Narrower Portfolios, Shared Mills: Non-random Restructuring of Corporate Palm Oil Mill Disclosures

Palm oil is a ubiquitous ingredient, found in everything from chocolate bars to shampoo, and its production relies on a vast, complex web of farms and processing facilities. To make this industry more sustainable, major companies have begun publishing lists of the specific mills where they buy their oil. The hope behind these lists is that transparency will allow outsiders to monitor environmental damage, such as deforestation, and hold companies accountable for what happens in their supply chains. The underlying idea is that if a company knows exactly where its oil comes from, it can ensure that no forests are cut down to make it. However, this new study suggests that the way companies are changing these lists might be creating a different kind of problem. Instead of simply cleaning up their supply chains, some companies appear to be narrowing their focus so much that they are leaving behind a large number of smaller mills, potentially pushing those mills toward buyers who do not care as much about the environment.

The researchers, based in Hong Kong, examined the public disclosures of twenty major manufacturing companies that use palm oil. They looked at the lists of mills these companies reported during two distinct time periods: one from 2020 to 2021 and another from 2023 to 2024. By comparing the two sets of lists, they tracked how the connections between companies and mills changed over time. They focused on a specific group of 1,863 mills that appeared in the data for both periods, allowing them to see exactly which relationships were kept, which were dropped, and which were new. The goal was to understand if companies were simply getting better at tracking their suppliers or if they were fundamentally restructuring who they bought from.

The analysis revealed a clear and significant shift. In the earlier period, the companies' lists were extensive and overlapped heavily, meaning many companies were buying from the same large pool of mills. By the later period, the average number of mills listed by each company had dropped by 17 percent. This reduction was not uniform; four of the twenty companies cut their lists by more than 70 percent, drastically shrinking the number of suppliers they claimed to use. Importantly, these companies did not report buying less palm oil overall, suggesting they were not consuming less but rather sourcing from a much smaller, more exclusive group of suppliers.

When the researchers looked closer at which mills remained on the lists, they found that the companies were not choosing randomly. Instead, they were converging on a specific set of highly connected mills. These are mills that already had many buyers before the changes began. The study showed that the companies that cut their lists the most were the ones that ended up relying most heavily on these popular, well-connected mills. This pattern was not a result of chance; the researchers used statistical methods to confirm that the shift toward these specific mills was a deliberate, non-random strategy.

The study also investigated why companies were making these choices. They tested whether environmental factors, such as recent deforestation near a mill or the importance of the local biodiversity, influenced which mills were kept or added. Surprisingly, the data showed no link between these environmental risks and the companies' decisions. A mill located near a recently deforested area was just as likely to be kept on a list as one in a pristine forest. Instead, the strongest factors were related to how the mills were certified and how many other companies already bought from them. Mills that were certified under a strict "identity preserved" model—which keeps certified oil separate from non-certified oil throughout the supply chain—were much more likely to be retained or added. Similarly, mills that were already connected to many other companies were more likely to stay on the lists.

This behavior suggests that companies are prioritizing ease of management and traceability over broad environmental oversight. By concentrating their purchases on a few, highly connected, and strictly certified mills, companies can monitor their supply chains more easily and reduce their own reputational risks. However, the researchers warn that this creates a "twin-track" system. While the disclosed segment of the industry becomes more transparent and better governed, the mills that are excluded from these lists continue to operate. These excluded mills likely shift their sales to other buyers who do not require such strict disclosures, meaning the environmental problems they cause may simply move to a part of the market that is less visible. The study concludes that while individual companies may be improving their own oversight, this restructuring does not necessarily lead to better sustainability for the palm oil industry as a whole, because the most vulnerable suppliers are being pushed out of the spotlight rather than being helped to improve.