Indofood Agri Resources New Palm Oil Policy
Singapore-listed Indofood Agri Resources (IndoAgri) is one of the largest oil palm plantation companies in Indonesia, with a total landbank of 63 concessions covering 549,287 ha (42 percent of which is contested land), and planted area of 247,000 ha. This week it launched a new sustainability policy, superseding its former policies.
The new policy will apply to the company’s own plantation operations as well as third-party suppliers, including smallholders. At present, at least 36 percent of the crude palm oil processed in IndoAgri’s refineries comes from undisclosed sources. These third-party suppliers will now be confronted with these policy requirements.
The new policy is quite similar to the No Deforestation, No Peat, No Exploitation (NDPE) policies earlier adopted by the main traders and processors of oil palm. IndoAgri is an exception because it has chosen to follow the weaker RSPO standards for preserving High Carbon Stock areas, instead of the prevailing HCS approach. Since 2013, the company has had a policy of refraining from developing peatlands.
IndoAgri’s new policy, for the first time, expresses its intentions to comply with the fundamental conventions of the International Labour Organization. However, the company has not adopted sector specific labor standards. This exposes it buyers and investors to material risks. In October 2016, the NGOs Rainforest Action Network, OPPUK and ILRF filed a complaint with RSPO. In their report The Human Cost of Palm Oil these NGOs documented several material violations of workers’ rights in North Sumatra, and to date IndoAgri has not resolved these issues. This case, and the lack of a commitment to establish a credible grievance mechanism aligned with UN Guiding Principles on Business and Human Rights in its new policy, shows that the company still has a long way to go in its opening up to society and handling of grievances.
IndoAgri’s new policy does not include a statement requiring its executive directors to maintain NDPE in their outside activities – and it does not cover the side businesses of Mr. Anthoni Salim, the controlling shareholder of IndoAgri. His oil palm operations are linked to the destruction of peat forests in Sintang, West Kalimantan and orangutan habitat in East Kutai, East Kalimantan. For comparison, Bumitama’s sustainability policy from August 2015 advises its executive directors with oil palm assets outside the listed group to uphold a similar no-deforestation policy. Mr. Salim needs to embrace a similar policy to address NGO-scrutiny over his plantation businesses which are not compliant with IndoAgri’s own NDPE policy or the NDPE policy of IndoAgri’s buyers.