Malaysia palm oil giant says used as 'scapegoat' as green standards ramp up

Reuters News
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Posted: Jun 07, 2016 4:40 PM

By Tom Esslemont

LONDON (Thomson Reuters Foundation) - One of the world's largest palm oil producers, Malaysia's IOI Group, said it has been made the "scapegoat" of an industrial watchdog's increasingly muscular approach to ending slash-and-burn deforestation by major world players.

The Roundtable on Sustainable Palm Oil (RSPO), a body of consumers, green groups and plantation firms that aims to promote the use of sustainable palm oil products, withdrew the IOI Group's "sustainability certification" in March..

The move - which followed complaints from environmentalists that IOI had illegally chopped down rainforests in Indonesia and cleared peatland for palm oil plantations - prompted several multinationals to drop IOI as a supplier and drove its share price down by 11 percent.

Palm oil, commonly used in soap, cosmetics and food spreads, has been one of the fastest expanding crops in the past few decades but the industry is facing pressure over deforestation and its land clearing techniques.

IOI's head of sustainability, Surina Ismail, said the company accepted the findings that it had cleared rainforests and peatland in Indonesia but felt the punishment was too severe because it affected it all of its operations.

"We accepted the findings but the scope and breadth of the suspension all the way down to our refineries was a bit excessive," Ismail told the Thomson Reuters Foundation in the company's first interview since the suspension.

"Of course we say the suspension was unjustified. We felt like the naughty child in all this."

The action by the RSPO reflects a tougher stance against malpractice, said Eric Wakker, head of Aidenvironment Asia, a campaign group based in Indonesia.

"It is the first time RSPO fully enforced the ultimate sanction - the withdrawal of certificates from a company - at this material scale," said Wakker, who first raised the complaint against IOI Group.

For the RSPO to go a step further, to strip a company of its membership, would be almost unthinkable, Wakker said, because it would have no more leverage.

BLACK CLOUDS

Between 1990 and 2010, up to 3.5 million hectares of forests were cut down for palm oil plantations in Indonesia, Malaysia and Papua New Guinea, according to the World Wildlife Fund.

The clearance results in vast clouds of smoke across Southeast Asia every year, described by climate officials as a "crime against humanity" with plantation companies accused by environmentalists of endangering precious forests and peatland.

This mounting pressure has prompted major palm oil buyers, such as food and confectionary makers, to insist on environmentally sound certification from suppliers.

The suspension of IOI's green credentials caused Nestle, Unilever, Mars and Kellogg to drop IOI Group as a supplier.

Following the suspension of its certificates IOI filed a lawsuit against Zurich-based RSPO, saying the move had "caused significant disruption" to its business in Europe and America.

But the company withdrew the suit on Monday after a barrage of criticism from customers and activists.

Ismail said the company had announced instead that it was voluntarily adopting a more stringent certification system that the RSPO will put in place by the end of the year.

"Since the filing of the challenge proceeding, IOI has engaged with many of our stakeholders such as customers, NGOs and RSPO to resolve this matter," the company said on its website.

IOI is not the only plantation company under pressure.

Malaysia's government-linked Felda Global Ventures, the world's third-largest plantation firm, voluntarily withdrew RSPO certifications from 58 processing mills after what happened to IOI, saying it needed to clean up its supply chain.

IOI admitted its response to complaints about clearing peatland had not been adequate.

"Our rehabilitation is probably not what it should be," Ismail said, ahead of the RSPO's European conference in Milan which opens on Wednesday.

But Tom Johnson, head of research at environmental charity, Earthsight, said this was an understatement.

"For companies that are trying to improve the ... dire reputation of the palm oil industry, and maintain their access to market, the best thing they could do is to stop clearing forests," Johnson told the Thomson Reuters Foundation.

"They should respect the rights of rural communities, obey the law and restore damaged peatlands."

(Reporting By Tom Esslemont; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women’s rights, corruption and climate change. Visit news.trust.org)