Cargill takes rare step of cutting business with Guatemalan palm oil supplier

Cargill has suspended business with a major Guatemalan palm oil supplier that has been accused of human rights violations and environmental degradation, an uncommon move by the agribusiness giant.

Minnetonka-based Cargill is one of the world's largest traders of palm oil, which is used in all sorts of food from cookies to cakes and ice cream, as well as in cosmetics.

Some palm oil plantations have long been dogged by complaints of deforestation and at times, human rights abuses. So Cargill and other companies in the palm oil industry — prodded by environmental and human rights activists — have set up "sustainability" codes for their suppliers.

In late November, Cargill suspended business with Reforestadora de Palmas del Petén S.A. (REPSA), saying it would not enter any new purchase contracts until the Guatemalan company can meet the "requirements of our sustainable palm oil policy," said a Cargill review laying out the decision.

Within the past two weeks, another palm oil industry giant, Singapore-based Wilmar International, says it has "put on hold" purchases from REPSA.

Cargill's suspension of business with REPSA sends an important signal to the palm oil industry, said Jeff Conant, senior international forests program director for Friends of the Earth, one of several environmental and human rights groups that have pushed Cargill and other palm oil manufacturers to pressure their suppliers.

"Cargill is among the global agribusiness companies that have tried to dissociate themselves from human rights exploitation, and by making this definitive break with REPSA, they are showing they are serious," Conant said. "Instead of just working with a company to come up with what are often cosmetic improvements, this shows a willingness to suspend business."

Cargill has been working with REPSA since December 2015 to get the palm oil supplier to comply with its sustainability policies. REPSA made "encouraging progress" but "fell short on several key expectations," Cargill's review said.

Cargill, one of the world's largest private corporations, will reassess its "business relationship" with REPSA if the supplier shows a renewed commitment to Cargill's sustainability goals.

Cargill's review of REPSA began after the September 2015 shooting death of Rigoberto Lima Choc, a 28-year-old Guatemalan schoolteacher who had spoken out about a big fish kill in the Pasión River in northern Guatemala.

Choc and other local activists in the Petén region claimed that millions of fish died due to effluent discharged into the river from a REPSA palm oil operation. A Guatemalan judge ordered REPSA to shut down the plantation for six months. The ruling was quickly followed by the kidnappings of three local human rights activists and Choc's killing near a courthouse in Sayaxché, a poor city with a largely indigenous population. A higher Guatemalan court overturned the order to temporarily close the REPSA plantation. Choc's murder case has not been resolved.

REPSA has said it is not linked with Choc's death. The company could not be reached for comment.

Cargill's decision to suspend business with REPSA is rare because it's based not only on environmental concerns, but human rights issues, said Gemma Tillack, agribusiness campaign director of Rainforest Action Network, which has questioned the rigor of Cargill's palm oil policies.

"In our view, this is a precedent-setting moment, given that this is such a monumental case involving violence and intimidation," she said.

Indeed, Cargill has only once suspended business with a palm oil supplier, IOI Group, a measure it took in May 2016 over environmental concerns. Several other palm oil buyers took the same action against IOI Group, a large Malaysian company, after it allegedly chopped down part of an Indonesian rain forest to plant palm trees.

Palm oil comes from the fruit of certain palm trees, and Southeast Asia — particularly Malaysia and Indonesia — account for at least 80 percent of world supply. Cargill owns palm oil plantations in Indonesia, but as a palm oil refiner, manufacturer and trader, it buys from other plantations worldwide. Central America has become a significant source of palm oil over the past 25 years or so, and Guatemala is the region's top palm oil exporter.

Palm oil companies in Guatemala "are operating in very complicated environments," according to a 2014 report by Verite, a Massachusetts-based nonprofit research and advocacy group for workers. Conflicts over land, weak government protection and unscrupulous labor contractors can "contribute to land grabs and the exploitation of workers," Verite found.

In 2004, corporations and nongovernmental groups created the Roundtable on Sustainable Palm Oil, which is aimed at making the palm oil industry more socially responsible. Cargill was one of the first corporations to join the group, and in 2014 the company announced an updated palm oil policy committed to "deforestation-free, socially responsible palm oil," according to Cargill's website.

The company maintains a log of grievances lodged against its palm oil suppliers. The log chronicles five grievances against direct suppliers, including REPSA and Felda Global Ventures. Felda is a Malaysian company that was featured prominently in a 2015 Wall Street Journal story about worker abuses in Southeast Asia's palm oil industry.

In Guatemala, Cargill required REPSA in mid-2016 to implement an "action plan" that included strengthening environmental and social protections; adhering to local and national laws; and issuing a "strong 'zero tolerance' policy on violence and intimidation," said Cargill's review.

Cargill monitored REPSA's progress before calling on REPSA in August to meet "four critical milestones in response to environmental and social grievances" raised by Guatemalan and international nongovernmental organizations. Cargill gave REPSA an Oct. 31 deadline.

But the palm oil supplier fell short on "several key expectations," and Cargill cut off business "effective immediately" on Nov. 24.

On Dec. 20, Cargill added another entry to its REPSA grievance log: "We will not tolerate any form of retaliation toward internal or external stakeholders such as employees, local communities and activists, including retaliation resulting from decisions undertaken by Cargill through our grievance procedure," the review said.

Cargill declined to comment further on its REPSA review.

Mike Hughlett • 612-673-7003