Tuesday April 12, 2011
Commodities Talk- by Hanim Adnan
WHILE IOI Corp is busy clearing its name following a sanction by the Roundtable on Sustainable Palm Oil (RSPO) on allegations of land disputes and deforestation charges in Sarawak, environmental NGOs are equally hard at work to gain the support from major palm oil buyers to suspend their purchases from the plantation giant.
One such NGO is San Francisco-based activist group Rainforest Action Network (RAN). RAN is campaigning around the situation given the fact that IOI is a supplier to Cargill, the largest importer of palm oil into the United States.
RAN has demanded Cargill institute basic safeguards on its supply chain to ensure it is not selling palm oil from stolen indigenous land to American consumers.
Unilever, the world's second largest consumer group, had come out with a statement saying that it would review supply agreements with IOI should the latter fail to deliver the requirements by the RSPO. However, it is currently still business as usual between the two companies.
Another major purchaser, Finland-based renewable diesel producer Neste Oil Corp, meanwhile maintained that it would continue to buy palm oil from IOI as its palm oil procurement comes from sustainable mills with the supply chain fully traceable and documented and not from the conflict area in question. In 2009 and 2010, PT Sinar Mas Agro Resources and Technology (PT Smart), an Indonesian subsidiary of Golden Agri Resources, which in turn is a member of RSPO, suffered the brunt from Greenpeace of clearing peatlands and rainforest in Indonesia which resulted in the lost of a number of major customers.
Unilever, Kraft, and Nestle were among the big companies that abandoned PT Smart, which has since announced a strict forest policy for new plantations.
So, will IOI also suffer a similar fate as PT Smart? All will depend on the local plantation giant's rebuttal.
The RSPO has given IOI till May 2 to deliver a proposal to resolve the outstanding issues for breaching “two core membership mandates and obligations” on land conflict and conversion of high conservation forest into oil palm plantations.
Failing to do so, RSPO would consider further sanctions on IOI i.e. suspension of licence on new certified sustainable palm oil including GreenPalm certificates.
At least for now, many purchasers of IOI's certified sustainable palm oil are still showing full support for the local plantation giant.
However, a lot would be at stake should IOI be held accountable for the claims on land dispute grievances filed by the indigenous community of Long Teran Kenan in Baram, Sarawak and allies including RAN.
Apart from major disruption or suspension in palm oil purchases from major buyers, the share price of IOI Corp one of the favourite plantation counters on Bursa well monitored by both local and foreign fund managers could be affected as well.
Deputy news editor Hanim Adnan believes more plantation companies will come under close scrutiny of the NGOs and the RSPO as the global demand for a truly “green” palm oil becomes more intense.