KUALA LUMPUR – Major palm oil buyers are seeking to bar FGV Holdings and Sime Darby Plantation (SDP) from their global supply chain after the US banned imports from both planters, Reuters reported.
The newswire, citing four sources, said following US food company General Mills issuing global “no buy orders” for both companies, other buyers have requested suppliers reduce or exclude FGV and SDP products for supplies entering, not only the US, but also Europe, Australia and Japan.
FGV and SDP, two of the world’s biggest palm-oil producers, were banned by the US Customs and Border Protection (CBP) last year over the alleged use of forced labour during production.
Palm oil is one of the world’s cheapest and fastest growing crops, but the industry has faced scrutiny over the years, with rights groups blaming producers for vast deforestation in Southeast Asia and exploitative labour practices.
Reuters said that the caution from buyers was another blow to Malaysian palm oil, which has long had the reputation as being more sustainable compared with bigger rival Indonesia.
The two countries together control nearly 85% of global production of palm oil – a ubiquitous commodity used in everything from cereal to soap.
“Customers are very afraid, and very cautious... They are questioning to what extent we are sourcing from them,” said one source whose firm supplies palm oil products to multinational consumer goods manufacturers.
“Companies are fearing the risk to their own reputation if they buy from Sime Darby and FGV,” the source added.
According to Reuters, none of the four sources wanted to be identified as they were not authorised to talk to the media.
“We have instructed all of our suppliers globally to remove both Sime Darby and FGV from our supply chain; and have issued ‘no buy orders’ on both suppliers,” General Mills said in an emailed statement to Reuters.
Chocolate-maker Hershey said its North American suppliers have removed all SDP volumes in compliance with the US order.
Some buyers, including Nestle, Unilever and Hershey, had suspended FGV since 2018 after industry watchdog Roundtable on Sustainable Palm Oil (RSPO) found “exploitative” labour practices in the company.
But not all companies, according to Reuters, had moved quickly to remove SDP from their supply chain. SDP is the world’s biggest producer of palm oil certified as sustainable by the RSPO.
Kraft Heinz, Nestle and Unilever said they were in discussions with SDP about the US allegation.
“We are in ongoing engagement with Sime Darby in terms of the human rights grievances that were alleged against them, and additional actions Kraft Heinz will take to ensure there are no violations of human rights in our supply chain, including the potential to terminate the business relationship,” Kraft said. – The Vibes, February 8, 2021
