LETTER | Liberty Shared's response on allegation of forced labour

Editor's Note: Sime Darby Plantation responded here.

LETTER | We are pleased that Sime Darby Plantation gave us the opportunity to explain the issues that have been described to us by local and foreign workers, experts and activists. We are also pleased to see the response from the Human Resources Ministry, which stated that it will not compromise on issues involving forced labour. 

It is encouraging to read that the Independent Social Compliance Audit (ISCA), which seeks to ensure employers fully comply with national labour standards, will become mandatory on Jan 1, 2021 and that the ministry proposes that the ISCA be extended to all industry sectors. 

Finally, we were encouraged to read on July 20, 2020, that Deputy Plantation Industries and Commodities Minister Willie Mongin has stated that his ministry will do its part to come up with solutions and will make continual efforts to act upon these allegations and eradicate the labour issues in this sector.

However, despite these encouraging responses, we do not believe there have been assurances that the companies involved have made or intend to make the internal organisational governance changes needed to ensure that any improvements will be effective within the plantations themselves, and to the appreciable benefit of plantation workers. We also wait to hear more about the requirements of the ISCA.

During 2019 and 2020, we interviewed workers from plantations owned and run by both Sime Darby Plantation and FGV Holdings. The workers described conditions on various plantations owned and run by each of these two companies which satisfied the forced labour indicators set out by the International Labour Organisation.

We passed the content of these interviews to US Customs and Border Protection in support of the two petitions filed in relation to FGV Holdings in 2019 and in relation to the petition filed by us in relation to Sime Darby Plantation in 2020.

From the issues raised during the interviews with local and foreign plantation workers, we believe it is difficult to be convinced that Sime Darby Plantation and FGV Holdings have implemented sufficient corporate governance, risk management and internal controls to manage and supervise plantation managers and mandors effectively – ie, to prevent the abuse of and provide protection for vulnerable workers. 

Workers can arrive at plantations already vulnerable from their experiences during the recruitment and we found little information that demonstrated that palm oil businesses, including Sime Darby Plantation nor FGV Holdings, provide any assistance to reduce that vulnerability. Instead, workers describe situations in which managers and mandors may exploit this vulnerability in order to coerce them.

We have learned that consultants and NGOs have been engaged to assist but, as discussed with Sime Darby Plantation directly, we understand these problems to be about corporate governance, risk management and internal controls, and this requires the support of experts in these issues. 

We would find it more encouraging to know that experts in corporate governance, risk management and internal controls, such as corporate advisors, accountants, lawyers, and risk management and compliance consultants, had been engaged. 

NGOs are not experts in corporate governance, accounting processes and reconciliation (to remove the potential for wage theft and deductions), anti-bribery mechanisms, financial crimes (wage theft) or internal control training, and though NGOs must be involved, this is primarily work for experts who specialise in developing and implementing corporate governance, risk management, checks, balances and internal controls. 

The necessary framework of controls, mechanisms and measures to ensure responsible governance on plantations is beyond the realm of corporate social responsibility and ethical business initiatives. The workers describe events and conditions that suggest and allege unlawful and criminal matters occurring on plantations and these should be dealt with by the appropriate professionals and experts.

At the very least, we believe that the palm oil industry should adopt the following measures on plantations:

• Develop and implement a continually updated corporate governance, risk management and internal controls framework that creates robust ongoing consistent integrated policies, procedures and practices to ensure that the conduct of plantation managers and their forepeople (mandors) is in full compliance with the law, industry and local regulations, and ethical practices, and to include mechanisms of accountability where there are failures and/or breaches of conduct.
• Ensure the above corporate governance, risk management and internal controls framework is fully embedded in organisational risk management and compliance structures and functions and supported by sustainability functions.
• All foreign workers should be provided with passport lockers with a single key, so only the worker has access. Passports are the private personal property of the workers yet those we spoke to did not believe they had given consent for their passports to be retained – the workers could not recall that explicit notice of this was given.
• Each unit of worker accommodation should have large durable weatherproof posters showing all worker standard contract terms in multiple relevant languages to remove the potential for coercion by contract uncertainty.
• Ensure that the content of the employment contract is explained to every new worker.
• Payslips should be redesigned so that workers can reconcile the deductions taken against those expressly agreed in the contract terms. There should be no confusion or obfuscation.
• The accounting department and account controls should be able to ensure that all payments to workers reconcile against their regular hours plus overtime worked.
• Medical certificates should be issued and reconciled separately by the medical facility and by management.
• Using the same bank for employer and employee creates a conflict of interest when there is a risk of wage theft arising from forced labour. We understand from workers that their accounts are at Maybank and that Maybank is also banker for both Sime Darby Plantation and FGV Holdings. This may create a potential conflict of interest and, if there is wage theft from employees’ pay, also the risk of potential money laundering.
• The financial auditor for both Sime Darby Plantation and FGV Holdings is PriceWaterhouseCoopers (PWC) and we ask whether it is possible that PWC may be in a position to assist their clients in the palm oil industry with improved disclosure in annual reports.
• To improve accountability, there should be transparency as to the identity of at least the managers, and perhaps the mandors, of each plantation.
• There should be transparency as to the names of the recruitment agencies.
• There should be regular certified compliance training for all managers and mandors with certifications displayed.
• Recognised NGOs should have access to workers and not be prevented from entering plantations.
• NGOs should provide training and assist companies in creating mechanisms, for implementation on plantations, that ensure vulnerable workers are onboarded so their vulnerabilities are not exploited – in particular, debt arrangements should be fully understood.
• Anti-forced labour, child labour and human trafficking should be integrated into the same corporate governance, risk management and internal control framework as anti-corruption, anti-money laundering and anti-bribery measures, and legal and regulatory disclosure should describe actual ongoing procedures, processes and practices.
• Labour rights education materials should be available to workers throughout hostels, in tandem with contract information, so that workers can understand their rights and entitlements and how to successfully access these entitlements.
• A formal, transparent, auditable and readily accessible grievance mechanism should be provided consistently across all plantations with the promise of non-retaliation.
• Worker-driven trade unions should be facilitated, instead of management-driven unions.
• Ensure that there is free, sufficient and adequate personal protective equipment for all workers.
• Interview workers upon their arrival, with a translator, to ensure that no worker paid for recruitment charges beyond the cost of obtaining passports and travelling from their home village to the port of egress. Records should be kept for reconciliation at any time.
• Ensure that workers are consistently made aware of occupational safety and health (OSH) policies through continued training, and briefing or roll call. All sites must socialise OSH policies through posters, in languages understood by workers and placed at strategic locations including workers’ accommodation.
• Ensure workers are not penalised, fined or disadvantaged unless such mechanism is clearly set out and not in violation of any laws, regulations, human rights, ethical practices, religious practices or basic common decency.

We hope that stakeholders in supply chains of palm oil and palm oil products (eg palm stearin) such as MeWah Group, Wilmar Oils, Golden Agri-Trade, and fund managers, such as Blackrock, Vanguard, Prudential Assurance Malaysia, AIA Berhad and State Street, will consider the above issues and communicate with palm oil plantation businesses.

We hope this response helps to clarify some of our thoughts and some of the changes that will improve worker conditions, and potentially improve confidence in the management of plantations.

The writer is the managing director of Liberty Shared.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.