CARBON FOOTPRINT & CLIMATE CHANGE
As a rapidly growing industry with a large land footprint, palm oil producers have an important role to play in reducing greenhouse gas (GHG) emissions and limiting the environmental and socioeconomic risks posed by climate change. REA seeks to make a material contribution towards this common goal.
Following a review of the group’s sustainability strategy and practices undertaken in 2022, the group has developed an implementation roadmap framed by a series of principles and procedures to evaluate and dress climate-related risks and opportunities related to the group’s business and the wider community and to monitor the group’s response to such risks and opportunities. The group aims to deliver regeneration through addressing change, enhancing biodiversity, reversing environmental degradation and providing opportunities for stakeholder prosperity.
The group has made a commitment to achieve a 50% reduction in net GHG emissions by 2030 and to work towards the longer term objective of net-zero emissions by 2050, including scope 1 and 2 emissions. To this end, the group has engaged with the SBTi, an international, cross-industry framework aimed at promoting corporate adoption and disclosure of verified, science-based targets concerning decarbonisation. Under this framework the group will be setting verified short and medium term emissions reductions targets which will be published and against which the group must report on an agreed schedule.
The group publishes emissions data under three methodologies: the RSPO mandated PalmGHG tool, ISCC and the UK Government Streamlined Energy and Carbon Reporting (SECR) framework. Whilst the methodology for calculating emissions under SECR is identical to that used for RSPO, the scope of activities covered is different. RSPO requires only the GHG emissions from the group’s palm oil mills and their supply bases to be included. Emissions linked to the group’s estates that do not yet supply FFB to one of the group’s mills are not included. Instead, emissions associated with the land use change component of new oil palm developments (which represent the majority of emissions from new developments) are accumulated over the immaturity period of each development and then amortised over the 25 year oil palm lifecycle once the development starts producing crop.
The scope of emissions reported under SECR, however, includes all group activities worldwide and thus includes emissions from new developments as these arise, but excludes the amortisation of emissions accumulated during the development of areas now in production. Except where otherwise stated, the PalmGHG methodology, adjusted for this different basis, has been used for the calculations.
Streamlined energy and carbon reporting (SECR) framework
The scope of current emissions and energy usage reported under SECR includes those associated with all group activities worldwide irrespective of where these arise. These are designated as Scope 1 (emissions from group owned or controlled sources) and Scope 2 (indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the group). Scope 3 (indirect emissions within the group value chain) are not currently included in the report.
|Oil palm cultivation in Indonesia1|
|Collection, milling and distribution operations in Indonesia2|
|Emissions from electricity purhased for own use3||79.0||86.1|
|UK emissions included within global emissions||17.0||27.0|
|Energy usage (kWh) ('000)|
|Energy use from combustion of fuel||85,416||69,752|
|Energy use from methane capture generated electricity||17,519||18,881|
|Energy use from purchased electricity||75||82|
|Global energy use||103,011||88,715|
|UK energy use included within global energy use||16||26|
|Net emissions per tonne of CPO produced (tCO2eq/tonne CPO)||0.34||0.69|
|Net emissions per planted hectare (tCO2eq/ha)||2.13||4.12|
1 Covers Scope 1 direct GHG emissions from historic land conversion, agricultural practices and peat soil; includes sequestration by crop and conservation forest areas. Some Scope 3 indirect GHG emissions including those associated with the extraction, production and transport of purchased materials such as fertilisers and pesticides, as well as fuel usage by third party contractors involved in operations
2 Covers Scope 1 and Scope 3 emissions from the transport and processing of crop and waste products; also includes sequestration from sale of excess electricity generated from waste products and sale of excess palm kernel shell for energy generation. Conversion factor used to calculate energy use from combustion of fuel is 10.58 kWh/litre diesel (source: UK Government GHG Conversion Factors for company reporting 2020)
3 Covers Scope 2 emissions associated with electricity usage in group offices in both Indonesia and the UK, representing indirect GHG emissions from the consumption of purchased electricity as defined by the GHG Protocol.
