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PepsiCo products in Indonesia tainted with worker abuses, report finds

  • A two-month NGO investigation into palm oil giant Indofood’s plantations reveal numerous worker and human rights abuses.
  • PepsiCo, which has licensed out its brand to Indofood in Indonesia, said it was taking steps to address the findings.
  • Indofood is an arm of the Salim Group and one of the world’s largest palm oil companies.

An investigation into two Sumatran plantations operated by Indonesian food giant Indofood, a joint venture partner with PepsiCo, has found evidence of numerous human rights abuses including the use of child labor.

The report released earlier this month, titled The Human Cost of Conflict Palm Oil, alleges that investigators from two Indonesian NGOs — the Rainforest Action Network (RAN) and labor group OPPUK — along with the International Labor Rights Forum, found that child labor, exposure to hazardous chemicals, below minimum-wage payments, a reliance on temporary workers and the use of company-backed unions were all employed by the plantations.

“Simply put, this report reveals that Indofood is violating the fundamental rights of workers on its palm oil plantations, as PepsiCo watches on. Both companies must act without delay to address the egregious worker exploitation exposed on Indofood’s plantations,” Robin Averbeck, senior campaigner with RAN, said in a statement.  

PepsiCo does not buy palm oil from Indofood, but it has licensed out its brand to the company. While Indofood’s subsidiary PT London Sumatra (Lonsum) is a member of the Roundtable on Sustainable Palm Oil, the world’s largest association for ethical production of the commodity, the investigators found multiple violations of RSPO principles addressing workers rights on the two Lonsum plantations.

“These workers live in a world dominated by palm oil. The plantations stretch for miles in every direction, and [Lonsum] has nearly complete power over the livelihoods of its workers,” Averbeck said. “Women are rarely afforded full, permanent employment and are given some of the most toxic jobs applying highly hazardous pesticides. Harvesters, one of relatively few permanent positions, struggle under a high quota system which forces them to bring their wives and children to work with them for help to earn the measly base pay — well below a living wage.

“Children leave school and childhood behind and work in the rows of palm oil trees to help their families make ends meet. It’s a disturbing system of abuse, where workers’ rights are rarely respected.”

Palm oil is produced by pressing the fruit of oil palm trees. Photo by James Morgan / WWF-International
Palm oil is produced by pressing the fruit of oil palm trees. Photo by James Morgan / WWF-International

Stefanus Indrayana, Indofood’s head of public relations, declined to answer specific questions about the evidence in the report, instead referring to previous company statements in which CEO Mark Wakeford had said that the firm was in compliance with regulations governing its operations and that RAN had not provided “evidence to substantiate their claims.”

PepsiCo updated its palm oil policy in September 2015, but did not require Indofood to comply with the new policy.

Eric Gottwald, legal and policy director at the International Labor Rights Forum, said “bold action” was needed by PepsiCo to address the alleged abuses outlined in the report.

Any serious responsible palm oil commitment must include Indonesia, the world’s largest palm oil producer and the country most greatly impacted by rainforest destruction and human rights abuses caused by palm oil plantation expansion.”

Oil palm in Riau, Sumatra. Photo by Rhett A. Butler
Oil palm trees, top, and land cleared for planting in Sumatra. Photo by Rhett A. Butler

The two-month investigation, one of the first to focus on in-depth interviews with workers on the plantations, found that, among other things, palm oil’s status as one of the world’s cheapest vegetable oils was partly due to cost-cutting measures such as a high reliance on casual and other precarious forms of labor. Many of the workers lack healthcare and other benefits and are paid poverty wages, the report said. So-called kernet workers, who are not directly employed by the companies and are often women and children, are also regularly hired for core functions on the plantations.

The workers’ pay is often too low to keep their children in school, leading to the offspring of plantation workers joining their parents in the fields, the report notes, where hazardous chemicals such as the pesticide Paraquat are used without the proper health and safety equipment being provided by the company.

Independent unions are also discouraged, helping to keep wages low and protections few, the investigation found, with most unionizing occurring through company-backed groups.

A worker on a palm oil plantation in Indonesia's Sumatra. Photo by Rhett A. Butler
A worker on a palm oil plantation in Sumatra. Photo by Rhett A. Butler

Aurora Gonzalez, a PepsiCo spokesperson, said the New York-listed company was taking steps to address the claims.

“When we were made aware of this issue we immediately engaged with our snack food joint venture partner Indofood, including a letter from PepsiCo’s chairman and CEO to the Indofood CEO. The letter acknowledged the gravity of the allegations and confidence that Indofood is taking them as seriously as PepsiCo does,” she said.

“Based on the last information we have from Indofood, they have engaged with RAN but due to a lack of detailed info and data supporting the allegations, Indofood expressed concern in their ability to fully investigate the matterThe full report has now been provided so we will continue to engage Indofood to address any outstanding issues.”

PepsiCo is one of a growing number of companies to promise to purge its palm oil supply chain of deforestation, peatland conversion and human rights abuses. RAN previously criticized Indofood for failing to ensure that its commitment applies to its joint venture partners like Indofood, which has made no such commitment and, according to the consultancy Aidenvironment, has been involved in numerous acts of environmental destruction and conflicts with indigenous peoples.

Indofood also came under fire recently for allegedly expanding its footprint in Indonesia’s West Papua through four “secret” concessions by using shell companies in an attempt to distance its parent company, the Salim Group, from association with contentious projects and to maintain a veneer of responsibility while quietly flouting its own sustainability guidelines.

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