The move follows a two-month Greenpeace campaign that exposed Nestlé's use of palm oil in products like KitKat. The expansion of palm oil and pulp plantations is driving the destruction of Indonesia's rainforests and peatlands, and pushing orang-utans to the brink of extinction.
Thousands of Australians joined people around the world in asking Nestlé to stop buying palm oil from suppliers that destroy rainforests.
To each and every one of you who took action: thank you. This is very much your victory.
So, what exactly is Nestlé committing to?
Under its new policy, Nestlé commits to identify and exclude companies from its supply chain that own or manage 'high-risk plantations or farms linked to deforestation'. This exclusion would apply to companies such as Sinar Mas, Indonesia's most notorious palm oil and pulp and paper supplier, if it fails to meet the criteria set out in the policy.
It also applies to Nestlé's business with palm oil traders such as Cargill, which continues to buy from Sinar Mas.
Greenpeace will closely monitor and push for the rapid implementation of Nestlé's plan.
Consumers creating positive change for our environment
We launched the campaign on 17 March 2010, kicking off with a parody video that became a viral hit on YouTube.
Video: Watch the viral video below.
People around the world embraced the campaign across social media sites Twitter and Facebook, where consumers posted their concerns on Nestlé's fan page.
Greenpeace activists dropped in on the company's global AGM in Lausanne, Switzerland with a message to shareholders, while other activists took the message to regional offices, including their Sydney office in Rhodes.
No place for rainforest destruction in marketplace
Nestlé's move sends a clear message to Sinar Mas, as well as the rest of the palm oil and paper industries: rainforest destruction is not acceptable in the global marketplace. They need to clean up their act and move to implement full peatland protection and a moratorium on rainforest destruction.
Global demand for both palm oil and paper is increasing, as companies like Sinar Mas expand into Indonesia's forests and peatlands.
The result? Indonesia has one of the fastest rates of forest destruction on the planet, and is the world's third-largest greenhouse gas emitter after China and the United States.
Palm oil is used in a huge range of products - from chocolate, toothpaste and cosmetics, to so-called 'climate-friendly' biofuels.