Report links paper giant RGE to Indonesia deforestation despite pledges

JAKARTA — Singapore-based pulp and paper giant Royal Golden Eagle is linked to deforestation in Indonesia despite having a no-deforestation policy since 2015, an investigative report says.

RGE is one of the world’s largest producers of wood pulp and the products that are made from it, including paper, tissue, packaging, and viscose rayon.

The report co-published by five environmental organizations alleges that RGE’s pulp and paper unit in China, Asia Symbol, received 1.5 million cubic meters (53 million cubic feet) of wood in 2021-2022 from nine pulpwood suppliers in Kalimantan, the Indonesian portion of the island of Borneo.

Using geospatial remote-sensing data from TheTreeMap, the report, titled “Pulping Borneo,” found that three of the nine suppliers had cleared a combined 37,105 hectares (91,688 acres) of natural forest in Kalimantan — an area more than half the size of Singapore — from 2016 to 2022.

The three suppliers are PT Industrial Forest Plantations (IFP) in Central Kalimantan province, PT Adindo Hutani Lestari (AHL) in North Kalimantan, and PT Fajar Surya Swadaya (FSS) in East Kalimantan.

IFP accounted for the largest deforested area, with 21,827 hectares (53,936 acres) of forest loss detected within its concession during that period. The company’s deforestation rate peaked at 6,790 hectares (16,778 acres) in 2022, the second-highest rate of forest loss among nearly 300 pulpwood concessions in Indonesia.

Almost all of IFP’s concession area, including the forest that was recently cleared, is identified as orangutan habitat, according to data from Indonesia’s Ministry of Environment and Forestry.

While the deforestation by the three suppliers might be legal, given that it occurred within concession areas, it’s important to remember that what’s being lost is natural forests, which play a critical role in sequestering carbon emissions and mitigating climate change, according to Greenpeace Indonesia, one of the five NGOs behind the new report.

“The deforestation all occurred within natural forests,” Greenpeace Indonesia forest campaigner Syahrul Fitra told Mongabay. “So we should move on from [the question of] whether the deforestation is legal or not. If we’re talking about climate change, it doesn’t matter [whether the deforestation is legal]. When forests disappear, it contributes to climate change.”

By sourcing from plantations with a history of deforestation, RGE has failed to adhere to its own sustainability policy, which commits it to eliminating deforestation from its entire supply chain, said Sergio Baffoni, senior campaign coordinator at the Environmental Paper Network (EPN), another co-publisher of the report.

“The RGE Group and its subsidiaries, APRIL, Sateri, Asia Pacific Rayon, and Asia Symbol, promised that RGE companies have eliminated deforestation in their supply chains, but this report shows that promise has not been kept,” he said. “Ordinary people around the world are using these companies’ products in their everyday lives: the viscose is in clothes from global fashion brands, paper packaging in grocery stores, and tissue products in our kitchens and bathrooms.”

Tracing the links

The three suppliers with deforestation in their concessions didn’t sell their wood directly to Asia Symbol, but rather to PT Balikpapan Chip Lestari (BCL), which operates a wood chip mill in Balikpapan, East Kalimantan province. From there, 90% of BCL’s wood chip exports were delivered to Asia Symbol in the port of Rizhao, China, in 2021 and 2022.

RGE appears to have links to both BCL and the shipper that transported the commodity, Nova Shipping & Logistics Pte. Ltd., according to the report. It added that BCL’s ultimate beneficial owner isn’t publicly known because the corporate ownership chain leads to a company registered in the British Virgin Islands, where the identity of company shareholders isn’t available for public review.

However, there’s strong evidence that BCL and RGE are under common control, the report said. That evidence includes BCL’s wood chip mill in Balikpapan sharing land with an RGE-owned palm oil company and an RGE-linked wood fiber plantation company.

BCL also appears to have exclusive buyer and supplier relationships with RGE-owned businesses. BCL’s top wood supplier in the past two years, reportedly delivering more than 500,000 m3 (17.7 million ft3) of wood, is an RGE-owned company, PT ITCI Hutani Manunggal.

BCL’s key management personnel also have ties to RGE. BCL’s current president, Lina Bustam, used to be an executive at PT Toba Pulp Lestari, an RGE related party that operates a pulp mill in North Sumatra province, until 2019. Another BCL executive, Zulkifli, has a reported address at RGE’s pulp and paper mill in Kerinci, Jambi province, Sumatra.

As for RGE’s reported ties to BCL’s shipping company, Nova Shipping, the report said the firm shares the address, phone number and fax number of the Singapore corporate office of Asia Pacific Resources International Limited (APRIL). APRIL is RGE’s main pulp and paper subsidiary in Indonesia.

And an executive at Nova Shipping, Lee Chong, states on his LinkedIn profile that his current position is as corporate business controller for RGE.

