Palm oil body criticises Malaysia's IOI for environment, social damage

Niki Koswanage Reuters 7 Apr 11;

* IOI the 2nd firm to face censure after Indonesia's SMART
* IOI licence for green palm oil may get suspended-RSPO
* IOI shares flat, analysts see limited market impact
* Firm accepts RSPO view but warns on NGOs' false statements

KUALA LUMPUR, April 7 (Reuters) - An industry body for eco-friendly palm oil has censured Malaysia's second largest palm oil planter, IOI Corp , alleging it has drained peatlands and felled forests on Borneo island to expand and that it could face further sanctions.

The censure follows complaints by green groups over IOI's environmental practices in the Malaysia's Borneo state of Sarawak, including a protracted land dispute with a local community.

The Roundtable on Sustainable Palm Oil (RSPO), a group of planters, NGOs and consumers, said its grievance panel found IOI to have breached its membership obligations, making it the second firm after Indonesia's SMART to face censure.

IOI's current and ongoing applications to certify its plantations as environmentally and socially responsible have been suspended and the firm has until May 2 to come up with an acceptable solution to the issues raised, the RSPO said.

"Failure to deliver the required proposal ... will result in the RSPO considering further sanctions, which may include the suspension of (the) IOI licence," RSPO said in a statement on its website seen on Thursday.

The comments will invite further scrutiny to $30 billion palm oil industry that has tried to boost its green credentials in the wake of an aggressive campaign by environment and social activists as well as consumers shunning palm oil-based products.

IOI shares were up slightly to 5.56 ringgit around 0400 GMT on Thursday.

Analysts said there will be muted market impact unless big customers like Unilever (UNc.AS: Quote) and Finnish oil refiner Neste Oil stop buying from the firm although that may provide more opportunities for companies in China and India to snap up cargoes.

IOI said on its website that the company accepted the RSPO's decision and would work with the industry body to find a solution, especially for the land dispute issue.

But it warned that activists were making unfair and false statements against the planter.

"Merely pressuring one party will not guarantee or facilitate the successful conclusion of the discussion said," IOI said.

U.S.-based green activists Rainforest Action Network welcomed the RSPO statement and called on agribusiness giant Cargill, the largest palm oil importer to the U.S., to scrutinise its relationship with IOI.

"This ruling reinforces RAN's demand that Cargill institute basic safeguards on its supply chain to ensure it is not selling palm oil from stolen indigenous lands to American consumers," said Lindsey Allen, RAN forest programme director.

The spotlight on IOI comes as Golden Agri Resources , the parent of Indonesia's SMART, joined the RSPO and pledged to commit to producing green palm oil as both companies raced to win back their customers. [ID:nL3E7F41I0]

Major palm oil consumers such as Unilever and Nestle stopped buying from SMART because of environmental concerns, and have yet to resume supply ties, traders said. (Reporting by Niluksi Koswanage; Editing by Ed Lane)

Malaysia's 2nd-biggest listed palm-oil company under scrutiny
The Star 7 Apr 11;

KUALA LUMPUR: IOI Corp Bhd, the country's second-biggest listed palm-oil company, is being scrutinised by an industry group following allegations about land disputes and illegal deforestation.

IOI was given 28 days to respond to the allegations, the Roundtable on Sustainable Palm Oil said in a statement on its website.

The group would consider further sanctions, including the suspension of licences for new certified sustainable transactions, if IOI didn't deliver the required response by May 2, it said. IOI shares fell 17 sen, or 3%, to RM5.55, the most since Feb 10.

The dispute concerned plantation land in Sarawak occupied by IOI Pelita Plantation Sdn Bhd, which is 70% owned by IOI, the company said.

The complaints were made by “several non-governmental organisations (NGOs) and the local community of Long Teran Kanan in Sarawak,” the RSPO statement said.

The organisations weren't named. Calls to the company's head of corporate communications after office hours weren't answered.

“The nature of the grievance covers two locations and three specific matters land dispute over native customary land leased by IOI for palm oil production in Sarawak; drained peat land on endangered wildlife habitat and clearing of forest area; and illegal deforestation,” the statement said.

“IOI accepts this decision and will work closely with RSPO in developing a plan to find an acceptable solution to the issue of compensation,” the company said in an e-mailed statement yesterday.

“However, IOI is concerned over the sustained actions by various NGOs and some online news websites, which seek to mislead public opinion on the issue by repeating various false statements and unfair allegations against IOI.”

RSPO certification indicates that palm oil used in a particular product is “produced without undue harm to the environment or society,” and that “volumes are traceable,” according to the group's website.

“Current and ongoing certification” of IOI's production had been suspended with immediate effect, the group said.

“IOI welcomes an independent organisation like RSPO to appoint representatives to observe the proceedings of the meetings between IOI Pelita and the natives and possibly mediate in the negotiation over the affected land area and the amount of compensation,” the company said.

Nestle SA, the world's biggest food maker, and Unilever, the largest palm oil user, last year suspended purchases from Indonesia's Sinar Mas Group after allegations from Greenpeace that the company was illegally destroying rainforests. An independent study cleared Sinar Mas. - Bloomberg