4 Calculated using palm oil industry emissions disclosure data for palm oil operations in Indonesia
RSPO PalmGHG standard
REA has been monitoring and reporting its carbon footprint using the PalmGHG tool for over ten years and currently uses the latest version (version 4) of the PalmGHG tool which became mandatory for RSPO members on 1 January 2020. The PalmGHG tool was developed by a multi stakeholder group within RSPO which included leading scientists in the field of GHG accounting for oil palm operations. Annual reporting of emissions using the PalmGHG tool has been mandatory for all RSPO members since 2016, with submissions independently verified by RSPO accredited certification bodies.
The PalmGHG tool uses a lifecycle assessment approach, whereby all of the major sources of GHG emissions (carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O)) linked to the cultivation, processing and transport of oil palm products are quantified (gross emissions) and balanced against the carbon sequestration and GHG emissions avoidance to calculate the net GHG emissions. All direct emissions, and the majority of indirect emissions, associated with the group’s oil palm operations in Indonesia are captured within the PalmGHG tool. Changes in the calculation methodologies of the various versions of the PalmGHG tool as it has developed, together with accounting adjustments to reflect the proportion of FFB that is processed in the group’s own mills each year, mean that there are variations in the calculation of emissions from year to year.
The group applies two measures to its evaluation of the intensity of its GHG emissions: net GHG emissions per tonne of CPO produced and net GHG emissions per planted hectare (immature and mature). Both intensity measures are considered relevant because the maturity of the oil palm within the supply base does not inﬂuence the trend in GHG emissions per planted hectare, whereas it does impact the GHG emissions per tonne of CPO. Net GHG emissions in 2022 show a 50.7 per cent reduction against 2021 when expressed per tonne of CPO produced and a 48.3 per cent reduction when expressed per planted hectare.
GHG gross emissions associated with the group’s oil palm operations were overall 8.3 per cent lower in 2022 compared with 2021, primarily reflecting a 22.2 per cent decrease in the applications of inorganic fertiliser. This was due partly to the cessation of fertiliser applications to the mature palms that were planned for replanting from 2023 and partly to delays in deliveries of fertiliser supplies and subsequent applications as a result of heavy rainfall and flooding. 2022 fertiliser applications have been carried forward and are being applied in the first months of 2023. In addition, GHG emissions from land use change reduced in 2022 with the increase in replanting of first generation oil palms to 277 hectares compared with 65 hectares of replanting in 2021. In the RSPO PalmGHG tool, emissions associated with palm to palm replanting are lower than those associated with first generation planting of forest to oil palm.
By contrast, gross emissions associated with crop collection, milling and palm product distribution marginally increased by 0.7 per cent in 2022 due to a small increase in diesel fuel consumption for processing higher crop volumes.
Net GHG emissions associated with the group’s oil palm operations decreased by 48.3 per cent in 2022 due to increased carbon credits earned by producing excess electricity supplied for domestic use and to the local community. Additional carbon credits were also earned though increased sales of kernel shell as biomass fuel and a reduction in emissions from KCP operations compared with 2021. Net GHG emissions are calculated by deducting from the gross GHG emissions the carbon that is estimated to have been fixed (sequestered) by the oil palms and conserved set-aside forest through the process of photosynthesis. A further deduction is made to account for the GHG emissions that have been avoided as a result of the use of renewable electricity from the group’s methane capture facilities in domestic buildings and by local communities that were previously supplied with electricity from diesel powered generators.
For more detailed information on the calculation of GHG emissions on an individual mill basis, click here.
International Sustainability and Carbon Certification (ISCC)
Since 2012 the group has also been reporting GHG emissions under the ISCC system which uses a different calculation methodology and for which annual emissions calculations are independently verified by an ISCC accredited certification body. ISCC is a globally applicable sustainability certification system which covers sustainable feedstocks including, amongst others, agricultural and forestry biomass.
The ISCC requirements regarding GHG emissions apply to all relevant supply chain elements from raw material production to the distribution of the final product, including cultivation, all processing steps, and transport and distribution of intermediate and final products. The calculation methodology follows the requirements of the Renewable Energy Directive 2009/28/EC amended through Directive (EU) 2015/1513 (RED) and Fuel Quality Directive 2009/30/EC amended through Directive (EU) 2015/1513 (FQD)1. The RED2 allows economic operators to calculate actual GHG emission values, to use default values or to use a combination of disaggregated default values and calculated actual values. In this calculation, the group chooses to use the actual value calculation method for all stages of the process. The group must be able to prove and justify that the resultant GHG emissions calculations represent all emissions from the group’s production process. Calculated GHG emissions are submitted annually to an ISCC accredited Certification Body for auditing, verifying and approval as part of the group’s annual ISCC recertification process.
