Iceland is to stop using palm oil in own-brand products by the end of 2018.
The Deeside-based chain – the first major UK supermarket to ban palm oil – said it was used in more than half of its products, from biscuits to soap.
Iceland said growing demand for the oil was devastating tropical rainforests across southeast Asia.
The frozen food specialist said it was alerted to the environmental challenges that palm oil presented by campaigners at Greenpeace.
The ban only applies to Iceland-brand products, meaning other products sold by the retailer may still contain palm oil.
Iceland managing director Richard Walker said there was “no such thing” as properly sustainable palm oil.
“Certified sustainable palm oil does not currently limit deforestation and it does not currently limit the growth of palm oil plantations,” he told the BBC. “So until such a time as there is genuinely sustainable palm oil that contains zero deforestation, we are saying no to palm oil.”
Mr Walker said the move would increase costs but they would not be passed on to customers: “There will be an extra cost but we think it’s the right thing to do.”
One species affected by palm oil is the orangutan population.
In some regions, oil palm cultivation has resulted in deforestation, leaving species that lived in virgin forest without a home.
Some palm plantations have been developed without consulting local communities over the use of their land, or even caused them to be forcibly displaced.
There are organisations dedicated to finding ways of producing palm oil more ethically and sustainably and a growing number of players in the palm oil industry have committed to adopting more sustainable practices.
Despite the high level of concern over the effect palm oil has on the environment in countries where it is grown, a survey of more than 5,000 UK consumers found about a third were not sure what palm oil is.
However, once they were told about effects on the environment, 85% said they did not think it should be used in food products.
Iceland says it has already found alternative recipes for 50% of its own-label range.
The store chain has a history of acting to remove controversial products from its shelves.
It was the first supermarket to ban GM-grown crops in its own-brand goods, and earlier this year said it would eliminate or drastically reduce plastic packaging of all its own-label products by the end of 2023.
Last year, the Bank of England considered the use of palm oil in its future banknote production, following complaints over the use of animal-derived tallow in its polymer notes.
The Bank launched a public consultation, receiving responses from 3,554 people. Of those who expressed a preference, 88% were against the use of animal-derived products and 48% objected to the use of palm oil-derived additives.
However, any switch to palm oil was ruled out as the Bank said its suppliers were “unable to commit to sourcing the highest level of sustainable palm oil”.