Indonesia's palm oil giant faces sanction from industry body

KUALA LUMPUR, Sept 23, 2010 AFP © - An industry body for sustainable palm oil on Thursday accused Indonesian giant Sinar Mas of breaching its principles, and warned that it could face expulsion.

Environmentalists blame palm oil production for deforestation. Photo : AFP

Sinar Mas Agro Resources and Technology (SMART) has been struggling to repair its image after Greenpeace alleged the Indonesian firm was devastating rainforests and habitats for endangered species like orangutans.

The name-and-shame campaign by the environmental group has led several foreign buyers to cancel major contracts, but SMART said last month that an audit it had commissioned had cleared it of the charges.

In a rare public censure, the Roundtable of Sustainable Palm Oil (RSPO) -- an industry group of producers, environmental groups and food companies -- said it had found "serious non-compliance" on the firm's part.

"The Roundtable on Sustainable Palm Oil takes all infringements of its Code of Conduct and Principles and Criteria very seriously," the Kuala Lumpur-based RSPO said in a statement on its website.

"Members who have been found to not be in compliance and who continue to be in non-compliance with the RSPO regulations could ultimately face sanctions, including the suspension and, eventually, the termination of their membership of the RSPO."

The industry group said SMART was found to have failed to "work towards implementation and certification of the RSPO Principles and Criteria".

The RSPO was formed in 2004 to establish stringent social and environmental criteria including a ban on clearing forests in order to plant the crop.

SMART, the Indonesian palm oil unit of its Singapore-listed parent company Golden Agri Resources (GAR) and part of the Sinar Mas agri-industry empire, commissioned the audit in February after Greenpeace made the claims.

The environmental watchdog accuses SMART of widespread forest destruction, including clearing primary forests and peatland.

SMART -- part of the Singapore-listed Sinar Mas agribusiness group -- has said it should not be blamed for the destruction of Borneo's forests and that the allegations are "largely unfounded".

GAR has lost major clients including Unilever, Kraft and Nestle in the resulting furore.

Indonesia is the biggest producer of palm oil, which is used in everything from biscuits to cosmetics, but environmentalists say plantations are driving deforestation blamed for habitat loss and producing greenhouse gases.