Palm Oil Sustainability Certifier to Review Indonesian Bribery Claims
March 20 2020 - 9:31PM
Dow Jones News
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.
Write to Dylan Tokar at dylan.tokar@wsj.com
(END) Dow Jones Newswires
March 20, 2020 21:16 ET (01:16 GMT)
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