IOI’s stronger commitment to sustainability credit positive, says Moody’s
KUCHING: Global ratings agency Moody’s Services believe IOI Corporation Bhd’s update on its progress to implement its sustainable palm oil policy (SPOP) was a credit positive move.
On April 28 this year, IOI said that it is adding new commitments to the original action plan, including independent third-party verification of its progress toward SPOP implementation, and more stringent peatland management practices in its Indonesian plantations aligned with the Palm Oil Innovation Group’s standards, an initiative that strives to adopt sustainably responsible palm oil production practices globally.
The environmental activist organisation Greenpeace also acknowledged IOI’s progress in implementing SPOP standards.
“IOI’s increased transparency and commitment to sustainable palm oil production is credit positive and will strengthen the company’s existing off-take relationships within its specialty oils and fats downstream segment,” Moody’s said in a statement yesterday.
“More sustainable palm oil practices will also allow IOI to re-establish relationships with customers that terminated contracts with IOI after it was suspended from the Roundtable for Sustainable Palm Oil (RSPO) over environmental lapses.
“We expect IOI’s downstream revenues to grow five to 10 per cent over the next 12 to 18 months, helped by rising sales volume from its specialty oils and fats sub-segment following the company’s renewed commitment to sustainable practices.”
IOI’s specialty oils and fats business segment is a global leading producer of fractionated oils and blends, which have strong demand in processed-food applications, particularly in North America and Europe, where palm oil-based products require the RSPO-certification.
Compliance with RSPO principles and criteria is an important differentiating factor for palm-oil producers, providing a competitive advantage and profitability enhancement in the industry.
“RSPO-compliant palm oil producers are well positioned for growth, particularly in Europe and North America, because certified crude palm oil and its derivatives are increasingly required by leading global food and household product companies,” Moody’s added.
IOI introduced SPOP after RSPO suspended its certification of IOI’s palm oil value chain in April 2016.
The main reason for the suspension was a complaint filed by environmental organisation Aidenvironment, criticising IOI’s clearing of peatlands in Kalimantan, Indonesia.
RSPO lifted the suspension on all of IOI’s palm oil products in August 2016 because it was satisfied with the company’s actions to address deforestation.
Both sides have agreed on an action plan, with RSPO’s board monitoring IOI’s implementation of sustainable palm oil practices in the company’s value chain over the 12-month period ending July 2017.