UN Unilever NV

Global food giants Nestlé S.A. (NESN.VX) and Unilever N.V. (UN) may continue to buy palm oil from IOI Corporation Bhd. (1961.KU) for now, executives from both firms said Friday, after the world's main sustainable palm oil industry reprimanded the firm on land disputes and deforestation charges.

Both of the buyers have policies requiring raw materials to be sustainably sourced and have pledged that by 2015, 100% of their palm oil consumption will come from sustainable sources.

"We are concerned about the breach and the RSPO sanctions [as} IOI Corp. is a large and reputable supplier to Unilever, for a long time," Unilever spokesman Flip Dotsch said.

Sales of palm oil by IOI Corp. to Unilever will continue for now, although the food giant may review its procurement position "if IOI Corp fails to deliver on RSPO's requirements," said Dotsch, who's based in Rotterdam.

The Roundtable on Sustainable Palm Oil--a multi-stakeholder group comprising traders, consumer firms, environmental groups and planters to promote sustainably produced palm oil--suspended an ongoing certification process for major plantation firm IOI Corp. Bhd.

"IOI Group will be given a period of 28 days to [respond] with an acceptable solution," the RSPO said earlier this week.

If IOI Corp fails to deliver a required proposal by May 2, the sustainable palm oil group said it may consider further sanctions, which may include "suspension of licenses for new transactions involving certified sustainable palm oil."

Major consumer products company Nestlé said it "is accelerating the engagement of its partner The Forest Trust with this supplier in order to assess their full compliance with the Nestlé Responsible Sourcing Guidelines...that form the basis of our palm oil purchasing decisions," Vevey-based Nestle spokesman Ferhat Soygenis told Dow Jones Newswires via email.

"[IOI's] response and the next steps of the Grievance Panel will also be taken into account in our TFT assessment," Soygenis said.

Nestle in May last year entered into a partnership with The Forest Trust, a global non-profit organization, to help Nestlé to build responsible supply chains by identifying and addressing social and environmental issues.

According to RSPO data, IOI Corp. began its certification process in 2008. So far, four palm oil mills have been certified while three mills have been audited. The remaining five palm oil mills are scheduled to complete audits by end-2011.

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com

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