Eye on palm oil in Indonesia

Top firms 'supplied with illegal palm oil'

Study: Fruit grown in conservation areas being sent to local mills supplying the firms

An illegal oil palm plantation in Tesso Nilo National Park in central Sumatra. The companies implicated by the investigation include Singapore-listed Wilmar International and Golden Agri-Resources.
An illegal oil palm plantation in Tesso Nilo National Park in central Sumatra. The companies implicated by the investigation include Singapore-listed Wilmar International and Golden Agri-Resources. PHOTO: EYES ON THE FOREST

and Arlina Arshad Oil palm from illegal plantations in protected forest areas in Sumatra has tainted the supply chains of some of the world's top palm oil firms that sell to makers of everyday items, from soap and shampoo to ice cream, an investigation has found.

The study by Eyes on the Forest (EoF), a coalition of Indonesian non-governmental organisations, underscores the complexity of tracing all sources of palm oil.

The findings also challenge the zero-deforestation commitments of leading palm oil firms.

The investigation occurred over several months last year and focused on five conservation zones in central Sumatra. The authors found that subsidiaries of Indonesia's Royal Golden Eagle (RGE) group, Golden Agri-Resources (GAR) of the Sinar Mas group, Wilmar International, Musim Mas and smaller companies had received fresh fruit bunches or crude palm oil (CPO) tainted with palm fruit from plantations in conservation areas meant to protect tigers, orang utans and other endangered wildlife.

"The report shows that corporate zero-deforestation commitments did not stop illegal deforestation for oil palm," said Mr Made Ali, deputy coordinator of Jikalahari, an EoF partner.

"Companies need to understand that their suppliers have knowingly been feeding illegal product into the global supply and it is time to focus all efforts on tracking supplies to the plantation base," he told The Straits Times in an e-mail.

The palm oil companies investigated are among the most influential in the industry. In recent years, all have made far-reaching commitments to sustainability, including traceability of palm oil supplies, though full traceability to the plantation level is a major challenge.

Singapore-listed Wilmar produces and trades almost half the world's palm oil, while GAR, also Singapore-listed, is one of the world's largest producers. RGE subsidiaries - Apical and Asian Agri - and Musim Mas are also large producers and processors. RGE and Musim Mas have corporate offices in Singapore.

The problem is the large number of mills they buy from, and the large number of illegal plantations.

Illegal plantations have been a problem for years. The five conservation areas, including Tesso Nilo National Park, total 263,150ha, or nearly four times the size of Singapore. But in recent years, the areas have been progressively deforested. By the end of last year, 81 per cent had been cleared. Oil palms now grow where forests once stood.

Using hot-spot maps and satellite imagery, EoF also found a strong correlation between fires and the establishment of illegal plantations.

Indonesia has tough laws against illegal plantation development.

Anyone who sets up a plantation faces a fine of up to five billion rupiah (S$520,000) and 10 years' jail, while a corporation that buys or processes plantation products faces a maximum fine of 15 billion rupiah and up to 15 years' jail.

"Our team is collecting all the information regarding all these kinds of illegal activities, not only within these areas (mentioned in the report) but... other areas," Mr Rasio Ridho Sani, the director-general of law enforcement for the Ministry of Environment and Forestry, told The Straits Times.

EoF tracked lorries carrying illegal fresh fruit bunches from the plantation areas to CPO mills. It documented which mills the lorries entered, focusing on 19 mills found to have bought illegal palm fruit.

It found that GAR, Wilmar and RGE bought tainted palm fruit or CPO from some of these mills. EoF presented its findings to the companies before publication this month.

In an e-mail to The Straits Times, GAR said it was concerned about the findings, saying they were counter to its sustainability principles, which apply to its subsidiaries. The company has been engaging with three supplier mills named in the report to seek further clarification.

Asian Agri said it took swift action once it received the report.

"We terminated contracts with the said suppliers in June 2015," Mr Freddy Widjaya, director of Asian Agri, said in an e-mail reply.

Musim Mas said it took grievances raised in the report seriously and has already contacted the 14 tainted mills listed in the report as suppliers and will investigate further.

Wilmar did not respond to queries but the company has a programme to map supplies to the plantation level. It said in a recent report on its website that there was "a low level of willingness from many mills to share any information on their FFB (palm fruit) suppliers".

Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on April 15, 2016, with the headline Top firms 'supplied with illegal palm oil'. Subscribe