On today’s earnings call (info here) at 10 am ET, agribusiness giant company Bunge Limited (NYSE: BG) will report on its global business results. But evidence has just emerged that Bunge is excessively reliant on a single palm oil supplier that has engaged in rampant deforestation and clearance of ultra carbon rich peatland, and is working to sabotage emerging progress that is breaking the link between commodity production and deforestation.
Why This Matters: Bunge and Sarawak
Sarawak Oil Palms Bhd (SOP) is actively working to sabotage progress towards protecting forests, peatlands, and the people that rely on them. According to trade data, Bunge purchases 88% of the Sarawak Oil Palms Bhd Company exports. According to Bunge’s own filings with the industry trade group, this represents approximately 44% of Bunge’s total global palm oil supply.
Sourcing from SOP will likely make Bunge ineligible to supply to major global, premium value customers because of SOP’s rampant deforestation and clearance of peat. The world’s largest palm oil consumers including Nestle, Unilever, Hershey’s, Mondelez, Ferrero Rocher, Neste Oil, Safeway, and Reckitt Benckiser have all made public commitments not to source palm oil from companies engaged in deforestation or peatland clearance. Many other companies are racing to adopt similar policies in response to rising pressure from consumers. Continuing to source from SOP means that Bunge will have a difficult time accessing these markets.
Sarawak’s actions have drawn the attention of major companies and investors and create a significant liability for Bunge. Reporters should ask what actions it will take to mitigate this risk.
Wilmar International (the world’s largest palm oil trader with a 45% market share) recently announced its “No Deforestation, No Peat, No Exploitation” policy that requires their suppliers to immediately cease deforestation, peatland clearance and human rights abuse. Wilmar is working hard to implement the policy, and we have already seen many supplier companies take action to comply. As such, the policy has created important momentum.
Again, info on the call can be found here.
More on Sarawak below
- Sarawak Oil Palms continues to clear Sarawak’s globally important peat resource (see evidence about corruption and deforestation in Sarawak on pages 4 and 14 here)
- We understand that Sarawak Oil Palms is telling other Sarawak palm oil suppliers that they can keep on destroying peat and forests and that Sarawak Oil Palms will continue to buy palm oil – no questions asked.
- Sarawak Oil Palms CEO Wong Kee Hwong also serves as CEO of the Sarawak Oil Palm Plantation Owners Association (SOPPOA), and has been using the trade association as a platform to publicly attack peat protection policies.
- Sarawak Oil Palms has aggressively lobbied Sarawak’s government to oppose peat, forest, and community protection.
- Peatland clearance for palm oil is the largest contributor to climate change in Southeast Asia. Studies by Kim Carlson and others for the National Academies of Science and Stanford University have shown that clearance of peatland in just part of the island of Borneo are expected to release more greenhouse gas emissions into the atmosphere than Canada’s entire fossil fuel sector.
- Sarawak is the epicenter of peatland clearance in the world. The state cleared an incredible one third of its peatlands between 2005 and 2010 alone, with Sarawak Oil Palms Bhd at the center of these activities.
- Under pressure from SOP, the Sarawak government has announced plans to clear one million additional hectares, much of it on peat, for palm oil plantations as part of its “more aggressive” expansion strategy. See Chatham House report.