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The Chain: Five large palm oil producers announce HCS moratorium

September 19, 2014

Five large palm oil producers announce HCS moratorium, but questions remain

Five major palm oil producers – Sime Darby (SIME:MK), Asian Agri, IOI Corporation (IOI:MK), Kuala Lumpur Kepong (KLK:MK), and Musim Mas, – announced today that they would institute a moratorium on clearance of high carbon stock areas while a yearlong industry–sponsored study of what constitutes a forest is underway.

The move potentially signals a move towards a unified approach towards protecting forests in the palm oil industry. This group of growers had previously resisted the “No Deforestation” approach to forest conservation undertaken by Wilmar, GAR, Cargill and others, and instead promulgated a “Sustainable Palm Oil Manifesto” that allowed continued clearing of high carbon stock forests.

Some questions remain about the approach announced today by this manifesto group. The companies’ statement does not define how they will determine what qualifies as a high carbon stock landscape. Wilmar, Cargill, GAR, and APP all use an approach pioneered by The Forest Trust, GAR, and Greenpeace that clearly defines high carbon stock forests. A joint industry-NGO panel known as the High Carbon Stock Steering Group is meeting in Singapore to further refine their approach. But Sime Darby and Musim Mas said they would also look at this steering group’s conclusions as it determines HCS.

Meanwhile, Asian Agri, a participant in the moratorium, announced a new “No Deforestation” policy says it embraces the TFT/GAR/Greenpeace HCS approach, also until the joint industry study is complete. However, some details on how Asian Agri will implement its policy, such as independent verification of compliance, were unclear in the policy.

Bumitama’s new direction

On September 12th, Indonesian palm oil producer Bumitama Agri (BUMI:SI) announced that following a High Carbon Stock assessment of five major subsidiaries, it would set aside more than 13,000 hectares of forest and peatland for conservation. The study made 42,000 hectares eligible for development. The study used the same High Carbon Stock forest mapping methodology employed in recent months by Wilmar, GAR, and Cargill. With the move, Bumitama becomes the first Indonesian palm oil producer to publicly launch the use of this mapping methodology pioneered by The Forest Trust.

The move was particularly notable because the company has been the target of more NGO criticism for deforestation and peatland clearance than any other Indonesian producer. Although the HCS pilot won praise from its customers and conservationists, the company still has serious issues to address that were not covered by its recent study. A report released the same day as Bumitama’s HCS study found that the company is still illegally operating palm oil plantations in Borneo through its subsidiary PT Hati Prima Agro (not covered by the HCS pilot) in violation of a July Indonesian Supreme Court ruling. However, Bumitama has told customers that it expects a comprehensive forest policy by the end of the year that would build on this HCS pilot, and attempt to address issues such as HPA.

Dunkin’ Donuts and Krispy Kreme make zero-deforestation commitments

On Tuesday, Dunkin’ Brands Group, Inc. (DNKN:NASDAQ), the parent company of Dunkin’ Donuts, the world’s largest doughnut chain, announced a new policy to purchase palm oil only from companies not linked to deforestation. Dunkin’ committed to source palm oil for its 10,000 plus U.S. outlets that is 100% deforestation-free by no later than the end of 2016. The company has stores in over 55 countries and is rapidly expanding internationally, and committed to announcing a timeline for its international supply by March 2015.

Within 24 hours of Dunkin’s announcement, Krispy Kreme (KKD:NYSE), the second-largest doughnut retailer in the United States, made its own public commitment to shift to only deforestation-free suppliers no later than 2016, applicable to both US and international outlets. Both retailers’ policies require suppliers to protect lands with high carbon stock and peatland of any depth. The Canadian company Tim Hortons, recently the subject of a merger with Burger King (BKW:NYSE) is now the only major North American doughnut retailer yet to announce a policy to transform its supply chain away from deforestation.

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