective of reaching 100% by 2025.    

Smallholder Program

In 2020, Hershey contributed to Earthworm Foundation’s Rurality Program in East Riau – Indonesia’s largest palm producing area. The Rurality program aims to address challenges facing local farmers, including old oil palm trees with low productivity, limited livelihood opportunities, deforested areas and degraded environments, long and inefficient supply chains, and more recently, human elephant conflict. Through a multi-stakeholder approach, Rurality aims to build the resilience of palm farmers in East Riau while also building capacity of good agricultural practices to support smallholder inclusion into commercial supply chains.