New Zealand's PKE-purchasing dairy farmers contribute over $200 million a year to companies currently committing the worst damage to the world's rainforests, Greenpeace says.
Greenpeace New Zealand campaigner Simon Boxer is urging the New Zealand dairy industry to pursue alternatives to palm kernel expeller (PKE).
"As part of our global campaign we are focusing on PKE, because that is New Zealand's greatest financial contribution to the palm industry, more so than consumer products," Boxer said.
"Given the fact that PKE is coming from major deforestation, it means that that expeller actually has a carbon footprint that comes with it, which then starts to undermine New Zealand's good record. So it's a concern that for short-term gains we are making the wrong long-term decisions."
PKE, a by-product of crude palm kernel oil which is a by-product of crude palm oil, is used as supplementary feed for dairy cows. However, Fonterra says PKE remains a minor source of feed compared with the "traditional" farming model of pasture-based systems.
Each year for the last three years, New Zealand has imported over 1.3 million tons of PKE, at an average yearly cost of $280m.
"The palm industry itself calls PKE a co-product, together with kernel oil and palm oil," Boxer said.
"So they've never called it a by-product or a waste product, they've always treated it as an economic product. As we've shown in our report, a co-product always carries the carbon footprint."
Quality control in the supply chain of PKE has proved a "major headache" for Fonterra, whose subsidiaries such as RD1 import large quantities of PKE, Boxer said.
"They've been going to Indonesia and Malaysia and actually struggling quite significantly to be able to say that all the PKE coming from this or that company has been certified OK," he said.
Many of the subcontractors supplying the larger firms in South East Asia lack a transparent supply chain.
"Fonterra say they deal with Wilmar, but we've been able to show that Wilmar can't vouch for over 60 per cent of what they supply. We know from all sorts of sources that I can't reveal that Fonterra has been going over there and finding it actually quite murky, difficult and concerning - that actually things were not so good," Boxer said.
According to bloomberg.com, Wilmar International, the world's largest palm oil trader, "relies on third parties for more than 90 per cent of the crude palm oil for its refineries".
Greenpeace commissioned an independent report in 2011 on the carbon cost of PKE and its contribution to the dairy carbon footprint in New Zealand, which was allegedly forwarded to Fonterra.
"We are more than happy to meet with Fonterra and talk about it, as we've done a lot of reports on it, but they've never really taken us up on that offer," Boxer said.
In that report by Rob Carlton of Carlton Consultancy, sustainable, eco-friendly options for the palm industry in South East Asia were raised.
Fonterra's managing director, Co-operative Affairs, Todd Muller, said grass remained the major feed in New Zealand and PKE accounted for less than 5 per cent of milk production.
Stopping imports of PKE would not address deforestation, given it is a by-product of the main crop of palm oil, he said.
Fonterra purchases its PKE from Wilmar, and senior managers from Fonterra have visited Wilmar plantations in Indonesia to satisfy themselves of their performance.
Muller challenged the statement that PKE is "dismissed as zero" in carbon footprinting.
"All feed sources, including PKE, are taken into account in our carbon footprint.
"But this isn't about focusing on a single aspect like PKE. It has to cover everything - supplementary feed, the emissions sequestration lost when forests are converted to dairy land, our processing emissions in NZ and emissions from transporting raw milk to factories and processed products to destination ports.
"This work does not sit on a shelf - we keep it under review as we are committed to a 20 per cent reduction in emissions by 2020."
- Straight Furrow