Wilmar launches landmark sustainable finance deal, child protection policy

The world’s largest palm oil trader has unveiled a series of sustainability initiatives. But some campaigners say it has failed to tackle the root causes of exploitation in its operations.

Child labour on palm oil plantation
A child labourer at a palm oil plantation in Indonesia. Labour abuses within the palm oil industry's supply chain have come to the fore in recent times. ILO in Asia and the Pacific, CC BY-NC-ND 2.0

In a world first for the palm oil industry, Singaporean agribusiness giant Wilmar International has reached an agreement with a financier that will allow it to pay lower interest rates on a loan if it meets sustainability-linked performance targets. 

The deal, announced on Monday, will see Wilmar working with Dutch bank ING to convert part of an existing US$150 million loan to a sustainability performance-linked one.

It is the first company in Asia, and the first palm oil company to work with ING to tie its financial obligations to its sustainability performance in this way. ING has inked similar sustainability performance-linked loans with clients such as a health technology company, a chocolate and cocoa producer and a gas and electricity company in Europe since March this year.

The announcement comes almost a year after international human rights group Amnesty International released a report outlining extensive labour abuses in Wilmar supplier plantations, including the use of child labour, unsafe conditions for workers which include exposure to toxic pesticide Paraquat, and a failure to pay minimum wage to workers. 

As part of its deal with ING, Wilmar will have to meet targets in various aspects of its environmental, social, and governance (ESG) performance. These metrics are part of sustainability consultancy Sustainalytics’ research methodology for assessing the ESG rating of organisations.  

Metrics include the effectiveness of programmes around biodiversity, greenhouse gas reductions, renewable energy and sustainable agriculture. If Wilmar’s performance is satisfactory, ING will reduce the interest rate for part of the firm’s loan in 2018. Wilmar did not disclose figures for how much the interest rate would be cut by. 

Ho Kiam Kong, chief financial officer, Wilmar, said in a statement that “sustainability is a priority at Wilmar and we are constantly seeking improvements in our sustainability performance.”

“We believe that incorporating sustainability metrics into every aspect of our business, from daily operations to corporate financing, is key to creating value for our stakeholders,” added Ho. 

Perpetua George, general manager for group sustainability, Wilmar, told Eco-Business that in addition to its ongoing sustainability efforts, the company would be taking additional steps as part of its efforts to meet the Sustainalytics targets. These include improving the sustainability of other crops in Wilmar’s portfolio, such as sugar. 

We are actively working on plans to address this, but it’s not something that will change immediately. We cannot yet say we have successfully solved the wage issue.

Perpetua George, general manager for group sustainability, Wilmar International

Child protection policy

Wilmar’s sustainable finance deal comes close on the heels of a new policy to protect children living in the company’s oil palm plantations. 

Launched on November 22, the Child Protection Policy (CPP) takes a broader view to safeguarding the welfare of children than its existing No Child Labour Policy, which has been in place since the company’s inception.

The new CPP is applicable across Wilmar’s global operations, including its joint ventures, third-party suppliers, and contractors. Wilmar says this is the first such policy to apply explicitly to external parties. 

It includes commitments to protecting the interests and well-being of children in Wilmar’s operations and those who live in Wilmar concessions, providing children access to primary and secondary education, and responding to any reported abuses “swiftly and appropriately”. 

George said that “over the last year, we have received feedback from many organisations, principally Unicef, that rather than child labour per se, the bigger issue with children and the oil palm industry is about safeguarding children and their rights”. 

“We definitely agree with that and the CPP is conceived to ensure that we respect the rights and protect the welfare and wellbeing of children at all times,” she added. As part of the policy, Wilmar will be upgrading all the schools in and around its palm oil estates, and expects this to benefit as many as 7,000 children annually.

Ai Maryati Solihah, Commissioner of Trafficking and Exploitation, Indonesian Child Protection Commission, welcomed the effort and said in a statement that “I think this will have a positive impact on eliminating children’s involvement in Crude Palm Oil production”. But human rights campaigners were less impressed.

Lauren Armistead, business and human rights campaigner, Amnesty International, told Eco-Business: “We are really disappointed that this child protection policy isn’t more targeted. It doesn’t really address the root causes we identified in our report.” 

Amnesty’s report had explained that harvesters often had no choice but to bring their children to help out on plantations and work overtime, because it was the only way they could meet unreasonably high targets for fruit harvesting, and earn enough money to live on. 

“Without reforming the working policies and practices on plantations, and changing the wage and quota system, this policy could actually make working conditions harder for parents,” said Armistead. “It’s really about attacking the root causes.”

She also pointed out that Wilmar’s policy made no reference to any measures to remediate the physical and economic harm that had already been done to workers being exploited by suppliers. 

She added: “A lot of the abuses we highlighted—such as a failure to pay minimum wage to workers—were infringements of Indonesian and international law. Why it has taken a year to address this, we don’t know.” 

Amnesty International had in July this year also pointed out various omissions in an action plan developed by Wilmar in April, which sought to tackle labour violations in its operations.

The Wilmar document outlined commitments such as identifying why children did not attend school, educating parents on the hazards of having children on plantations, evaluating temporary workers for permanent roles, and educating workers on their healthcare entitlements.

But in a letter to Wilmar chief sustainability officer Jeremy Goon, Amnesty International head of business and human rights Seema Joshi pointed out various omissions: A failure to address issues such as penalties levied on workers and forced labour; no remediation for past harm suffered by workers; and a refusal to acknowledge structural issues such as unreasonably low salaries which forced workers to clock overtime hours.

“We have given really comprehensive feedback but it hasn’t been incorporated,” said Armistead.

In response, Wilmar’s George acknowledged that while the CPP’s intention was to look at children’s well-being in a more holistic manner across its operations, “it’s a fair point, and yes, the root cause of some of these issues is about wage structure.”

“But we are not saying that the policy is going to fix everything,” she said, adding that Wilmar is already working with global labour advocacy organisation Verite to address issues related to labour and wages in its supply chain. 

The issues identified by Amnesty International are rife in the whole industry, so solutions have to be broadly applicable, said George.  “We are actively working on plans to address this, but it’s not something that will change immediately,” said George. “We cannot yet say we have successfully solved the wage issue.”

She added that a series of supplier training workshops that Wilmar has recently initiated in partnership with advocacy group Business for Social Responsibility (BSR) will hopefully make it easier for suppliers to understand, and meet expectations on issues such as wages, labour conditions, and human rights.

Currently the workshops, which were announced in mid-November, aim to educate suppliers on the areas where they need to make improvements in their engagement with workers. Once that has been completed, Wilmar will move on to looking at the tools needed to make these changes, and how to measure their impact, said George.

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