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FSC complaint filed against pulpwood firms tied to Indonesia’s richest man

An Acacia plantation in Indonesia. Image by Rhett A. Butler/Mongabay.

  • An NGO that linked two pulpwood companies to Indonesia’s wealthiest man has alleged continued deforestation by the companies, in violation of sustainability commitments.
  • The companies are owned indirectly by cigarette and banking tycoon Robert Budi Hartono, and supply, among others, paper and pulp giants APP and APRIL.
  • APP has denied responsibility for the wood sourced from one of the companies, even though it acknowledges having “significant influence” over the mill that bought it.
  • APRIL says the supplier hasn’t violated its own sustainability commitment — but part of the reason is that that commitment isn’t retroactively applicable to existing suppliers.

JAKARTA — An Indonesian NGO has filed a complaint with the Forest Stewardship Council (FSC), alleging deforestation carried out by pulpwood firms linked to Indonesia’s wealthiest individual and supplying two of the world’s biggest paper and pulp companies.

In its letter dated Dec. 4, the environmental group Auriga Nusantara says pulpwood plantation companies PT Fajar Surya Swadaya and PT Silva Rimba Lestari cleared 320 square kilometers (123 square miles) of forests in East Kalimantan province between 2013 and 2017.

Official records show both companies are owned indirectly by Robert Budi Hartono, a cigarette and banking tycoon who first made his fortune with the Djarum tobacco company and is now the richest person in Indonesia. Other members of the Hartono family are also indirect shareholders of the two companies.

Robert also directly and indirectly controls a 51 percent stake in PT Bukit Muria Jaya, a paper and packaging processor. While not implicated in the alleged deforestation, PT Bukit Muria Jaya is certified by the FSC — which, under the council’s rules, means its majority shareholder can be deemed “indirectly involved” in the “unacceptable activities” of other companies in which they hold shares or sit on the board, according to Auriga.

Syahrul Fitra, a researcher with Auriga, said that despite his organization and other NGOs having documented the deforestation in a report published in August 2018, with a follow-up report in October 2019, the FSC had failed to act on the findings. That’s what prompted Auriga to lodge the complaint with the FSC, he said.

“We don’t want any further clearing of natural forests, whether it’s inside the concessions or outside,” Syahrul said. “Enough is enough. FSC doesn’t allow the clearing of natural forests to make plantations.”

Land-cover maps from the government show substantial areas of natural forest still standing in five pulpwood concessions held by PT Fajar Surya Swadaya, PT Silva Rimba Lestari and other companies linked to the Djarum group, according to Auriga.

Data from Global Forest Watch indicates that forest clearing has already occurred in several of these concessions. Publicly available records of timber royalty payments indicate the companies have harvested significant volumes of natural forest wood, including protected species like ironwood.

Auriga called on the Djarum group to immediately adopt a policy of “no deforestation, no peatland and no exploitation of local communities,” known in the industry as NDPE.

“We push Djarum to comply [with NDPE policy] because they don’t have a sustainability policy,” Syahrul said.

Deforestation in the concessions of PT Fajar Surya Swadaya, from 2001-2012 (in purple) and from 2013-2017 (in red). Sources: Forest cover from Indonesia’s Ministry of Environment and Forestry land cover maps from 2000 and 2015, tree cover loss from Hansen et al. 2013 with updates for 2017 from Global Forest Change.

APP: No ownership or control

This isn’t the first time the two Djarum-linked companies have come under scrutiny. In its 2018 report as part of an “anti-forest-mafia coalition,” Auriga identified PT Fajar Surya Swadaya, PT Silva Rimba Lestari as supplying wood to paper giants Asia Pulp & Paper (APP) and Asia Pacific Resources International Holdings Limited (APRIL).

The report alleged those purchases would have violated APP and APRIL’s respective zero-deforestation commitments. Both companies denied the allegations, with APRIL saying at the time that the wood was sourced from areas outside high conservation value (HCV) forest, and APP saying it received the wood after an administrative lapse and had since quarantined the shipment.

