Oct 8, 2021
This blog post is part of the Summer 2021 Internship Series, where we highlight the works of our summer interns. Jonathan Martinez is the author of this particular post.
As we face many economic, environmental, and political challenges in today’s world, change and transparency have become increasingly important. This summer, my colleagues and I used data to investigate the ESG claims made by Fortune 500 companies.
ESG outlines the standards used by investors, credit analysts, compliance officers, and others to gauge not only the socio environmental impact of a company, but also how well governed it is.
Colgate-Palmolive is a consumer product company famous for Colgate toothpaste and Palmolive dish detergent. What I sought to discover was simple enough: are Colgate-Palmolive’s sustainability and ESG claims genuine?
Palm oil is a lesser-known commodity that exists in many of the personal care and food products we consume on a daily basis (i.e. the Colgate toothpaste you use each morning & the Oreo cookies you love). Consequently, its production has increased tremendously in the past couple of decades.
Unfortunately, non-sustainable palm oil sourcing is bad news for tropical rainforests and those who inhabit them. Thus, over the past few years, many companies (including Colgate-Palmolive) have committed to sustainable palm oil sourcing.
More specifically, Colgate-Palmolive outlines a No Deforestation Policy and asserts that they strive for a future with no exploitation. These commitments are analyzed below.
For a company to appeal to ESG-conscious investors, transparency is imperative…and after a first glance at Colgate-Palmolive’s website and Sustainable Palm Oil Policy, they do seem to be quite forthcoming. On their webpage, they share supplier requirements, the percentage of palm and palm kernel oil they procure from specific regions of their supply chain, and even a list of suppliers and every mill they source their palm oil from.
My analyses focus on both countries and provinces from Colgate-Palmolive’s supply chain.
The country-level analyses focus on Indonesia and Malaysia – the primary palm oil exporters of the world. Using Tresata’s proprietary software, TIDES, I transformed data regarding these countries into charts and visualizations that contextualize ESG details about regions which just-so-happen to be part of Colgate-Palmolive’s supply chain.
First, I examined tree cover loss in both Indonesia and Malaysia, where Colgate-Palmolive lists some of their mills.
It is important to note that tree cover loss ≠ deforestation. Tree cover loss also encompasses other drivers such as natural change over time.
That being said, data sourced from Global Forest Watch (a forest monitoring tool developed by World Resources Institute) suggests that the majority of tree cover loss in both Indonesia and Malaysia can be attributed to commodity-driven deforestation (i.e. the sourcing of palm oil). This is highlighted in the visualizations below.
It is important to note that the two visualizations above are built in Tresata’s platform, using data provided by Global Forest Watch on the Indonesia and Malaysia pages linked above.
We’ve established that the vast majority of tree cover loss in Indonesia and Malaysia is due to commodity-driven deforestation. Let’s take a look at tree cover loss by province for 2020.
The visualizations below display (1) the number of times each Indonesian province is listed on Colgate-Palmolive’s palm oil 2020 mill list and (2) tree cover loss per Indonesian region for the year 2020. Thus, all relationships represented below are correlational; we cannot conclude that Colgate-Palmolive’s suppliers are or not at the root (no pun intended) of deforestation in these regions.
We can see that Sumatera Utara, the Indonesian province listed most on Colgate-Palmolive’s palm oil mill list, experienced considerably less tree cover loss in 2020 than 6 other Indonesian provinces – potentially indicating that Colgate-Palmolive was intentional about sourcing a great deal of its palm oil from a more sustainable region of Indonesia.
On the other hand, there are provinces listed many times on Colgate-Palmolive’s mill list that house considerably more tree cover loss than others – Riau, Sumatera Selatan, and Kalimantan Barat, to name a few.
We cannot know the degree to which Colgate-Palmolive’s suppliers and supply chain do or do not contribute to deforestation in these regions. This analysis merely highlights the power of Tresata’s software as a tool that allows us to visualize and examine the facts (and sometimes raise an eyebrow).
These visualizations represent the same metrics – this time in Malaysia.
Johor, the Malaysian province listed most on Colgate-Palmolive’s palm oil mill list, experienced considerably less tree cover loss in 2020 than 3 other Malaysian provinces, though it does fall in the top 4 Malaysian provinces for tree cover loss in 2020.
Additionally, there are provinces listed many times on Colgate-Palmolive’s mill list that house considerably more tree cover loss than others, including Pahang and Sabah.
Does this necessarily mean that Colgate-Palmolive is or is not delivering on their commitment to a future without deforestation? Probably not. However, the fact that Tresata’s software empowers users to build visualizations and begin these analyses indicates that we are well-positioned to tackle many of today’s hard-hitting ESG questions.
Now that we’ve covered tree cover loss, let’s take a look at Colgate-Palmolive’s commitment to a future sans exploitation.
Aside from exploitation of the environment, social exploitation, specifically child labor, has been a long-standing issue in many countries of South East Asia and Latin America.
The TIDES visualization below (constructed with data from the International Labour Organization) shows the number of children in child labor for several countries in the year 2019.
As you can see, Indonesia had just over 2,000 children in child labor during 2019. This begs the question: how can companies monitor their suppliers in countries where exploitation is an ongoing issue?
Enter RSPO certification. The Roundtable on Sustainable Palm Oil (RSPO) certification serves as verification of a supplier’s sustainable palm oil practices – both for the environment and society. Thus, ifa mill is uncertified, it can be difficult to determine whether or not it practices sustainable palm oil sourcing.
The TIDES pie chart below depicts the percentage of Colgate-Palmolive’s mills that are RSPO certified.
As you can see, roughly 74% of the mills that appear on their list are NOT RSPO-certified, and thus, difficult to evaluate.
Of course, this does not warrant the assertion that child labor (or any other form of social exploitation) could be occurring in the mills on Colgate-Palmolive’s list. However, given Indonesia’s presence on Colgate-Palmolive’s palm oil mill list and the fact that child labor frequently occurs in agriculture, it would behoove Colgate-Palmolive to prioritize RSPO certification in this region.
In all, I believe that Colgate-Palmolive is doing well to maintain a green image. However, the persistent controversy around exploitation in South East Asia coupled with a majority of uncertified mills raises red flags that point to a potentially unregulated supply chain.
If you or your company is interested in how Tresata’s sustAIn can help gain visibility into the ESG supply chain, please contact us at email@example.com.