Abengoa Drops Sinar Mas From Palm Supply Chain Over Sustainability Dispute

Abengoa SA, a Spanish energy company, said today it won’t buy palm oil from Sinar Mas Group until the Indonesian producer complies with its sustainability policies.

Abengoa joins Nestle SA, the world’s biggest food maker, and Unilever NV in ruling out purchases from Sinar Mas, Indonesia’s biggest palm oil producer. That follows an April 2008 report by the environmental group Greenpeace that said Sinar Mas destroyed rainforest, causing global-warming emissions and hurting the habitat of the endangered orangutan.

Indonesia is the largest palm oil producer. Abengoa’s biofuels unit asked its raw materials providers to exclude palm oil from any unit of the Sinar Mas group, the company said in an e-mailed statement. All of Abengoa’s suppliers must measure their greenhouse-gas emissions or promise to do so within an agreed time span, it said.

“The measure will be in place until Sinar Mas can demonstrate that it complies fully with the social environmental sustainability policies pursued by Abengoa,” the Seville, Spain-based company said.

“We reaffirm our commitment not to develop on peat lands and primary forests as well as to conserve biodiversity,” Daud Dharsono, president director of PT Sinar Mas Agro Resources and Technology, a biofuels unit, wrote today in an e-mail response to questions from Bloomberg.

“We will get in touch with Abengoa SA to address their concerns and share with them our sustainability practices,” Dharsono said.

The Indonesian company’s unit, known as SMART, said April 1 that it’s appointed two bodies, Control Union Certification and the BSI Group, to investigate the Greenpeace claims. The review is scheduled to take three months from its April 20 start date.

The Indonesia Palm Oil Association has called the decisions by Nestle and Unilever to halt purchases unfair. Cargill Inc., the largest U.S. agricultural company, has also said it may stop doing business with the company if the claims are correct and it takes no action.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

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