Fonterra's Singapore-based palm kernel feed supplier in labour abuse scandal

Dairy giant Fonterra is facing fresh calls to axe use of palm kernel expeller (PKE) in the wake of "appalling" child labour abuse claims against its Singapore-based supplier.

The use of PKE - a waste product from palm oil production - as supplementary feed on dairy farms has been controversial because of the palm oil industry's association with rainforest destruction in Indonesia and habitat loss.

In August, Fonterra was applauded by environmental groups when the company announced it would use only responsible palm oil products throughout its global supply chains, following a move by Landcorp to completely phase out its use of PKE.

But today the Green Party has put renewed pressure on Fonterra after an Amnesty International investigation alleged a palm oil company linked to Fonterra, Wilmar International, was responsible for "appalling abuses" of workers on two Indonesian palm plantations.

PKE sold by Fonterra's subsidiary Farm Source is bought from INL, which import it from a single source: Wilmar.

Amnesty International interviewed 120 workers of two Wilmar subsidiaries, finding women were being forced to work long hours under the threat of having their pay cut, paid below minimum wage and kept in insecure employment without pensions or health insurance.

Its investigation further found children as young as eight were doing hazardous, hard physical work, and labourers having to work long hours to meet "ridiculously high" targets, some of which involved highly physically demanding tasks such as operating heavy manual equipment to cut fruit from trees 20 metres tall.

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In a statement, Wilmar stated it welcomed the report, as it "helps highlight labour issues within the wider palm oil industry and in Indonesia specifically".

"We acknowledge that there are ongoing labour issues in the palm oil industry, and these issues could affect any palm company operating in Indonesia."

But Green Party conservation spokeswoman Mojo Mathers has called on Fonterra to immediately cut its ties with Wilmar, which she described as a "company tainted by shocking human rights abuses".

"It's not okay for the New Zealand dairy industry to be profiting from the exploitation of child labour abroad," Mathers said.

"We're calling on Fonterra to do the right thing and phase out its use of PKE."

The dairy industry needed to look after the country's "100 per cent pure" reputation abroad and stop using the product altogether, she said.

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"Landcorp is phasing out PKE use on its farms by June 2017 saying that the decision was 'virtually cost-neutral' and comes with significant longer-term gains by attracting new premium export customers."

Fonterra's director of social responsibility, Carolyn Mortland, told the Herald this afternoon that the report was "concerning" and that its policy on palm products included a commitment to ensuring its sourcing partners provided a "fair, safe and healthy working environment for all employees".

Mortland added she welcomed Wilmar's "proactive response" to the issues raised in the report.

"For our part, we will discuss the serious allegations in the report with Wilmar, and identify what it needs to do to stop illegal and unacceptable practices."

Terminating the relationship risked driving the issue "underground" with further human rights consequences, Mortland said, but if over time there was no action to remedy the situation, Fonterra "would need to review our on-going business relationship".

The investigation also linked many major multinational companies to the firms exposed in the report, among them Unilever, Nestle and Procter and Gamble.

It comes as New Zealand and Australia are considering following other nations and making it mandatory for products containing palm oil to be clearly labelled, although this was on nutritional grounds and also applied to other vegetable oils.

A decision that was anticipated to have been made this month has been deferred to another trans-Tasman meeting in April.