PepsiCo cuts ties with palm oil supplier over labor abuse claims

KUALA LUMPUR (Thomson Reuters Foundation) - Food and beverage giant PepsiCo has suspended procurement from a palm oil supplier over claims of labor abuses on its Indonesian plantations, a move hailed by campaigners on Wednesday.

A 2016 probe by several campaign groups alleged there were child labor and worker exploitations, such as low wages and hazardous working conditions, on Indonesian plantations operated by Singapore-listed Indofood Agri Resources (IndoAgri).

Although IndoAgri has taken action to address the complaints, PepsiCo said it decided to suspend ties “pending further progress and visibility around the issues” after it looked into the allegations.

“PepsiCo is very concerned about the allegations that our policies and commitments on palm oil, forestry stewardship and human rights are not being met,” it said in a statement.

Neither IndoAgri nor its parent company, Indofood, were immediately available to comment. IndoAgri said on its website that it has a sustainable palm oil policy which ensures human rights are respected.

Businesses are facing increasing pressure from governments and consumers to disclose what actions they are taking to ensure their supply chains are free from modern-day slavery.

Indonesia is the world’s largest palm oil producer but it has been regularly linked to the destruction of rainforests and wildlife habitats, as well as displacement of indigenous communities.

IndoAgri is a subsidiary of Indonesian food manufacturer Indofood, which produces PepsiCo’s snacks in Indonesia under a joint venture partnership. The joint venture sourced palm oil from IndoAgri.

The investigation was carried out by San Francisco-based Rainforest Action Network (RAN), Indonesian labor rights group OPPUK and Washington-based International Labor Rights Forum.

“After years of denial, PepsiCo has admitted to the high risks associated with its palm oil supply chain and business partner,” RAN campaigner Robin Averbeck said in a statement.

Palm oil, used in soap, cosmetics and food spreads, has been one of the fastest expanding crops in the last few decades.