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Malaysian palm oil giant IOI sues RSPO over suspension

Oil palm fruit in Indonesia. Palm oil is used in everything from detergents and cosmetics to breakfast cereals and ice cream. Photo by Rhett A. Butler/Mongabay

  • The Roundtable on Sustainable Palm Oil suspended IOI Group’s sustainability certification in March. Now the company has filed a lawsuit against the association in Zurich, the seat of the RSPO.
  • The company characterized the move as a “painful” decision given its “great commitment and attachment” to the RSPO, but maintained that it had been “unfairly affected” by the suspension.
  • A leaked memo written by the RSPO’s secretary general reveals the company told him it “has done no wrong” and “prefers if this legal action is kept low profile.”

A Malaysian company that helped found the Roundtable on Sustainable Palm Oil is suing the RSPO for suspending its sustainability certification over alleged environmental transgressions in Indonesia.

IOI Group has filed a lawsuit in Zurich against the RSPO, the world’s largest association for ethical palm oil, whose corporate and NGO members jockey to set the terms for sustainable production of the commodity, used in everything from snack foods to cosmetics and detergents.

Since the suspension was announced in March, key customers like Unilever, Kellogg and Nestlé have cut supplies from IOI, which has lost permission to sell the RSPO-brand “Certified Sustainable Palm Oil” (CSPO) preferred by companies trying to clean up their supply chains.

Three of IOI’s subsidiaries in the Ketapang area of Indonesian Borneo are alleged to have cleared rainforest without the proper government permits, operated on carbon-rich deep peat soil, and used fire to clear land cheaply — practices not uncommon in an industry rife with illegality.

“The decision to challenge the RSPO Board’s suspension decision is a difficult and painful one for us to take…we have great commitment and attachment to RSPO,” IOI chief executive Lee Yeow Chor said in a statement.

“On the other hand, we feel that we have been unfairly affected by the extent and scope of the suspension,” he added, arguing that the penalty should apply only to IOI’s plantations so that its refineries could continue marketing CSPO and avoid disrupting its customers’ supply schemes.

The suspension was seen as an indication the RSPO might finally be getting tough on the oil palm growers that make up the bulk of its membership, as the roundtable has been criticized for failing to enforce its standards. But the lawsuit — as well as a surprising move by palm oil giant Felda Global Ventures to decertify 58 of its mills, and the continued refusal by Malaysian and Indonesian growers to hand over their concession maps — are perhaps signs of a backlash against stricter oversight by the RSPO, whose membership also includes palm oil traders, retailers and banks.

“No one should be surprised that IOI has chosen to bully its critics,” said Richard George, head of forests at Greenpeace UK. “The RSPO and its members must meet this intimidation head on by excluding IOI until it has cleaned up its act and repaired the forests and peatlands it has destroyed.”

Drone image collected in April by Greenpeace documents extensive forest loss as a result of fires in and around an IOI concession in Ketapang, Indonesia.

An internal memo written by RSPO secretary general Darrel Webber reveals IOI told him that the roundtable had “no right” to suspend the company, that it had “done no wrong” and that “it prefers if this legal action is kept low profile.”

The roundtable, Webber wrote, was insured against such claims up to 10 million Malaysian ringgit ($2.5 million).

“Whilst the situation is serious, I do not feel it is something to be overly worried on,” he added. “The claims made are simple enough to counter…The only issue I have with this dramatic turn of events is the amount of time and money that will be wasted in this process.”

The legal proceedings will begin in June.