Breaking News: Felda Global Ventures (FGV) Withdraws from RSPO Certification of 58 Mills, Possibly Due to Peatland Deforestation

As reported today by Reuters, Yahoo Finance, and in The Edge Financial Daily, Felda Global Ventures (FGV:MK) withdrew today its Roundtable of Sustainable Palm Oil (RSPO) principles and criteria certificates for “58 complexes located throughout Malaysia.” This action may have been taken in anticipation of potential suspension of these lands by RSPO itself. Last month, Chain Reaction Research documented peatland deforestation on the company’s land, which is contrary to RSPO standards.

Many corporate buyers who purchase RSPO certified sustainable palm oil (CSPO) from Felda have clear and explicit zero-deforestation supply chain commitments. Felda’s documented deforestation of 880 ha of identified High Conservation Value peatlands puts these specific corporate procurement relationships at risk. Otherwise, Felda is increasing these corporations’ reputation risk by potentially selling them palm oil that does not meet their zero-deforestation commitments.

Since CSPO often sells at a premium to crude palm oil (CPO), Felda may lose this premium now that its mills are no longer certified. The company could lose a CSPO premium of 1% to 2% compared to their average 2015 selling price, which would result in $6 to $12 million in cash-flow-at-risk in 2016. This is separate from any broader market share losses.

For more information, see last month’s CRR analysis, “Felda Global Ventures: RPO Credentials at Risk, Immediate Cash Flow Impacts.”