Nestlé suspends palm oil supplier REPSA over corruption scandal

07-Feb-2018 - Last updated on 13-Feb-2018 at 10:36 GMT

Palm oil supplier to Nestle and others caught up in corruption scandal ©iStock

Nestlé has said it will phase out palm oil purchased from Guatemalan company Reforestadora de Palmas AC (REPSA), which has been linked to corruption charges in a high-profile investigation of systemic tax fraud in Guatemala.

The International Commission against Impunity in Guatemala (CICIG) found that REPSA officials were operating as part of a wider “corruption network” operated by the tax authorities Superintendencia de Administración Tributaria (SAT) to collect “illicit commissions” to expedite the processing of tax credit refunds.

Responding to the news, Nestlé said: “We have decided to stop our sourcing of palm oil from REPSA. We will honour existing contracts with the company, however these will not be renewed and we expect to cease commercial ties by September 2018 at the latest.”

REPSA accused of humanitarian, environmental violations

REPSA, which is owned by Grupo Olmeca, has also attracted criticism over its environmental performance and alleged links to humanitarian abuses.

In 2015, the company was linked to a large-scale spill of palm oil effluent into Guatemala’s Pasion River. The spill was labelled “ecocide” by Guatemala’s environmental court in Peténmbut. REPSA has appealed the ruling.

REPSA also stands accused of “human rights abuses”. According to environmental charity Friends of the Earth, which has waged a two-year campaign to raise awareness of what it characterises as REPSA’s violations, the company has “possible links” to the 2015 murder of indigenous community leader Rigoberto Lima Choc. No formal charges have been made in relation to the killing.

Nestlé stressed that it has “worked diligently” with REPSA “on the ground” in Northern Guatemala to address these “serious allegations”.

“Through our engagement, REPSA put in place an action plan to address the issues identified, which we were monitoring with our partner, TFT.

“REPSA is now accused of further corporate governance failures relating to financial irregularities in Guatemala. As such, we have decided to end our commercial ties but hope that the company will continue to implement its action plan regardless of our decision.”

Jeff Conant, Senior International Forests Program Director at Friends of the Earth, said the decision from the Swiss multinational was a “step in the right direction”.

However, he continued: “It is frustrating that it took charges of corruption and bribery for Nestlé to sever its relationship with REPSA, despite widespread public knowledge of REPSA’s actions, and the atmosphere of violence and impunity that permeates the region.”

A spokesperson for Nestlé said the Swiss food maker had “nothing further” to add on the situation and declined to share what products REPSA-sourced palm oil is currently used to manufacture

Do other multinationals need to follow suit?

Nestlé is not the first multinational company to cut its ties with REPSA. At the end of 2017, Wilmar International and Cargill both suspended their relationships with the company.

A number of other leading food manufacturers continue to source palm oil from REPSA, according to Friends of the Earth. "We are urging all other companies who still have connections to REPSA to follow Nestlé’s lead and stop sourcing palm oil from REPSA and its parent conglomerate Grupo Olmeca,” Conant said.

According to Friends of the Earth, these include PepsiCo, Kraft Heinz, Kellogg, Hershey, Unilever, Mars and Mondelez International. However, PepsiCo, Kraft Heinz, Kellogg, Unilever and Mars all told FoodNavigator that they do not source palm oil from REPSA.

A spokesperson for Kraft Heinz noted: "Kraft Heinz is committed to sourcing palm oil that is 100% RSPO-certified and traceable to the mill of origin. Based on this work, 90.4% of our direct supply is traceable at this time, with no known current exposure to RESPA. Given the complexity of the palm oil supply chain, we are constantly engaging with our network of suppliers to ensure they’re meeting the expectations set forth in our global sustainable palm oil policy."

A Kellogg representative added: "We only use a very small amount of palm oil globally and we continuously work to improve the sustainability of palm oil. We support responsible sourcing of palm oil through our Global 2020 Sustainability Commitments. We’re also committed to working with our suppliers to source fully traceable palm oil to known and certified sources that are environmentally appropriate, socially beneficial and economically viable."

A spokesperson for Unilever clarified that the company does not source REPSA palm oil and added that it does not enter its supply chain via a third party. “Unilever does not source from REPSA directly nor does any REPSA palm oil enter Unilever’s supply chain via our suppliers.”