Environment

Rainforest Activists Just Scored a Big Win Against One of Pepsi's Closest Business Partners

The move over palm oil sends a powerful message to investors: unethical companies pose too great a risk.

Orangutan mother and child in the forest in Indonesia.
Photo Credit: Kate Capture/Shutterstock

The world’s largest sovereign wealth fund has divested from a major snack food company due to its failure to implement ethical palm oil policies. Norway’s Government Pension Fund Global (GPFG), which is valued at around $880 billion, divested from First Pacific Group Ltd (HK: 0142), the parent company of Indonesia-based Indofood, which has controlling interests in one of the biggest plantation companies in Indonesia tied to conflict palm oil.

Conflict palm oil is connected to human rights abuses, forced and child labor, loss of local sustainable food and farming practices, species extinction, habitat destruction, forest and peatland destruction and climate pollution. The move sends a powerful message across the globe, not just to companies that are sourcing conflict palm oil, but to fund managers and other investors concerned about the risks associated with investing in such unethical and irresponsible companies.

A globally traded agricultural commodity, palm oil is ubiquitous in the marketplace: It can be found in about half of all consumer goods, from packaged foods like pizza dough and instant noodles to cooking oil, biofuels and personal care products like shampoo, soap and even lipstick.

A forest area being cleared to make room for a palm oil plantation. (image: NASA)

Rainforest Action Network, an environmental group that has been campaigning for an ethical global palm oil market, has identified 20 major food companies that have failed to adopt sustainable and ethical policies in regard to sourcing palm oil: Toyo Suisan Kaisha, Kraft Foods Group, Nissin Foods, Hillshire Brands Company, Grupo Bimbo, H.J. Heinz Company, Campbell Soup Company, Hormel, Unilever and PepsiCo. The group asserts that the so-called Snack Food 20 laggards “are almost certainly using conflict palm oil.”

As the Indonesian joint partner of snack food giant PepsiCo, Indofood produces Pepsi-branded snack foods that are sold across Indonesia. The risks in Indofood's global operations were exposed by an investigative report released by RAN and Rainforest Foundation Norway in September 2015 that documents the company's role in social conflicts and the destruction of the nation’s rainforests.

According to the report:

In 2013 and 2014, Indofood cleared 1,000 hectares of previously untouched tropical rainforest in East Kalimantan, on the island of Borneo. The forest cleared was previously protected as part of a lowland swamp forest known as the Metau forest. The Metau forest is located in one of the largest wetlands in Kalimantan and is a critical breeding and nesting habitat for endangered birds, including the Lesser Adjutant, a large-winged bird in the stork family which is listed as vulnerable on the IUCN Red List of Threatened Species.
The Metau forest is a forest that has been used by local Dayak communities for generations. The Muara Ohong village is home to 800 people and is now seriously affected by Indofood’s palm oil plantation operations. For the past two years, the villagers have been unable to drink from their water source, and the fish in community fish ponds have died due to run-off pollution linked to the plantations. Increased incidence of floods, droughts and extreme water levels in nearby Lake Jempang have impacted the villagers ability to grow crops, and villagers, left with no other option, are leaving their homes. Indofood has continued to develop the Metau swampland for palm oil plantations, despite efforts by the Governor of East Kalimantan to protect the region as a water conservation area.

Indonesia is the world's eight biggest greenhouse gas polluter. One of the sources of this pollution is deforestation, driven in large part by the nation’s palm oil industry. In addition to its contribution to greenhouse gas emissions, deforestation in Indonesia has put some 20 million of the nation's indigenous and forest-dependent people at risk. It has also led to the widespread habitat destruction of many species, including critically endangered orangutans, Sumatran tigers and elephants.

A worker on a palm oil plantation. There have been numerous reports that the palm oil industry uses forced and child labor. (image: wandee007/Shutterstock)

RAN is calling on all global investors in First Pacific Group or in its majority held companies — Indofood CBP Sukses Makmur, Indofood Sukses Makmur, Indofood Agri Resources Ltd. — as well as investors in Indofood snack food joint-partner PepsiCo, to demand commitments from each company to make verifiable changes to their current unsustainable policies and practices connected with the production and use of conflict palm oil.

While the move to divest by Norway’s Government Pension Fund Global is a major step, it only impacts one of the many companies involved in destructive and unethical palm oil production.

“We need to convince each of these [Snack Food 20] laggards to adopt a time-bound and truly responsible global palm oil procurement policy, which requires fully traceable, legally produced palm oil, and eliminates sourcing from companies which are destroying rainforests or carbon-rich peatlands, stealing community lands or violating human and workers’ rights,” RAN said in a petition statement.

Aerial view showing the deforestation caused by a palm oil plantation (image: Jaggat Rashidi/Shutterstock)

Mahindra Siregar, Indonesia’s deputy trade manager, points out that a sustainable palm oil industry must strike the right balance between environmental stewardship, the interests of local communities and economic development. He notes that the palm oil industry, 50 percent of which is owned by small farmers, provides almost 6 million jobs to Indonesians.

“It’s very clear that the challenges that the industry faces are very important [and need] to be addressed,” he said in an interview with Al Jazeera. But, he added, “this is an economy that is growing 6 percent just to sustain the level of poverty and to address the issues of unemployment. So I think we have to appreciate the big picture.”

Part of the big picture are the communities impacted when the forests they have relied on for generations are cleared for palm oil plantations. In 2010, Michael Brune, then-executive director of RAN, sent an email describing the plight of Jamaludin, an Indonesian whose livelihood depends on a healthy rainforest. 

"The people driving the bulldozers and excavators told Jamaludin and his family that they were going to build a road," Brune wrote. "Instead, they burned down the Indonesian rainforest Jamaludin's community had called home for centuries. In its place: a sprawling palm oil plantation that has ravaged the local and global environment."

"The forest provided us with many ways to earn money: fish, honey, pigs, rattan vines," said Jamaludin. "Now, everything our grandparents left us is gone."

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