Nestle Buys Palm Oil Promises of  Sinar Mas

Swiss food giant Nestle will resume purchases of palm oil from Sinar Mas Agro Resources and Technology following an 18-month halt after Smart made improvements to abide by Nestle’s guidelines for responsible environmental practices.

The parent company of the palm oil producer known as Smart, Golden Agri Resources, has been working with environmental group The Forest Trust on the implementation of a Forest Conservation Policy. The plan would ensure that GAR has no deforestation footprint and also seeks sustainable growth.

Based on results of TFT assessments and GAR’s work in progress, “we have decided to place an order with Golden Agri for our factory in Indonesia,” Nestle Indonesia’s spokesman Brata T. Hardjosubroto said in a statement on Friday.

He said that Smart, Indonesia’s second-biggest listed plantation operator, and GAR had been making continuous progress and demonstrated clear action to meet Nestle’s responsible sourcing guidelines.

Brata lauded GAR’s new conservation policy, but he said that purchasing palm oil would remain conditional on GAR and Smart’s commitment to sustainable rainforest development.

The spokesman added that a segregated supply chain has been established, ensuring traceability of shipments from GAR plantations to the Nestle factory in Indonesia. The full traceability of this supply chain has been checked by an independent third-party auditing body, the TUV Rheinland Group.

Smart president director Daud Dharsono confirmed that Nestle has placed an order to resume palm oil purchases.

“We welcome Nestle’s decision, which is an acknowledgement of our sustainability efforts,” he said.

“This represents an important milestone in our journey toward the continuous production of sustainable palm oil.”

Nestle, which started construction on its $200 million factory in West Java on Monday, had dropped Smart as a supplier in March 2010. The company reinforced its commitment to sustainable rainforests by stating in July that it was committed to stop using products that contributed to the destruction of rainforests, and entered a partnership with TFT.

The decision came following campaigns by Greenpeace highlighting Nestle’s purchase of crude palm oil from Sinar Mas Group, which Greenpeace accuses of destruction of rainforests and peatlands to make way for new plantations.

Smart said in its statement that it began complying with Nestle’s standards in late 2010, when GAR developed a joint action plan with TFT to help GAR ensure that palm oil delivered to Nestle would meet all requirements according to the guideline.

“We believe the FCP is a strong platform in which all stakeholders can collaborate to find solutions for sustainable palm oil,” Daud said.

Bustar Maitar, the head of Greenpeace Indonesia’s forests campaign, said that Greenpeace would give Smart a chance to show whether it would carry out its stated FCP commitment.

“This is a test of how serious GAR and Smart are in implementing the FCP. We will wait and see,” Bustar said.

Other companies that had stopped purchasing from Smart include Burger King, Unilever, and Kraft.

These companies had yet to announce whether they would resume purchases, but Bustar said he expected that the other companies would follow suit.

“The other buyers would monitor GAR’s and Smart’s commitment to the FCP before deciding on resuming purchases. If GAR can meet its commitment, the others will likely join Nestle,” he said.

Smart’s shares rose 2.3 percent to Rp 6,650 on the Indonesia Stock Exchange on Friday.