Hans Nicholas Jong, Jakarta – A major palm oil producer linked through supplier-reported mill lists to global brands like General Mills and PepsiCo has escaped sanction for allegedly concealing a web of "shadow companies" linked to deforestation and rights abuses, after the industry's leading certification body ruled the allegations fell outside its current rules.
The Roundtable on Sustainable Palm Oil (RSPO) dismissed allegations that Indonesian conglomerate First Resources Ltd. (FRL) controls a network of shadow companies – affiliates secretly under the same ownership but undeclared to regulators – despite evidence presented by NGOs linking these firms to deforestation, peatland destruction, river pollution and labor abuses.
The decision by RSPO has triggered outrage among NGOs that say it exposes a loophole that lets corporate groups hide destructive operations behind undeclared affiliates while keeping their sustainability credentials intact.
A group of NGOs, whose names were not disclosed in the panel's decision, filed the complaint against FRL in 2021. They alleged FRL secretly controlled three firms – identified in the RSPO decision only as Company A, B and D, but presumed by NGOs to be FAP Agri, Ciliandry Anky Abadi (CAA) and New Borneo Agri (NBA).
CAA has been Indonesia's single biggest palm oil deforester for the past two years, according to analysis by French-based technology consultancy TheTreeMap.
By not declaring these affiliates, NGOs say, FRL has been able to profit from destructive operations while still touting its 2015 zero-deforestation pledge and RSPO membership – allowing it to keep selling certified "sustainable" palm oil to multinational buyers.
In 2023, The Gecko Project and the International Consortium of Investigative Journalists published an investigation that echoed the NGOs' allegations, finding that First Resources' founding Fangiono family allegedly secretly controlled a web of "shadow companies" responsible for extensive deforestation, peatland destruction and land conflicts.
The expose traced palm oil from these affiliates into the supply chains of major consumer brands, prompting several multinationals to suspend sourcing from First Resources.
After the expose, several global buyers (including BASF, P&G, Danone, Henkel and others) publicly suspended FRL or asked suppliers to stop sourcing from it.
However, supplier-reported mill lists for 2024 (PepsiCo) and 2025 (General Mills) still included FRL mills, underscoring the difficulty of cutting ties to the company through complex supply chains.
What RSPO decided
To test the claims, RSPO hired an independent investigator. Based on its findings, the RSPO complaints panel ruled in August 2025 that FRL had not breached its membership rules. Because the alleged harms depended on proving FRL's control over the affiliates, the complaints of deforestation and rights violations were also dismissed.
In a joint statement, NGOs condemned the ruling as setting "a highly dangerous precedent," saying it reassures companies that they can exploit loopholes to keep RSPO certification while harmful operations continue unchecked.
Company A: Loophole in plain sight?
In the case of Company A, presumed to be FAP Agri, the panel acknowledged FRL shared a beneficial owner with the firm. But because FAP Agri is not itself an RSPO member, the panel concluded the rules did not compel consolidation.
"Corporate groups with separate memberships can be treated as one group if they are found linked to the same beneficial owner. Where links extend to non-members, these entities cannot be treated as part of an RSPO group, since the RSPO cannot suspend or sanction an organisation that is not part of its membership," the RSPO told Mongabay.
NGOs countered that this misrepresents the current rules.
This is because even if the RSPO can't suspend a shadow company (because it's a nonmember), the current rules already give it the power to sanction members for failing to declare group entities.
They cited Clause 5.2.3, which requires a parent company to apply on behalf of all entities in its group engaged in the palm oil supply chain. By failing to register FAP Agri when applying, NGOs argue, FRL itself violated the rules.
"[So In this case] RSPO can and should sanction the parent [First Resources]," a number of NGOs, which include Lembaga Bentang Alam Hijau (LemBAH), TuK INDONESIA and Forest Peoples Programme (FPP), told Mongabay.
RSPO acknowledges gaps
The RSPO said its membership rules do not fully address cases where members have beneficial ownership of nonmember firms. It is revising the rules, with a draft scheduled to be presented to its board of governors in September 2025.
However, the secretariat said that some issues may require "higher-level policy" beyond the rules themselves.
The NGOs welcomed the review but stressed the revisions must enshrine group-level responsibility, adopt broad definitions of corporate groups and include robust methods for handling cases where ownership is obscured.
While clearing FRL of shadow-company allegations, the panel did suspend the group for three months – not for hidden affiliates, but for misleading communications.
When the complaint was filed in 2021, FRL told the panel Company A was merely an "ad-hoc supplier," implying a small, irregular relationship.
Yet FRL's 2023 annual report to the Singapore Exchange (SGX) listed FAP Agri transactions as "Interested Person Transactions" – a category reserved for related parties – totaling $100 million, or about 10% of FRL's consolidated sales.
RSPO found that FRL downplayed the relationship to investigators, breaching its code of conduct on transparency, hence the short suspension.
FRL defended itself, saying SGX disclosures are technical compliance requirements and that "ad-hoc" described the irregular, nonintegrated nature of the transactions.
"The use of different terminology reflects distinct regulatory and commercial contexts; it does not imply concealment. FRL maintains that it acted in good faith and in a transparent manner," FRL told Mongabay.
Company B and family control
For Company B, linked to a British Virgin Islands firm (Company C), the panel acknowledged family ties to FRL's owners but said these did not meet the membership rules' definition of "control" because they were still legally distinct individuals.
NGOs warned this exposes another loophole.
While the membership rules mention family links as a possible indicator of control, they're not treated as determinative or even strongly weighted.
"This creates uncertainty, particularly in the palm oil sector where many groups are family-controlled and ownership is often spread across family members through multiple entities," the NGOs said.
They urged RSPO to adopt definitions, like those used by the accountability framework initiative (AFi), that explicitly recognize family control as a factor in group membership.
"Given the prevalence of family-controlled conglomerates in palm oil, RSPO should make this explicit and provide operational guidance to prevent loopholes," the NGOs said.
Company D and secrecy jurisdictions
For Company D, believed to be NBA, the panel said secrecy laws obscured ownership and it lacked sufficient evidence of FRL's control.
Therefore, the panel said it "cannot be expected to act beyond its jurisdiction and mandate or beyond the provisions of the Membership Rules."
NGOs warn this lets companies hide behind offshore jurisdictions.
Therefore, they urged a "precautionary approach," including reversing the burden of proof so companies must demonstrate they don't control linked entities.
"Without such safeguards, RSPO enables corporate groups to obscure their structure and evade accountability for harmful operations carried out through undeclared (non-member) affiliates, setting a dangerous precedent," the NGOs said.
FRL responds
FRL told Mongabay it recognized transparency concerns but emphasized that the panel "did not find evidence of hidden operations or deliberate concealment." It said it complies with disclosure obligations under SGX and RSPO rules and is open to dialogue if broader requirements are adopted.
"Consistent, sector-wide standards developed through RSPO consensus would provide the most effective framework," FRL said.
NGOs say failure to close loopholes will leave RSPO open to abuse by members hiding affiliates, undermining its credibility.
The RSPO Board of Governors is expected to review proposed rule changes, a test of whether the body can close loopholes critics say threaten its credibility.
"Without such reform, RSPO will continue to allow members to exploit loopholes, shielding shadow companies from scrutiny, and the credibility of its certification and grievance systems will remain in serious question," they said.