The Chain: EXCLUSIVE – FGV Risks Supply Chain Exclusion Over Repeat Offenses – See Video

New evidence has emerged that Malaysian-based agri-business, Felda Global Ventures (FGV) (USD 1.7 billion market cap), continues to clear peat forest, contrary to its policies and industry standards, on its PT Temila Agro Abadi (PT TAA) plantation in West Kalimantan, Indonesia.

FGV is violating its own sustainability policy, adopted in August 2016 by its Board of Directors. FGV’s deforestation is also directly in violation of RSPO’s Principles and Criteria.

FGV’s deforestation pose material risk to its current commercial and business relationships. The majority of FGV’s customers, including Unilever, Wilmar, IOI, Musim Mas, Sime Darby, and KLK, have No Deforestation No Peat No Exploitation (NDPE) policies.

Satellite and Drone Images Show Ongoing Deforestation

As seen below in Figure 1, Chain Reaction Research-partner Aidenvironment’s satellite imagery shows that FGV’s subsidiary PT TAA continues to clear forest and peatland. The total cleared area since 2016 is 1,612 ha of mostly peat forest. This cleared land includes High Conservation Value (HCV) areas. Since FGV announced its new policy, it has cleared 864 ha of mostly forested peatland.

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Figure 1: Satellite images of PT TAA’s concession

Aidenvironment commissioned a drone fly-over on location April 12, 2017 of the PT TAA concession.

You can view the video here.

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The Chain: Unilever Changing Strategy After Kraft Pulls Bid and Invests USD 200 Million in Sustainability

Unilever Selling its Spreads / Margarine Business

Unilever announced April 6, 2017 that it will sell its spreads / margarine business, possibly by Q2 2017. The move came after Unilever conducted a review of its business segments following Kraft Heinz February 2017 unsolicited USD 143 billion takeover offer.

Two days after it became public, as analyzed by Profundo, by February 19, 2017, Kraft Heinz had pulled its bid for Unilever. Kraft Heinz, controlled by Warren Buffett and the Brazilian private equity firm 3G Capital, pulled its bid for various reasons including Buffett’s longtime aversion to hostile bids. While he supported the “friendly” takeover of H.J. Heinz in 2013 and later combining it with Kraft Foods Group Inc. in 2015 to create Kraft Heinz, he does not like to go where Berkshire Hathaway is not welcome.

Kraft Heinz Rejected So Announces USD 200 Million CSR Investment

Kraft Heinz in response announced March 21 2017 a USD 200 million investment to expand its CSR commitment.

Kraft Heinz says it will improve its supply chain’s sustainability, decrease its GHG emissions 15 percent and donate one billion meals by 2021. It also aims to set raw material-sourcing policies and practices to improve supply chain sustainability.

For example, under its new policy, it will only purchase palm oil products certified by the Roundtable on Sustainable Palm Oil (RSPO). But Kraft’s plan to rely on the RSPO and its Green Palm certificates scheme has been targeted by NGOs.

Domini Impact Investments and Calvert Investments Launch Proxy Against Kraft

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The Chain: NASDAQ’s EU Listing Guidance; Nestlé, Others’ Cocoa Deforestation Commitment; EU Votes for Sustainable Vegetable Oils; Court Orders Indonesian Palm Oil Review

Mondelēz, Nestlé, Others Make Cocoa Deforestation Commitment

12 of the biggest companies in the cocoa supply chain including Cargill, Olam, Ferrero, The Hershey Company, Mars, Mondelēz International and Nestlé made a public pledge to end deforestation and forest degradation in the cocoa sector by 2018. The cocoa commitment will link producer nations with buyer nations and corporate entities with financial tools intended to stop deforestation, support cocoa-growing communities and enable broader gender and community inclusion.

Moody’s recently suggested that global cocoa demand may grow. Annual per capita cocoa demand in China and India is about 0.1 kilograms per capita, much lower than the annual cocoa demand in Western Europe of 4.7 kilograms per person.

EU Votes for Sustainable Vegetable Oils

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BREAKING – Grupo Palmas: First Peruvian NDPE Policy Creates Business Opportunities But Strands Land

Grupo Palmas, including Palmas del Espino and subsidiaries, is specialized in the cultivation and processing of palm oil in the Peruvian Amazon. Grupo Palmas is 100 percent owned by the Peruvian conglomerate Grupo Romero. Grupo Palmas is Peru’s largest producer, refiner and exporter of palm oil.

