Kellogg, Mars and Unilever cancel palm oil contracts

Kellog, Mars and Unilever have cancelled contracts with the Malaysian IOI Group following its suspension from the Roundtable on Sustainable Palm Oil (RSPO) last month.  Three subsidiaries of IOI are alleged to have breached RSPO standards in relation to deforestation and social conflict. Unilever was the first to look to sever links with IOI – one of the company’s largest supplies of RSPO “Certified Sustainable Palm Oil” (CSPO). Kellogg announced that it had started to remove IOI from its supply chain in January and by last month, 67% of IOI’s volume was assigned to other suppliers. Mars has pledged not to source palm oil from IOI for as long as its suspension remains in place.

Malaysia’s IOI was suspended from the RSPO over violations of the roundtable’s sustainability standards in Borneo.

Since then, IOI’s customers have moved to cancel contracts with the conglomerate, to date one of the major suppliers of RSPO-brand “Certified Sustainable Palm Oil.”

IOI has submitted an action plan for RSPO reinstatement.

In the wake of IOI Group’s suspension from the the world’s largest association for ethical palm oil production, its customers Unilever, Kellogg and Mars have announced they will stop doing business with the Malaysian conglomerate.

IOI Group, and its downstream affiliate IOI Loders Croklaan, were suspended from the Roundtable on Sustainable Palm Oil (RSPO) last month over the group’s plantations in the Ketapang area of Kalimantan, the Indonesian part of Borneo. Three of IOI’s subsidiaries are alleged to have violated a raft of RSPO standards meant to prevent rainforest destruction and social conflicts, and to have broken the law.

Unilever was the first to drop IOI. The Anglo-Dutch consumer goods giant said in a statement last week that it was “disengaging” with the conglomerate in what was expected to be a three-month process.

Asked whether that meant it was cancelling its contracts with IOI or simply suspending them, a Unilever spokesperson told Mongabay, “The reason we’ve said disengaging rather than cancelled is that is takes a number of weeks to end these sorts of contracts – so the process isn’t instant.”

The spokesperson added, “Separately but in tandem with this process, we are working with IOI and NGOs to try and transform IOI’s business make it sustainable – this is because of the transformational effect this could have on the palm oil industry.

“IOI does now have the opportunity to turn this back around and demonstrate its commitment to sustainable palm oil but this needs to be done immediately and with complete transparency.”

It is understood that Unilever told NGOs it was cancelling its contracts with IOI, one of its biggest suppliers of RSPO-brand “Certified Sustainable Palm Oil,” or CSPO.

“Unilever is the first customer to cancel contracts with IOI,” Greenpeace forest campaigner Annisa Rahmawati said on Friday. “Other companies should 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, labor and environmental issues that continue to taint its supply chain.”

Also on Friday, Kellogg said it had already begun removing IOI from its supply chain in January because of troubling reports about its operations. As of March, 67% of IOI’s volume had been transitioned to other suppliers, and the remaining volume would be transitioned over the next 90 days, according to Kellogg.

“We continue to drive industry transformation through our engagement with RSPO, all suppliers, and palm industry working groups,” the American multinational said.

Mars, which is owned by the Mars family, said it would “not source palm oil from [IOI] while the suspension is in place.”

Unilever, Kellogg and Mars have each pledged to purge their supply chains of rainforest destruction, peatland conversion and human rights abuses, though none can yet claim to have traced its palm oil supply to the plantation level, a prerequisite for achieving the ambitious goals.

Before the suspension took effect, IOI appealed to the RSPO to apply the suspension only to its plantations and not to its refineries, so that IOI Loders Croklaan could continue marketing CSPO and avoid disrupting its customers’ supply schemes.

“I can admire the chutzpah required to put such an outlandishly attenuated notion of justice on paper – that there should be no accountability because accountability would cause some commercial disruption,” Glenn Hurowitz, former chairman of the Forest Heroes campaign, which tries to get corporations to adopt zero-deforestation policies, wrote in the Huffington Post.

“But after six years of having every chance in the world to address these grievances in some other fashion, and meanwhile continuing to pile up serious deforestation and labor rights violations, I would hope RSPO takes IOI’s appeal as seriously as IOI has taken any one of its own promises to do better.”

IOI has submitted an action plan for RSPO reentry, and a spokesperson said the company “is very concerned about the impact on its stakeholders and reputation, if the group is not able to supply certified palm oil in the future due to prolonged suspension; these potential sales losses are not quantifiable.”

IOI is controlled by the family of the 77-year-old Lee Shin Cheng, whose net worth Forbes estimates at $5 billion. The listed conglomerate is also a major property developer and chemicals manufacturer.