Singapore-based Wilmar International has said that it recognises the challenges raised in an investigation by an Indonesian green coalition that found palm oil from illegal plantations in Sumatra had tainted the global supply chains of Wilmar and four other top palm oil companies.
Wilmar is the top global player in the palm oil sector, producing and trading almost half the world's palm oil.
The report by Eyes on the Forest (EoF), an alliance of several Indonesian non-governmental organisations, tracked palm oil fruit produced in five conservation areas in central Sumatra meant to protect tigers, orangutans and elephants.
Most of the conservation areas, including Tesso Nilo National Park, have been progressively deforested in recent years and illegally planted with oil palms.
The palm fruit is laundered via dealers who sell to local mills that crush the fruit to produce crude palm oil (CPO), which is further processed by refineries. The refined palm and palm kernel oil is used in anything from margarine to soap, cosmetics to ice cream.
EoF tracked trucks carrying the illegal palm oil fruit to 19 CPO mills in central Sumatra.
In the investigation published this month, EoF found that subsidiaries of Indonesia's Royal Golden Eagle (RGE) group, Golden Agri-Resources (GAR) of the Sinar Mas group, Wilmar International, Musim Mas and smaller companies had received tainted palm fruit or crude palm oil.
All five companies have made significant commitments to improve their environmental practices, including zero-deforestation, in recent years as well as improving the transparency of their operations.
However, being able to fully trace the source of all palm oil supplies remains a challenge, despite direct engagement with third-party suppliers.
"Wilmar's traceability work has been the most advanced and transparent of all five companies," said EoF in their report.
However, gaps remain.
EoF found that three facilities of PT. Wilmar Nabati Indonesia, a palm oil processor, received palm oil from some of the 19 tainted suppliers.
In turn, one of these plants supplied tainted palm oil to three other Wilmar facilities, some of which in turn supplied another plant.
"As a result, seven out of Wilmar's ten Indonesian facilities processing palm oil could have traces of illegal FFB (palm fruit) from the areas EoF investigated," the report said.
In a statement to The Straits Times, Wilmar International said it "recognises the issues raised in the report; and concur with EoF on their observations on the challenges faced by the palm oil industry in and around the Tesso Nilo region of Sumatra, Indonesia".
The company said suppliers have been told to comply with the company's "No Deforestation, No Peat and No Exploitation Policy" and that a breach of its policy would lead to a review of, and possibly termination of, business dealings.
"Wilmar appreciates the investigative efforts of EoF and the World Wide Fund for Nature (an EoF partner), in particular, their recognition that some of the issues are systemic, including illegality issues.
Wilmar said fighting illegality in Indonesia's palm oil sector "is not a challenge which can easily be solved by one mill/refinery/company or group alone", adding that if one mill stopped buying illegal palm fruit, the supplies would find their way to another mill.
Wilmar said in respect to the issues in Tesso Nilo, the company would log EoF's concerns on its grievance procedure; engage with all CPO suppliers listed in the report to re-emphasise Wilmar's policies again; and update the progress of its efforts on the grievance procedure.