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Breakthrough? Controversial palm oil company signs rainforest pact

Oil palm and logged over rainforest in Sabah, Malaysia. Photo by Rhett A. Butler 2008.

One of the world’s highest profile and most controversial palm oil companies, Golden Agri-Resources Limited (GAR), has signed an agreement committing it to protect tropical forests and peatlands in Indonesia. The deal—signed with The Forest Trust, an environmental group that works with companies to improve their supply chains—could have significant ramifications for how palm oil is produced in the country, which is the world’s largest producer of palm oil.

GAR owns PT Sinar Mas Agro Resources and Technology (SMART), a firm that has been aggressively targeted by Greenpeace and other environmental activists for destruction of rainforests and peatlands in Borneo. The campaigns cost SMART dearly, with the company suffering a wave of customer defections, including Unilever, Kraft, Nestle, Burger King, and General Mills, among others. SMART exacerbated its woes by misrepresenting the results of an independent audit of its operations and hiring marketing firms and lobby groups to make dubious claims about its environmental performance. SMART was subsequently threatened with expulsion from the Roundtable on Sustainable Palm Oil, a body that sets social and environmental criteria for palm oil production.

expansion of the oil palm estate across indonesia and malaysia, 1990-2008

Expansion of the oil palm estate and natural forest loss in Indonesia and Malaysia, 1990-2008. Click image to enlarge

The new agreement offers SMART and GAR a path toward redemption. GAR will establish a forest conservation policy that bans development of peatlands and high carbon stock and high conservation value (HCV) forests. The policy also includes social safeguards including free, prior and informed consent (FPIC) for indigenous and local communities as well as compliance with Indonesian laws and RSPO Principles and Criteria. The policy will apply for all plantations GAR owns, manages, or invests in.

GAR, which has 433,000 hectares of oil palm plantations and is the world’s second largest producer of palm oil, said it will promote the policy across the palm oil industry.

“We will leverage our leadership position and advocate this policy in partnership with the Indonesian and global community,” the company said in a statement.

GAR’s partner in developing and monitoring the policy said the agreement could have global implications for the world’s forests, which are increasingly at risk from commodity production, rather than subsistence farming, as was once the case.

“Today’s agreement represents a revolutionary moment in the drive to conserve forests,” said Scott Poynton, TFT’s executive director, in a statement. “It’s about going to the root causes of deforestation; we have shown that the destruction of forests is anchored deeply in the supply chains of the products we consume in industrialized nations and we are showing we can do something about that.”

mother and baby orangutan

TFT’s engagement with GAR arose out of uproar generated by a Greenpeace campaign over Nestle’s use of palm oil in its KitKat bar. The campaign included a video showing an office worker biting into the finger of an orangutan, implying that Nestle’s palm oil—which came from SMART—was contributing to destruction of orangutan habitat. After some critical misteps, Nestle announced it would implement a new sourcing policy for palm oil.

Franky Wijaya, Chairman and CEO of GAR, said the deal would help put Indonesia on a more sustainable development path for growing its economy.

“As a leading player in the palm oil industry, we are committed to playing our role in conserving Indonesia’s forests and look forward to working with all stakeholders including the Government of Indonesia, other key players in the palm oil industry, NGOs and the local communities, to find the common ground for sustainable palm oil production,” Wijaya said in a statement. “Our partnership with TFT allows us to grow palm oil in ways that conserve forests and that also respond to Indonesia’s development needs; creating much needed employment while building shareholder value.”

Even GAR’s fiercest critic, Greenpeace Indonesia, is cautiously optimistic about the announcement.

“Leadership of GAR is important to make other player’s believe this is good for Indonesia’s economy and business,” Bustar Maitar, Forest campaigner for Greenpeace Southeast Asia, told “There no choice for other producers but to move toward higher standards of palm oil production. Producers can no longer say ‘no’ to saving Indonesian forests. GAR is already committed to making a profit without destroying forest, so I believe other companies can also do it.”

Ensuring GAR abides by its commitment

The Forest Trust (TFT) says it will working closely with a range of stakeholders to ensure GAR upholds its commitment.

Healthy forest and an oil palm plantation. The difference is bigger than it looks: oil palm plantations store less carbon, house less biodiversity, and are more prone to erosion than natural forests.

“We all know that this agreement counts for nothing if it’s not now implemented,” Poynton said in a statement. “The process has begun already with TFT experts visiting GAR plantations, and we have funding from the company and a clear action plan for making sure this agreement sticks. We have worked with other companies to clean up their supply chains successfully, and it is our intention to do so again. We are confident we will be able to overcome any concerns about whether this agreement will lead to substantive change.”

Poynton told that local NGOs, including rights’ groups and environmental organizations, will be the “eyes and ears” to help ensure GAR’s pledges are implemented. He also noted that TFT will conduct site visits on an ongoing basis.

Greenpeace’s Maitar said the government would have a role to play as well.

“Participation of other stakeholders is important,” he told mongabay. “Government should play a key role in law enforcement and for sure civil society is important to monitor, together with the local community, what is going on the ground.”

“The partnership is good signal for moving forward to address deforestation, but this is still on paper,” he continued. “Greenpeace wants to see this commitment implemented on the ground, but so far we are seeing there is a serious effort by GAR to move forward with this.”

The palm oil paradox

Palm oil is now found in up to half of packaged processed foods in some markets. By virtue of its high yield, palm oil is a cheaper substitute than other vegetable oils. In an effort to reduce costs, some candymakers are using palm oil in place of cocoa butter in their milk chocolate products. Photo by Rhett A. Butler

Palm oil is used widely in processed foods, cosmetics, and soaps — WWF estimates that palm oil is found in roughly half of packaged supermarket products. It is also increasingly used as a biofuel.

Over the past twenty years, palm oil has emerged as a economic juggernaut in Indonesia and Malaysia. With its high yield, oil palm is an astoundingly profitable crop and accordingly, plantations have spread across Sumatra, Borneo, New Guinea, and other islands, taking a heavy toll on forests. By some estimates, more than half of oil palm expansion since 1990 occurred at the expense of forests, spurring strong backlash from environmentalists concerned about greenhouse gas emissions and loss of habitat for endangered wildlife—including orangutans, pygmy elephants, Sumatran rhinos and tigers. Oil palm plantation development has also exacerbated social conflict in some areas.

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