PepsiCo Delays, Palm Oil Workers Despair

Palm oil fruit held in a child worker's hands - courtesy of OneVillage/Flickr

More than a year after the publication of a detailed report showing child labor, exposure to toxic pesticides, and other serious labor rights violations in its palm oil supply chain, PepsiCo has failed to take meaningful steps to remedy the abuses.

Rainforest Action Network (RAN), OPPUK, an Indonesian labor rights advocacy organization, and the International Labor Rights Forum (ILRF) co-published a report in June 2016 documenting serious human and workers’ rights violations on two Indonesian palm oil plantations owned by IndoAgri, a subsidiary of PepsiCo’s joint-venture partner Indofood. Indofood is one of the largest food the sole manufacturer of PepsiCo’s snack products in Indonesia.

Through two months of intensive worker interviews on Indofood plantations in Northern Sumatra, we found systemic human rights and labor violations, including child labor, workers exposed to highly hazardous pesticides, failure to pay minimum wages, workers with no employment relationship with the company, and the use of company-backed unions to deter independent labor union activity. Since the report was published, the workers profiled report no real changes to their working and living conditions.

Denials, threats, and inaction

Prior to publication, ILRF and its allies provided Indofood with the opportunity to review and comment on the report’s findings, but the company instead chose to send a letter threatening legal action if the report was made public.   

Needless to say, we did not back down, and the report generated widespread media coverage in both international and local press outlets.

In response, Indofood declined to comment on the report’s findings, issuing a short, vague statement claiming that it “complied with all relevant Indonesian laws and regulations.” Later on the company claimed that it could not investigate the report’s allegations unless we shared transcripts of the worker interviews and other sensitive information that could be used to identify and punish the workers who spoke out.

PepsiCo also declined to address the report’s findings and instead touted its palm oil sourcing policy, under which its palm oil suppliers are supposed to uphold human rights standards, including respecting the rights of all workers. While this sounds good on paper, the policy does not apply to its joint venture partner, Indofood, for the palm oil it uses to make PepsiCo’s products for the Indonesian market.

PepsiCo has subsequently tried to dodge its responsibility by downplaying the extent of its business relationship with Indofood. For example, in its 2016 Palm Oil Progress Report, PepsiCo emphasizes that it has “no contractual relationship” with IndoAgri, but fails to mention that Indofood owns IndoAgri and uses its palm oil to produce Pepsi-branded snack foods in Indonesia. On other occasions, company representatives have emphasized the “delicate nature” of a joint venture partnership, but this fact only increases PepsiCo’s responsibility since it is a part owner of Indofood, as opposed to merely a customer. 

PepsiCo claims that it has contacted Indofood on multiple occasions to express concerns about its handling of the allegations of labor violations, but so far it has refused to articulate at what point, if any, it would exit the business relationship if Indofood does not meaningfully address ongoing labor concerns. Meanwhile, some major financiers, including the Norwegian Government Pension Fund, have seen enough and divested from Indofood and its parent company First Pacific over its poor social and environmental performance.    

PepsiCo isn’t the only company that’s under fire for sourcing palm oil from suppliers who fail to respect basic labor rights. Amnesty International released a detailed report in August 2016 exposing shocking labor violations – including child labor, exposure to toxic pesticides, and failure to pay minimum wages -- on plantations owned by palm oil giant Wilmar, a supplier to major global brands, including Unilever, Colgate-Palmolive, Kellogg's, Nestle, and Procter & Gamble. 

Compared with PepsiCo and Indofood, Wilmar has taken a far more constructive approach to news of labor violations on its plantations. Shortly after receiving the Amnesty report, the company immediately opened an internal investigation, contracted with a third party to conduct a labor assessment, and adopted a public action plan in which it made specific commitments to convert temporary workers to permanent status, provide workers with written pay slips and contracts, and revise its quota system in consultation with workers and unions. 

Workers wait while RSPO dithers

As months went by after the report release, and workers on Indofood’s palm plantations reported no meaningful changes, ILRF and its partners escalated the pressure by filing an official complaint against Indofood with the Roundtable on Sustainable Palm Oil (RSPO), a multi-stakeholder initiative that markets “sustainable” palm oil that is supposed to be free from environmental and human rights abuses. Shortly after the complaint was filed, Accreditation Services International (ASI) did an independent investigation on a third Indofood plantation that found violations similar to those documented in our report.

Over ten months later, we still have no decision from the RSPO’s on whether Indofood will be suspended or even a timeline for when a decision will be made. Despite receiving independent confirmation of labor abuses (via the ASI audit) on certified Indofood plantations, the RSPOs complaint’s panel believes that it still does not have sufficient evidence to suspend the company. Meanwhile, Indofood continues to enjoy the benefit of selling “sustainable” palm oil while workers suffer abusive working conditions.

Consumers are increasingly demanding products that are made sustainably, including being free from environmental destruction and human rights abuses. The RSPO and PepsiCo have responded with shiny promotional materials meant to make consumers feel better about their products (commonly called “greenwashing”), while still profiting from the low-road practices that harm people and planet. It’s time for both organizations to live up to their own policies and hold Indofood accountable for its brazen disregard for RSPO principles and palm workers’ human rights. That would be a genuine step towards sustainability.