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Industry News & Insights


20 Mar 2023

PepsiCo asks suppliers to avoid buying palm oil from major producer in Indonesia

PepsiCo asks suppliers to avoid buying palm oil from major producer in Indonesia

PepsiCo is among the latest consumer goods companies to ban palm oil from Indonesia-based conglomerate Astra Agro Lestari in its supply chain.

AAL, which owns palm oil plantations in Indonesia, was accused last year of human rights abuses and land grabbing.

In an open letter, the International Federation for Human Rights asked several major consumer goods companies, including PepsiCo, to cut AAL from their supply chains over its “sustained role in forcibly grabbing communities’ land, contributing to environmental destruction, negatively impacting communities’ livelihoods, and criminalizing land and environmental human rights defenders.”

Other companies addressed in the letter include Hershey’s, Kellogg, Unilever, Nestlé and Procter & Gamble.

An investigation from earlier in 2022 by the environmental group Friends of the Earth alleged that subsidiaries of AAL illegally occupied 16,000 acres of local farmers’ land. After the report came out, AAL said it would appoint a third party to investigate the allegations.

In a statement, PepsiCo said that it was reviewing the allegations against AAL through its established grievance process.

“While PepsiCo does not source directly from AAL, we are engaging with suppliers who continue to source from them and have asked that they suspend the mills identified as being potentially linked to the grievance and underlying allegations,” the company said.

PepsiCo uses palm oil primarily in its packaged food business and is one of the largest buyers of the ingredient in the world, though its purchases still represent less than 1% of the supply, according to the company.

The company’s goals around palm oil include having 100% of its supply covered under “No Deforestation, No Peat, No Exploitation” principles or a time-bound initiative showing progress toward that sustainability goal.

According to Reuters, which earlier reported on PepsiCo’s suspension of AAL palm oil from its supply chain, Nestlé, Procter & Gamble and infant formula maker FrieslandCampina have also suspended sourcing from AAL.

AAL has said in the past that it is committed to upholding human, community and labor rights, and that it cooperates with farming communities in its supply chain.

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