Singapore-based Indonesian palm oil exporter Musim Mas has become the world’s second palm oil company to get its decarbonisation targets validated by the United Nations-backed standards body Science Based Targets initiative (SBTi), a senior manager revealed to Eco-Business.
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Carolyn Lim, who heads up the group’s corporate communications, told Eco-Business that its climate goals received a stamp of approval from SBTi, which is the world’s main arbiter of corporate net zero goals in line with Paris Agreement’s 1.5°C warming limit, on Monday.
SBTi has confirmed that the company has validated its near-term targets and that they should be published within the next few weeks.
The company plans to officially announce its SBTi-approved targets on 3 October, after the release of its annual sustainability report this month, said Lim.
Musim Mas has operations in 13 countries and is a supplier to many major consumer brands like Unilever, Nestle and PepsiCo.
Lim said that Musim Mas had already planned to integrate these validated climate targets into the key performance indicators (KPIs) for its inaugural sustainability-linked loan (SLL) from Dutch bank Rabobank and British lender HSBC.
The KPIs under the loan agreement, which has come under scrutiny for closing before external verifiers tracking progress on the sustainability targets were identified, will be reviewed in a few years’ time, she added.
SLLs offer firms a lower cost of borrowing if they meet certain sustainability goals, such as cutting carbon emissions or improving board diversity.
The current KPIs in Musim Mas’ SLL are heavily focused on smallholder farmers, which Lim said is a result of both European banks pressuring the company to be more ambitious in its inclusion of smallholders, with the European Union Deforestation Regulation (EUDR) kicking in.
Over the past decade, Musim Mas is among the world’s biggest palm oil traders that has been repeatedly exposed to illegal palm oil production driving the destruction of Indonesia’s Leuser Ecosystem, which is one of the most biodiverse places on Earth.
EUDR requires major exporters of commodities to provide proof that their products have not led to forest degradation by late-2024. Lim said that Musim Mas will have to comply with the new deforestation law by next month, as shipments to Europe take about three months.
The palm oil giant, which runs one of Indonesia’s most extensive independent smallholders programmes, first committed to setting science-based targets in January 2024. It has also pledged to eliminate deforestation in its supply chain since end-2015.
Since 2022, the company has been working to finalise its baseline Scope 3 emissions to develop reduction targets that will align with SBTi’s Forest, Land and Agriculture (FLAG) guidance, which applies to companies in land-intensive sectors including timber, pulp and paper, palm oil and rubber.
Based on Musim Mas’ last sustainability report, Scope 3 emissions, or indirect emissions from its value chain, make up 91 per cent of its emissions in the baseline year of 2022. This includes emissions from land use changes of suppliers – such as converting peatlands into oil palm plantations – as well as the transportation of raw materials and products to consumers.
This validation comes after Malaysian palm oil giant SD Guthrie, formerly known as Sime Darby Plantation, got both its near- and long-term net zero targets signed off by the SBTi last December.
The firm has committed to cut 100 per cent of its absolute Scope 1 and 2 emissions – which refer to emissions from an entity’s own operations and energy use – by 2050 and to mitigate any residual Scope 3 emissions through carbon removals or offsets.
SBTi’s flip-flopping on plans to allow for the use of carbon offsets in the past few months has frustrated the business community. The leading targets validator is now seeking public feedback on technical papers which showed mixed evidence of their effectiveness in reducing Scope 3 emissions.
SD Guthrie is among the first globally to have its FLAG emissions reduction targets approved since May 2023, when SBTi started requiring companies to account for land-based emissions separately from energy and industrial emissions.
Other firms that have received SBTi endorsement on their FLAG targets include Dutch brewer Heineken and Japanese beverage company Asahi Group.
