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Palm Oil Sustainability Certifier to Review Indonesian Bribery Claims

Palm Oil Sustainability Certifier to Review Indonesian Bribery Claims

Palm Oil Sustainability Certifier to Review Indonesian Bribery Claims
March 23
09:56 2020

By Dylan Tokar

The palm oil industry’s sustainability certifier has for the first time been asked to review allegations that one of its member companies paid bribes to cover up the improper use of protected forest land in Indonesia—a case that highlights the difficulties facing multinationals whose supply chains rely on the widely used vegetable oil.

The bribery and land-use claims against Golden Agri-Resources Ltd., one of Indonesia’s largest palm oil producers and a supplier in recent years to Kellogg Co., Unilever PLC, Nestlé SA and others, is under review by the Roundtable for Sustainable Palm Oil, an organization comprising producers, buyers and environmental groups.

The complaint that the Roundtable published Thursday was filed by the U.K.-based human rights organization Forest Peoples Programme and U.S.-based Elk Hills Research. The groups used public records and satellite imagery to examine deforestation on Golden Agri plantations and encroachment on protected areas.

The complaint also ties this alleged land-use violations to a case last year in which Indonesia’s anticorruption commission brought bribery charges against three former Golden Agri employees.

A spokesman for Golden Agri, a Singapore-listed company with more than $6.4 billion in 2019 revenue, said it plans to contest the claims in the complaint.

The allegations underscore ongoing challenges faced by consumer food and retail companies, and their suppliers, as they work to root out environmental, labor and human rights issues throughout their supply chains, especially as investors pay closer attention to how companies manage these issues. It also represents a test for the industry’s sustainability certifier, which has come under fire from advocacy groups for not adequately enforcing its sustainability standards.

Palm oil is one of the world’s most-widely used vegetable oils, and is an ingredient in everything from lipstick to food products. But the crop has contributed to deforestation and human rights abuses in many of the countries where it is grown, according to advocacy groups.

The Roundtable was created by industry stakeholders to address some of these concerns. The group sets environmental and labor standards, and producers that adhere to them typically can sell their palm oil at higher prices. Members include large retailers and consumer food companies such as Kellogg, Unilever and Nestlé and other companies that make or sell palm oil products. The group currently certifies roughly 19% of the oil produced globally.

If the RSPO were to find that Golden Agri had violated the group’s standards, it could suspend certificates held by the company—in turn potentially limiting a source of certified palm oil to major manufacturers. Under the group’s rules, members can’t buy certified palm oil from plantations that have lost certification.

Some large multinationals, including Kellogg, Unilever and Nestlé, have chosen to publish lists of the mills where they source their palm oil—often indirectly—in an effort to promote accountability, and have made commitments to source only RSPO-certified palm oil within a certain period.

Unilever didn’t immediately provide a comment. A spokeswoman for Nestlé said the company prohibits its business partners, including suppliers, from engaging in bribery and corruption, and that it is monitoring the situation closely. A Kellogg’s representative said the company works through its supply chain to ensure the palm oil it uses upholds its commitment to protect forests and peatlands, as well as human and community rights.

Prosecutors in 2018 conducted a sting operation that resulted in the arrest of the three Golden Agri employees, four local government officials and the confiscation of 240 million rupiah ($14,923), which they said was intended as a bribe.

The purpose of the bribe was to ensure the local government overlooked the lack of land-use permits at one of Golden Agri’s plantations, according to the RSPO complaint, which cites Indonesian court documents.

The three former Golden Agri employees were sentenced by an Indonesian court to one year and eight months in prison. Golden Agri, in a statement published after the decision, said it had taken steps to reinforce awareness of its code of conduct through enhanced training and communication with staff.

It could be some time before the new complaint against Golden Agri is resolved. An RSPO spokesman, Dan Strechay, said the organization has tried to speed up its complaints process in response to criticism, but the complexity of issues and differing needs of a diverse group of stakeholders has created limitations, he added.

The certifier currently aims to close cases in about a year, Mr. Strechay said.

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