Hans Nicholas Jong, Jakarta – More than a decade after the palm oil industry embraced a pledge to not deforest, clear tropical peatlands, or use exploitative practices, policies to that end now cover most of the global palm oil trade, as major traders, refiners and consumer brands have pledged to keep deforestation-linked palm oil out of their supply chains.

However, deforestation linked to palm oil continues, particularly in Indonesia, the world's largest producer of the commodity.

Satellite analysis by forest-mapping initiative TheTreeMap shows 31,073 hectares (76,783 acres) of forest were cleared for palm oil in Indonesia in 2025, slightly higher than the 30,956 hectares (76,494 acres) recorded in 2024 – highlighting persistent gaps in how the industry enforces its zero-deforestation pledges.

In some cases, palm oil from newly cleared land still enters supply chains that companies describe as deforestation-free.

"No Deforestation, No Peat, No Exploitation" (NDPE) policies aim to eliminate three major sources of harm in palm oil production: clearing natural forests, developing plantations on carbon-rich peatlands, and exploiting workers or local communities. By 2020, these commitments covered roughly 83% of palm oil refinery capacity in Indonesia and Malaysia, the world's main producing region.

In recent years, companies have also built systems to enforce these pledges. Many now publish grievance mechanisms where violations can be reported, while third-party monitoring groups use satellite imagery to track forest loss and flag suspicious activity.

Large-scale corporate deforestation in Indonesia has fallen compared to the mid-2010s, when some plantation companies were clearing vast areas of rainforest.

Yet TheTreeMap data show deforestation linked to palm oil has not disappeared. This happened even as plantation expansion slowed: the total area covered by plantations expanded by 101,120 hectares (249,873 acres) in 2025, an 18% drop from the previous year.

Campaigners say the persistence of deforestation reflects how the problem has shifted. Instead of large-scale clearing by major plantation groups, forest loss increasingly occurs through three structural gaps in the system: incomplete traceability, corporate ownership loopholes, and NDPE policies that apply only to palm oil and not to other deforestation-linked commodities.

"Whilst overall the level of deforestation for palm has reduced in the last 10 years, I think it's reduced mainly at the large-scale cases," said Phil Aikman, campaign manager at U.S.-based environmental advocacy group Mighty Earth.

Leakage points

One of the biggest gaps is traceability to plantation level.

An analysis by investor research firm Sustainalytics, which looked at 17 key companies sourcing palm oil, including four of the largest palm oil traders in the agriculture industry, found that 69% have traceability programs covering both direct and indirect suppliers.

These companies also publicly disclose the locations of their suppliers to at least to the mill level.

However, traceability remains one of the biggest obstacles to deforestation-free commodity supply chains, according to a recent report by consultancy AidEnvironment.

The report says complex supply chains, large numbers of smallholder farmers, and multiple intermediaries often prevent companies from tracing products back to individual farms.

Palm oil mills process fruit from many suppliers. A large share of the palm fruit they receive doesn't come from company-owned estates but from independent farmers, cooperatives and third-party companies. These suppliers often sell through brokers or village collectors who combine fruit from multiple farms before delivering it to mills. While mills typically record the names of these intermediaries, they frequently lack detailed information about the farms where the fruit was grown.

That makes it difficult to verify whether the fruit came from land cleared in violation of NDPE commitments.

The fragmented nature of Indonesia's smallholder sector adds to the challenge. Independent farmers account for roughly 40% of the country's palm oil production, and many operate outside formal traceability systems.

Fruit harvested in different villages can be pooled together before reaching a mill. Once mixed, it becomes difficult to determine the origin of individual batches – meaning fruit grown on newly deforested land can enter the supply chain alongside fruit from NDPE-compliant farms.

"There are a lot of these mills in Indonesia that are receiving fresh fruit bunches from companies that are still involved in deforestation or even smallholders," Aikman said. "The problem is that these mills are not really being checked by traders and brands who source from them, and thus this becomes a leakage point."

Distance can also complicate monitoring.