Using the definition of a “corporate group” from the Accountability Framework Initiative, a collaborative effort by 25 NGOs to build and scale up ethical supply chains for agricultural and forestry products, all these findings indicate that RGE controls BCL, Syahrul of Greenpeace Indonesia said.

“In the accountability framework, sharing the same address, management, shareholders and financial controls are indicators that show they are under common control,” he said.

Mega mill in the making

The report also alleges that RGE is secretly behind a huge new pulp mill currently under construction on the island of Tarakan in North Kalimantan. According to the mill’s environmental impact assessment, completed in early 2023, the mill is expected to be completed in the next six years.

The mill’s formally registered owner is PT Phoenix Resources International, a company incorporated in Indonesia in June 2021. Phoenix’s majority shareholder is Chung Hua United Resources Sdn. Bhd., a Malaysian company, which itself was established in April 2021, just two months before Phoenix.

Chung Hua, in turn, is owned by Phoenix Resources Holdings Limited, a company established that same year in the Cayman Islands, which, like the British Virgin Islands, is a corporate secrecy haven. That means the mega mill’s ultimate beneficial owner remains unknown.

But like BCL, a number of corporate details indicate that the Phoenix mill is linked to BCL and RGE, according to the report.

For one, a number of people hold positions at both BCL and Phoenix Resources International. For instance, Phoenix director Ivan Chandra is also a director at BCL, while two of Chung Hua’s executives in Malaysia, Tang Hong Hwee and Cheah Seng Keong, are also BCL’s majority shareholders there.

Former employees of RGE-affiliated entities and BCL also served as executives at both Phoenix Resources International and Chung Hua, the report noted.

A current executive at Phoenix, Sardion Sihombing, was an executive at BCL from January 2020 until May 2022, according to his LinkedIn profile. Before that, he was a project cost controller for PT Toba Pulp Lestari from January 2018 to December 2019. Prior to his employment at Toba Pulp, Sardion was reportedly employed at other RGE companies since 2004, including a tenure at the RGE Group’s palm oil processing and trading division, Apical, from 2013-2014.

As of June 14, Sardion’s LinkedIn profile only lists his current position as a project cost controller at Phoenix, without any trace of his past employment. But the public activity in the past year on his LinkedIn account is almost exclusively “likes” of RGE/APRIL events, particularly ones involving the RGE founder’s son and current RGE managing director, Anderson Tanoto.

Phoenix and its shareholders also share the same address as BCL’s corporate shareholders and PT Tarakan Chip Mill (TCM), a company indicated to have numerous links to RGE, according to the report.

“Taken together, the common management personnel and shared office locations between PT Phoenix Resources International, the company developing a pulp mill in North Kalimantan, and PT Balikpapan Chip Lestari, the company with a woodchip mill in East Kalimantan, strongly indicate that these are entities under common control,” the report said.

And since BCL is indicated to be controlled by RGE, it means there are strong indications that Phoenix and RGE are under common control as well, the report said.

RGE has denied any such ties to BCL and the planned mega mill.

“RGE has acknowledged the Accountability Framework Initiative and its definition of ‘Corporate Group’ and we can confirm that no such association, influence or control exists in relation to the two entities mentioned in the EPN report,” Ignatius Purnomo, RGE Indonesia’s head of corporate communications, told Mongabay. “It is not therefore possible or appropriate for RGE to comment on matters related to those parties and unrelated to RGE.”

Ignatius said the presence of former RGE employees at BCL and Phoenix isn’t strong enough evidence to link RGE to the two entities.

“We operate in a free and open employment market in which employees can choose to join or leave companies as they wish,” he said. “None of the arguments alleged in the report establish any connection or form of ‘control’ to these companies.”

Future deforestation

The Phoenix pulp mill will have a total capacity of 1.7 million metric tons per year once complete, for which it’s projected to consume at least 3.9 million m3 (138 million ft3) of wood annually, or the equivalent of about 100,000 truckloads of wood.

This demand for wood fiber is likely to drive more deforestation, the report warns, given the lack of clarity over where Phoenix will get this much wood from.

The mill’s environmental impact assessment only states that most of the wood will come from 12 suppliers, but doesn’t name them or their locations.

Using satellite imagery-based spatial analysis, the report identified 637,933 hectares (1.58 million acres) of tropical rainforest — an area 10 times the size of Indonesia’s capital city, Jakarta — within seven timber and plantation concessions at risk of being cleared to feed the new mill.

These forests include areas within forestry concessions currently supplying BCL in the provinces of North, East and Central Kalimantan, and those linked to RGE companies in South Papua and West Papua.

The report noted that these may not be the only forest areas threatened by wood demand from the Phoenix pulp mill project in North Kalimantan, but they’re likely to be among the first, given RGE’s links to the companies holding these forestry concessions.

