Palm oil supplier challenges R.S.P.O. suspension in court

by Jeff Gelski
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IOI Loders Croklaan palm oil
IOI says its penalty is disproportional to the findings of the Roundtable on Sustainable Palm Oil.

PUTRAYA, MALAYSIA — IOI Corp. Berhad, a founding member of the Roundtable on Sustainable Palm Oil, has filed a challenge on its suspension from the R.S.P.O. in the Zurich District Court of Switzerland.

The suspension, which went into effect April 4, came after complaints about oil palm growers and IOI subsidiaries PT Sukses Karya Sawit (PT SKS), PT Berkat Nabati Sawit (PT BNS) and PT Bumi Sawit Sejahtera (PT BSS). Following the suspension, such companies as Mars, Inc., McLean, Va., and Unilever P.L.C., London, announced plans to step away from IOI as a palm oil supplier for their products.

“The decision to challenge the R.S.P.O. board’s suspension decision is a difficult and painful one for us to take,” IOI, based in Malaysia, said on May 9. “On the one hand, we have great commitment and attachment to R.S.P.O., an organization of which we are a founding member and on whose board we have been actively contributing since 10 years ago. On the other hand, we feel that we have been unfairly affected by the extent and scope of the suspension decision, which was recommended by the complaints panel and subsequently endorsed by the board of R.S.P.O.”

IOI said the suspension affected shareholders, suppliers, its customers, certified palm oil users and thousands of IOI employees.

“We therefore believe the scope and effect of the suspension decision is highly disproportionate to the findings by the panel, and the decision has not duly taken into account the corrective actions taken by us and verified by an R.S.P.O.–accredited auditor during the one-year period between the complaint and the decision dates,” IOI said.

IOI said the suspension should not cover the downstream processing units certified under a different set of rules than the oil palm growers and that the suspension should not affect existing palm oil purchases and sales contracts that were agreed upon before the suspension decision.

A Justice of the Peace in the Zurich District Court will hold a hearing, IOI said. If both parties fail to reach an agreement, the Justice of the Peace then will sanction a formal legal action.

The R.S.P.O., a not-for-profit group, unites stakeholders in the palm oil industry and develops and implements global standards for sustainable palm oil, which include environmental and social criteria. Complaints against the three IOI subsidiaries included sub-standard reviews, land clearing without permits and fraudulent statements.

Because of the suspension, Unilever on March 31 said it was disengaging with IOI and planned to do so over a three-month period. Mars, Inc. said it will discontinue sourcing palm oil from IOI while the suspension is in place. The Kellogg Co., Battle Creek, Mich., said it began removing IOI from its supply chain in January. By March, 67% of the volume from IOI Loders Croklaan, a palm oil supplier and IOI subsidiary, had been transitioned to other suppliers.

Once the R.S.P.O. suspended IOI, Nestle S.A., Vevey, Switzerland, immediately ceased sourcing from the IOI plantations named in the complaint, said Nina Caren Kruchten, senior corporate spokesperson for Nestle. The company also asked its partner organization, The Forest Trust, to look into how IOI responds to the R.S.P.O. issues.

“Alongside T.F.T., we have now carried out an assessment of IOI’s action plan, which it claims is designed to deliver on the group’s commitment to no-deforestation in its operations,” Ms. Kruchten said. “Our conclusion is that it does not go far enough in tackling the issues raised by IOI’s R.S.P.O. suspension and that Nestle will therefore not award any new business to IOI group with immediate effect. We will also phase out all existing contracts with an expected completion date of Aug. 31, 2016.” 

IOI said that since the suspension it has conducted a four-day field verification visit with the Global Environment Centre, a specialist firm in peat and HCV (high conservation values) matters and has begun to implement measures suggested by the Global Environment Centre. IOI also has appointed Proforest, an international firm, as a sustainability consultant and implementation partner.

“We regard the challenge of the R.S.P.O. board’s suspension decision as a separate matter from taking the concrete actions required by the panel to lift the suspension,” IOI said. “The challenge action, which has to be filed within the 30-day time period, is not intended to influence the complaints panel decision on lifting the suspension.

“Rather, it is a last-resort measure to draw serious attention to the weaknesses in the decision-making process in certain parts of R.S.P.O., which we have observed over the last one year, and hopefully will help to catalyze some needed improvements to the process and mechanism within it.”
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