Paper giant APRIL linked to Borneo forest clearing despite zero-deforestation vow

JAKARTA — Pulp and paper giant Asia Pacific Resources International Holdings Limited (APRIL) has allegedly violated its own sustainability commitment by purchasing wood from a company clearing rainforest in Indonesian Borneo, according to a new report.

APRIL is one of the world’s biggest producers of pulpwood, from which paper and related products are made. Since 2015 it has committed to not harvesting wood pulp from natural and peat forests.

But the new report by a coalition of environmental NGOs alleges that APRIL has been sourcing some of its wood pulp from PT Adindo Hutani Lestari (AHL), a company that has cleared an area of natural forest the size of 15,000 football fields over the past five years.

According to the report, at least 7,290 hectares (18,000 acres) of natural forest, half of them located in areas deemed of high conservation value (HCV) as well as carbon-rich peatland, have been cleared within AHL’s pulpwood concession in North Kalimantan province between June 3, 2015 — the date when APRIL adopted its zero-deforestation policy — and Aug. 31 this year.

In its deforestation analysis, the coalition used land-cover classification maps from Indonesia’s Ministry of Environment and Forestry as well as global tree cover loss data from the University of Maryland based on NASA’s Landsat satellite imagery.

AHL has for the past five years been among the top five suppliers to APRIL, sending 79,000 truckloads of wood to the group’s pulp mill in central Sumatra from 2015-2019.

During that period, “APRIL received or purchased material from AHL amounting to 2.3 million cubic meters [81 million cubic feet], which were then processed in its mill in Riau province,” said Supin Yohar, forest director at the environmental NGO Auriga, a member of the coalition behind the new report.

Crucially, while the coalition found evidence that natural and peat forests in AHL’s area had been cleared, that doesn’t mean the company is doing anything illegal: the deforestation occurred within its permitted concession, and as such is allowed. Supin also qualified the findings by noting it was possible that all or part of the wood that AHL supplied to APRIL came from its pulpwood plantations and not from logged natural forest. According to the wood utilization reports filed by the mill’s operator, APRIL subsidiary PT Riau Andalan Pulp & Paper (RAPP), all of the pulpwood that the mill sourced from AHL during 2015-2019 was classified as plantation-grown wood.

But exactly what happened to the forest trees that AHL cleared remains shrouded in mystery, the coalition says. The company was entitled to sell the logs, for which it would have been obliged to pay royalties to the government. However, the environment ministry’s publicly accessible database of timber royalty payments shows nothing from AHL between 2016 and August 2020 for natural forest timber. Instead, it appeared to have only paid royalties on plantation-grown timber, which are significantly cheaper than for natural forest timber.

“Despite 7,000 hectares of natural forest clearance, we couldn’t find AHL reporting forest taxes and reforestation fund on the Ministry of Environment and Forestry website,” Supin said. “Why did AHL not report on its production from natural forest, even though there was forest clearance?”

APRIL responds

In a response, APRIL denied that there was any deforestation — what it calls “land cover change” — on AHL’s concession after May 16, 2015, the group’s cutoff date for suppliers to comply with its zero-deforestation policy.

Instead, it said, AHL only planted on non-HCV areas as determined by a 2014 assessment carried out by Tropenbos, an independent consultancy, and subjected to an independent review.

“No land cover change issues were detected because the planting occurred in the designated plantation area following a legitimate HCV process,” APRIL said in a statement to Mongabay.

It added that all 89,181 hectares (220,371 acres) of HCV area, representing 47% of AHL’s total concession, were conserved. APRIL said this protected area is considerably larger than AHL’s currently planted area of 50,388 hectares (124,511 acres).

“We are open to any stakeholder reviewing these areas, either with recent imagery or as part of a field visit,” APRIL said in its statement.

But the coalition’s report used the same HCV map produced by Tropenbos to detect the forest loss, and found that 3,745 hectares (9,254 acres) of deforestation — more than half of the total forest loss in AHL’s concession — occurred inside HCV areas. According to the report, the deforestation inside HCV areas peaked in the second half of 2015, right after the zero-deforestation commitment took effect, and again in 2017. More than 230 hectares (568 acres) of deforestation has occurred inside HCV areas in the concession every year since the commitment was made, including in the first half of 2020, according to the report.

The coalition also questioned APRIL’s claim that no deforestation had occurred in HCV areas. Maps presented by APRIL comparing AHL’s concession in June 2015 and August 2020 appear to show that the company is excluding peatlands from its accounting of what constitutes HCV forest. According to the coalition, almost all of the deforestation detected in the HCV areas was in locations designated by the Tropenbos assessment as “main planted crop with water management.”

This terminology seems to refer to peatland areas that were determined to have high conservation value and designated by AHL for pulpwood planting, while not being explicitly labeled as peatlands. As a result, they can be labeled as designated plantation areas, which means any forest clearing occurring there isn’t considered deforestation of HCV forest, even if the area is of high conservation value.

This has allowed APRIL to get away with its claim of operating with zero deforestation, the coalition said. And even if its claim of not clearing HCV areas is true, the evidence shows that natural forest was cleared nonetheless, said Syahrul Fitra, a researcher at Auriga. The deforestation-monitoring platform Borneo Atlas, developed by the Center for International Forestry Research (CIFOR), shows that 6,406 hectares (15,830 acres) of forests inside AHL’s concession disappeared within the period of 2016-2018.

“It’s not just about whether it’s HCV or not, it’s about [AHL] cutting down natural forests in the concession,” Syahrul said. “APRIL’s commitment is to not clear natural forest any more, not just natural forest inside HCV area. And we did find [natural forest clearance].”

