Unilever Drops Palm Oil Supplier

By TOM WRIGHT
JAKARTA—Unilever PLC said on Friday it would stop buying palm oil from Indonesian producer PT Sinar Mas Agro Resources & Technology after fresh allegations emerged the company was destroying pristine rainforests to make way for plantations.
Unilever's decision comes after environmental campaigner Greenpeace alleged in a report that the company, one of Indonesia's largest producers of palm oil, was illegally cutting virgin rainforest in West Kalimantan province, home to orangutans, gibbons and other rare species.
A spokeswoman for Sinar Mas Agro said the allegations were "not accurate" but declined further comment, saying the company was preparing a detailed response. The palm oil market is fragmented, meaning the Unilever order cancellation won't make a material difference to overall sales, the spokeswoman added.
The spotlight on the damage to Indonesia's forests—an area half the size of Switzerland is lost to deforestation yearly—comes as climate-change negotiators meet this week in Copenhagen. Indonesia is the world's third-largest largest emitter of carbon dioxide, the greenhouse gas, after the United States and China, due to forest destruction. The burning of trees and peat lands to clear land for palm oil plantations releases massive amounts of carbon dioxide into the atmosphere.
The Greenpeace report alleges the Jakarta-listed company cut forests without permits, failed to protect areas of high biodiversity and drained environmentally-valuable peat lands, violating Indonesian laws and the principles of the Roundtable on Sustainable Palm Oil, a green certification body set up by environmentalists and corporations. Sinar Mas Agro is a member of the group.
"The Greenpeace claims are of a nature that we can't ignore," said Marc Engel, chief procurement officer of Unilever, the world's largest single buyer of palm oil, which is used in products such as margarine and cosmetics. "We have no choice but to suspend our future purchasing of palm oil."
The company is owned by Indonesia's Sinar Mas Group, whose Asia Pulp & Paper Co. Ltd. unit, a major producer of photocopier paper, paper bags, and other stationery products, has lost key U.S. and European customers including Staples Inc. in recent years on concerns the company's operations have led to massive forest destruction in Indonesia.
Sinar Mas Group has in the past denied claims that it improperly cleared forest and said it is committed to protecting the environment.
The Roundtable on Sustainable Palm Oil was set up earlier this decade by Unilever, the environmental group WWF, Malaysian plantation companies and a Swiss supermarket chain to set minimum environmental standards amid rising pressure from consumer groups.
Today, 5% of the 45 million tons of crude palm oil produced annually, more than 90% of which comes from Indonesia and Malaysia, is certified by the RSPO as coming from production methods that don't destroy forests.
But critics say many RSPO members, such as Sinar Mas Agro, join to bolster their green credentials without getting any palm oil supply certified. The group has a procedure to kick out members that don't meet its standards—which include protecting biodiverse forest areas and respecting human rights—but has been lax in policing its own rules, critics say.
"The evidence clearly shows that buying palm oil from members of the RSPO does not protect consumer (goods) companies from buying a product connected to forest destruction and climate change," said Joko Arif, Greenpeace Southeast Asia's forest campaigner.
"The only solution is to demand a full moratorium on all forest and peat land clearances from all suppliers of palm oil."
Unilever said it remains committed to the RSPO and would reconsider its stance toward Sinar Mas Agro if it can produce proof it's not involved in unacceptable environmental practices.
Write to Tom Wright at tom.wright@wsj.com