Unilever breaks palm oil bonds over environmental fears

Unilever PLC updates

Unilever, one of the world’s largest single buyers of palm oil, has stopped buying oil from Indonesian company PT Smart over allegations by Greenpeace that its plantations are destroying forests.

It is the first time that Unilever, which uses palm oil in its margarines, soups and shampoos, has stopped sourcing oil from one of its suppliers for environmental reasons.

The multinational consumer goods company buys around 3-4 percent of the world’s palm oil production, or around 1 million tons annually. It uses six suppliers in Indonesia and Malaysia, including PT Smart.

Unilever decided to stop buying palm oil from PT Smart after it was presented with a Greenpeace report alleging the company’s environmental practices. “They showed us evidence that we cannot ignore,” the company said.

Unilever declined to disclose how much money it spends annually on purchases from PT Smart. It said it has an “ongoing relationship” with the Indonesian company, rather than an annual contract, and would move PT Smart’s purchases to its existing suppliers.

PT Smart is part of the privately owned Sinar Mas Group, Indonesia’s largest palm oil producer, and owns a 130,000 hectare palm plantation.

The Sinar Mas group is controlled by the Indonesian Widjaja family. In 2001, the family’s Asia Pulp & Paper company collapsed with $ 14 billion in debt.

Unilever is committed to sustainable all of its European palm oil purchases by 2012 and all of its global purchases by 2015.

She buys GreenPalm Certificates for about 15 percent of her total purchases. The certificates are awarded to palm oil producers for every tonne of sustainably produced oil. The manufacturers can then sell the certificates to manufacturers on a web-based trading platform.

Indonesia, the world’s largest producer of palm oil and emitter of greenhouse gases from deforestation, plans to grow 8.1 million hectares of palm oil by 2010, which would produce 23.2 million tons of oil.

The executives at Sinar Mas have regularly denied any wrongdoing. Gandi Sulistiyanto, a general manager of the company, told Reuters earlier this year that the company had only opened new plantations on degraded land that was cut down on or before, and not in the rainforest.

“We should have been arrested if we were ever involved in deforestation,” he said. “We are still a growing company. We (Indonesia) are still competing with Malaysia for the world’s largest palm oil producer. So we have to keep planting. “

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