U.K. retailer, Citigroup take actions against palm oil

It was a tough week for the multibillion-dollar palm oil industry. A British grocery chain with 900 stores said it would remove all palm oil from its branded products by the end of 2018, and Citigroup announced it would suspend loans to IndoAgri, the agribusiness arm of Indonesia’s largest conglomerate, the Salim Group.

Citi appears to have based its action on two reports issued this week, one documenting labor abuses on IndoAgri plantations and the other providing evidence of illegal rainforest clearance by a pair of oil-palm plantation companies with links to Salim Group CEO and President Anthoni Salim. The U.K. grocery chain, Iceland, also cited the destruction caused by the production of palm oil to the rainforests of Southeast Asia.

In a video released to coincide with the Iceland announcement, the company’s managing director, Richard Walker, surveys oil-palm plantations in West Kalimantan, on the Indonesian side of Borneo, and calls the region “an environmental disaster zone.”

“Until such time as the big corporations can prove zero deforestation,” Walker says, “I’ve made the ethical decision for Iceland to say no to palm oil.”

The company, which specializes in frozen goods, says it will replace the palm oil in its products with alternatives including rapeseed (canola) oil, sunflower oil, and butter. It has already begun to remove palm oil from some items and expects that by eliminating it from 130 more, it will reduce demand for the commodity by more than 500 metric tons per year.

In response to the company’s announcement, Darrel Webber, CEO of the Kuala Lumpur–based Roundtable on Sustainable Palm Oil (RSPO), released a statement: “We fully share Iceland’s concerns about the environmental impact of palm oil, but we do not agree with the solutions they are adopting. Before getting rid of palm oil, we should ask ourselves: What is the impact of the alternatives? We should let consumers know that palm trees produce 4 to 10 times more oil per hectare than any other oil crop. Therefore eliminating palm oil might lead to the use of more land with higher risks of deforestation.”

In its report about labor conditions on IndoAgri plantations, Accreditation Services International, the accreditation body of the RSPO, verifies ongoing abuses and legal violations. The Amsterdam-based sustainability consultancy Aidenvironment, in its report about deforestation, documents the clearing of some 25,000 acres in West Kalimantan, based on field investigations and satellite analysis. Both plantation companies — one majority-owned by Salim, the other linked to him through business associates — have continued to clear and drain peat land, despite new regulations adopted by the Indonesian government to prevent such practices. These actions also go against the sustainability policies of the Singapore-based Salim Group’s publicly listed subsidiaries and those of its business partners and financiers. Not only are peat deposits critical carbon sinks, but when set on fire to prepare them for planting, peat lands tend to burn uncontrollably.

IndoAgri is a subsidiary of Indofood, one of the world’s largest instant noodle producers and a joint-venture partner of PepsiCo. (In January, the U.S. company partially suspended procurement from IndoAgri, based on previous reports documenting labor abuses on its plantations.) Anthoni Salim, who is the fourth-richest man in Indonesia, worth a reputed $6.9 billion, had been made aware of the rainforest clearing in early 2016, when Aidenvironment provided a preliminary version of its report to members of his management team.

“Citigroup’s decision to cancel its loans to IndoAgri is a necessary first step, and should be a stark wake-up call to the Salim Group to finally reform its ways,” said Gemma Tillack, who oversees forest policy for the San Francisco–based Rainforest Action Network, one of the organizations that worked with Aidenvironment on the report.  

The Salim Group did not respond to email requests for comment on the suspension. Robert Julavitz, a spokesperson for Citi, said via telephone that the company had no comment on the report.

A frequent contributor to FERN, Jocelyn Zuckerman is working on a book about palm oil.