After past controversies, Grupo Palmas is now shifting to a zero-deforestation approach. On April 4, 2017 Grupo Palmas published its No Deforestation, No Peat, No Exploitation (NDPE) policy that covers palm oil and cocoa. This creates new business opportunities, while also stranding its past expansion plans. These undeveloped concessions would be financially risky to develop.
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The Chain: Two Rotten Meat and Deforestation Scandals Impact JBS’s and BRF’s USD 2.5 Billion IPOs and Brazilian Economy

Two Rotten Meat and Deforestation Scandals
JBS SA, the world’s biggest meatpacking company, halted beef production at all but three of its 36 plants in Brazil last week as federal police released results from their two-year investigation of pork, poultry and beef meatpackers. They found that health inspectors and politicians took bribes to allow domestic and international sales of rotten meats. Countries around the world responded by ceasing imports of Brazilian meats. Markets were down about 20 percent on the news.

JBS also is caught in a second scandal as Ibama, Brazil’s environmental protection agency, raided JBS meatpackers in Redenção and Santana do Araguaia, in the state of Pará last week. Ibama’s raid identified 59,000 cattle sourced from land deforested illegally. This illegal deforested land equals the size of Manhattan – roughly 200 square miles. JBS sourced 90 percent of the animals from this illegally deforested land. In 2014, Brazil’s National Institute for Space Research reported that cattle ranching caused 65 percent of deforestation in the Amazon. In 2012, Tesco canceled its contract with JBS after JBS sold deforestation-linked beef to Tesco.

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Financial Impacts: JBS and BRF Allegedly Sold Rotten Meat
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REPORT: Alicorp – Peru’s dominant palm oil player has NDPE opportunity

Alicorp is one of the largest consumer goods companies in Peru. It has an important presence in Latin American countries. Alicorp is a domestic market leader in various product categories in the following business segments: consumer goods, B2B and aquaculture. It dominates the Peruvian oils and fats sector, and is the major buyer of palm oil for domestic use in Peru. Grupo Romero, one of the leading family-owned company groups in Peru, owns 45.7 percent of Alicorp.

Key Findings

  • Between 2000 and 2015, an estimated 40,000 hectares (ha) of primary forest have been cleared for palm oil plantations in Peru. While this represents a minor share of overall deforestation in Peru, it also corresponds to 52 percent of the cultivated area for oil palm in Peru. Alicorp is a major buyer of Peruvian palm oil. But it does not yet have a public No Deforestation, No Peat, No Exploitation (NDPE) commitment in place.
  • The lack of a NDPE policy poses business risks for Alicorp. Zero-deforestation is rapidly becoming a requirement to access international buyers. An important and increasing number of domestic consumers value sustainability initiatives.
  • Four percent of Alicorp’s revenue may be at risk due to increased demand for zero-deforestation products. For the consumer goods segment, changing consumer behavior could put three percent of revenue-at-risk. Additionally, the B2B segment may add one percent revenue-at-risk. This could mean a 12 percent equity price decline.
  • Financial institutions increasingly recognize deforestation as a material financial risk. The lack of a public zero-deforestation commitment could prevent Alicorp’s access to finance from international markets, reduce enthusiasm for future bond or share issuance and raise their cost of debt. BlackRock has recognized deforestation as a material climate-change related risk.
  • A strict cross-commodity NDPE policy could make Alicorp Peru’s frontrunner in the drive to halt deforestation and expand its competitive advantage into international markets. It could align the company with efforts by the Peruvian government and other stakeholders, which could increase the company’s market value.
  • Alicorp’s adoption of an NDPE policy would reduce the Peruvian market for  palm oil linked to deforestation.Alicorp is 45.7 percent owned by Grupo Romero. Grupo Romero wholly owns Alicorp’s competitor Grupo Palmas, which is Peru’s largest palm oil producer. Alicorp’s board overlaps with Grupo Palmas’ board, although they directly compete against each other in the B2B segment. With Grupo Palmas, an Alicorp NDPE policy that applies to all affiliated companies would cover nearly the entire Peruvian palm oil value chain.

Download as PDF: Alicorp: Peru’s Dominant Palm Oil Player Has NDPE Opportunity

The Chain: KLK’s Equatorial Palm Oil Obtains Five-Year Tax Holiday – Palm Oil Sector Hides Risks, says ZSL

KLK’s Equatorial Palm Oil Obtains Five-Year Tax Holiday

Kuala Lumpur Kepong’s (KLK) Equatorial Palm Oil PLC gained a five-year extension to its tax holiday in Liberia last week. Equatorial Palm Oil trades as PAL the AIM market of the London Stock Exchange.

PAL’s tax holiday covers its Palm Bay and Butaw palm oil concessions in Liberia. It was initially applied for seven years. Liberia has extended the tax holiday because development is slower than planned.

Last September, PAL’s joint venture Liberian Palm Developments disclosed a $30 million loan from KLK Agro Plantations (KLK Agro). Proceeds will fund the next building phase of a 60-metric ton palm oil mill on the Palm Bay Estate, Liberia. Palm oil from this new mill will be exported by the Equatorial Palm Oil PLC subsidiary LIBINC Oil Palm Inc. facility at the port of Buchanan.

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