This article first appeared in The Edge Financial Daily, on March 30, 2016.

KUALA LUMPUR: IOI Corp Bhd yesterday confirmed that the Roundtable on Sustainable Palm Oil (RSPO) had suspended its certification for the group’s oil palm production.

The suspension, which takes effect on Friday, follows complaints against IOI Corp’s Indonesian subsidiaries’ plantation estates, which produce about 2% of the group’s annual crude palm oil (CPO) production.

“According to the complaints by a non-governmental organisation, the Indonesian plantations are alleged to be non-compliant with various RSPO Principles and Criteria and requirements,” IOI Corp said in a filing with Bursa Malaysia.

It was reported earlier that three of the group’s operations in West Kalimantan province had allegedly violated certain RSPO standards meant to prevent rainforest destruction and social conflict and other laws.

IOI Corp has denied the allegations, which include uprooting trees without proper government permits, flouting the RSPO’s procedures, operating on deep peat and using fire to clear land.

In its filing yesterday, the group said it is very concerned about the impact on its stakeholders and reputation if it is not able to supply certified palm oil in the future due to prolonged suspension.

These potential sales losses are not quantifiable, it added.

As a founding member of the RSPO, IOI Corp said it recognises the importance of sustainability and had played an active role in promoting sustainable practices since its inception in 2004.

“IOI Corp has been fully committed in upholding the requirements of [the] RSPO and will continue to deliver sustainable palm oil to the market,” it said.

The group said it on March 23 submitted a comprehensive action plan to the Complaints Panel and is actively engaging with the RSPO to review the plan and to resolve the issues without further delay.

The plan includes conducting stakeholder engagement with all the relevant governmental departments and ministry regulating the palm oil industry in Indonesia to ensure comprehensive understanding of the legal procedures and processes.

It also includes conducting internal capacity building for all relevant personnel responsible for legal and regulatory compliance.

Last week, IOI Corp said the suspension would have a minimal impact on its earnings as it can continue to sell CPO without the RSPO certification. Also, its existing certified sustainable palm oil (CSPO) inventory remains unaffected and can continue to be sold as CSPO.

The only effect of the suspension, it added, is that the group would not be able to earn CSPO premium on its CPO which represents less than 0.5% of its total revenue.

Shares in IOI Corp rose three sen or 0.65% to RM4.66 yesterday, with a market capitalisation of RM30.05 billion.