11/04/2011 (The Star) - IT'S perfectly understandable if IOI Corp Bhd doesn't see things the same way, but the Roundtable on Sustainable Palm Oil's (RSPO) handling of complaints against the listed Malaysian plantation player may well turn out to be a watershed in the palm oil industry's long-standing efforts to convince the rest of the world that most of the major oil palm growers are serious about addressing sustainability issues.

To some people, this development is a blow against palm oil, but that's the view of those who are prone to seeing half-empty glasses. In fact, this case has tested the robustness of the RSPO's grievance process, and ultimately, it has gone some way in showing that the framework for the certification of sustainable palm oil products is strong and credible.

It was not the first time that the RSPO Grievance Panel has been called into action, but considering that it was IOI that came under scrutiny this time, there was definitely a reason to sit up and take notice.

For one thing, the company is huge and has an international presence. Its website describes the group as a “leading global integrated palm oil player with operations stretching the entire palm value chain from seedlings to plantations to crop oil extraction to diverse value-added manufacturing across major continents serving global markets in more than 65 countries”.

There's also the point that IOI had a hand in the founding of the RSPO. A press statement to announce the setting up of the “global multi-stakeholder initiative” in April 2004 named Loders Croklaan of the Netherlands as among those active in the RSPO executive board. Loders Croklaan is the specialty fats arm of the IOI group.

Because it has acted on the complaints against IOI, the RSPO has basis to claim that it operates without fear or favour.

It helps too that IOI says it accepts the RSPO's April 1 decision, which was to immediately suspend the ongoing certification process of the IOI group's activities and to give the company 28 days to come up with a solution to the matters identified by the RSPO.

(In its own words, the RSPO is a not-for-profit association that “unites stakeholders from seven sectors of the palm oil industry oil palm producers, palm oil processors or traders, consumer goods manufacturers, retailers, banks and investors, environmental or nature conservation NGOs and social or developmental NGOs to develop and implement global standards for sustainable palm oil.”)

The IOI episode began when several non-governmental organisations (NGOs) and the community in Long Teran Kanan, Sarawak, went to the RSPO to complain about the company. According to an RSPO statement issued on Tuesday, the grievance covers two locations and three specific matters a dispute over native customary land leased by IOI for palm oil production in Sarawak, drained peat land on endangered wildlife habitat and clearing of forest area, and illegal deforestation and non-compliance with RSPO Principles and Criteria.

In a statement released on Thursday, IOI says this relates to a dispute with the natives over plantation land occupied by 70% subsidiary IOI Pelita Plantation Sdn Bhd. A Sarawak state agency is IOI Pelita's other shareholder.

The Grievance Panel concluded that IOI had breached two RSPO rules. One is a provision in the organisation's Code of Conduct that requires members to “commit to open and transparent engagement with interested parties, and actively seek resolution of conflict”.

The other relates to an obligation under the RSPO certification system that says: “Organisations with more than one management unit and/or that have a controlling holding in more than one autonomous company will be permitted to certify individual management units and/or subsidiary companies only if there are no significant land conflicts, no replacement of primary forest or any area containing HCVs (high conservation values) since November 2005, no labour disputes that are not being resolved through an agreed process and no evidence of non-compliance with law in any of the non-certified holdings.”

Apart from suspending the certification of IOI's activities and imposing the deadline to deliver “an acceptable solution to these matters, which preferably should be mutually agreed by parties involved”, the RSPO also warned: “Failure to deliver the required proposal by the due date of May 2, 2011 will result in the RSPO considering further sanctions against your company, which may include the suspension of your licence for new transactions involving Certified Sustainable Palm Oil materials including GreenPalm certificates.”

In response, the plantation company says: “IOI accepts this decision and will work closely with the RSPO in developing a plan to find an acceptable solution to the issue of compensation.”

At the same time, the company expresses concerns about the conduct of some NGOs and online news outfits, saying they are trying to mislead public opinion on the issue by repeating false statements and unfair allegations.

“IOI welcomes an independent organisation like the RSPO to appoint representatives to observe the proceedings of the meetings between IOI Pelita and the natives, and possibly mediate in the negotiation over the affected land area and the amount of compensation,” it adds.

“While IOI Pelita will endeavour to reach an agreement over the issue of compensation, IOI wishes to point out that in any discussion for settlement, the successful conclusion of the discussion depends on the sincerity and reasonableness of both the parties to the discussion, merely pressuring one party will not guarantee or facilitate the successful conclusion of the discussion.”

This suggests that IOI isn't quite confident that there will be “an acceptable solution” like the one the RSPO prefers. In other words, it's too soon to declare that the RSPO has dealt with the complaints against IOI to everybody's satisfaction .

However, at this point, it's good to see that the grievance process hasn't turned into a whitewashing exercise. Hopefully, it doesn't veer to the other extreme, when even flimsy complaints can lead to indiscriminate witch-hunts and unreasonable penalties.