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Zero-deforestation commitments pose acute challenges for commercial giants in the palm oil industry

Nothing can ruin the intensely enjoyable experience of digging into a spoonful of the delectable hazelnut spread, Nutella, than turning over the can to examine its ingredient list. Right there, front and center, is palm oil: its production directly imperils Critically Endangered orangutans, among thousands of other species. But attempts to regulate palm oil production are well under way, and in late 2013, several prominent members of the commercial food industry adopted zero-deforestation commitments. In the months following these announcements, often heralded by the media as unprecedented progress in the palm oil debate, the actions of these companies have come under even closer scrutiny. The path to zero-deforestation appears to be paved with good intentions, but how successful are these companies in staying on that path? A controversial proposal to construct a refinery in the wildlife-rich Balikpapan Bay in Indonesian Borneo highlights the challenges faced by both palm oil companies and conservationists in the face of zero-deforestation commitments.



Balikpapan Bay: A case in point



Wilmar International Limited is a Singapore-based agribusiness group that is one of Asia’s largest, managing over 400 subsidiary companies across the continent. Its major branch in Indonesia, PT-Wilmar Nabati Indonesia (PT-WINA), provides refinery services for edible oils. Palm oil is Wilmar’s biggest product, and it is the world’s single largest processor and trader of this commodity. With over 37 million metric tons produced each year, palm oil is also the top-selling vegetable oil on the market.




Palm oil derived from the fruit of the African oil palm (Elaeis guineensis). Photo credit: Rhett Butler.


“Today, palm oil is so versatile that we don’t realize its omnipresence in our everyday lives,” states the Roundtable on Sustainable Palm Oil (RSPO) in their factsheet, a group working to certify palm oil production, trade, and consumption across the world. After the first roundtable of palm oil producers and consumers met in Kuala Lumpur in Malaysia in 2003, the RSPO has gained 1,491 members including certified growers, palm oil mills, and supply chain affiliates.



Wilmar has been a RSPO certified member since 2005. Palm oil’s appeal lies in its productivity – a plantation of palm oil can yield six to ten times the amount of oil than comparable rapeseed, sunflower, or soybean plantations. Thus, while palm oil occupies 4.8 percent of the world’s oil plantations, it produces 34.7 percent of its vegetable oil.



In Balikpapan Bay lies a 149.8-hectare concession owned by PT-WINA containing mangrove and secondary forests, now the site of a proposed refinery. Palm oil production requires the replacement of forests with a monoculture of palms, increasing deforestation and severely threatening wildlife such as the orangutan (Pongo species), proboscis monkey (Nasalis larvatus), Sumatran elephant (Elpehas maximus sumatranus) and sun bear (Helarctos malayanus). In fact, four species of monkeys have lost a tenth of their habitat in Borneo, during a single decade, from palm-oil related deforestation.






Young Malayan sun bear (Helarctos malayanus) at a rehabilitation center. The species is listed as Vulnerable by the IUCN Red List. Photo by: Rhett A. Butler.


“[This concession] is of key importance as a complex corridor connecting in [the] east-west direction the coastal ecosystem with the Sungai Wain Protected Forest, and connecting in [the] north-south direction the major sections of proboscis monkey populations,” explained Stanislav Lhota, a researcher at the Czech University of Life Sciences in Prague, who has worked in the area for over seven years. Thus, PT-WINA’s future plans for this area have come under close scrutiny from a variety of concerned conservationists.



In late January 2014, PT-WINA announced intentions of setting up a palm oil refinery within the concession.



However, primary among conservationists’ thoughts was WIMAR’s recent adoption of a zero-deforestation policy. At the start of 2014, in less than a year, over half of the world’s palm oil traded in international markets became bound by zero-deforestation commitments. Golden Agri Resources, the world’s second largest oil palm plantation company, extended its zero-deforestation commitment to all of its palm-oil production in March this year, an announcement that followed closely on the heels of a similar declaration from Wilmar, the world’s largest palm oil company, in December 2013. Others have also pledged to distance themselves from deforestation linked to palm oil, including prominent companies such as Cargill, Proctor & Gamble, Orkla, Safeway, General Mills, and Colgate-Palmolive.



Thus, PT-WINA’s proposed refinery comes on the heels of an industry-wide change in approach to palm oil and deforestation, and is one of the first trials in practice of these new policies. But zero deforestation doesn’t really mean “no deforestation,” instead it means abiding by stricter regulations. For example, the most important requirement when a “zero deforestation” company proposes to cut a forest in their concession area is that the ecosystems are first assessed to determine if any areas are of high conservation value (or HCV) or contain high carbon stocks.



“There is no specific requirement under the RSPO for its members to conduct an HCV assessment in setting up non-plantations activities,” says Simon Siburat, the Group Sustainability Coordinator for the Wilmar Group, emphasizing that WILMAR nevertheless went ahead with an HCV assessment by a certified assessor.




The PT-WINA Concession representing one of the last remaining biodiversity hotspots in Balikpapan Bay. This land is classified as degraded scrubland in the HCV assessment. Photo by: Gabriella Fredriksson.


