KUALA LUMPUR: Sime Darby Plantation (SD Plant) has cleared the air over the delayed report by Impactt and the reason for winding up the its expert stakeholder human rights assessment commission, CGS-CIMB Equities Research said.

       In its research note on Wednesday, it said SD Plant revealed at its recent briefing Impactt was not able to complete its assessment of its labour practices by May 2021 due to the strict movement restrictions imposed throughout Malaysia due to Covid-19.

       “Impactt was not able to conduct face-to-face interviews at its estates to complete its assessment,” it said.

       SD Plant also explained the dissolution of the human rights assessment commission was to provide more time for Impactt to complete the labour assessment.

       The company continues to engage human rights activist Andy Hall to review and improve its foreign workers recruitment process, though he has resigned from the human rights commission, which was subsequently dissolved.

       To recap, SD Plant appointed Impactt on March 1 as a third-party assessor to conduct a comprehensive evaluation of the labour practices across its Malaysian operations.

       In April, SD Plant revealed that it expects to complete the assessment report by May 2021, make the report public and submit it to the US Customs and Border Protection (CBP).

       Among the actions which SD Plant is taking to counter the allegation are that it is taking corrective actions to improve its labour practices based on recommendations from Shift and Impactt.

       Some of the actions taken are (1) improve its recruitment process; (2) improve its grievances mechanism; (3) improve the management of passports of its foreign workers; (4) run more workshops on gender related issues, and (5) improve workers’ understanding of how wages are calculated.

       CGS-CIMB Research said assuming travel restrictions are lifted according to the National Recovery Plan (NRP), the assessment report on SD Plant’s labour practices could be completed by the end of the year.

       “As SD Plant is currently taking actions to improve labour practices, we are hopeful there will be positive developments on this issue in 1H22,” it said.

       Potential impact on Malaysian planters:

       The longer-than-expected time required to complete the labour assessment report on SD Plant’s operations in Malaysia due to movement restrictions has delayed the timeline to resolve this issue.

       “We believe this uncertainty has affected sentiment on the Malaysian palm oil sector, resulting in foreign and local institutional selling of plantation counters over ESG concerns,” it said.

       On a more positive note, SD Plant revealed that none of its customers have left due to this issue. It also revealed that it is willing to cooperate with the Roundtable on Sustainable Palm Oil (RSPO) should it wish to conduct an assessment on its labour practices.

       The group has so far incurred around RM20mil to RM25mil in costs to resolve the allegations of forced labour at its estates. These costs comprise mainly consultancy fees as well as costs to provide passport lockers for its workers.

       “We are of the view that current measures taken to improve its labour practices will help shorten the timeframe to correct any gaps. However, it remains unclear whether SD Plant will need to incur remediation fees to compensate its migrant workers, as highlighted in our earlier note.

       “SD Plant revealed that it conducts direct recruitment of its Indonesian workers, who make up 60-65% of its foreign workforce. SD Plant also does not charge workers any recruitment fees and pays for all official and legal recruitment costs.

       “In view of the above, the remediation costs per worker, if any, are unlikely to be as significant compared to those paid by glove makers to their foreign workers. We stay sector Neutral as high CPO price is offset by high taxes, labour shortage and ESG issues,” CGS-CIMB Research said.