US bank pulls $140 million financing after RSPO dropped Indonesian palm oil giant for widespread labour violations
Citigroup has divested from Indofood after an RSPO investigation into the Indonesian food company's practices.
Indofood is facing a $140 million black hole after Citigroup cancelled all funding to the firm following allegations it used child labour and breached numerous employment laws at its palm oil plantations.
The Roundtable on Sustainable Palm Oil (RSPO) launched an investigation into the palm oil giant in 2018 and found the largest food company in Indonesia to have violated 20 of its standards as well as 10 breaches of Indonesian labour laws.
After conducting inspections at its RSPO-certified unit, the regulatory body said that the “grave and methodical nature of the breaches” required immediate suspension of its sustainability certificate.
The move followed a complaint by Rainforest Action Network (RAN) and other NGOs that detailed numerous labour violations including unpaid wages, gender discrimination, workers being exposed to hazardous chemicals and a high probability of child labour.
Reacting to the June announcement by Citigroup, RAN senior campaigner Hana Heineken said: “We are glad to see Citigroup enforce its policy and cut ties with Indofood, as this company has been flouting Indonesian laws, certification standards and international business norms for far too long.”
“This should send a strong signal to Indofood’s remaining financiers and business partners that Indofood is a bad investment.”
Indofood, which is controlled by The Salim Group, has lost a host of big-name buyers in the past two years with Nestle, Musim Mas, Cargill, Fuji Oil and Hershey’s among those to sever ties.
Despite being dropped by RSPO and international groups, working conditions at its palm oil operations have failed to improve, according to an Indonesian NGO collaborating with RAN.
“Indofood has allowed systemic labour exploitation to continue by ignoring RSPO’s warning. In fact, since the company left the RSPO, instances of intimidation and attacks against the independent union have escalated,” said Herwin Nasution, executive director at OPPUK.