Indonesian palm oil giant Sinar Mas rejected claims of environmental vandalism on March 18 after Nestle, the world's biggest food company, dropped it as a supplier following protests by Greenpeace.
It was the second embarrassing blow to Sinar Mas in three months after Unilever severed ties with it in response to Greenpeace claims it is destroying rainforests.
Greenpeace activists held protests on March 17 at Nestle's headquarters and factories in Britain, Germany and the Netherlands, linking the company's Kit Kat confectionery to the destruction of orangutan habitats.
"Considering its size and influence, it should be setting an example for the industry and ensuring its palm oil is destruction free," Greenpeace said. "Instead, Nestle continues to buy from companies, like Sinar Mas, that are destroying Indonesias rainforests and peatlands."
Rampant deforestation in Indonesia makes it one of the biggest emitters of greenhouse gases in the world and threatens habitats of endangered species like orangutans, tigers and rhinos.
Nestle responded immediately to the protests, dropping Sinar Mas and repeating its commitment to using only Certified Sustainable Palm Oil by 2015, "when sufficient quantities should be available."
"Nestle has replaced the Indonesian company Sinar Mas as a supplier of palm oil with another supplier for further shipments," it said.
"We confirm that Nestle has only bought from Sinar Mas for manufacturing in Indonesia, and no palm oil bought from Sinar Mas has been used by Nestle for manufacturing in any other country."
Sinar Mas Agro Resources and Technology (SMART) president director Daud Dharsono denied that its palm oil plantations were damaging the environment. "We are committed to applying responsible land clearing and best practices in our plantations. We've been implementing best practices since the early 1980s," he said.
"We're ready to have a dialogue with Greenpeace to clarify their report. However, we haven't received any official notification from Nestle that it has dropped us as their supplier of palm oil," he added.
Greenpeace Southeast Asia campaigner Bustar Maitar said Nestle must also stop buying Sinar Mas's palmoil from third parties. "Despite their announcement cancelling their direct orders with Sinar Mas, Nestle will still be using palm oil from Sinar Mas in Kit Kats because theyll still be getting it from their other suppliers," he said. "The Greenpeace campaign will continue until Nestle cuts the Sinar Mas group from its supply chain completely."
Indonesia is the world's biggest producer of palm oil, which is used in the manufacture of products including margarine, soups, ice-cream, chocolates and beauty products.
Indonesian officials have said they aim to more than double the country's crude palm oil output to 40 million tons by 2020 through increased yields and more plantations.
The plans have been opposed by environmental groups, who say the nation's forests are vital carbon sinks in the fight against climate change and an irreplaceable source of biodiversity.
Of the 45 million tons of annual, global crude-palm-oil output, only 2.3 million tons has been certified by the palm oil watchgroup Roundtable for Sustainable Palm Oil as having been produced through sustainable methods.
Of the 2.3 million tons, Indonesia accounts for only 400 tons.
Copyright Agence France-Presse, 2010