IOI drops legal action against RSPO

06-Jun-2016 - Last updated on 07-Jun-2016 at 11:32 GMT

IOI has announced it will not only drop the court case against RSPO but has pledged to sign up to RSPO Next, the certification body's strictest policy. © iStock

Palm oil supplier IOI Corporation Berhad has ditched plans to sue the Roundtable on Sustainable Palm Oil (RSPO), saying it has “engaged” with customers, NGOs and the RSPO to resolve the matter.

The firm has also made a commitment to adopt the “more stringent” RSPO Next certification system in its Malaysian plantations from the end of this year. “We believe we are the first major plantation company to make this commitment,” the company noted in documents sent to the RSPO.

It is a remarkable u-turn. The RSPO suspended IOI – one of its founding members – back in April for non-compliance of certain principles and criteria within the roundtable’s certification scheme. However, IOI argued that the decision was “highly disproportionate” and in May it launched legal proceedings against the RSPO.

This led to widespread criticism – and not just from NGOs. Two weeks ago, in a statement sent exclusively to FoodNavigator, Mondelēz publicly urged IOI to drop its legal action.

Major food brands, including Unilever, Nestlé and Kellogg, had already distanced themselves from the supplier. This prompted Moody’s to review the credit ratings of IOI for a possible downgrade – a move that was “driven by uncertainty regarding IOI's operating performance, particularly on its downstream business, after its entire oil palm production was suspended by the Roundtable on Sustainable Palm Oil (RSPO) and the resultant announcement by several of its customers to cease cooperation with the company", according to Jacintha Poh, a Moody's vice president and senior analyst.

The RSPO is currently assessing the merits of the action plan submitted by IOI in its bid to have the suspension lifted. But Nestlé said those proposals didn’t go far enough in tackling the issues raised.

Signs of improvement?

Last week, IOI sent a quarterly progress report to the RSPO, as well as further details of “more robust policy initiatives to strengthen our commitment towards sustainability”. This included the announcement on RSPO Next as the group committed to “all the necessary actions (both corrective and forward-looking)” to meet its sustainability principles, including zero tolerance to deforestation.

Aidenvironment, the environmental consultancy that originally raised concerns about the areas of non-compliance last year, said the suspension has led to a more “open dialogue” with IOI.

“[We appreciate] the work done by IOI staff over the past two months. However, it is too early to say that the requirements set by the RSPO Complaint Panel have been met,” noted Aidenvironment Asia’s Eric Wakker.

The withdrawal of the legal action will be formalised during a conciliatory hearing before the Justice of Peace in Zurich on 14 June 2016. RSPO acknowledged the update from IOI but had no further comments at this stage. “We will await the developments at the Justice of Peace hearing,” said Stefano Savi, RSPO global outreach and engagement director.

Jonathan Horrell, director for global sustainability at Mondelēz International welcomed the news. “We urge [IOI] to focus on building improved relations with stakeholders,” he added.

IOI’s change of heart comes just ahead of the European Roundtable conference in Milan this week, where more countries will be urged to sign the Amsterdam Declaration in support of a fully sustainable palm oil chain by 2020. Governments in the UK, Germany, Denmark and the Netherlands have already committed.