The coalition also noted that, based on the Ministry of Environment and Forestry’s peat map, the detected deforestation occurred on 3,790 hectares (9,365 acres) of forested peatland, with 56% of this peat area designated by the government in 2017 as protected.

The coalition called the peat clearing unacceptable, given that draining and burning of peatland is a major source of fires in Indonesia. In 2015, fires on drained peatlands emitted toxic smog that blanketed much of western Indonesia, Singapore and Malaysia.

“Remarkably, PT AHL’s clearing of forest on peat areas continued in 2016 and peaked in 2017 at over 1,000 ha [2,500 acres],” the report read. “In 2018, 2019, and the first half of 2020, clearance of forests on peat areas inside PT AHL’s concession remained over 200 ha [500 acres] for each of those years.”

The coalition called APRIL’s response a smokescreen, with the company seemingly trying to obscure the fact that deforestation of natural forest occurred in the concession of its supplier by using a very limited definition of deforestation. This, the groups said, goes against APRIL’s sustainability policy stating that all HCV areas and peatland must be protected.

“It has been well documented that even degraded forests often have significant value supporting natural habitats and ecosystems, as well as important cultural values,” the report says. “The High Conservation Value Network highlights this point in its HCV Common Guide: ‘Note that the absence of HCV alone should not be used to justify the conversion of natural ecosystems; there may be other environmental and social values worthy of protection.’”

APRIL countered that the HCV mechanism exists for a reason, which is to determine which forests need to be conserved and which can be developed for commercial purposes.

“The function of HCV, as applied all around the world, is to specifically identify where high conservation values exist in concessions, and where no values are identified under this multilateral framework, then these areas are designated for development,” it said. “What would be the point of conducting a HCV assessment if we were to conclude anyway that every area is HCV even if the assessment says it is not?”

APRIL added that just because an area is designated as peatland, it doesn’t automatically mean that it’s an area of high conservation value.

“Peatland in Indonesia, and elsewhere, supports agriculture where it is responsible to do so,” it said. It added that while plantation development did occur on 6,058 hectares (14,970 acres) of peatland out of the 8,387 hectares (20,725 acres) developed from June 3, 2015, to Aug. 31, 2020, none of it was on areas of peat dome — where the peat layer is so thick that it forms a hillock, and which is protected under Indonesian law.

There were still 61,334 hectares (151,560 acres) of natural forest remaining on AHL’s concession as of the end of August this year, according to the NGO coalition. The group called on APRIL and AHL to halt all further deforestation and development of peatlands within the concession.

“Don’t differentiate between primary and secondary forests,” Auriga’s Syahrul said. “All natural forests have to be protected. If this keeps happening, we are sure that a much more severe fire disaster will happen in the future and North Kalimantan can become one of the hotspots for forest fires if this deforestation isn’t addressed.”

Beneficial owners

In its report, the coalition also dug through dozens of papers and electronic document to try to identify the true owners of AHL, given that APRIL has in the past denied exercising any ownership or control over the plantation company.

In 2015, when AHL was accused of clearing peatland, APRIL said it sources fiber from AHL but that the company is an independent third party that is not part of the group.

However, the coalition says it has evidence indicating strong connections between AHL and APRIL and its parent conglomerate, the Royal Golden Eagle (RGE) group. These connections are hidden behind the opaque corporate structures of holding companies domiciled in Indonesia and in offshore jurisdictions notorious as tax havens, according to the coalition’s report.

Using official corporate registry profiles, the coalition found that holding companies within AHL’s corporate ownership structure were previously registered at RGE’s corporate headquarters in Jakarta and that of Asian Agri, an RGE-affiliated palm oil company.

Besides sharing the same addresses in the past, the board members, executives and shareholders of these holding companies — both current and former — have been revealed to be current and former RGE shareholders or employees.

These include the founder and chairman of RGE, Sukanto Tanoto, and an individual who was reportedly involved in funneling money to offshore accounts as part of a tax evasion scandal in which Asian Agri was embroiled.

The coalition also looked at legal documents exposed in the International Consortium of Investigative Journalists’ (ICIJ) Offshore Leaks database. It found that several of AHL’s holding companies were registered in offshore jurisdictions, including the British Virgin Islands (BVI), that have been linked to Sukanto Tanoto, one of Indonesia’s wealthiest men.

The coalition noted that this doesn’t necessarily mean that any individuals, companies or other entities included in the Offshore Leaks database have broken the law in Indonesia or any other jurisdiction.

“In addition, it must be acknowledged that some information in the Offshore Leaks Database, such as the status of a company and its shareholders, might have changed over time,” the coalition said.

APRIL continues to deny any kind of close connection with AHL, saying that none of the beneficial owners of its operating and holding companies, or individuals closely affiliated with the group, control AHL.

“Auriga’s report identified some instances of affiliation over several years but none of these confer beneficial ownership or control of PT AHL,” APRIL said.

The coalition called on APRIL and AHL to clear up the matter for good by publicly disclosing the identities of the latter’s beneficial owners, as required under a regulation issued by President Joko Widodo in March 2018. The regulation gave domestic firms one year to disclose their true, or “beneficial,” owners to the government.

“AHL is a company that controls almost 200,000 hectares [500,000 acres] of land in Indonesia, yet we do not know who controls it,” Syahrul of Auriga said, noting that this constitutes an area two and a half times the size of Singapore, where April is headquartered. “This basic information for accountability should not be locked away on a little island very far from Indonesia. If APRIL wants to demonstrate transparency, let’s start here.”

 

Banner image: Operation inside the pulpwood concession of PT Adindo Hutani Lestari in North Kalimantan, Indonesia. Image courtesy of Yudi Nofiandi/Auriga Nusantara.