Palm oil producers to meet May 3 to discuss deforestation charges

Dow Jones Newswires: Shie-Lynn Lim: 28 April 2010

KUALA LUMPUR -(Dow Jones)- Palm oil producers and government officials from Malaysia and Indonesia will meet May 3 to discuss the latest round of attacks by Greenpeace and other environmental organizations that have blamed producers for destroying rain forests and biodiversity, an industry executive said Wednesday.

The meeting, to be held in Kuching, Sarawak will discuss issues that affect the palm oil industry, including greenhouse gas emissions and the use of peatlands for plantations, a practice that environmental groups say will increase GHG emissions as peat lands hold significant amounts of carbon.

Indonesia's Sinar Mas came under fire recently after Greenpeace charged the company with failing to follow sustainable plantation practices required by the Roundtable on Sustainable Palm Oil (RSPO), a multi-stakeholder group formed to promote ethical plantation practices including the preservation of rain forests and biodiversity.

The report said Sinar Mas, the parent company of the Jakarta-listed PT Sinar Mas Agro Resources and Technology Tbk (SMAR.JK) and the Singapore-listed Golden Agri-Resources (E5H.SG), was widely involved in clearing rain forests and draining peatlands for developing oil palm plantations.

The campaign forced global giants such as Nestle N.V (NESN.VX) and Unilever Plc. (ULVR.LN) to stop sourcing palm oil from Sinar Mas, despite the company being a member of RSPO, an industry-sponsored certification body.

Sinar Mas has re-iterated its commitment to sustainable practices and appointed Control Union Certification and the BSI Group to carry out independent audits. It has also suspended a plantation manager who the company said was responsible for questionable practices.

But Greenpeace is demanding that even trading companies such as Cargill Inc. ( CRG.XX) boycott Sinar Mas' palm oil, amid concerns that its produce is indirectly reaching end consumers through third parties, making the boycott by Unilever and Nestle meaningless. Cargill has said it would wait for the results of the external audit before taking a view.

"What is important is for us to strategise and improve communication between both parties to be well-positioned when the industry meets to address this issue at the RSPO level," said Mamat Salleh, chief executive of the Malaysian Palm Oil Association.

He said the upcoming meeting will be a follow-up from a collaboration agreement signed between the MPOA, the Indonesian Palm Oil Association and other plantation organizations in early March.

The meeting has generated much speculation amid talk that some palm oil producers, particularly those in Indonesia, may be planning to set up an alternative certification body, as they felt the RSPO hasn't been able to serve their cause.

Some industry executives have even said the meeting will be the precursor to setting up the alternative certification body.
Most major plantation companies in Malaysia are members of the RSPO while only some Indonesian companies have joined the body. Indonesia and Malaysia currently account for about 85% of the global palm oil supply.

"The key issue in the upcoming meet is to discuss ways to address environmental and other issues" and producers are keen on a win-win solution at the RSPO level before opting to setup of a separate certification body, Salleh said.

Growers had threatened to walk out of the RSPO annual meeting last November and quit the organization if it agreed with demands by the E.U and Greenpeace to include additional conditions such as greenhouse gas (GHG) emissions to the already stringent certification process.

Many growers say they are burdened with too many RSPO requirements while those with certified oils feel the demand for "green" palm oil was sluggish as buyers weren't willing to pay a premium for RSPO-certified sustainable palm oil.

By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@ dowjones.com