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July 2, 2013

Wilmar to cut ties with Indonesian firms that clear land with illegal fires

Kuala Lumpur: Wilmar International Ltd, the world’s largest palm oil trader, plans to cut ties with Indonesian suppliers that clear land with illegal fires after blazes engulfed Singapore in a record haze.

Wilmar, which bans burning on its own plantations, relies on third parties for more than 90% of the crude palm oil for its refineries.

Sime Darby Bhd, the biggest publicly traded palm oil producer, also prohibits burning at its own plantations and relies on other sources for supplies, buying as much as half the commodity for its plants from others.

Palm oil refiners are being pushed to enforce their no burning policies to suppliers after hundreds of illegal blazes raged last month in Indonesia, the world’s top producer of the commodity.

Unilever, buyer of 3% of the world’s palm oil, said the haze was a reminder of the need to accelerate sustainability efforts.

“We need the money to speak,” said Scott Poynton, founder of The Forest Trust, which worked with Nestle SA and Golden Agri-Resources Ltd on sustainability policies.

If companies “made a no-deforestation commitment that says to these communities, ‘you can’t burn because we won’t buy your oil,’ that’s directly money speaking to the people,” he said.

Palm oil is the world’s most used edible oil. It’s in Unilever’s margarine, ice cream and soap. The London and Rotterdam-based firm made a commitment to buy sustainable palm oil and wants all its supplies to be from certified, traceable sources by 2020.

“What the industry has realised is that they can’t be simple bystanders in an ecosystem that gives them life in the first place,” Unilever chief executive officer Paul Polman said on June 27 in Jakarta.

While Indonesia and Malaysia ban burning to clear or manage acreage, 17 timber concession and 10 palm oil plantations had land affected by fires in Indonesia, according to June 24 data from the non-government World Resources Institute (WRI).

Indonesia was investigating a number of firms suspected to be involved in illegal fires and would announce those names once the probe was completed, Environment Minister Balthasar Kambuaya said last week.

Wilmar dealt with some of the companies identified by WRI on the assurance they did not burn, the company said in an e-mailed response to Bloomberg News.

“Should they be found to be involved in burning to clear land for cultivation, we will stop doing business with them,” Wilmar said. The firm’s buying policy states suppliers must comply with all local and national laws and regulations.

 — Bloomberg



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