This article first appeared in The Edge Financial Daily, on April 8, 2016.

KUALA LUMPUR: IOI Corp Bhd, controlled by tycoon Tan Sri Lee Shin Cheng, has received another blow after a report saying three of the world’s major food and consumer products companies would drop the plantation major as their supplier.

This follows the suspension of the Roundtable on Sustainable Palm Oil (RSPO) certification of IOI this month.

In a statement issued on March 31 on its website, Anglo-Dutch company Unilever said it is now in the process of disengaging with IOI and has set a time-bound plan to do this over the next three months, citing that the RSPO suspension had put IOI in breach of its policy.

“Unilever takes the allegations against IOI and its suspension from the RSPO extremely seriously. We expect the highest standards from all of our suppliers and strict adherence to the Unilever Sustainable Palm Oil Policy (March 2016),” it said.

Nevertheless, Unilever said it is reaching out to IOI and to relevant non-governmental organisation (NGOs) and stakeholders to rectify the situation IOI got caught in.

“(We will) work together to determine a way forward for IOI to address and remediate the proven complaints, and to demonstrate its commitment to fundamentally and transparently change the way it drives sustainable palm oil development to meet the highest social and environmental standards,” it added.

Unilever is one of the world’s largest buyers of palm oil and palm kernel oil, which are used in its products from Magnum ice cream to its Dove and Finesse personal care products.

United States food and confectionary producers Mars Inc and Kellogg’s Co were also reported to be in the process of removing IOI as a supplier by progressively dropping contracts with IOI’s refining subsidiary IOI Loders Croklaan, which has refineries in Malaysia and the Netherlands.

Mars and Kellogg’s did not respond to queries from The Edge Financial Daily.

To recap, IOI — one of the founding members of the RSPO — was informed by the RSPO secretariat on March 25 that its RSPO certification for its entire group’s oil palm production would be suspended from April 4 following complaints by NGOs of violation of the RSPO criteria against the plantation estates of IOI’s Indonesian subsidiaries. The suspension will last until the action plan submitted has been accepted and the peer reviews of the high conservation value (HCV) assessments have been performed.

Last Thursday, IOI Corp chief executive officer and executive director Datuk Lee Yeow Chor said in a statement that the group takes the matter “very seriously” and has taken new measures to beef up its sustainable operations, which includes putting in place a new sustainability team structure and setting aside land equivalent to its plantation areas for conservation to compensate for affected HCV area.

In a note to clients dated April 3, CIMB Investment Bank plantation analyst Ivy Ng Lee Fang estimated that IOI could see up to 7% of its net profit for the financial year ending June 30, 2017 (FY17) being shaved off due to the RSPO suspension, assuming that the group is suspended for a year.

“The downstream business (refinery, specialty fats and oleochemicals) made up 28% of IOI’s FY15 earnings before interest and tax.