Major brands break ties with Indonesian palm oil giant

Big brands Nestlé and PepsiCo have decided to stop sourcing palm oil from IndoFood Group in light of longstanding allegations of labour and environmental violations.

palm oil fruit bunch in truck
Cases of labour exploitation and human rights abuses in Indonesia's palm oil industry have been brought to light by local and global NGO over recent years. Image: Shutterstock

Global confectionary brands have announced that they are cutting ties with Indofood, Indonesia’s largest food and palm oil production company.

Nestlé and PepsiCo, both long time business partners of Indofood, have ended direct and indirect sourcing of palm oil from IndoAgri, a Singapore-listed subsidiary of Indofood, due to concerns over ongoing deforestation and human rights abuses within its operations.  

In an updated statement on its palm oil policy in Indonesia, PepsiCo said that it has decided to suspend sourcing palm oil from IndoAgri to its joint venture with Indofood, “pending further progress and visibility” around allegations of labour violations on its plantations. PepsiCo remains in business with the company under Indofood Fritolay Makamur (IFL), which produces snacks in Indonesia under the Lays brand. 

According to PepsiCo, the company has taken steps to ensure its direct suppliers have temporarily halted palm oil sourcing from IndoAgri. The company added it will be reviewing its decision on a regular basis while taking into consideration recent actions taken by the Indonesian company to address its human rights breaches and links to rainforest and peatland destruction.

Nestlé has also stated on its website that it had agreed to close its joint venture with Indofood Group in September 2018 for “commercial reasons”, including it in a list of companies that have been or are in the process of being removed from Nestlé supply chains.

We’ve done 18 RSPO audits for recertification and we’ve had some corrective actions to do but we haven’t been sanctioned. We’ve done everything we can do with RSPO. 

Mark Wakefield, chief executive officer, IndoAgri

Agribusiness campaign director Robin Averbeck from the Rainforest Action Network, a US-based non-government organisation (NGO) that has actively campaigned against Indofood for years, called the decision by Nestlé a strong move, adding: “No company, bank or certification system which espouses commitments to uphold human rights and stop deforestation should continue to be in business with Indofood.”

Averbeck pointed to Indofood’s history of labour and environmental violations, which have been exposed in numerous reports by NGOs such as RAN. Together with the International Labor Rights Forum and Indonesian labour rights group OPPUK, RAN conducted a 2015 probe into workers’ conditions on Indofood’s certified plantations in North Sumatra.

The investigation revealed instances of forced labour, dangerous working conditions and poverty-level wages that resulted in the NGOs leading a joint complaint in 2016 to the Roundtable on Sustainable Palm Oil, the industry’s largest certification body. In 2017, IndoAgri revised its policy on sustainable palm oil, but it was criticised by NGOs as falling short of demands. 

Tracing Indofood’s dirty trail in palm oil 

Indofood has repeatedly come under fire from environmental groups over the years. The company has been the focus of various reports because of its link to the controversial Salim Group, as seen in a 2018 report by Aidenviroment titled “Palm oil sustainability assessment of Salim-related companies in Borneo peat forests.”

No company, bank or certification system which espouses commitments to uphold human rights and stop deforestation should continue to be in business with Indofood.

Robin Averbeck, agribusiness campaign director, Rainforest Action Network

The report exposed ongoing clearance of peatland the size of 10,000 rugby fields in the span of five years in Kalimantan by two palm oil companies with connections to the Salim Group. Headed by wealthy businessman Anthoni Salim, the family-run conglomerate has a reputation for clearing huge swathes of land and breaching labour and human rights laws in its palm oil operations. 

NGOs leading the investigation called for IndoAgri’s buyers, namely major consumer goods companies such as PepsiCo and Nestlé to “stop sourcing from the Salim Group while it remains in noncompliance with both presidential policies and government regulations of Indonesia, as well as their own published policies.”

On being the prime target of environmental groups over the last few years, IndoAgri’s chief executive officer Mark Wakefield told Eco-Business in an interview in May that the company had done its bit by working with RSPO to address the allegations.

“We’ve done 18 RSPO audits for recertification and we’ve had some corrective actions to do but we haven’t been sanctioned. We’ve done everything we can do with RSPO,” he said, adding that NGOs had not been transparent about where the company had gone wrong, making it hard to address the allegations.

After the formal complaint against Indofood was lodged in 2016, the RSPO conducted its first investigation into the matter in December last year. However, there has been little indication that Indofood will be suspended by the certification body despite strong pressure from NGOs to do so.

In December, Nestlé was suspended by RSPO after claims that the company had failed to report on its sustainability and pay membership dues to the certification body. The company was reinstated three weeks later after handing in its plan of achieving 100 per cent RSPO-certified sustainable palm oil by 2023.

RSPO has received public criticism for its failure to stall ongoing deforestation across Malaysia and Indonesia, and crack down on members found with instances of ecological damage and human rights abuses in their supply chains.

Averbeck commented: “The fact so many companies are moving ahead of the RSPO should be a loud wake up call to the certifier that it cannot continue to certify Indofood’s labour abuses as ‘sustainable.’”

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