US blocks Malaysian palm oil from FGV Holdings Berhad over forced labor and abuse concerns

01 Oct 2020 --- US Custom and Border Protection (CBP) has banned all palm oil and palm oil products manufactured by Malaysian producer FGV Holdings Berhad. The restrictions came into force yesterday following a year-long investigation that revealed indicators of forced labor.

These included physical and sexual violence, intimidation and threats, withholding of identity documents and wages, debt bondage, abusive living conditions, excessive overtime, abuse of vulnerability, deception, restriction of movement and isolation.

The investigation also raised concerns that forced child labor is potentially being used in FGV’s palm oil production process.

“The use of forced labor in the production of such a ubiquitous product allows companies to profit from the abuse of vulnerable workers,” says Brenda Smith, executive assistant commissioner for CBP’s Office of Commerce.

“These companies are creating unfair competition for legitimately sourced products and exposing the public to products that do not meet ethical standards.”

Key players in the palm oil supply chain have been working hard in recent years to clean up the image of this major ingredient, which is widely used across food applications. 

CBP has ramped up its use of these types of orders recently, following a 2016 change in US law that renewed CBP’s mandate to block products made with forced labor. 

Similar orders restricting imports have been given to several Chinese companies that the CBP accuses of forced labor practices. 

“CBP will continue to remind Americans that we can use our economic power to tell companies that we will not tolerate forced labor in US supply chains,” Smith adds.

“We urge all consumers to research fair trade products and companies and buy directly from reputable retailers.”

FGV hits back
FGV Holdings Berhad is a global agricultural and agri-commodities company with operations worldwide. The publicly-listed company produces oil palm and rubber plantation products, soybean and canola products, oleochemicals and sugar products.

It is the third-largest palm oil company in the world by planted acreage, and it controls more than 850,000 hectares of land in Malaysia.

FGV has hit back at the CBP, emphasizing that all issues raised “have been the subject of public discourse since 2015”. 

“FGV is disappointed that such a decision has been made when FGV has been taking concrete steps over the past several years in demonstrating its commitment to respect human rights and to uphold labor standards,” says an FGV statement. 

The company insists that various efforts have been carried to honor such commitments, including strengthening its procedures and processes in the recruitment of migrant workers. 

It adopted its “Guidelines and Procedures for the Responsible Recruitment of Migrant Workers” in 2019 in accordance with international standards and promises to strengthen the document. 

No involvement with refugees
FGV says it is not involved in any recruitment or employment of refugees. “Effective 2020, FGV recruits its migrant workers mainly from India and Indonesia through legal channels and processes recognized and approved by the authorities of Malaysia and the source countries,” it says. 

As of last month, FGV has 11,286 Indonesian workers and 4,683 Indian workers, who together form the majority of FGV’s plantation workforce. FGV says that it does not hire contract workers and all workers are employed directly by FGV.

Over the past three years, FGV has invested approximately MYR350 million (US$84.3 million) to upgrade housing facilities for its workers by constructing new residences in its plantations all over the country. 

“Mindful that human rights and sustainability standards must be fulfilled throughout our supply chain, FGV has adopted a Supplier Code of Conduct (SCOC), outlining the principles and standards relating to sustainability; business ethics and integrity; safety, health and environment; and labor, with which our suppliers and vendors are required to comply,” a statement says. 

Imposing an action plan
FGV insists that it does not tolerate any form of human rights infringements or criminal offense in its operations. 

“FGV pays serious attention to any allegation of physical or sexual violence as well as intimidation or threats, and as a responsible company any case of such nature will be acted upon by FGV including by reporting them to the relevant authorities,” says the statement.

FGV began to implement its action plan to bolster these commitments in April amid the COVID-19 pandemic. Although this did pose some challenges, the company says that it is “on the right track to be able to accomplish the action items due to be completed by the end of 2020.”

FGV says it will continue to engage with CBP to clear its name and is “determined to see through its commitment to respect human rights and uphold labor standards.”

Fighting deforestation and creating a sustainable palm oil supply chain 
Key players in the palm oil supply chain have been working hard in recent years to clean up the image of this major ingredient.

Palm oil is widely used across food applications such as bread, pastries, cereal, peanut butter, chocolate and margarine. It is also used in personal products like shampoo, cosmetics, cleaning products and biodiesel.

Many still consider its use controversial, although producers and other stakeholders in palm oil believe it can be produced sustainability.

Indeed, industry has been bolstering efforts to create certifications programs and educational initiatives involving farmers and their communities. Importantly, mapping and tracking systems can now identify where palm oil is being sourced and its journey through the supply chain.

For instance, Nestlé stepped up its no-deforestation game in 2018 when it became the first food company to use a high-tech satellite-based service to monitor its palm oil supply chains.

In a bid to distance itself from the controversy associated with deforestation and hit its no-deforestation targets, Nestlé implemented Starling. The global verification system uses technology combining high-resolution radar and optical satellite imagery to provide constant unbiased monitoring of land cover changes and forest cover disturbances.

Some years back, palm oil buyers and producers took collective action to improve labor conditions and livelihoods of workers across the wider palm oil supply chain in Indonesia.

Colgate-Palmolive, Kellogg’s, Nestlé, Unilever and Wilmar International Limited, in collaboration with Business for Social Responsibility (BSR), were involved. 

In terms of certification and monitoring, the Roundtable on Sustainable Palm Oil (RSPO) was established in 2004 to promote the growth and use of sustainable oil palm products through credible global standards and multi-stakeholder governance.

“There is in an ever-urgent need and growing global concern that commodities are produced without causing harm to the environment or society. RSPO certification is an assurance to the customer that the standard of palm oil production is sustainable,” says its website. 

Also, according to the RSPO website, FGV has been a member since December 2016. 

FoodIngredientsFirst has reached out to RSPO for further comment. 

By Gaynor Selby