PepsiCo is among the latest consumer goods companies to ban palm oil from Indonesia-based conglomerate Astra Agro Lestari in its supply chain.
AAL, which owns palm oil plantations in Indonesia, was accused last year of human rights abuses and land grabbing.
In an open letter, the International Federation for Human Rights asked several major consumer goods companies, including PepsiCo, to cut AAL from their supply chains over its “sustained role in forcibly grabbing communities’ land, contributing to environmental destruction, negatively impacting communities’ livelihoods, and criminalizing land and environmental human rights defenders.”
Other companies addressed in the letter include Hershey’s, Kellogg, Unilever, Nestlé and Procter & Gamble.
An investigation from earlier in 2022 by the environmental group Friends of the Earth alleged that subsidiaries of AAL illegally occupied 16,000 acres of local farmers’ land. After the report came out, AAL said it would appoint a third party to investigate the allegations.
In a statement, PepsiCo said that it was reviewing the allegations against AAL through its established grievance process.
“While PepsiCo does not source directly from AAL, we are engaging with suppliers who continue to source from them and have asked that they suspend the mills identified as being potentially linked to the grievance and underlying allegations,” the company said.
PepsiCo uses palm oil primarily in its packaged food business and is one of the largest buyers of the ingredient in the world, though its purchases still represent less than 1% of the supply, according to the company.
The company’s goals around palm oil include having 100% of its supply covered under “No Deforestation, No Peat, No Exploitation” principles or a time-bound initiative showing progress toward that sustainability goal.
According to Reuters, which earlier reported on PepsiCo’s suspension of AAL palm oil from its supply chain, Nestlé, Procter & Gamble and infant formula maker FrieslandCampina have also suspended sourcing from AAL.
AAL has said in the past that it is committed to upholding human, community and labor rights, and that it cooperates with farming communities in its supply chain.
Seeking a sustainable supply
Palm oil is widely used in food, cosmetics and other consumer products, as well as biofuels. AAL is one of the top five producers for the global market, which is projected to grow from $48.6 billion in 2022 to $70.2 billion by 2029, according to HTF Market Intelligence.
Environmental groups have long put pressure on companies over palm oil sourcing, as production of the oil has been linked to deforestation and human rights abuses.
Retailers as well as consumer goods companies are also alert to the sustainability issues tied to the commodity.
As part of its sustainability goals, retail giant Walmart plans to use only palm oil with no deforestation links by 2025 in its private label products.
Anbinh Phan, Walmart’s director of global government affairs and business diplomacy, noted that much of the world relies on palm oil from Indonesia, a country rich in biodiversity. According to the Yale Center for Business and the Environment, Indonesia and Malaysia produce over 85% of the global supply.
Phan, speaking at a panel hosted by the American Apparel & Footwear Association earlier in March, said that Walmart is beginning to invest in NGOs and place-based initiatives that address the needs and rights of local communities and as well as issues including deforestation in palm oil sourcing.
But the executive acknowledged that the company’s efforts can’t make a lasting difference on its own. “Even as we invest in these critical landscapes and address these issues around regeneration,” Phan said, “we really need government participation and action so that these projects last beyond the scope of our investments.”
Editor’s note: This story was first published in our Procurement Weekly newsletter. Sign up here.