Conservation news

PepsiCo to probe deforestation in palm oil supplier’s Leuser Ecosystem concession

The truth is that the economic future of local Sumatrans, the Leuser ecosystem and orangutans, along with industrial agriculture, global commodities investors and the world’s hunger for palm oil are intricately bound together. Photo by Rhett A. Butler

  • PepsiCo has launched an investigation into reports of deforestation in one of its supplier’s oil palm plantations, located in the Leuser Ecosystem, a biodiversity hotspot that is home to some of the last Sumatran tigers, rhinos, orangutans and elephants left on Earth.
  • The investigation comes in response to a complaint from the Rainforest Action Network (RAN), which says the company has failed to act since the deforestation allegations were first reported four years ago.
  • For its part, the supplier alleges that the deforestation was carried out by local villagers encroaching into its concession, and that it is in discussions with them on resolving the long-running dispute over the land tenure.
  • Separately, PepsiCo has also recently updated and expanded its policy on sustainable palm oil, which has been criticized by RAN for failing to ensure the elimination of labor rights violations and forest destruction from the company’s extensive supply chain.

JAKARTA — Food and beverage giant PepsiCo has launched an investigation into reports of deforestation carried out by one of its suppliers in a key Indonesian habitat that’s home to critically endangered tigers, orangutans and rhinos.

The company said it was acting on a complaint by the Rainforest Action Network (RAN), a U.S.-based advocacy group, alleging ongoing deforestation within a concession owned by palm oil firm PT Surya Panen Subur II (SPS II), which is included in PepsiCo’s 2017 mill list.

“We take allegations of any policy non-compliance in our supply chain very seriously,” PepsiCo told Mongabay by email. “Immediately upon receiving this complaint, we activated our grievance process and contacted our direct suppliers, peers and others to investigate.”

RAN said its field investigation and satellite analysis showed that in the first five months of this year alone, 118 hectares (290 acres) of forest had been destroyed in SPS II’s concession, which falls inside the Leuser Ecosystem in Indonesia’s Aceh province. The area is an ecological hotspot celebrated as the last place on Earth where Sumatran tigers (Panthera tigris sondaica), rhinos (Dicerorhinus sumatrensis), orangutans(Pongo abelii) and elephants (Elephas maximus sumatranus) coexist in the wild.

PepsiCo, the largest globally distributed snack food company in the world and a major consumer of palm oil, said it had already received several responses and several suppliers were now making their own inquiries.

“PepsiCo has demonstrated in the past that we are willing to take action where we feel that complaints have not been adequately addressed,” the company said.

Cleared land is seen at an oil palm plantation belonging to PT Kalista Alam in the Tripa peat swamp, in Aceh, Indonesia, in 2012. Photo by Dita Alangkara/CIFOR. Attribution: https://www.flickr.com/photos/cifor/36282267366/in/photolist-Xh972U-LJ2dk-4q59tV-9x4Dmq-2tksH2-CZYnp-JG3v2-dKZ83f-pc3gTV-5KwxyE-6Mv5u9-bGj2jt-pKjLd-oaqP6P-6SC9Yx-W5caeC-WK3hHA-W7Aj2t-X8ZMHt-5jx61w-68q2xz-RxFiEz-tAgkrb-WK3ngU-99gXAY-X8ZLLP-W7AkjZ-V8UV6W-UX2VAm-68uksQ-7TgN6W-6ZUTko-2CqRYy-2svVZ9-b7CeKc-acyPoe-6WYf2b-8vt4Wq-4rQbpf-viZMRd-kwPp3n-4EyaWz-8Dha1m-9zg9wS-8ofyhY-e9JdYG-4gqZfr-4ECrbG-7SvYbp-nWwsvK/

Four-year-old allegations

That willingness to take action on the part of PepsiCo comes nearly four years after RAN began reporting on the alleged deforestation inside SPS II’s concession in 2014. In the intervening years, RAN said, PepsiCo remained silent and refused to take any concrete action.

Years of forest clearing and fires have ravaged SPS II’s concession, leaving it with only 30 percent of its original 130 square kilometers (50 square miles) of intact forest cover as of April this year.

“PepsiCo has not yet publicly responded to this case of ongoing deforestation in its supply chain, despite SPS II being named in multiple RAN reports since 2014,” Emma Lierley, forest communications manager at RAN, told Mongabay.

Lierley also said that SPS II had been profiled in case studies on LeuserWatch.org, a website set up by RAN containing updates on deforestation in the Leuser Ecosystem, and named in the media over the illegal use of fire to clear land in 2012. And yet, she said, PepsiCo continued to source palm oil derived from SPS II’s concession.

The fires six years ago, in the ecologically important Tripa peat area of Leuser, were described by Indonesian investigative magazine Tempo as a conflagration of falling ash and billowing smoke. The heat from the burning of the mulch-like peat drove out people and animals, leaving a smoldering ruin of “burned-down forest littered with charred, blackened tree trunks.”

The fires quickly put the Tripa peat swamp in the international spotlight; the carbon-rich area has the world’s densest population of Sumatran orangutans, a critically endangered, and has even been called “the orangutan capital of the world.”

