Palm oil producers beware

Tuesday March 23, 2010

Palm oil producers beware

Commodities Talk - By Hanim Adnan


LAST week, history repeated itself when multinational food conglomerate Nestle decided to cease its palm oil supply from Indonesia’s Sinar Mas Group on reports of rainforest destruction by the environment non-governmental organisation (NGO) Greenpeace.

This mirrors the first move by Unilever three months earlier to cancel its palm oil purchase from the same Indonesian company based on reports by Greenpeace.
Unilever was reported to have cancelled its US$30mil contract with Sinar Mas at end-2009 while Kraft cancelled its contract in early 2010. Sainsbury’s and Shell have also stated that they will not buy palm oil from Sinar Mas.

Greenpeace’s report “Caught red handed” last Wednesday revealed that Nestle has been using palm oil sourced from plantations grown on cleared rainforests from Indonesia in its products like Kit-Kat.

Switzerland’s Nestle in a statement said it would replace Sinar Mas with another supplier for further shipments after conducting its own investigations into the palm oil supply chain.

Interestingly, the issue also set off a public relations bomb for Nestle, which chastised users of its Facebook page after Greenpeace posted a mock-up of the company’s Kit-Kat candy bar logo on its own website and Facebook members adopted the graphic as their profile picture.

Nestle’s moderator wrote: “We welcome your comments, but please don’t post using an altered version of any of our logos as your profile pic – they will be deleted.”
On a more serious note, Greenpeace seems to be attacking only Indonesia’s oil palm producers and leaving Malaysian producers off the hook.

This, however, may not be true. Greenpeace’s counterpart, Friends of the Earth (FOE), has published a report using the same approach as Greenpeace to discredit IOI group’s RSPO sustainable palm oil and asking Unilever and Nestle to reject it.
FOE had also attacked United Plantations Bhd earlier but the swift action by United Plantations to rebut within 24 hours helped in the damage control.

FOE has also attacked on the oil palm cultivation on peat land in Sarawak. More Malaysian plantation companies will soon come under attack from the NGOs.
There are also many questions arising from the Sinar Mas incident such as:
•Is there a need to also penalise responsible palm oil producers with the RSPO certification for the wrong-doings of Sinar Mas?

•Does the RSPO see the need to blacklist Sinar Mas for its unacceptable environmental and social practices as the group is an RSPO member?
•Was Nestle’s own investigation on the palm oil supply chain of Sinar Mas sconducted with the RSPO assistance?

For Malaysian palm oil producers, one lesson learnt is that they must now cater to the increasing world demand for sustainably produced palm oil.
While producers should not entirely fear some of the unfounded claims by Western NGOs on palm oil, they must take heed of the more “revealing” facts exposed by NGOs. At stake is the future of palm oil exports especially to European Union, a major export destination.

Just imagine if other major importers of palm oil like China and India were to take similar stance on buying only sustainably produced oil palm in the near future?
• Assistant news editor Hanim Adnan who enjoys watching the “Have a Break, Have a Kit-Kat” TV advert, wonders whether the chocolate will taste the same using sustainable palm oil instead of the “non-sustainable” counterpart.

http://biz.thestar.com.my/news/story.asp?file=/2010/3/23/business/5910343&sec=business