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Malaysian palm oil giant IOI under pressure after Cargill ultimatum

  • Cargill said that unless IOI issues a new sourcing policy and sustainability plan by July 15, it will stay away from new contracts with the company.
  • Environmental advocates called Cargill’s declaration “disappointing and essentially meaningless” because IOI has already committed to zero deforestation.
  • Other multinational palm oil users have already cut supplies from IOI.

Leading palm oil user Cargill has issued an ultimatum to its supplier IOI Group after the Malaysian producer lost its Roundtable on Sustainable Palm Oil (RSPO) certification over environmental destruction in Indonesia. The U.S. multinational said last week that unless IOI came out with a plan to clean up its operations, it would not enter into any new purchase agreements with the company.

IOI is alleged to have cleared rainforest in Borneo without a permit, damaged deep peatlands and used fire to clear land, all in violation of roundtable standards. Both companies are members of the RSPO, the world’s largest association for ethical palm oil production.

In a statement, Cargill called for IOI to “issue a responsible sourcing policy” and “release a detailed sustainability implementation plan” by July 15 and to “establish a formal public grievance process” by September 15.

IOI has already committed (pdf) to refrain from deforesting, planting on peat and land grabbing. The ultimatum from Cargill was therefore “disappointing and essentially meaningless,” said Deborah Lapidus, campaign director at Waxman Strategies.

“What we need from IOI is action, no more paper commitments and plans that they violate,” she told Mongabay.

Other multinational palm oil users are already cutting back supplies from IOI. Greenpeace said that if IOI fails to meet Cargill’s requests, the company should phase out existing purchase agreements, not just say no to new contracts.

“Cargill’s willingness to do business with repeat deforesters like IOI makes their sustainability policy look like a joke,” said Glenn Hurowitz, senior fellow at the Center for International Policy.

“Cargill’s competitors and their customers are racing ahead to make sure their products are responsible while Cargill is just tripping over itself, and looking ridiculous doing it.”

A Cargill spokesperson did not reply when asked to clarify how the company’s ultimatum differed from what IOI had already committed to do.

Land cleared for oil palm and planted with saplings in Indonesia. Photo by Rhett A. Butler/Mongabay

A large coalition of environmental NGOs has called on IOI’s customers to stop buying from the company until it meets a long list of requirements. The NGOs want IOI to implement a moratorium on all plantation development, restore the forests and peatlands it has damaged, resolve outstanding conflicts with local communities and more.

New York-listed Bunge and Japan’s Kao Corporation along with Cargill are still buying from IOI, according to Waxman Strategies. Krispy Kreme has failed to respond to numerous inquiries about IOI, Lapidus said.