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The Chain: Pepsi Suspends Palm Oil Purchased from Indofood Agri Resources, Broadening Supply Chain Policies

February 9, 2018

On January 24, PepsiCo announced that the company and its joint venture with Indofood Sukses Makmur, IndoFood Fritolay Makamur (IFL), had suspended purchasing palm oil from Indofood Agri Resources (IndoAgri). Pepsi stated it made this procurement decision because “PepsiCo is very concerned about the allegations that our policies and commitments on palm oil, forestry stewardship and human rights are not being met.”

PepsiCo has been subject to NGO pressure for its ties to IndoAgri in the past. In 2016, the Rainforest Action Network (RAN), OPPUK – a local labor rights organization, and the International Labor Rights Forum documented alleged labor grievances against IndoAgri including laborers under 18 years of age, low pay, health and safety conditions, production quotas, and use of informal labor. In its updated 2017 analysis, the coalition called out PepsiCo’s supply chain for its “conflict palm oil,” writing in that “workers’ testimonies contradict Indofood’s statements related to Freedom of Association.” RAN filed a formal complaint for breaches of the labor rights laid out by the Roundtable on Sustainable Palm Oil (RSPO) was filed against Indofood subsidiary PT PP London Sumatra Indonesia Tbk in October 2016 and is still ongoing. A 2017 report by Chain Reaction Research showed that 36 percent of the Crude Palm Oil (CPO) processed by Indofood came from undisclosed sources, creating reputational risks for purchasers.

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ESG Discrepancy Between Soy Growers and Financiers Creates Risk of More Expensive Financing

January 25, 2018

The large-scale expansion of soybean cultivation in Brazil has been identified as one of the key drivers of deforestation in the last 20 years. The Cerrado, which is a particularly biodiverse and carbon-rich biome, has been rapidly converted. Prior analyses by Chain Reaction Research have found that soy producers face financial risks from ongoing involvement in this Cerrado deforestation. This report builds upon two previously-identified key trends:

  • At least 49 percent of soy traders have committed to make their supply chains deforestation-free. The share as well as the strength of commitments are expected to further increase in the mid-term future. This creates market access risk for producers with weak sustainability performance.
  • High ESG-performers are perceived as less risky due to their association with high performance. This likely gives them to access to cheaper green finance. Some rural financing programs are also cheaper for producers with higher sustainability standards.

This paper looks in detail at the financing relations between nine key soy producers and their investors, scrutinizing any mismatches between the ESG performance of the two. They are scored from 0 to 100 on a set of sustainability and policy indicators. The paper also explores whether soy producers face the risk of more expensive financing due to weak sustainability commitments and scores.

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About Us


Chain Reaction Research conducts sustainability risk analysis for financial analysts and investors. Our special focus is on sectors that deal with environmentally intensive commodities, especially those sourced from tropical regions like palm oil, and pulp and paper.<

We explore whether unsustainable corporate practices and actions have introduced unreported risks – and how or whether sustainability leadership can mitigate those risks and possibly provide competitive advantage. Where possible, we provide pre-IPO checking of claims about risk and assets reported in prospectuses. We also review claims made by publicly traded companies.

Chain Reaction Research has received support, in part, from the David and Lucille Packard Foundation, and from the International Climate and Forest Initiative (NICFI) scheme managed by the Norwegian Agency for Development Cooperation (Norad). Chain Reaction Research statements and materials do not necessarily reflect the standpoints of the Packard Foundation or Norad.


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