HCV forests are designated as such based on standards laid out by the Forest Stewardship Council. Each forest area is evaluated according to six criteria, including the presence of rare or threatened animals, high biodiversity or endemism, and even links to the cultural identities of local human populations.



In the case of Balikpapan Bay, PT-WINA hired PT-ReMark.Asia, accredited by the RSPO, to conduct the HCV assessment. Completed in early 2014, the assessment concluded that only 22 hectares of the 150 hectares forest was HCV. These results were presented to the general public during a meeting in late January. In their policy paper on zero-deforestation, Wilmar commits to communicating with other stakeholders, such as the local community and non-governmental and conservation organizations working in an area proposed for deforestation.



Lhota said that while some organizations attended this meeting, several others were sent invitations only a few days before, and the meeting was held far from the city, lowering overall attendance. Major protests from NGOs encouraged PT-WINA to set up a second meeting in late February 2014, with sufficient notice to concerned parties.



Gabriella Frederiksson, a scientist who has studied sun bears in the Sungai Wain Forest that neighbors PT-WINA’s concession for close to ten years, was present at this meeting in February. In an interview with mongabay.com, she shared that assessments of this kind had already been conducted poorly for 27 hectares of land deforested within Balikpapan Bay prior to the zero-deforestation commitment.



“They presented some of the results of the assessment in April last year [2013], and already then we had [a few] arguments as the assessment was so weak and flawed,” said Frederiksson, of the case that is still pending adjudication. Since then, ReMark.Asia also conducted further HCV assessments specifically within the 149.8-hectare concession slated as the site for the new refinery.



“At this meeting they tried to use those results for justification of further development plan[s] that they did not want to present,” added Frederiksson, describing the meeting as tense. The meeting itself was eventually terminated early because of what appeared to be an ineffective and incomplete assessment of the forest within the area.



Both Lhota and Frederikkson adamantly disagree with the major finding of the assessment that only 22 hectares of the 150 hectares forest (or 14 percent) is of HCV value, claiming that their experiences over several years working in the area have led them to believe that many threatened species depend on this land for survival.




Map from the HCV assessment conducted by Re.Mark Asia of the PT-WINA concession. Areas of high conservation value are outlined in red. Click image to enlarge.

“The area under Wilmar’s concession is very important in buffering from human influence the most important areas of primary forests located towards north and east from the concession,” Lhota told mongabay.com. “Wilmar plans to use their concession to develop a giant palm oil refinery, which would not only destroy the forest within those 149.8 hectares, it would impact the neighboring forests as well as cause serious destruction to the surrounding marine ecosystem.”



Among these species of high conservation value are some of the most endangered and rare Indonesian wildlife.



“Proboscis monkeys are the most affected by the mangrove and forest destruction,” stated Frederikkson.



According to Lhota’s assessments in 2007 and 2012, there are three groups (approximately 34 animals) of proboscis monkeys that live entirely within the concession, and five others that use the area as a corridor to connect their northern and southern ranges. The IUCN Red List currently lists these monkeys, known for their telltale bulbous noses, as Endangered.



“Therefore, at least eight groups (87 individuals) would be affected either by habitat loss or by isolation,” concluded Lhota. “Developing this area would expose this wildlife to contact with humans. In total, approximately 100-200 proboscis monkeys (ten percent of the total [Balikpapan Bay] population) would therefore be affected by Wilmar’s presence either directly (habitat loss and isolation, as described above) or indirectly (human encroachment due to loss of the buffer area).”



“Orangutans roam over larger areas and are also found in the area, though on a less certain/permanent basis,” reported Frederikkson. She also knows of orangutan nests within the PT-WINA concession, and asserts that sun bears, the focus of her research, also use the area.



Instead of assuaging fears, the meeting in February appears to have slowed the overall progress of the project.



“It caused another wave of protests and criticism, as the [HCV] document is full of errors, data are manipulated, the report underestimates the total extent of the HCV area by 87 percent and also highly understates its importance,” said Lhota, who added that the local government appears to have concluded that the report is not valid, and has requested that the company redo the assessment.




Proboscis monkeys (Nasalis larvatus) that are commonly threatened by palm-oil related deforestation in Indonesia. Photo by: Petr Čolas.



Besides the underwhelming and possibly erroneous features in the HCV assessment pointed out by conservationists in the area, Lhota also suggested several other reasons for opposing the construction of a palm oil refinery in Balikpapan Bay, including the impact on environmental services related to downstream watershed protection.



According to Lhota, Balikpapan Bay has high conservation value and “represents one of the last remaining biodiversity hotspots along the coast of East Kalimantan.” The Bay contains coral reefs, sea grass beds, mangroves, dipterocarp rainforest and karst, with over 100 mammal species, nearly 300 bird species, and over 1,000 tree species.



Balikpapan Bay also represents a closed water system. Lhota describes it as having only limited water exchange with the sea, resulting in almost all sediment and industrial waste accumulating in the Bay itself. Lhota also claims that erosion, which can be as high as seven tons per hectare per year under deforestation, has created up to one-three meters of sedimentation per year in some places. The influx of sediment kills coral reefs and sea grass beds, which can in turn cause the collapse of local fisheries that constitute the major economic activity in Balikpapan Bay.



