Companies Reluctant To Source Palm Oil from IOI Even After Suspension Is Lifted

19 Aug 2016 --- Despite IOI Group regaining its certified status following a suspension from the Roundtable on Sustainable Palm Oil, companies are still reluctant to use the supplier.

As reported in FoodIngredientsFirst on August 9, the RSPO lifted a temporary suspension against IOI earlier than anticipated prompting several organizations to claim it was premature to do so.

But ten days on and companies, including multinational Unilever and Mondelez, are reluctant to source palm oil products until IOI shows tangible improvements on the ground. The suspension concerned three subsidiaries that allegedly violated a raft of RSPO standards that are meant to prevent rainforest destruction, social conflict and some laws.

A Mondelez spokesperson said: “Following IOI’s suspension from RSPO in early April, we immediately stopped buying RSPO-certified palm oil from IOI Group companies. We subsequently informed IOI group that we are phasing out purchasing all supplies. We’ve called on IOI to implement group-wide reforms, over and above regaining RSPO status. While we are encouraged by the action they’ve taken so far, we urge IOI Group to quickly withdraw its legal challenge against the RSPO and build relations with stakeholders. We will maintain our engagement with IOI during this process and will reconsider their status as a supplier when there is evidence of a credible plan being implemented against clear milestones.”

GreenPalm is a certificate trading program that allows manufacturers and retailers to purchase GreenPalm certificates from an RSPO certified palm oil grower to offset each ton of palm oil, palm kernel oil they use.

Bob Norman, general manager of GreenPalm, tells FoodIngredientsFirst about the current palm oil market and how companies are still hesitant to contract IOI. “We have seen an increase in prices over the past two months in the palm certificate market. The volume that is showing on the GreenPalm website as being committed to be bid for is twice the volume showing as being offered,” he says.

“In simple terms, the current snapshot is that there is twice as much demand as there is supply, in terms of volume. That indicates to the market that the price rises are justified. In volume terms, the greater impact is from Felda’s withdrawal of their certification.”

“Despite IOI regaining its certified status, we understand that companies will be hesitant to sign contracts with the supplier until they see tangible improvements."

“This means that the sustainable palm kernel oil market is still going to be tight, and this may well translate into more end users considering the GreenPalm market as an option to support sustainable production on the ground.”

Although Unilever acknowledges IOI’s revised Sustainable Palm Oil Policy (SPOP), it still does not intend to source until more concrete evidence of change is demonstrated on the ground.

“Unilever recognizes that IOI has made a good start with the remedial action plan to resolve the Ketapang complaint case,” a statement says. “While we acknowledge the action taken by the RSPO, we do not intend to resume sourcing palm oil products from IOI until we see tangible progress and on-the-ground implementation of their declared action plan.”

“We reiterate that we expect the highest standards from all of our suppliers and only source from suppliers who demonstrate strict adherence to the Unilever Sustainable Palm Oil Policy.”

“We will keep the dialogue with IOI open to encourage positive action and adoption of sustainable practices. As always, we continue to work closely with our suppliers, NGOs, governments, and other stakeholders to drive change in the industry and make sustainable palm oil commonplace. We are strongly convinced that we can make this happen through constructive dialogue and close cooperation among all stakeholders.”

A spokesperson for IOI commented to FoodIngredientsFirst: "Unilever's position is a matter for them and it is not for us to comment on it. What we can say is that, as previously announced, we have published a revised Sustainable Palm Oil Policy (SPOP) alongside a very detailed Sustainable Implementation Plan (SIP) setting out clear activities, milestones and timelines for delivery of the Policy. We consulted widely on the contents of those documents, including with our customers. Our focus will now be on the implementation of our commitments and progress reports will be made public on a quarterly basis beginning in Q4 of this year."

by Gaynor Selby