New mill a test of APP's green credentials

Fires last year destroyed 86,000ha of plantations needed to feed APP's new mill in South Sumatra.
Fires last year destroyed 86,000ha of plantations needed to feed APP's new mill in South Sumatra.ST PHOTO: AZIZ HUSSIN

Last year's fires in Sumatra destroyed timber plantations bigger than Singapore that supply Asia Pulp and Paper (APP), Indonesia's largest pulp and paper company, a report from green groups shows.

The damage, while hitting the company's bottom line, raises wider concerns about how the company will feed one of Asia's biggest pulp mills, now nearing completion in South Sumatra province.

A dozen non-governmental organisations (NGOs) last week expressed concerns the company could be forced to renege on a pledge to use only plantation timber to supply the mill and two others in Sumatra.

APP, which makes paper products ranging from tissue paper to cardboard, told The Straits Times that its 2013 commitment to stop using rainforest timber was unshakeable. It would buy wood chips from overseas to meet its growing needs if necessary.

"We continue to stress that APP will never compromise or lapse on its commitments," APP managing director for sustainability Aida Greenbury said in a statement.

APP said the mill in Ogan Komering Ilir (OKI) district in South Sumatra will rely solely on the commonly used, fast-growing Acacia plantation timber.

For NGOs, the US$2.6 billion (S$3.5 billion) largely Chinese-financed mill is the ultimate test of APP's green credentials, particularly better management of its timber concessions, many of which are on flammable peatlands.

Several APP suppliers were investigated last year after many hot spots emerged in their South Sumatra concessions. The fires highlighted the hazards of clearing and draining peatlands for agriculture. Dried peatlands produce acrid smoke when burned and release huge amounts of greenhouse gases.

The NGOs are concerned because pulp mills devour a lot of timber and need large plantations, putting immense pressure on the environment.

The company has long maintained the mill's pulp production capacity will be 2 million tonnes a year. At that output, it will consume 70,000ha of plantation timber a year - roughly the size of Singapore. APP normally runs five-year rotations for its plantations, from planting to harvest. That means the mill will need a minimum planted area of 350,000ha to ensure adequate supply.

However, the fires destroyed 86,000ha of those plantations in South Sumatra, satellite imagery analysis showed, according to the NGO report released last Wednesday. APP, speaking to The Straits Times, confirmed that the mill's true capacity will be 2.8 million tonnes - what NGOs have suspected.

That means APP will have an even larger supply gap to meet the mill's needs at full production and, potentially, greater pressure to source timber to make the mill profitable for investors. Also, because of new government regulations, a large portion of the 86,000ha burned plantations cannot be replanted with Acacia.

"If faced with shortages of fibre, we are concerned that APP could default on its zero-deforestation commitment and resume using large volumes of wood from natural forests at its Sumatra mills," saidWorld Wide Fund for Nature in Indonesia forest commodity leader Aditya Bayunanda.

NGOs have also called for APP to release a long-term wood supply plan. "It will be important for APP to release a credible wood supply plan showing where the OKI mill will source its wood fibre over the long term," said Mr Christopher Barr, executive director of Woods & Wayside International, one of the organisations that released the report.

Such a plan should include verifiable data on growth rates and yields at existing plantations and should include production estimates for the next 15 to 20 years. NGOs said the lack of transparency is worrying, particularly given APP's legacy of large-scale rainforest destruction and conflicts with local communities, which it is now trying to fix.

The OKI mill will start production this year at a low level, APP said, and "will gradually increase, subject to demand and the availability of raw materials". Suppliers would be bound by the company's strict forest conservation policy.

Greenpeace, which has been working with APP to monitor the policy's implementation, said they do not see any sign of APP pulling back from its commitments on zero deforestation. Switching back to rainforest fibre would be "commercial suicide", said Greenpeace Indonesia forests campaigner Rusmadya Maharuddin.

A version of this article appeared in the print edition of The Straits Times on April 25, 2016, with the headline 'New mill a test of APP's green credentials'. Subscribe