“This mill is a flashing red-alert signal for a new wave of industrial-scale deforestation, this time in Kalimantan and Papua,” Greenpeace’s Syahrul said. “In Sumatra, the demand for wood from mega-scale pulp mills drove catastrophic and irreversible deforestation. Now the same pattern could repeat itself in Kalimantan, starting with this new mega-scale pulp mill.”

This expansion of the pulp and paper industry and its need for new land is to be expected as the global pulp price keeps rising on the back of growing demand for packaging paper, EPN’s Baffoni said.

“Pulp is becoming rare and expensive because pulp and paper consumption in the world never stopped to grow,” he said. “And especially by the end of this decade, there will be another stunning increase by around 20% of global production and demand for pulp.”

Baffoni said single-use paper packaging isn’t necessarily the sustainable solution to plastic packaging that it’s often touted to be, since it’s not easily recycled.

“[M]uch of the packaging requires long fiber in order to be resistant, especially bags and beverage boxes. And most food packaging can’t have recycled fiber because inks are toxic and because they have films of coating of plastic. So it’s a mix of plastic and paper,” he said. “So this is a very dangerous slope we’re falling down. So this is why it’s important to have strong policies in place against deforestation but also put policies to decrease the consumption of wasteful single-use throwaway products.”

Bid to rejoin FSC

For RGE, addressing the allegations of possible links to deforesting companies and the new mill is important as APRIL seeks to rejoin the Forest Stewardship Council (FSC), considered the world’s foremost body certifying the sustainable forestry industry, Syahrul said.

APRIL used to be a member of the FSC, but in 2013 it withdrew after a number of NGOs filed a complaint against the company for large-scale deforestation in Indonesia. In a 2020 analysis, the FSC found APRIL’s wood suppliers had destroyed 435,877 hectares (1.08 million acres) of forest. These were likely forests with high conservation value, and their loss was deemed irreversible.

Since the disassociation, APRIL has tried to regain entry to the FSC, and in 2022 the certification body adopted a new policy called the remedy framework that opens the door for APRIL’s reassociation. Under the framework, companies that were previously ineligible to join the FSC because they’d cleared forests since before 2020, would now be able to do so as long as they restored the same amount of forests that had been cleared in their concessions between 1994 and 2020. They also need to provide remedy for the social harm done in the deforestation process.

The report noted that the FSC will soon begin a process to end its disassociation from APRIL, which will be one of the first test cases for the application of the remedy framework.

That’s why it’s important for the FSC to consider the allegations that RGE has hidden links to continued deforestation in Indonesia, Syahrul said. This is especially true because the FSC recently adopted the Accountability Framework Initiative’s definition of “corporate group,” the same definition used in the NGOs’ report.

This means that the scope of responsibility for any corporate entities that want to enter the FSC has been broadened to be based on “control,” rather than “involvement,” and as a result, FSC monitoring for future violations applies to a much wider network of companies than it has historically linked to APRIL.

“[W]ill the Forest Stewardship Council continue with the process to end disassociation with APRIL, even as there is ongoing forest destruction in RGE Group’s pulp supply chain and a new mill being built without a sustainable fiber supply in an ecologically sensitive region?” the report said.

Besides calling on the FSC to consider the allegations, the report also called on the parties responsible for monitoring APRIL’s implementation of its own sustainability policies — namely, its Stakeholder Advisory Committee (SAC) and the global accounting firm KPMG — to take action.

The NGOs that published the report have already presented the findings to SAC and KPMG. Both parties responded by denying it was their responsibility to monitor and report on the activities of RGE group companies other than APRIL.

“What APRIL’s Stakeholder Advisory Committee and KPMG do with this information is likely to play a key role in determining the future impacts of RGE’s operations,” the report said. “Will the SAC and KPMG overlook the ongoing forest destruction and future risks due to RGE’s use of complex corporate structures, thereby enabling such practices to continue? Or will they hold RGE and APRIL accountable for complying with the sustainability policies they have established and promoted?”

As for RGE, the report called on the company to enforce “No Deforestation, No Peatland and No Exploitation” (NDPE) practices across the entire corporate group, as defined by the Accountability Framework Initiative. This can be done by ensuring affiliated forest concession holders, plantation companies and third-party wood suppliers cease clearing natural forests and protect all areas identified to have high conservation value and high carbon stock, the report said.

The government should also step up by issuing a total ban on the clearing of natural forests, regardless of whether they’re located in protected areas or licensed concessions, said Timer Manurung, director of Indonesian environmental NGO Auriga Nusantara, which co-published the report.

“We have to push the president to issue a presidential regulation that protects all remaining natural forests,” he said. “It’s about time for us to ensure that deforestation is illegal. So there should be no more deforestation.”

 

Banner image: An elephant roams through a recently cleared eucalyptus plantation in northern Borneo. Image courtesy of Daniel Kong.

 

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