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World’s Palm Oil Buyers Need Cross-Commodity No Deforestation Policies

In August, Aidenvironment published a new report highlighting 133,000 hectares of deforestation by ten companies in the industrial tree plantation sector in Indonesia and Malaysia since 2016. All these companies operate oil palm plantations and are suppliers to some of the world’s largest palm oil refiners and traders. These refiners/traders all operate under No Deforestation, No Peat, No Exploitation (NDPE) policies that commit them to preventing deforestation by their suppliers.

The report highlights an issue of increasing significance as the palm oil sector continues to adopt and implement NDPE policies: suppliers to NDPE palm oil supply chains are actively deforesting for other commodities and palm oil buyers are not taking action to stop that deforestation because NDPE policies only apply to land clearing for oil palm plantations.

It is common for companies in Indonesia and Malaysia to operate in multiple sectors. Of the ten largest oil palm growers in Indonesia, six are involved in mining. In Indonesia, 64% of all industrial tree plantation permits are held by company groups that also grow oil palm. In the Malaysian state of Sarawak, the six largest companies in oil palm plantation development are estimated to hold 69% of Sarawak’s industrial tree plantation concessions.

The report covers cases of deforestation by seven such companies in Indonesia (Nusantara Fiber, Djarum Group, Adindo Hutani Lestari, Alas Kusuma Group, Jhonlin Group, Hardaya Inti Plantations, and Sampoerna) and three companies in Malaysia (Rimbunan Hijau, Samling, and Shin Yang), all of which have supply chain links to one or more of the world’s largest palm oil refiners.

The Djarum Group, for example, cleared 10,833 ha of forest on its industrial timber concessions in Indonesia between January 2016 and March 2021. PT Silva Rimba Lestari (PT SRL) operates an 88,000 ha concession in Kutai Kartanegara district, East Kalimantan and was the Djarum Group’s biggest deforester, accounting for 5,064 ha of deforestation. Djarum’s deforestation for industrial tree plantations led the Indonesian NGO Auriga Nusantara to file a complaint against the group with the Forest Stewardship Council (FSC) in December 2019. In December 2020, Djarum’s FSC-certified subsidiary withdrew its FSC certificate, thereby removing the basis of the complaint.

Despite these well-known deforestation issues, Djarum supplies to the palm oil refiners/traders Wilmar, Wings, AAK, ADM, BASF, Bunge, Cargill, Fuji Oil, HSA Group/Pacific Inter-Link, Itochu Corporation, Neste Oil, Oleon NV, and Pertamina. It also supplies to the downstream companies Avon, Colgate-Palmolive, Danone, FrieslandCampina, General Mills, Grupo Bimbo, Johnson & Johnson, KAO, Kellogg’s, L’Oreal, Mars, Mondelēz, Nestle, P&G, PepsiCo, PZ Cussons, Reckitt Benckiser, Hershey, Unilever, Upfield, and Vandemoortele.

All these palm oil buyers have NDPE policies that commit them to deforestation-free supply chains. The presence of a company like Djarum in supply chains is therefore a clear case of policy non-compliance. However, because Djarum’s deforestation issues are in its industrial tree plantations and not in its oil palm plantations, NDPE refiners/traders consider the deforestation outside the scope of NDPE policy compliance. Djarum has therefore been profiting from these supply chains while actively clearing forest.

NDPE policies need to be strengthened for the industry to make authentic No Deforestation claims and meaningfully commit to forest conservation. Aidenvironment’s report also shows that the seven deforesting Indonesian companies still have 373,000 hectares of intact forests inside their concession areas, much of it habitat of the critically endangered Bornean orangutan. By including industrial trees in their No Deforestation policies and applying pressure on these suppliers to comply with NDPE policies, palm oil refiners could save more forests and contribute significantly to increased sustainability in both Indonesia and Malaysia’s two most significant land use sectors.

For more information please contact Chris Wiggs

 

 

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