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The Chain: Jardine Matheson under fire for deforestation connection


May 26, 2015

Jardine Matheson under fire for deforestation connection, portending increased focus on growers 

An alliance of campaign organizations launched a major new global initiative last week targeting the Jardine Matheson Group (JM:SP) for the company’s connection to deforestation, and its role in blocking Indonesian government reform. A new investigative report commissioned by Rainforest Foundation Norway and conducted in partnership with Indonesian civil society organizations KKI Warsi and YMP reported that one of Jardine’s subsidiaries, the Astra Agro Lestari (AALI:IJ) palm oil company, has cleared 14,000 heactares of forests and 29,000 hecatres of peatlands, including endangered species habitat, and has serious community conflicts.

Representatives of the campaign told The Independent (UK) that they had launched the initiative in part because Astra has played a leading role in blocking Indonesian government efforts to improve forest law enforcement and governance. Astra’s director, Joko Supriyono, serves as chairman of the Indonesian palm oil producers’ association (GAPKI), and has used that perch to foment opposition to efforts by Astra’s major customers – Wilmar International, Musim Mas, Golden Agri-Resources, and Asian Agri – to eliminate deforestation from the palm oil industry.

In response, advocates have targeted another Jardine’s subsidiary, Mandarin Oriental Hotels (MAND:SP), with an online campaign and events outside the hotel in London and New York City this past week. The corporate campaign organization SumOfUs.org has also targeted Pizza Hut, part of Yum! Brands (YUM:US); Jardines is one of the largest Pizza Hut franchisees. In response to the campaign, Jardines told The Independent that it was “actively working towards signing up to” the Indonesian Palm Oil Pledge, which requires companies to eliminate deforestation, and was “carrying out a detailed assessment of all of its practices to determine what specific steps are required.”

The new campaign showcases how efforts to reduce deforestation in the palm oil industry are increasingly shifting from major traders like Wilmar and Cargill, which have already adopted No Deforestation policies, to major suppliers like Astra. As part of this trend, we anticipate that other major producers such as First Resources (FR:SP), Indofood Agri (IFAR:SP), Triputra Agro Persada, and Sarawak Oil Palms (SOP:MK) are likely to face significantly increased scrutiny.

Golden Agri-Resources backslides on sustainability commitments

Last week, The Forest Trust (TFT) – the independent organization serving as an implementation partner to many of the largest companies with No Deforestation policies –announced that it had suspended PT Smart, the plantation division of Golden Agri-Resources (GGR:SP), due to serious breaches of the company’s Forest Conservation and Social and Community Engagement policies. The suspension followed more than a year of serious efforts by TFT and other organizations to work with GAR to address the company’s processes, but serious issues have persisted.

In addition to TFT’s action, the Roundtable on Sustainable Palm Oil (RSPO) on May 8, 2015 took the serious step of banning the company from “acquiring or developing any new areas” after its complaints body investigated a grievance by the Forest People’s Programme related to a subsidiary operating in Kalimantan. The RSPO called the subsidiary’s HCV assessment “inadequate and potentially misleading.” Finally, following GAR’s suspension by TFT, the organization Greenomics released an analysis showing that GAR was the leading purchaser of palm oil from PT Austindo Nusantara Jaya, a company it found to be clearing extensive High Carbon Stock forests in Papua, home to one of the largest stretches of intact forest in all Indonesia. GAR issued a statement in response to the various actions taken against it, and is promising further action.

Reports say First Resources involved in extensive peat clearance

Last week, the Jakarta Post revealed extensive clearing of peatlands in Riau, Sumatra, Indonesia by a subsidiary of palm oil producer First Resources (FR:SP). The Jakarta Globe also reported on the situation at the PT SAL subsidiary last week, and described alleged human rights abuses by the company, which has spurred significant conflict with the local community in Pungkat village. Major traders have told CRR that they are closely scrutinizing the reports, which could represent serious breaches of traders’ No Deforestation policies.

RSPO complaint filed against IOI Loders Croklaan

A new RSPO complaint and supporting research recently filed by Aidenvironment alleges a breach of IOI Loders Croklaan’s (IOI:MK) November 2014 “Taking Responsibility” policyand prior commitments, which had pledged to cease deforestation, peat conversion, and human rights abuse by both its third-party suppliers and its own plantations. The complaint calls on RSPO not to certify palm oil that was grown on land illegally cleared or planted by IOI.

The complaint will go through the RSPO grievance process. IOI Loders Croklaan has issued a preliminary response, and conducted its own investigation – and will have the opportunity to respond to the findings formally.

Briefs

  • Dolphin International Bhd (Malaysia), a company that manufactures palm oil machinery, plans to raise RM 31.28 million (US $8.65 million) from the issuance of new shares while listing on the Main Market of Bursa Malaysia Securities on 9 June 2015. The principal adviser, underwriter and placement agent is the Hong Leong Investment Bank.
  • Palm oil plantation company PT Sawit Sumbermas Sarana (SSMS:IJ) plans to buy two smaller palm oil firms in Central Kalimantan worth more than 1 trillion rupiah (US $76 million), the Investor Daily reported, quoting CEO Rimbun Situmorang. SSMS was the subject of a 2013 CRR report.
  • On May 7, 2015, palm oil trader Olam International (OLAM:SP) issued a $30 million (US $23.7 million) of notes under its US $5 billion Euro Medium Term Note Programme.

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