INDONESIA – American soda and food giant PepsiCo and Dutch dairy producer FrieslandCampina have asked their suppliers to stop buying palm oil from plantation owner Astra Agro Lestari (AAL), accused by environmental groups of illegal land grabbing, harming the environment, and human- rights abuses.

The corporate supply chains, recently, have been subject to lots of scrutiny as regulators and investors increasingly consider environmental and social impacts, while consumers worry about climate change and biodiversity loss.

Last year, environmental groups found that Jakarta-based palm oil producer Astra Agro Lestari did not obtain consent from local communities before claiming land, improperly disposed of waste, and cleared areas leading to flooding in Indonesia.

The findings ignited a public debate that led to some major consumer products and packaged food manufacturers, which widely use palm oil, to cut ties with the agricultural company.

FrieslandCampina conducted its investigation on AAL practices and its findings led the company to halt sourcing materials from them.

“Responsible purchasing with respect for the environment, biodiversity, and human rights is important to us. In October 2022, we received critical questions from an NGO. This motivated us to conduct further investigation. Based on the findings, we asked our supplier to no longer source materials from this plantation,” a FrieslandCampina spokesperson said.

Nestlé’s also decided to stop sourcing from the three subsidiaries of AAL accused of land abuses following an independent assessment.

AAL later noted that it would appoint “an independent third party to review the allegations and any other issues that may arise concerning them,” and will publish the findings of the review, following the NGO’s report.

A PepsiCo spokesperson told Reuters the company is “engaging with suppliers who continue to source from (AAL) and have asked that they suspend the mills identified as being potentially linked to the grievance and underlying allegations.” PepsiCo does not directly source from AAL, the spokesperson elaborated.

Meanwhile, FrieslandCampina highlighted that based on the findings, the Dutch dairy giant asked its supplier to no longer source materials from this supplier.

Globally, international palm oil prices have continued to drop and are at their lowest level since the beginning of 2021, according to the UN Food and Agriculture Organization (FAO).

In its last food commodity prices update for February, the UN body noted that the global demand for palm oil is “lingering sluggish” despite seasonally lower production from major growing regions.

Palm oil is used to create soap, provide taste and texture and keep chocolate from melting, among other purposes, according to the World Wildlife Fund.

An AAL spokesperson said it had no direct commercial relationship with PepsiCo or FrieslandCampina, and the companies had not contacted them about the issue.

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