A new April 2018 report by Rainforest Action reveals one of the most serious cases of illegal destruction of tropical forests in Borneo in recent years. Approximately 10,000 hectares of peat bogs have been illegally destroyed to make way for oil palm plantations, in defiance of Indonesian regulations and despite the companies' commitment not to destroy more forests and peat bogs. The report implicates two palm oil producers, both controlled by or associated with Indonesia's largest conglomerate, the Salim Group. This vast network of companies includes Indofood, a key partner of the multinationals PepsiCo and Nestlé.
Ahis report is interested in the destruction activities of two palm oil producers operating in the Sintang District region of the island of Borneo, Indonesia: PT Duta Rendra Mulya (PT DRM), whose main shareholder is Anthoni Salim, and PT Sawit Khatulistiwa Lestari (PT SKL), linked to Mr Salim through business partners.
10,000 hectares of the largest peat bog in the Sintang region of Borneo, called Ketungau, have just been destroyed, the equivalent of 10,000 rugby stadiums, in favour of palm oil production. According to analyses carried out by Greenpeace based on official data, 24 million hectares of forest were destroyed in Indonesia between 1990 and 2015.
The Salim Group was first informed of this massive deforestation in February 2016, but did not intervene despite repeated government injunctions to stop the destruction of peat bogs. Instead, the report shows that one of the group's subsidiaries had the map of the moratorium protecting peat bogs modified, even though the maps drawn up by the Peatland Restoration Agency (BRG) classified most of the land bank as "peatland areas to be protected as a priority".
Anthoni Salim, the fourth wealthiest man in Indonesia according to Forbes, and his business partners have been in the spotlight in the past. Salim is well known because he owns several publicly traded companies (First Pacific, Indofood Agri, Salim Ivomas Pratama, London Sumatera), but also because he holds shares, often hidden by opaque ownership structures, in a set of private plantation companies that continue to destroy tropical forest and peatlands despite government regulations and corporate policies prohibiting such activities, a process of degradation that contributes significantly to global warming through massive carbon emissions.
"This report is clear evidence of questionable practices and inaction at the highest corporate levels, as tropical forests continue to disappear because of illegally produced palm oil, says Gemma Tillack, head of forest policy at the Rainforest Action Network (RAN).). "In the meantime, Salim Group's commercial and financial partners, such as PepsiCo, are complicit in this illegal deforestation, as they continue to do business with Salim without being concerned. PepsiCo, Nestlé and Wilmar must ensure that their business partner complies with Indonesian law and standards of sustainable development without deforestation or else terminate their business relationship".
The companies of the Salim Group are affected by the current situation. Major banks, such as Citibank and Rabobank, are linked to illegal deforestation because they finance the Salim Group, despite internal policies prohibiting such practices. However, Japanese and Indonesian banks, including Mizuho and Bank Central Asia, are the most exposed because they have no policies condemning such destruction activities.
"Salim Group companies benefit from billions of dollars in corporate loans and financing in the form of bonds and shares despite Mr. Salim's link to ongoing illegal deforestation, says Vemund Olsen of the Rainforest Foundation Norway. "This report demonstrates the failure of major banks, including those that have been repeatedly alerted to environmental, social and governance risks, to face up to their responsibility in the destruction of carbon intensive peatlands. Banks must live up to their climate change commitments and stop financing peatland destruction.
The report shows how Mr. Salim's business relationships have been called into question. His empire is divided into a number of publicly listed companies controlled by the Salim Group, which has declared, but not adhered to, a commitment to transparency and sustainability, while behind the scenes, Salim's related companies (or "business apart" companies as they are called in Indonesia) continue to destroy tropical forests and attack protected peatlands.
However, the Indonesian national government, through a "Presidential Instruction" of May 2011, prohibits the issuance of location permits on peat bogs and primary forests. Nearly three-quarters of the world's palm oil refiners also prohibit the development of peatlands for the expansion of oil palm plantations. Left untouched, peatlands act as a natural "carbon sink", safely absorbing and storing carbon out of the atmosphere and underground.
Peat bogs are therefore particularly protected under Indonesian law, also because of their high fire risk (fires are almost impossible to contain) and their importance in regulating the global climate. They are also crucial carbon sinks because they store greenhouse gases in the atmosphere. Each hectare of tropical peatland that is lost to a plantation emits an average of 55 tonnes of CO2 each year, which is equivalent to burning more than 22,000 litres of petrol. The destruction of 10,000 hectares of peatland is equivalent to the emission of 555,000 tonnes of CO2 every year. For comparison, an average passenger vehicle emits about 5 metric tonnes of CO2 per year.
Indonesia is committed to reducing its greenhouse gas emissions by 29 % by 2030, compared to a business-as-usual scenario. This is an ambitious target, especially since the land-use planning and energy sector alone accounts for 80 % of Indonesia's GHG emissions. For example, in 2010, agriculture and forestry were responsible for 59 MtCO2 out of a total of 63 MtCO2 in West Kalimantan.
The destruction of forests and peat bogs caused by plantations is conducive to forest fires. Many of these fires are deliberately caused by companies to clear land for plantations. In 2015, Indonesia experienced a devastating wave of forest fires that spread toxic smoke to several countries in Southeast Asia, causing about 100,000 premature deaths.
"Consumers around the world are demanding forest friendly products and are calling on banks and brands to take urgent action." indicates Fatah Sadaoui of SumOfUs. "We can't stand by and watch forests disappear and climate chaos worsen because of irresponsible bank investments or the use of unsustainable palm oil by brands.
Published studies (1) Recent evidence shows that most of the major brands continue to source palm oil from Salim Group companies or are exposed to it through their palm oil suppliers. Other recently published data also indicate that the major brands are sourcing from palm oil mills that are most likely to source from the companies named in this report, once the plantations become productive.
By maintaining their business partnerships without imposing clear and firm demands for change, PepsiCo, Nestlé and Wilmar remain complicit in the deforestation and destruction of the Ketungau peat bogs caused by PT DRM and PT SKL, and other socio-environmental consequences due to palm oil activities controlled by the Salim Group, or associated with Mr. Salim.
A summary of the results of this report was sent to Mr Salim, the members of these management teams and the Executive Director of PT Indofood Agri. No response to date ...
Read the report (in English)
The report, based on research compiled by AidEnvironment, was commissioned by Rainforest Action Network (RAN), Rainforest Foundation Norway (RFN) and SumOfUs.
(1 ) See the recent report "Moment of Truth" from Greenpeace for more information.
Header photo: More than 90 % of the Borneo forest has been destroyed. Photograph ©Matthias Klum, National Geographic Creative
To go further :
- Climate and zero deforestation commitments : Companies' promises of "zero deforestation": all you need to know about itir (theguardian, September 2017) - In English
- Analysis ofOxfam on deforestation - In English
- Analysis of the World Resources Institute - In English