“It is very important to know that our concern is not only in 149.8 hectares, which are under direct threat of forest conversion by Wilmar,” stated Lhota. “The crucial issue is the impact of this development on the whole ecosystem of Balikpapan Bay, including the surrounding forests and the marine ecosystem.”



HCV Assessments: loophole or blessing?



The Forest Trust (TFT) is a non-profit organization whose mission is to assist companies in providing “responsible products” that take into account sustainable and accountable resource management. The NGO has become a major player in assisting large companies in streamlining their operations to procure and use palm oil only from refineries that have 100 percent traceability, right back to the plantation. In fact, TFT assisted Wilmar in reaching their zero-deforestation policy.



“We agreed that the HCV evaluations would be done according to the HCV Resources Network requirements,” said Scott Poynton, the Executive Director of TFT, about his group and Wilmar’s coordinated efforts to ensure zero-deforestation as a priority. “The Network aims to outline best global practice in completing HCV Assessments and has many respected stakeholders guiding its work.”




Oil palm plantation in Sabah, Malaysian Borneo. Photo credit: Rhett Butler.



Boris Saraber, Senior Manager Asia North for TFT, confirmed that Mr. Pak Dwi, a experienced and credible HCV assessor from PT-Re.Mark Asia conducted the HCV assessment of the concession in Balikpapan Bay. Although some development had taken place at the site, Saraber stated that this occurred well before Wilmar’s zero-deforestation commitment in December 2013.



“Since that time a road reserve has been opened up by the Government [in the concession]. Wilmar and TFT have started a HCS assessment process over the site and will be going to the field to ground test the desk top work very soon,” Saraber told mongabay.com. “During this period, Wilmar is not doing any new development.”



According to Saraber, Balikpapan Bay is not the first time that Wilmar (or a subsidiary) is attempting to follow the zero-deforestation policy.



“A great deal of work is ongoing across Malaysia, Indonesia and Africa to understand the issues on the ground both in Wilmar operations and that of their many suppliers,” confirmed Saraber.



TFT said they will be contacting a number of local organizations and communities, including conservationists like Stanislav Lhota, with a plan to better understand their concerns and gain their input.



HCV assessments, both Saraber and Poynton agree, are subject to human error, particularly in this early stage as large companies try to implement a complicated policy across many stakeholders in their supply chains.



“The HCV Network does try to counter the risk of too much leeway or poor practice by requiring accredited assessors but also there is a Peer Review process in place to review reports before they’re published,” confirmed Poynton. “Having said that, we have seen HCV assessment reports in Indonesia that clearly do not follow the HCV Network’s rules and are, to be kind, not well done. So, like any human system, there is a chance that things will be done less well.”



Simon Siburat, representing WILMAR, reports that in light of the opposition raised by NGOs and conservationists, the HCV assessment has been sent for peer review.




The PT-WINA concession viewed via satellite imagery. The white line on the right indicates a firebreak, and clear patches of deforestation within the concession are visible. Image courtesy: Google Earth.



“Independent consultation with community and stakeholders is being undertaken by TFT during April 2014,” he added.
The major difficulties that have been encountered seem to surround communication between palm oil companies and the concerned citizens whose livelihoods are threatened, as well as the conservationists that are worried about the true consequences of a zero deforestation policy. Lhota and others shared concerns that such HCV policies could legitimize deforestation, using poorly managed assessment standards, and providing no alternatives for appeals.



“Part of the Wilmar Policy requirement is to establish a Grievance Process and our teams are still working at that,” affirmed Poynton, emphasizing that local stakeholder points of view are important to the process. “Right now, the approach is that if someone has a grievance, as in this case, then our aim is to meet them, get them together with the Wilmar team and work out how to resolve it in a respectful, positive way…[We] strongly believe that the best way to resolve grievances is to get the parties together to find a solution. We believe that we can do this with Wilmar and the concerned NGOs in this case too and that is the approach we’re taking.”



Moving forward



According to Simon Siburat of WILMAR, “There has been no development on site by Wilmar since well before the Integrated policy was announced on 5 December 2013. Future operations will concentrate on building the infrastructure in areas that have already been developed in 2007/2008, as well as constructing a road linking our existing facilities to the new road constructed by the local government on the Eastern side of the project area. The road is anticipated to reduce our impact on the use of the jetty facility, which may have some impact on the marine life such as dolphins that sometimes frequent the area.”



The case of Balikpapan Bay and PT-WINA can be considered representative of the types of challenges that companies can anticipate after the recent spate of zero-deforestation commitments that have occurred in the last six months. The implementation of these policies will require careful planning, with the help of groups such as the TFT and the RSPO. But the limiting factor here is time. Companies rushing into the fray to continue business as usual are likely to violate their commitments, and conservationists, who are carefully monitoring the system, will draw attention to these mistakes. However, both the conservationists and the companies play an important role in identifying the glitches in the proposed zero-deforestation policies, which could be critical to these policies’ successful implementation.



Acknowledgements:Thanks to Faezan Redwan for monitoring local news sources in Indonesia and providing translations.



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