Overall, the group’s total emissions increased by 39% in 20221, taking account of all elements of emissions.
This increase is influenced by changes in the provisions of the ISCC referring to the Renewable Energy Directive 2009/28/EC amended through Directive (EU) 2015/1513 (RED) and Fuel Quality Directive 2009/30/EC amended through Directive (EU) 2015/1513 (FQD)1 (RED II) whereby excess electricity from methane capture is no longer counted as an emission credit and there is a change in the coefficient on the emission factor and feedstock factor.
In 2022, reported emissions from cultivation increased by 18% due to a change in the ISCC calculation formula and despite a 20% decrease in the actual emissions originating from estate operations. For the same period an increase in the volume of diesel usage for FFB deliveries to mills and downstream palm product distribution allied with a change in the ISCC calculation formula contributed equally to a 103% increase in reported emissions from transportation. Increased diesel usage at the mills due to boiler breakdowns and a 26% increase in the volume of POME produced at the mills resulted in a 50% increase in processing emissions in 2022.
REA has prepared intensity reduction targets for GHG emissions for 2023–2025. This involves the identification of all sources of emissions and carbon sequestration (scope 1 and 2) that specifically affect the balance of GHG emissions. The group uses the gross emissions value (total GHG emissions resulting from the operational activities of plantations and palm oil mills) as the indicator of the GHG emission reduction target.
The emission sources that have been identified are shown in the table below, together with the emissions reduction targets for 2023–2025.
|Sources||Gross emissions value (tCO2eq)||Emissions intensity (tCO2eq / tFFB)||Emissions intensity (tCO2eq / tCPO)||Emissions intensity (tCO2eq / Ha planted)||Increase / (Decrease) (%)|
|Mill fuel consumption||10,881||10,119||9,715||0.01||0.01||0.01||0.05||0.04||0.04||0.31||0.28||0.27||(0.07)||(0.04)|
|Grid electricity utilization||105||98||94||0.00||0.00||0.00||0.00||0.00||0.00||0.00||0.00||0.00||(0.07)||(0.04)|
|CO2 from fertilizer||34,341||31,938||30,660||0.03||0.03||0.03||0.14||0.14||0.14||0.97||0.90||0.86||(0.07)||(0.04)|
|N2O from peat||818||818||818||0.00||0.00||0.00||0.00||0.00||0.00||0.02||0.02||0.02||0.00||0.00|
|N2O from fertilizer||27,659||25,723||24,694||0.03||0.02||0.02||0.12||0.11||0.11||0.78||0.72||0.69||(0.07)||(0.04)|
|Field fuel consumption||12,860||11,959||11,481||0.01||0.01||0.01||0.05||0.05||0.05||0.36||0.34||0.32||(0.07)||(0.04)|
|Third party FFB suppliers||31,909||29,675||28,488||0.03||0.03||0.03||0.13||0.13||0.13||0.90||0.83||0.80||(0.07)||(0.04)|
|Chemicals for WTP||0.35||0.33||0.31||0.00||0.00||0.00||0.00||0.00||0.00||0.00||0.00||0.00||(0.06)||(0.06)|
|Inputs - herbicides & pesticides||797||741||711||0.00||0.00||0.00||0.00||0.00||0.00||0.02||0.02||0.02||(0.07)||(0.04)|
|Total gross emissions||650,004||604,978||580,398||0.63||0.58||0.56||2.72||2.66||2.57||18.29||17.02||16.33||(0.07)||(0.04)|
|Export of excess electricity to housing & grid||(26,365)||(24,520)||(23,539)||(0.03)||(0.02)||(0.02)||(0.11)||(0.11)||(0.10)||(0.74)||(0.69)||(0.66)||(0.07)||(0.04)|
|Sale of palm kernel shell||(27,444)||(25,523)||(24,502)||(0.03)||(0.02)||(0.02)||(0.11)||(0.11)||(0.11)||(0.77)||(0.72)||(0.69)||(0.07)||(0.04)|