ESG Adoption Provides IOI Corp With Competitive Advantage
12/12/2022, The Edge Markets

IOI Corp Bhd, one of the world’s largest integrated palm oil producers, bagged the gold award under the plantation category at The Edge Malaysia ESG Awards 2022.

Datuk Lee Yeow Chor, its group managing director and chief executive, attributes the win to the company’s early focus on environmental, social and governance (ESG) issues 16 years ago. For instance, the company joined the Roundtable on Sustainable Palm Oil (RSPO) in 2006 when some of its peers had not done so.

The successful alignment of IOI’s vision and that of its 24,000 strong workforce operating in a geographical area about three times the size of Singapore is another factor, he says. But it is also the main challenge the firm faces.

A lot of effort has been put into the welfare of our plantation workers in Sabah by providing them with good housing, medical care, and community facilities. With about 3,000 students, we are the largest provider of plantation-based education to the children of our plantation employees. - IOI Corporation Berhad, Group Managing Director and Chief Executive, Dato' Lee Yeow Chor
(File pic by IOI Corporation).

“Ensuring everyone understands the ESG policies and procedures is a big challenge. To overcome this, we have to align our ESG or sustainability policies with the company’s vision, mission and core values. Over time, we have inculcated everybody within the company with them,” says Lee.

“We have made them realise that ESG is the collective responsibility of everyone, and not just the responsibility of a few people at the top or the dedicated sustainability team in the company.”

Lee believes that the adoption of good ESG practices gives IOI a competitive advantage in selling its palm oil to multinational customers and selected markets.

He adds that the company has been focusing on more social and governance issues recently. In the last few years, it has introduced policies on women empowerment, anti-sexual harassment, zero recruitment fees when hiring foreign labour and more.

“A lot of effort has been put into the welfare of our plantation workers in Sabah by providing them with good housing, medical care and community facilities. With about 3,000 students, we are the largest provider of plantation-based education to the children of our plantation employees.”

Last June, IOI was accused by human rights group Finnwatch of mistreating its workers, who face poor living conditions and pay high recruitment fees. The US Customs and Border Protection (CBP) was said to be investigating the firm over allegations of forced labour.

In response to Finnwatch’s allegations, Lee says IOI has introduced an enterprise resource planning (ERP) system to track the working hours of its workers and implemented an e-wallet crediting system in its plantation operating units to simplify its estate workers’ payroll system.

The company continuously monitors its workers’ living conditions through monthly inspection of their houses and other amenities and has implemented a programme to repair over 6,000 houses.

On the CBP investigation, Lee clarifies the issue was based on a “communication” in May 2021 between the CBP and an activist. However, no Withhold Release Order or findings have been issued to IOI.

“Nevertheless, IOI proactively collaborated with one of our major customers to conduct an independent third-party audit based on the International Labour Organization’s 11 indicators of forced labour, as well as on our governance in June 2021. After the completion of the audit, the findings and recommended actions of improvements were shared with the CBP in December last year,” he says.

Overall, Lee is happy with the support provided by the Malaysian government, market regulators and institutional investors in helping public-listed companies adopt ESG practices.

However, he hopes that when consumers and non-governmental organisations evaluate companies on ESG matters, they also consider the socioeconomic situation of the country. They should not base it on conditions in developed nations.

Achieving its net-zero goals is one of IOI’s main aims moving forward. “We recognise that climate change is a global phenomenon that is impacting the weather patterns, economic sustainability and social well-being of the global population,” says Lee.

“As such, we have used science-based methodologies to calculate and reduce the greenhouse gas emissions and water usage in our operations progressively over time. This year, we launched our net zero goals with short-term (2025), mid-term (2030) and long-term (2040) milestones.”