The palm fruit must usually be processed within about 24 hours of harvest, but within that window it can still travel more than 100 kilometers (60 miles) to reach a mill. This allows fruit grown outside a company's monitored supply base – including from recently cleared plantations – to enter mills supplying major traders and consumer brands.

Once processed, the oil becomes impossible to separate.

Mills crush fruit from many suppliers together, mixing harvests from estates, smallholders and traders. The resulting crude palm oil is blended during extraction, making it impossible to distinguish oil produced from compliant and noncompliant sources.

Without full traceability to plantations, palm oil linked to deforestation can therefore still flow into supply chains that companies describe as deforestation-free.

"And full traceability is something that's still elusive in the palm oil industry," Aikman said. "At the mill level, if you ask all the players what percentage of traceability do they have to their mills, you'll find that it's nowhere near 100%."

Nevertheless, some consumer brands are actively working toward 100% traceability to the plantation level. Colgate-Palmolive has reported 81% traceability to the plantation level for its palm oil and palm kernel oil volumes in 2024. Danone said it has achieved 98% overall traceability to plantation, and publicly discloses the GPS coordinates of the plantations from which it sources.

First Borneo

Campaigners point to the First Borneo Group as an example of how these gaps can allow deforestation-linked palm oil to enter NDPE supply chains.

Investigations by Mighty Earth found subsidiaries linked to the Jakarta-headquartered group clearing forest across several concessions in Indonesian Borneo, including PT Borneo International Anugerah, PT Arjuna Utama Sawit and PT Equator Sumber Rezeki.

Satellite monitoring detected more than 3,600 hectares (8,900 acres) of forest loss between 2023 and 2025 in areas linked to these companies.

Unlike many plantation operators, First Borneo doesn't operate mills in some of the regions where it's expanding. Instead, it sells the fruit harvested from its plantations to mills owned by other companies. Once processed into crude palm oil, that production can enter the supply chains of major traders and consumer brands.

Investigators have also documented how far the fruit can travel. In one case, fruit from a First Borneo-linked concession was delivered to a mill more than 350 km (220 mi) away by road. Other shipments were traced to mills nearly 300 km (185 mi) from the plantations.

After the evidence was raised, some mills said they would stop buying palm fruit from First Borneo. But campaigners say the case illustrates a broader weakness in NDPE enforcement: without traceability to plantation level – and monitoring that extends far beyond the immediate vicinity of a mill – fruit from producers that clear forests can still enter supply chains.

Definitions on paper create loopholes

Another gap lies in how companies are defined and monitored at the corporate group level.

Certification systems and monitoring efforts often rely on formal corporate structures, which may not reflect the full network of companies controlled by the same owners. The Roundtable on Sustainable Palm Oil (RSPO), the industry's leading sustainability certification body, requires members to disclose subsidiaries within their immediate corporate group.

However, disclosure of broader beneficial ownership structures – including companies controlled by the same family but registered under different corporate groups – has historically been less consistent. This creates a challenge for enforcing NDPE commitments.

Companies controlled by the same beneficial owners can operate through multiple corporate groups that appear independent on paper. If one group is linked to deforestation and excluded from supply chains, another entity controlled by the same owners may continue selling palm oil to NDPE-compliant buyers.

Since the RSPO standard is widely used as an industry benchmark, many companies rely on the same definition of a corporate group, Aikman said.

"So it's a weakness in the entire system," he said. "I think, personally, the RSPO needs to up the game on its membership. If the RSPO had a group membership, which incorporated everything that they say is group, things would improve at that level. But they don't."

Campaigners say these ownership structures can allow companies to operate what they describe as "shadow companies" – separate corporate entities linked to the same owners but not covered by the same monitoring or sanctions.

Fangiono

An example of how these ownership structures can complicate enforcement is the case of the billionaire Fangiono family in Indonesia. The family has been linked to a number of plantation companies responsible for deforestation.

