Italian confectionery giant Ferrero said it will stop sourcing palm oil from Sime Darby Plantation after the United States found the Malaysian planter used forced labour, in a reputational blow for the palm producer and for Malaysia.

Labour practices across the Southeast Asian country have come under scrutiny in the past two years, with six companies including Sime Darby banned by US customs over forced labour allegations.

Palm oil, the most widely used vegetable oil, is a key ingredient in Ferrero Rocher chocolates and Nutella spread, giving the iconic products their smooth texture and shelf life.

"On 6th April, we have...