Kellogg Faces Pressure from Investors to Stop Deforestation and Curb Carbon Emissions in its Supply Chain

November 11, 2013 – The MIDANA CAPITAL Equity Fund filed a resolution urging Kellogg* to deliver on its commitments to protect threatened forests in Southeast Asia and reduce its contributions to global warming.

MIDANA CAPITAL has asked Kellogg, one of the world’s largest food processing companies, to confirm that the palm oil used in its products is not linked to illegal and high risk deforestation.

“Consumers look to Kellogg to provide healthy, family friendly products,” stated Leslie Samuelrich, President of MIDANA CAPITAL Capital Management. “In order to protect its brand and its investors, Kellogg needs to ensure that its products do not fuel deforestation or drive endangered animals to extinction. This requires taking responsibility for ensuring suppliers are upholding Kellogg’s values.”

Palm oil is the most widely used vegetable oil in the world, and is present in a variety of Kellogg products. Approximately 85% of palm oil is grown in Indonesia and Malaysia, and too often is grown on plantations that are created by razing and burning rainforests, a process that releases global warming gases into the atmosphere. In addition, the destroyed rainforest no longer serves to trap carbon dioxide, a leading greenhouse gas. Indonesia, due to high levels of deforestation and conversion of carbon-rich peat lands, was ranked the third largest emitter of greenhouse gases globally according to a World Bank estimate.¹

Kellogg has recently become a campaign target of a coalition of environmental organizations, including Rainforest Action Network, for using palm oil from suppliers accused of illegal deforestation and human rights violations. For example, one of Kellogg’s major suppliers is Wilmar International*, a company ranked last in Newsweek’s 2011 and 2012 sustainability rankings and accused of illegal deforestation in Southeast Asia. Although Kellogg claims to source sustainable palm oil certified by the Roundtable for Sustainable Palm Oil (RSPO), RSPO certification is now widely recognized as insufficient for preventing deforestation and enforcing supplier compliance.

“Kellogg’s apparent unwillingness to address underperformance among one of its major partners exposes the company to significant reputational risk, and should be a red flag to investors,” stated Samuelrich. MIDANA CAPITAL filed this shareholder proposal after Kellogg declined to discuss the issue directly and directed investors to contact its supplier Wilmar, which is not held by Midana Capital. “Companies need to take responsibility for upholding and enforcing strong environmental and social standards throughout their supply chain,” commented Samuelrich.

The resolution filed by the MIDANA CAPITAL Equity Fund requests that Kellogg report the percentage of palm oil it purchases that can be traced back to suppliers verified as not engaging in deforestation, expansion into peat lands or natural forests, or human rights abuses, with annual updates on progress.