Global consumer goods giant Unilever suspended on 27 June sourcing of materials from Indonesian palm oil company Sawit Sumbermas Sarana (SSS) after a report linked the firm with unsustainable palm oil practices.

In a statement, Unilever said it had independently verified the claims made by Chain Reaction Research (CRR) in its report titled ‘Sawit Sumbermas Sarana: Supplying the Palm Oil Leakage Market, Risks for Purchasers’ through Daemeter Consulting, an Indonesian sustainable development consultancy.

The inquiry concluded that SSS was in breach of Unilever’s sustainable palm oil sourcing policy.

Unilever said it had discontinued purchases from the company in line with its grievance policy and it did not intend to resume sourcing palm oil products from SSS until “clear progess” on a remedial action plan was visible.

“We are actively engaging with SSS and relevant NGOs and stakeholders to work together to determine a way forward for SSS to address and remediate the proven complaints and to demonstrate their commitment to the No Deforestation, No Peat, No Exploitation (NDPE) principles, which are part of our sustainable palm oil sourcing policy,” the company said.

Unilever was “encouraged by SSS’ willingness” to engage in the planning process and said it remained hopeful that the company would bring its production practices into line with NDPE principles.

According to the CRR report, SSS had not kept its practices in line with NDPE policies, which had between 2014 and 2015 cost it 81% of its customer base and prompted the company to start supplying what the report calls leakage market.

The report defines leakage as “any activity in the palm oil industry, production, trade and/or consumption that is not compliant with NDPE policy requirements”.

Leakage created an unlevel playing field and slowed and diluted industry transformation, incurring various financial and reputational risks, CRR said.

In December 2013, more than 95% of SSS land bank was contested due the company lacking government regulatory approvals, the report claimed.

Some of its subsidiaries had filed applications for approval, but as of 15 May 2017, CRR said the matter remained unresolved and subsequent assessments showed that SSS subsidiaries continued to deforest land and clear peatland.