Consumer goods giant Unilever has begun cancelling its contracts to buy sustainably-produced palm oil from Malaysian palm oil firm IOI Group after the latter was suspended by industry group Roundtable for Sustainable Palm Oil (RSPO) last week.
IOI, which was a founding member of the RSPO, has been suspended from April for violating the group’s standards following complaints filed by Amsterdam-based environment group Aidenvironment about its plantations in the Ketapang area in West Kalimantan of Borneo in Indonesia.
“Unilever takes the allegations against IOI and its suspension from the RSPO extremely seriously…This suspension puts IOI in breach of our policy,” Unilever said in a statement on Thursday.
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The Netherlands-based consumer goods producer, which uses about one million tonnes of crude palm oil and its derivatives annually, claims to be the largest company using certified palm oil in its supply chain. In 2015, it used 300,000 tonnes of certified sustainable palm oil.
In 2010, it signed a multi-year agreement with IOI to buy palm oil that is 100 per cent traceable all the way back to the plantation. It was part of a wider plan to use 100 per cent certified plam oil for all its products by 2015.
Unilever said it has achieved sourcing 100 per cent sustainable palm oil in 2012, three years ahead of schedule. It said that last year, it successfully achieved 73 per cent of its target to source palm oil that can be traced from the mills.
“We are now in the process of disengaging with the supplier and have set a time bound plan to do this over the next three months,” Unilever added.
Malaysian-listed IOI’s subsidiaries in Indonesia were accused of land clearing without permission, including in forest areas with high conservation value.
With the suspension, IOI’s ability to supply certified palm oil is also suspended. IOI said it has submitted an action plan to the RSPO to review and resolve the issue following the suspension order, and noted that its sales of regular crude palm oil will not be affected.
“Sales of IOI’s crude palm oil will not be affected even in the event of a suspension as CPO is a globally traded commodity. The only effect is that IOI will not be able to earn CSPO premium on our oil which represents only a very small percentage (less than 0.5 per cent) of our revenue,” commented IOI sustainability manager Yeo Lee Nya to Malaysian media last week.
IOI said in its filing to Bursa Malaysia on Tuesday that it is taking measures to comply with the regulations on palm oil development in Indonesia.
International environmental group Greenpeace slammed IOI in a statement on Thursday, saying the company has not been addressing the real issue of forest and peatland destruction caused by its concessions.
“IOI has been given every opportunity to reform and has repeatedly refused to do so, even though its actions were contributing to the fire and haze crisis. Even now it is still pretending nothing is wrong and is appealing the decision instead of trying to right the wrongs it has done,” said forest campaigner Annisa Rahmawati of Greenpeace Indonesia.
The campaigns group also lauded Unilever’s actions and urged other multinational firms that use palm oil to follow its lead.
“If IOI wishes to regain its customers, it must take immediate and significant action to address its legacy by restoring and protecting the peatland forests it has destroyed. It must also address the serious social, labour and environmental issues that continue to taint its supply chain,” stressed Rahmawati.