But a follow-up report published this past October alleges APP and APRIL continued to buy wood from PT Fajar Surya Swadaya in 2018, with APRIL doubling its purchase volume from 2017. Specifically, the report identified shipments of wood from PT Fajar Surya Swadaya going to PT Sarana Bina Semesta Alam, an APP-affiliated chip mill, in both 2017 and 2018.

In response to the earlier report, APP denied responsibility for the wood purchased by PT Sarana Bina Semesta Alam, saying it APP didn’t own or control the company and had “no legal or financial connections or influence” over it.

However, in a recent independent assessment by APP to clarify its links with pulpwood suppliers in Indonesia, APP categorized PT Sarana Bina Semesta Alam as a “partner.” It defines its partners as “plantation companies where APP companies have significant influence.”

The NGO coalition has also identified PT Sarana Bina Semesta Alam’s ultimate controlling shareholders and sole commissioner as being current or former employees of APP or parent company Sinar Mas Forestry. Three of the holding companies for PT Sarana Bina Semesta Alam use the address of APP’s Jakarta headquarters, according to corporate profiles submitted to the Ministry of Law and Human Rights.

“It means they indeed control PT Sarana Bina Semesta Alam,” Syahrul said. “Besides being described to have significant influence, PT Sarana Bina Semesta Alam also supplies APP’S pulp mill in China.”

That would be Hainan Jinhai Pulp & Paper, to which PT Sarana Bina Semesta Alam exported more than $20 million worth of wood chip in 2017 alone, according to trade records.

In response to the follow-up report, APP said all the allegations had been clearly addressed by the company in its reply to the coalition’s previous report.

A pulpwood plantation in Indonesia’s Riau province. Photo by Rhett A. Butler/Mongabay

APRIL: No sustainability violations

Separately, APRIL has confirmed that PT Fajar Surya Swadaya has been one of its suppliers since June 2017. Throughout 2018, including the period after the NGO coalition raised the deforestation allegations, APRIL actually doubled the amount of wood it sourced from PT Fajar Surya Swadaya, buying about 10,000 truckloads’ worth for its mill in Sumatra.

APRIL denied that the supplier had violated its own sustainability policy, saying it had commissioned the Netherlands-based Tropenbos International to conduct an assessment and found that the wood was sourced from outside HCV areas.

APRIL also denied that the development of PT Fajar Surya Swadaya’s plantations violated community rights, saying it found that appropriate procedures for resolving land conflicts had been put in place.

But those findings haven’t been fully disclosed, according to the NGO coalition. Following demands from the coalition, in May 2019 APRIL uploaded a black-and-white photocopy of an executive summary of the HCV assessment to its updated supplier list. The coalition noted that the copy of the map included in the summary was blurry and not in color, making it impossible to denote specific HCV areas.

“We can’t analyze the map,” Syahrul said. “We’ve asked APRIL for the colored version, but they haven’t responded yet.”

APRIL said it would update the black-and-white copy of the map with a higher-quality reproduction in time.

The coalition is also pushing for APRIL to show that the areas from where the wood was sourced are not high carbon stock (HCS) areas. APRIL’s sustainability policy commits the company to not sourcing wood from suppliers who cultivate in HCV or HCS areas.

But APRIL says that HCS prohibition applies only to new suppliers and is not retroactively applicable to existing suppliers, including PT Fajar Surya Swadaya.

“There is an ongoing debate about the need to carry out retrospective HCS assessments, and we continue to be part of that discussion,” APRIL said. “In terms of our policy, HCS applies to new development and this is existing plantation supply so it does not apply.”

The company added it had no plans to cease sourcing wood from PT Fajar Surya Swadaya.

“Suspension and/or cessation of supply arrangements is considered as a last recourse and only if there clear unwillingness to address a confirmed non compliance with our policy,” APRIL said.


Banner image: An Acacia plantation in Indonesia. Image by Rhett A. Butler/Mongabay.


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