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Palm Oil Action Australia | November 23, 2017

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Palm oil producers shaken by own group

  • On July 19, 2016
Palm oil producers shaken by own group
Emily Chow – AAP on June 8, 2016, 10:36 am

In 2004, Malaysian palm oil producer IOI Group became a founding member of the Roundtable on Sustainable Palm Oil (RSPO) and later an executive board member in what seemed like a cosy arrangement.

Twelve years later, IOI attempted to take legal action against RSPO over an environmental ruling that has cost the company sales in the United States and Europe.

In March, the RSPO withdrew its “sustainability certification” from IOI, based on a decision to uphold a complaint from Amsterdam-based group Aidenvironment.

The complaint alleged that IOI had illegally chopped down rainforests in the Indonesian province of West Kalimantan and planted oil palms on peatlands, which are drained and then highly flammable. Fires across Indonesia in recent years have led to a massive haze of dangerous pollution across large parts of Southeast Asia.

Certification of environmentally sound behaviour is now required by some major palm oil buyers in the West, including major food and sweet makers. The suspension of IOI’s green credentials caused Nestle, Unilever, Mars and Kellogg to drop IOI Group as a supplier.

In response, IOI filed a lawsuit against the RSPO in Zurich, where RSPO is based, saying the move had “caused significant disruption” to its business in Europe and America.

IOI withdrew the suit on Monday in the face of a barrage of criticism from its customers and activists, and announced it was voluntarily adopting a more stringent certification system the RSPO is putting in place by the end of 2016.

“Since the filing of the challenge proceeding, IOI has engaged with many of our stakeholders such as customers, NGOs (non-government organisations) and RSPO to resolve this matter,” IOI said in a statement.

How the plantation firm and its overseer got into this situation may hold lessons for other companies in sensitive industries that are working with environmentalists to prevent deforestation and an increase in greenhouse gases, which most scientists say contribute to global warming.

“This is a call to all industries also to clean their operation and supply chain from deforestation,” said Annisa Rahmawati, Greenpeace Indonesia’s forest campaigner.

“There will be no market for companies that are still destroying our people’s life and planet.”

IOI is not the only plantation under pressure.

Malaysia’s government-linked Felda Global Ventures, the world’s third-largest plantations company, voluntarily withdrew RSPO certifications from all of its 58 processing mills after what happened to IOI.

Felda said it needed to clean up its supply chain before seeking certification again.

The plantation industry appeared to get outmanoeuvred on the RSPO, whose membership had evolved from 47 entities largely from the industry itself to 1,346 voting members, including 33 environmental and social activist groups and 612 consumer goods manufacturers, according to interviews with company executives, government officials, traders and activists.

Palm oil is the most widely used edible oil in the world, found in everything from margarine to cookies and from soap to soups. One of the cheapest edible oils on the market, it is extracted from the pulp of the palm fruit that drops from trees in tropical plantations, most of them in Malaysia and Indonesia.

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 (WWF). That’s a land area the size of Germany.

The fastest and cheapest way to clear new land for plantations is by burning. Every year, hundreds of thousands of hectares go up in smoke before monsoon rains begin to fall, choking people as a haze spreads over the region.

Palm oil plantations operating in remote rainforests have come under unprecedented scrutiny the past few years, not only from the mounting influence of activists, but from their customers as well.

“The market itself said it was not good enough,” said Eric Wakker, senior consultant at Jakarta-based Aidenvironment Asia which first brought the complaint against IOI to the roundtable six years ago.

“The big manufacturers like Unilever had overtaken RSPO itself when it came to deforestation.”

By 2013, the industry was on the defensive.

Environmentalists organised boycotts of palm oil products at supermarkets. Activists made videos for YouTube about burning forests and stranded orangutans. Pollution from that year’s forest fires reached record levels in Singapore and Malaysia.

That’s when the RSPO itself decided it was time to change.

At its annual general assembly in November 2013 in Medan, Indonesia, members voted overwhelming to beef up their standard and enforcement regime, and to commit to producing 100 per cent certified sustainable palm oil.

More importantly, RSPO agreed to overhaul its complaints panel to make it more independent. Up until then, the RSPO executive board, dominated by the plantations, ruled on complaints.

“It was filled with conflicts of interest,” Wakker said.

“The IOI case cost us six years and I almost fired myself over the lack of progress in 2013, when I realised… the system was crooked,” he said.

When RSPO finally adopted a resolution to make its complaints panel more transparent, “My response to bystanders was ‘now finally Aidenvironment can become an RSPO member’. And we did.”