In response to the fires, the Indonesian government launched an investigation that resulted in a civil lawsuit against SPS II in 2012. In 2016, a district court ruled in favor of the government, ordering the company to pay 3 billion rupiah ($212,000) in fines. Later that year, however, the Supreme Court overturned the lower court’s ruling on appeal.

While the company was let off the hook, three of its employees, including its chief executive, were found guilty of ordering the fires to be set, with each sentenced to two years in jail and fined 3 billion rupiah.

The Leuser Ecosystem in Indonesia’s westernmost Aceh province. The area contains Mount Leuser National Park. Image by Agungdwinurcahya/Wikimedia Commons

Outsiders to blame

The palm oil produced by SPS II enters PepsiCo’s supply chain via Golden Agri-Resources (GAR), one of the world’s biggest palm oil companies. In a 2014 report, GAR said SPS II was not to blame for the deforestation inside its concession.

Instead, it identified the perpetrators as residents of a nearby village, Kuala Seumayam, and a palm oil company called CV Sawit Mandiri, which it said had occupied parts of the concession.

“SPS II had been experiencing encroachment by local communities causing a series of land burning and deforestation incidents in its concession over several years,” GAR said on its website.

Residents of Kuala Seumayam, home to some 500 people, say they were kicked off their land when the district chief licensed SPS II and another palm oil company, PT Kallista Alam, to operate there in the 2000s.

GAR said it held an open dialogue between SPS II and the villagers to address the encroachment. During the discussions, GAR said, the villagers admitted to entering the concession and burning and clearing the land. They also said they believed the concession was abandoned when they first entered it, and asked not to be prosecuted, in light of how much money they had spent cultivating the land.

In turn, the village chief vowed to encourage the villagers to stop land clearing, pending the completion of a participatory mapping and land tenure study.

While GAR deemed the dialogue a success, it said its subsequent monitoring, from November 2017 through April 2018, found signs that land clearing inside the concession had continued.

“This suggested that although SPS II had a positive first engagement with the communities, they needed to do more work to ensure the right follow-up actions that would lead to change,” GAR said.

RAN’s Lierley acknowledged the encroachment problem, but said it did not absolve SPS II and PepsiCo of any responsibility. Other companies identified by RAN as sourcing some of their palm oil from the SPS II concession include Unilever, Nestlé, Mars, Mondelēz International and General Mills.

“It is safe to say that the current clearing and canal development is happening through an organized third party, while it has historically been done by SPS II,” Lierley said. “[However], SPS II remains responsible for its concession –– the past and current impacts of forest clearance.”

She said the encroachment and deforestation had continued unabated because of SPS II’s failure to resolve the long-standing dispute over the land through a transparent, credible and independently mediated conflict-resolution process. Market demand for so-called conflict palm oil from nearby mills and refineries, including those supplying major brands, also served to fuel the deforestation, she added.

RAN’s report said SPS II had chosen not to publish the methodology of its land tenure study or publicly report on any progress made on efforts to address ongoing deforestation, canal dredging, fires and conflict resolution.

Others question the likelihood of outsiders carrying out much of the deforestation inside the concession, citing the presence of heavy machinery in the cleared areas.

“While the land clearing wasn’t as massive as it was used to be, there are backhoes” being used to clear the forest, said Farwiza Farhan, chairwoman of HAkA, a local environmental NGO.

“Do those belong to the villagers? Really?”

Rainforest in the Leuser Ecosystem. Photo by Rhett A. Butler/Mongabay.

New policy

RAN has also taken PepsiCo to task for its recently updated sustainable palm oil policy, which the group says fails to entirely cut out labor rights violations or rainforest destruction from the supply chain.

“This policy is a dodge and cover,” RAN palm oil campaign director Robin Averbeck said in a press release. “At the end of the day it still allows PepsiCo to remain in business partnership with companies actively abusing workers’ rights and destroying tropical rainforests and peatlands.”

PepsiCo, though, said RAN’s criticism was aimed at Indofood Agri Resources (IndoAgri), a subsidiary of Indofood, the biggest food producer in Indonesia. IndoAgri, the food giant noted, “is not a direct supplier to PepsiCo.” Instead, it sells palm oil to international traders, some of whom supply PepsiCo.

In Indonesia, PepsiCo has a joint venture with Indofood to produce some products, such as Lays-branded snacks, for the domestic market. That joint venture previously sourced some of its palm oil from IndoAgri, but those procurements were suspended since January 2017, amid allegations of child labor and worker exploitation at IndoAgri-run plantations.

When it first rolled out its sustainable palm oil policy in 2015, PepsiCo stated that the palm oil it sourced through its suppliers would be produced with no further development of high carbon stock (HCS) forests or high conservation value (HCV) areas, and no new conversion of peatlands.

In its recent update, PepsiCo aims to achieve that by the end of 2020. It also sets a conversion cut-off date for forest and peatlands, meaning it will not buy any palm oil sourced from land cleared since the end of 2015.

“We believe we are the first company in our sector to make such a commitment,” PepsiCo said.

Banner image: On orangutan swings through the tress in Sumatra’s Gunung Leuser National Park. Photo by Rhett A. Butler.