Conservation news

Consumer pressure to ditch deforestation begins to reach Indonesia’s oil palm plantation giants

An oil palm plantation in Indonesia's Riau province. Photo by Rhett A. Butler/Mongabay

  • Four of Indonesia’s top 10 oil palm growers have improved sustainability practices due to pressure from buyers since June 2015.
  • But not all have changed their ways. At least one grower has found new customers that haven’t promised to eliminate practices like deforestation from their supply chains.
  • Several major palm oil users with strong sustainability policies continue to buy from the worst of these 10 growers.

Major oil palm growers in Indonesia have increasingly found that what’s bad for the environment is bad for business. The financial risk of losing buyers committed to sustainable supply chains has helped motivate four of Indonesia’s 10 biggest planters to mend their ways in the past year, according to a report released on Dec. 19 by Chain Reaction Research (CRR), titled “2016 Sustainability Benchmark: Indonesian Palm Oil Growers.”

Two of the growers — Eagle High Plantations and Austindo Nusantara Jaya — suspended their operations in contested areas due to interventions from buyers who have committed to purge their palm oil supply chains of deforestation, peatland conversion and human rights abuses. Two others — Astra Agro Lestari and Dharma Satya Nusantara Group — issued stronger sustainability policies.

CRR analyzed and ranked the sustainability policies and practices of the 10 largest planters listed on the Indonesian Stock Exchange (IDX). The fruit of the oil palm trees they grow is processed into palm oil, an ingredient found in around half of all packaged products, from ice cream to instant noodles. CRR looked particularly at the progress they have made since June 2015.

One of the report’s authors, Albert ten Kate, told Mongabay: “It’s sort of glass half-full or half-empty. At least four of these 10 companies had made progress with their policies and their practices, and that’s quite a lot. That’s really good news. It shows these NDPE [No Deforestation, No Peat, No Exploitation] policies do have an effect of suppliers suspending their operations or making stronger policies themselves.”

The sun rises behind an oil palm plantation in Indonesia’s North Sumatra province. A report released by Chain Reaction Research on Dec. 19 showed pressure from major palm oil buyers has caused some of Indonesia’s largest growers to strengthen sustainability practices since June 2015. Photo by Rhett A. Butler

On the “half-empty” side, some of the major growers continue to flout sustainable practices. And outside of these major 10, there are still hundreds of smaller-scale plantation firms in the country who aren’t as publicly scrutinized.

Sawit Sumbermas Sarana scored second lowest in CRR’s report. It has recently lost business from major buyers with strong NDPE policies, including Wilmar International and Apical, which represented 16 percent and 12 percent of its revenue respectively. But it has found buyers apparently less concerned with sustainability to replace them.

Sawit Sumbermas now sells mostly to Royal Industries Indonesia and Wings Group, ten Kate said. These are companies that produce cooking oil for the domestic market and they aren’t likely to apply as much pressure toward sustainability, he said. The two did not respond to inquiries as of press deadline.

In the first half of 2016, Sawit Sumbermas’ profits dropped about 11 percent from the same period the previous year. But it is looking to increase production in 2017 and export about 30 percent of its crude palm oil to countries such as India, Bangladesh, and some in the Middle East, reported the Jakarta Post.

While growers can still find buyers without NDPE policies, the number of such buyers “is not unlimited,” noted ten Kate.

What surprised ten Kate most was that companies like Nestle and Unilever, who have long committed to NDPE supply chains, were still sourcing from the two lowest scoring companies, Tunas Baru Lampung and Sawit Sumbermas respectively.

Unilever did not respond to inquiries as of press deadline, but ten Kate said his co-author, Eric Wakker, has recently spoken to company representatives about its business with Sawit Sumbermas. “It seems they had a more positive view on SSMS than we had,” ten Kate said, referring to the firm by an acronym.

An example of Sawit Sumbermas’ actions that caused it to score so low with CRR was its plan to clear carbon-rich peat soil on one of the tracts of land it recently bought. It does not have a public NDPE policy. Its website’s sustainability section is “under construction.” The company did not respond to inquiries as of press deadline.

Sawit Sumbermas has lost most of its NDPE buyers; less than 10 percent of its revenue is now from NDPE buyers.

Oil palm fruit in a motorbike basket in Indonesia’s Riau province. Photo by Rhett A. Butler

On the other hand, Tunas Baru — which CRR scored zero out of 12 for sustainability — still counts several NDPE companies, including Nestle, among its buyers. Tunas Baru and Nestle did not respond to inquiries as of press deadline.

Tunas Baru’s subsidiary PT Solusi Jaya Perkasa heavily cleared forest in the Kubu Raya district of West Kalimantan province this summer, CRR reported. Tunas Baru also continued peatland development in 2016.

Indonesian President Joko Widodo issued a presidential instruction in November 2015 to protect peat from new palm development, and this was incorporated into law on Dec. 5, 2016.

Tunas Baru ignored the instruction, CRR reported, but that wasn’t breaking the law. Ten Kate said now that it is law, it will be much easier to hold companies accountable if satellite images show peatland damage.

“I cannot say what will happen with this law,” he said. “In general, monitoring is not the best thing in Indonesia. Basically, central government has not so much power over the districts and the subdistricts.”

Pressure from NDPE buyers may continue to sway practices where law may fail.

Louis Dreyfus Company, listed by CRR as an NDPE buyer from both Sawit Sumbermas and Tunas Baru, has suspended business with these firms until they are able to adhere to NDPE policies.

Fatima John Sandoz, a spokesperson for Louis Dreyfus, told Mongabay: “While we have bought from these two palm producers in the past, we haven’t done so for a long period of time, during which we continue to operate our plants normally, working with suppliers who are aligned with our Palm Sustainability Policy.”

A palm oil mill in Indonesia. Photo by Rhett A. Butler

Other NDPE companies listed by CRR as sourcing from Tunas Baru include Musim Mas, Wilmar, Golden Agri-Resources, Archer Daniels Midland, and Asian Agri/Apical. Many of them have a history of either successfully pressuring large growers into sustainable practices or discontinuing business with them.

Wilmar told Mongabay it is aware of Tunas Baru’s infractions and has started a grievance procedure. Musim Mas has similarly engaged Tunas Baru’s parent group, Sungai Budi Group, to encourage change, a spokesperson said.

Archer Daniels Midland spokesperson Jackie Anderson said, “In the event that our suppliers do not comply with our protocols, we are committed to working with them to resolve such issues.”

Golden Agri spokesperson Archana Shah explained to Mongabay the approach taken by many NDPE companies: “[It is] our belief that engagement as a first response is more likely to trigger the change we want and we exercise the option of disengaging only as a last resort.”