FGV replies to labour queries

FGV Holdings Berhad received a petition submitted by a coalition of non-governmental organisations (NGOs) dated Aug 15 and addressed to the Acting Commissioner for the United States Customs and Border Protection agency.

There are several allegations made against FGV in the petition, citing a number of sources, including an article in The Wall Street Journal that was published on July 26, 2015.

Regrettably, some of those allegations were indeed factually accurate at the time. Most have been addressed and corrected over the period commencing December 2018, with one major item that is expected to be completed by the end of this calendar year. This pertains to the legalisation of foreign workers in the state of Sabah, which has required engagement at government-level and involves policy changes.

FGV is also planning to undertake a comprehensive exercise that will involve independent audits of FGV’s entire labour recruitment processes and procedures. This is expected to commence in the next few weeks. The agreements with the independent third parties are being finalised and FGV will make the announcement at an appropriate time.

In March 2019, FGV revised its foreign worker recruitment processes and appointed 13 new recruitment agencies for Indonesia and India. All these recruitment agencies were appointed through an open tender process. Each agency has been vetted through a stringent process and engaged under new contractual terms that include protection of the rights of foreign workers. FGV no longer uses the services of contractors who supply foreign labour.In September 2019, FGV will appoint independent third parties to audit and verify each of the newly-appointed foreign worker recruitment agencies to ensure that they are in full compliance with FGV’s requirements.

Additionally, FGV is also in the process of engaging and appointing:

> Independent third-party assessors to audit and verify our grievance mechanism processes.

> Independent third-party assessors to map the risks within our traceability protocols for oils produced by our third party suppliers, including smallholders and estates, which account for 70% of the palm oil produced by FGV.

FGV has 68 mills in Malaysia and an oil palm-planted hectarage of 339,385ha. Of this, 290,829ha is leased from the Federal Land Development Agency (Felda) and was developed as part of the national agricultural development programme more than 30 years ago.

A third of FGV’s current production of about three million tonnes is produced in these estates. FGV has full management control over these estates. The remaining two million tonnes is produced by independent or organised smallholders and estates.

A key element in addressing the issues that have been raised in the petition is the traceability of the fresh fruit bunches (FFBs) supplied to FGV’s mills.

At this time, FGV has 100% traceability on all our own estates and on all FFBs produced by smallholders who are part of organised government schemes. This accounts for about 70% of the oil produced by FGV.

Of the additional 30% – amounting to about one million tonnes of oil from plantations owned by independent smallholders and estates – FGV is now able to trace 66% of its FFBs quantity to Tier 1 suppliers (estates of origin and collection centres).

Thus, 86% of the oil produced by FGV’s mills is now fully traceable to Tier 1 suppliers. As a result, FGV is able to and has stepped up socialising our commitments to human rights and good labour practices to most of our smallholder suppliers and their dealer agents.

This process was initiated in March 2017 and reviewed and stepped up in November 2018.

FGV has made it clear that any supplier who does not comply with our requirements on labour standards, human rights and environmental sustainability will be terminated if they are unable to change their practices within a reasonable timeframe.

The coalition of NGOs quite understandably questioned FGV’s commitment to change our practices, noting that we have repeatedly failed to demonstrate improvements although the first WSJ article was published more than four years ago.

Several things have changed in FGV since 2018. For instance, the board of directors is entirely different from the board that was in place in 2015. Today, the board comprises subject matter experts and professionals.

In November/December 2018 and in 2019, FGV has also made several changes in its senior management team.

This new board and management team are committed to reform at all levels, especially in the areas of good governance and sustainability.

FGV welcomes all stakeholders who are interested to discuss these issues in greater detail and to visit and/or conduct verification audits of our operations, processes and procedures.

FGV has listed the allegations made in the letter and provided our responses and updates in each instance at bit.ly/fgv_response.

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