| KUALA LUMPUR, March 22
KUALA LUMPUR, March 22 Global consumer firms
are gearing up to cut ties with palm oil suppliers who are
resorting to widespread deforestation and peatland clearance in
a bid to meet growing food and fuel demand.
In a space of three months, the world's top food firm
Nestle NESN.VX and No. 1 palm oil buyer Unilever (UNc.AS)
(ULVR.L) have stopped buying palm oil from Indonesia's Sinar
Mas. [ID:nLDE62G2B3] [ID:nGEE5BA0Z3]
The cancellations come after environmentalist group
Greenpeace highlighted how these firms' suppliers destroyed
forest habitats of endangered orangutans.
Here are questions and answers on what could happen next:
WHICH BIG CONSUMER FIRM WILL BE THE NEXT TO SHUN SINAR MAS?
Greenpeace, in a series of reports on Sinar Mas, also
identified Proctor & Gamble (PG.N) and Kraft Foods KFT.N as
main customers. These firms will find it difficult not to
follow in the footsteps of Unilever and Nestle.
J.P. Morgan said in a recent note there may be more supply
cancellations if Sinar Mas, along with its Singapore-listed
unit Golden Agri (GAGR.SI) and PT Smart (SMAR.JK), continues
with its plantation practices.
The investment bank identified Cadbury CBRY.D, Campbell
Soup Co (CPB.N), McDonald's Corp (MCD.N), Shiseido (4911.T),
Burger King Holdings Inc BKC.N and Henkel (HNKG_p.DE) as
among the key global customers for Sinar Mas.
HOW WILL INDONESIAN PLANTERS REACT?
The Indonesian Palm Oil Association (GAPKI) wants to bring
together all planters that supply palm oil to Unilever to
discuss taking action against the consumer goods giant, with a
whether to stop supplying Unilever collectively.
But it remains to be seen if planters will take that step
as more customers are expected to cancel contracts on
environmental concerns and Indonesia needs overseas demand to
absorb 70 percent of its total palm oil production.
There could be other implications. Indonesia, and even
rival producer Malaysia may make good on their threats to take
EU to the World Trade Organisation courts if their palm
oil-based biofuel exports are rejected for markets there.
WILL CUTTING OUT ERRANT PALM OIL FIRMS SAVE FORESTS?
Analysts and traders say if more consumer goods companies
join the Unilever and Nestle bandwagon, some Indonesian and
Malaysian planters may have to rethink their farming practices.
They may finally take seriously the Roundtable on
Sustainable Palm Oil (RPSO) -- an industry body of consumers
and planters that has developed an ethical certification system
that include pledges to preserve forests and wildlife.
Many Indonesian planters, including Sinar Mas, are members
but only three have received certification for some of their
estates and mills as the majority say that premiums for
producing eco-friendly palm oil are not high enough for them to
Critics say many planters are using the RSPO to show they
are eco-friendly but are afraid to subject most of their
plantations and mills to scrutiny as many of their farming
practices are hardly eco-friendly.
For firms who certified some output, see [ID:nSGE62K024]
Indonesian and Malaysian planters have said they can always
rely on demand from top buyers India and China where access to
affordable consumer products are a bigger priority than saving
WHAT OTHER PALM OIL FIRMS ARE UNDER THE RADAR?
Friends of the Earth has recently accused Malaysia's second
largest planter IOI Corp (IOIB.KL) of encroaching into peatland
forests in Indonesian side of Borneo island as it expands -- a
practice the firm strongly denies.
This is bad publicity for a planter who belongs to the
RSPO, has obtained green palm oil certification for some of its
mills and estates in Malaysia and has become a key supplier to
Finnish refiner Neste Oil's NES1V.HE biofuel plants in
(Editing by Himani Sarkar)