Global buyers are no longer just purchasing palm oil — they’re demanding accountability. Environmental, Social, and Governance (ESG) standards have become essential. For palm oil producers, aligning with these expectations isn’t optional anymore — it’s the new license to operate.

 

A major turning point is coming with the EU Deforestation Regulation (EUDR), effective December 2025. All palm oil exported to the EU must be traceable to the plantation and proven free from deforestation or human rights violations from January 1, 2021. Non-compliance could mean market bans or heavy fines.

This isn’t just a European movement. Japan and South Korea are also adopting similar policies. Globally, we’re seeing a shift from voluntary efforts to legally enforced sustainability, requiring serious investment in transparency and traceability.

 

 

Market Expectations: Certification Is the New Standard

Alongside regulations, customer expectations are rising fast. Certified sustainable palm oil is no longer a “nice-to-have” — it’s a must. In 2015, only 19% of global production was considered deforestation-free. By 2025, that number is projected to hit 86%.

 

Certifications like RSPO, ISPO, and MSPO have become minimum standards to access premium markets. And big brands — from Nestlé and Unilever to L’Oréal and Mitsui — now require proof of compliance, often backed by blockchain or digital traceability systems. ESG data isn’t just shaping reputations; it’s shaping pricing and contracts.

 

While these expectations may seem steep, many producers are already taking action. In Indonesia, for example, deforestation linked to industrial palm oil production has plummeted — from a peak of more than 180,000 hectares per year (2008–2012) to just 32,400 hectares per year (2018–2022). That’s an 82% reduction. Even though 2023 saw a slight increase (around 30,000 hectares), the overall downward trend is encouraging.

 

Both Indonesia and Malaysia, which together produce more than 85% of the world’s palm oil, are stepping up efforts to align with global ESG expectations. Governments have imposed moratoriums on new forest-clearing permits, while companies are investing in bioenergy initiatives using palm oil waste. Meanwhile, smallholder farmers — often the backbone of the supply chain — are receiving training in traceability tools and sustainable practices, allowing them to participate in certified markets and benefit from premium pricing.

 

What’s Ahead: Sustainability as a Strategic Advantage

With the palm oil market valued at roughly USD 88 billion in 2022 and continuing to grow, it’s clear that the future belongs to those who embrace sustainability. Forecasts suggest that global demand for certified sustainable palm oil will increase by 25–30% by 2027, reflecting not just regulation, but a broader cultural shift toward responsible consumption.

 

From a productivity standpoint, palm oil continues to outperform alternatives. A single hectare can produce about 3.36 tons of oil annually, far more than soybean (0.47 tons/ha) or rapeseed (0.74 tons/ha). Combined with a strong ESG strategy, this efficiency gives palm oil a competitive edge in a sustainability-conscious marketplace.

 

In the years ahead, the winners will be the exporters who invest in digital traceability, conduct rigorous ESG audits, and build inclusive supply chains that uplift both people and the planet. These efforts won’t just help meet compliance — they’ll unlock better prices, stronger customer loyalty, and long-term growth.

 

Because in today’s market, sustainability isn’t a side benefit — it’s the foundation of success.