The rating agency said it served as acknowledgment from an independent third party that the company’s products were no longer being produced under forced labour.
In a note today, it said this also removed the risk of further sanctions as a result of forced labour finding by the CBP in January 2022, which could have led to a weakening in SDP’s credit quality if left unchecked.
On Feb 3, the CBP had permitted the importation of palm oil from SDP into the US with immediate effect as it has modified its forced labour finding against SDP.
“The finding will help to lower environmental, social and governance (ESG) risks by improving SDP’s relationships with stakeholders, which otherwise might have considered restricting their ties with the company if the allegations of forced labour were not addressed and resolved,” it said.
Furthermore, the agency said these restrictions could have included customers placing limitations on purchasing SDP’s products or lenders pulling funding because of sustainability policies that prevent lending to companies with alleged violations of international labour standards.
“The CBP determination came on the back of SDP proactively engaging with its stakeholders and enhancing its labour practices, particularly over the past two years,” it said.
Moody’s also said that SDP’s enhanced sustainability practices also extend to environmental considerations, including the release in December 2022 of a detailed framework to achieve net zero emissions across its entire value chain by 2050.
“Such efforts, along with the company’s conservative financial policies, ensure ESG considerations only have a moderately negative credit impact (CIS-3) on SDP, despite highly negative credit exposure to the environmental (E-4 Issuer Profile Scores – IPS) and social (S-4 IPS) risks associated with palm oil production,” it added.
Goods made by SDP, the world’s largest palm oil company by land size, have been blocked by the CBP since December 2020 from entering the US over suspected abusive labour practices.
In response, SDP appointed an ethical trade consultancy to audit its facilities, and last year set aside about US$20 million (RM85.16 million) to compensate current and former migrant workers who paid recruitment fees to secure jobs at the firm.
SDP said the decision indicated CBP’s recognition of the firm’s efforts “in the last two years to review, revise and… upgrade its protocols for recruiting, managing and working with its workers”.
“Today, our commitment to all our stakeholders is vigilance and a continuing responsibility to produce palm oil that is free of forced labour,” group managing director Helmy Othman Basha said in a statement last Friday.