TheTreeMap identified companies linked to the Fangiono family as the single largest driver of palm oil-related deforestation in Indonesia in 2025 through its network of companies, accounting for roughly one-third of that deforestation.

The bulk of the deforestation is concentrated in Indonesia's easternmost region of Papua, with nearly 70% happening in the region. This places the Fangiono-linked companies at the center of the observed shift of plantation expansion toward Papua.

Several companies linked to the Fangiono family, including First Resources, continue expansion despite RSPO certification.

In 2021, NGOs lodged complaints with the RSPO concerning undisclosed relationships between these companies. The RSPO Secretariat dismissed the complaint in 2025 and ruled that First Resources had not breached its membership rules. This decision drew strong condemnations from environmental organizations. In a joint statement, NGOs described the ruling as setting "a dangerous precedent," warning that it may enable companies to retain RSPO certification while still clearing forests.

Cross-commodity loophole

NDPE commitments also typically apply only to palm oil operations, leaving another potential gap: Companies can clear forest for other commodities – such as timber, coconut or sugarcane – while still selling palm oil to buyers with zero-deforestation commitments.

Some consumer brands have started adopting stricter approaches to address this. Aikman cited Unilever and The Hershey Company as examples of companies applying cross-commodity standards.

"They're not shy about doing things differently from other companies," he said. "Whereas a lot of other companies won't do anything because their competitors have not done anything."

These companies also maintain "no-buy lists" of suppliers linked to deforestation. For Unilever, this can include companies that are not currently in its supply chain but have been linked to forest clearing.

"Even if the cases that we filed are not in their supply chain, they scrutinize them and then put them on their no-buy list in the future," Aikman said. "Because they don't want to be dealing with this headache in a year's time, two years' time."

EUDR test

The persistence of these loopholes raises questions about the industry's readiness for the European Union Deforestation Regulation (EUDR).

The law, due to take effect at the end of 2026, will require companies selling commodities including palm oil, soy, cattle, cocoa, coffee and timber in the EU to prove they aren't linked to deforestation after Dec. 31, 2020.

To do so, the EUDR requires companies to go far beyond existing NDPE systems. Firms will need to collect geolocation data for production areas, assess deforestation risks, and maintain due diligence systems demonstrating that their commodities really are deforestation-free.

Analysts say this requirement could be particularly challenging in sectors like palm oil, where fruit from thousands of smallholders is often aggregated before reaching mills. With traceability to plantation level still incomplete and group-level enforcement uneven, Aikman questioned how some companies will demonstrate compliance.

"A lot of these mills that are reliant on third parties for the fresh fruit bunch are not really being checked," he said. "And so how these mills can be acceptable in EUDR is beyond me."

The analysis by Sustainalytics found that 65% of the 17 companies it studied do not conduct regular internal or external audits of their direct or third-party suppliers.

Independent monitoring, like the ones by Mighty Earth through its Rapid Response reports and TheTreeMap with its Nusantara Atlas, will therefore remain essential, he said.

Using high-resolution imagery from satellite operator Planet to detect small changes in forest or peatland cover, Rapid Response allows Mighty Earth's team to catch instances of deforestation in near real time. The alerts are then shared with more than two dozen of the largest palm oil companies.

Mighty Earth then uses these reports to engage with global traders and push them to intervene – often in as little as 48 hours – by suspending the suppliers found to be engaged in deforestation.

"You can't stop every hectare of deforestation," Aikman said. "But there's been an awful lot of suspensions over the last 10 years, which has shown these companies that they can't just keep doing what they were doing before."

Sustainalytics encourages companies to use the time before the implementation of the EUDR, which has been delayed twice, to take action.

"Companies that take the delay as a sign to postpone investments in traceability and compliance systems could face higher costs, operational disruption, and financial risks once enforcement begins," it wrote. "Early movers – many of whom have already invested time and financial resources toward compliance – could gain a competitive advantage through strengthened supply chain transparency and improved stakeholder trust."

Source: https://news.mongabay.com/2026/05/loopholes-undermine-palm-oil-industrys-antideforestation-pledges