'Palm oil companies will not be affected by new law'

Bigger palm oil companies will not be affected by a new European Union law banning goods linked to deforestation, two of Malaysia’s largest producers of the commodity said on Monday.

The EU passed a law this year banning imports of commodities linked to deforestation, a move that is expected to hurt palm oil, which is used in everything from lipstick to pizza.

Indonesia and Malaysia, which are the world’s top two producers and exporters of palm oil, have said the law is discriminatory and meant to protect the EU’s oilseeds market.

At an industry conference on Monday, Malaysian producers Sime Darby Plantation Bhd and United Plantations Bhd said they will not have difficulty complying with the new law as they have not been planting on deforested land for years.

“Most of the big companies in Malaysia signed up for no deforestation, no development on peat 10 to 15 years ago. I do not see a problem for us,” Carl Bek Nielsen, chief executive of United Plantations, told reporters.

However, the company is concerned about the compliance of small farmers, he said.

Sime Darby Plantation’s group managing director Mohamad Helmy Othman Basha said smallholders, many of whom feed into the supply chains of bigger producers, would find it difficult to trace all of their palm oil production as required by the new law.

Big companies “will not have major issues to comply with,” he said.

The EU law requires producers to submit a due diligence statement showing when and where their commodities were produced and provide “verifiable” information that they were not grown on land deforested after 2020, or risk hefty fines.

More than seven million smallholders globally cultivate palm oil for a living. In top producers Indonesia and Malaysia, smallholders account for about 40% of the total area for palm oil production.