ISCC statement on the Finnwatch report on suspected labour rights violations on IOI palm plantations in Malaysia

Cologne, 2 December 2014

On 16 September 2014 the Finnish non-profit organisation Finnwatch published the report “The law of the jungle – Corporate responsibility of Finnish palm oil producers” (an English translation was published on 18 September 2014). The report specifically addresses the working conditions and suspected labour rights violations on palm oil plantations in Malaysia from which Finnish companies purchase palm oil.

One of the companies covered in the report is Neste Oil, which sources palm oil from the Malaysian IOI Group. For the report, Finnwatch gathered findings from four IOI palm estates in the Malaysian states Johor and Negeri Sembilan. All four estates could be identified as suppliers for ISCC certified First Gathering Points and Oil Mills and had thus been audited by auditors from independent certification bodies as part of the ISCC certification process.

The findings on three of the four IOI estates compiled in the Finnwatch report are based on interviews with the management and workers, examination of records, on-site observation of workers at work and living conditions. Finnwatch did not visit the fourth estate on-site but a meeting with workers was organized outside the estate.

When ISCC first learnt from a draft report about alleged weaknesses detected by Finnwatch in September 2014 immediate action was taken. An ISCC integrity auditor was sent to Malaysia to get a comprehensive overview and verify the alleged violations mentioned in the Finnwatch report. All four estates were visited by the ISCC integrity auditor on-site in September and October 2014. Furthermore, the auditor conducted interviews with the management and workers and examined records and documentation.

The alleged non-compliances with labour rights that are raised by Finnwatch mainly refer to the working conditions of foreign workers. They include findings regarding the payment below statutory minimum wages, no payment of overtime, and, in general, unequal treatment of Malaysian and foreign workers. Other issues addressed include restrictions of the freedom of association, fees charged by recruitment agencies, incomprehensible working contracts, and leave times. Furthermore, it seems to be a common practice for the company to keep the passports of foreign workers and return them only upon request and for “important and emergency reasons”.

The thorough investigations conducted by ISCC on-site aimed to verify the issues raised by Finnwatch. With regard to national Malaysian legislation and ISCC requirements no real shortcomings could be verified. The allegation of the discrimination of foreign workers could not be confirmed. However, it became evident that IOI is acting close to the edge of existing requirements. This does not seem to be beneficial for the workers of IOI as well as the company itself.

ISCC sees a need for action to address these issues. However, some of the topics may neither be tackled by the company nor by ISCC in a solo attempt. This particularly applies to the issue of passports being kept by companies, which seems to be resulting from both common practice and legal requirements for companies to prevent illegal employment. This issue is currently not properly addressed by none of the certification systems.

ISCC will initiate working groups in the framework of the ISCC Technical Committee South East Asia to work on solutions. Both Neste and IOI have expressed their agreement to participate and support the development of improvement measures. These working groups shall be open to companies and other certification systems such as RSPO. NGOs are also welcome to participate.

ISCC is taking the allegations, such as raised by Finnwatch, very seriously and welcomes factual initiatives of NGO’s since they offer valuable input for ISCC’s continuous improvement process. This is why ISCC has been working with NGO’s on social and environmental topics. ISCC is the only certification scheme that runs an integrity program to monitor certification activities and to ensure compliant, consistent and objective work of the certification bodies cooperating with ISCC. This integrity program runs on top of the audits conducted by certification bodies, accreditation bodies and national authorities.

Download of the statement