Wilmar International, the world’s largest producer of palm oil, has announced major steps forward in reducing its environmental and social impacts. The company has worked out an innovative financial deal with ING to link its existing loan to its sustainability performance, and has unveiled a policy aimed at protecting children living on its palm oil plantations. But human rights campaigners say it may be little more than a band-aid.
ING has converted a portion of Wilmar’s existing bilateral, committed Revolving Credit Facility of $150 million into a sustainability performance-linked loan, making Wilmar the first company in Asia and in the palm oil industry to do so. ING has worked with eight other clients in Europe on sustainability improvement loans since March 2017, including health care technology giant Royal Philips, which earlier this year announced an agreement with a consortium of 16 banks for a new €1 billion Revolving Credit Facility with an interest rate dependent on its year-on-year sustainability performance improvement.
The deal with ING follows the release of an Amnesty International report last year accusing Wilmar of extensive human rights abuses throughout its supply chain, including child labor, unsafe working conditions and unfair pay. Progress in these areas, as well as on a range of other environmental, social and governance issues is the key to lower interest rates. Sustainalytics will measure Wilmar’s progress in these areas and, if met, the interest rate for part of the loan will be reduced for the following year.
According to Eco-Business, Wilmar intends to expand this finance model to other areas of its portfolio, including sugar.
“Sustainability is a priority at Wilmar and we are constantly seeking improvements in our sustainability performance,” said Ho Kiam Kong, CFO of Wilmar. “Our collaboration with ING dovetails Wilmar’s commitment to a responsible business. We believe that incorporating sustainability metrics into every aspect of our business, from daily operations to corporate financing, is key to creating value for our stakeholders.”
In addition to the announcement of its new sustainability-driven finance model, Wilmar has also launched a Child Protection Policy (CCP) throughout its global operations, buildings on its existing No Child Labor Policy in an effort to enhance the welfare of children living in palm oil plantations where their parents work.
The new policy includes commitments to improve access to primary and secondary education to the children of its staff and workers. The School Redevelopment Program is a key aspect of this commitment and will see 15 schools around Wilmar’s palm oil estates in Indonesia upgraded and redeveloped. The policy also pledges to “swiftly and appropriately” address any reported breaches of the Child Protection and No Child Labor Policies.
“KPAI welcomes the efforts of companies not to employ children and to safeguard their wellbeing,” said Ai Maryati Solihah, Commissioner of Trafficking and Exploitation at the Indonesian Child Protection Commission (KPAI). “This is a positive step especially for industries that involve manual labor, such as the palm oil sector. Wilmar’s CPP extends to its suppliers including plantations supplying crude palm oil (CPO) and I think this will have a positive impact on eliminating children’s involvement in CPO production. We encourage more companies to do the same.”
However, human rights campaigners believe the new policy does little to address the heart of the problem, such as unrealistic harvesting targets that force workers to bring their children onto the plantations for extra help.
“Without reforming the working policies and practices on plantations and changing the wage and quota system, this policy could actually make working conditions harder for parents,” Lauren Armistead, Business and Human Rights Campaigner for Amnesty International, told Eco-Business. “It’s really about attacking the root causes.”
The NGO also points out that the plan does little to remedy past harm done to workers and their children through forced labor, dangerous working conditions and poverty-level wages.
Wilmar has acknowledged the validity of the group’s criticisms and has said it is currently working with global labor advocacy nonprofit Verit****é to address labor-related issues in its supply chain. Together with Business for Social Responsibility, Wilmar has already begun rolling out supplier training workshops focused on human rights, wages and labor conditions.
“We are not saying that the policy is going to fix everything,” said Perpetua George, General Manager for Group Sustainability at Wilmar. “We are actively working on plans to address this, but it’s not something that will change immediately. We cannot yet say we have successfully solved the wage issue.”