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The Chain: Astra announces deforestation moratorium; APRIL launches strong sustainability policy

June 12, 2015

Astra puts moratorium on deforestation, working toward full policy

Indonesian palm oil producer Astra Agro Lestari (AALI:IJ) announced today an immediate moratorium on forest clearance. Astra released a public statement saying that it “has today introduced an immediate moratorium whereby it will stop all land conversion” and “will ensure that there will be no clearance of any natural forest either by the Company or any of its contractors across all its operations in Indonesia.”

Astra said that it is “now in the process of formulating a detailed sustainability policy” to comply with the industry standard for No Deforestation, No Peat, No Exploitation that has been adopted by traders like Wilmar International (WIL:SP) and Musim Mas who buy from Astra.

The implementation of such a policy would require the company to work with technical experts to carry out assessments of High Conservation Value (HCV) and High Carbon Stock (HCS) areas, as well as protecting peatlands and recognizing community land rights prior to future development. Astra’s director, Joko Supriyono, also stated that the company supports joining the Indonesia Palm Oil Pledge (IPOP), a group of major palm oil companies that have all adopted zero-deforestation policies, calling it “an important initiative for Indonesia.” Supriyono is head of the Indonesian Palm Oil Producers Association (GAPKI), making today’s announcement potentially transformative according to industry observers.

The announcement follows a campaign by civil NGO’s focusing on Astra Agro Lestari’s sister company, Mandarin Oriental Hotels (MAND:SP). Both Astra and Mandarin Oriental are both owned by British conglomerate Jardines Matheson (JM:SP). The She’s Not a Fan campaign featured an investigation that highlighted the luxury hotel group’s connection to Astra.

APRIL launches new sustainability policy

Indonesia’s second-largest pulp and paper producer, Asia Pacific Resources International Limited (APRIL), last week launched a new sustainability policy that aims to eliminate deforestation and peatland clearance from its supply chain, winning plaudits from Greenpeace and others, who said that rapid, transparent implementation of the updated policy would need to be monitored to satisfy investor and consumer company concerns.

The move comes after years of pressure from international NGOs, consumer companies, and financiers that sought to change the company’s practices. In the past few months alone, the pressure on APRIL grew steadily: in March, Santander Bank (SAN:SM) announced that it would no longer provide financing to APRIL; weeks later, paper products giant 3M (MMM:US) announced a zero-deforestation policy and said it would terminate purchases from APRIL without reform; and in April, reports showed that Credit Suisse (CSGN:VX) had violated its own Forestry and Agribusiness Policy by financing the Royal Golden Eagle Group, the parent company of APRIL.

With its policy, APRIL joins Indonesia’s largest pulp and paper producer, Asia Pulp and Paper, and more than 80% of Indonesia’s pulp and paper is now covered by strong forest conservation policies.

After TFT suspension, GAR moves to clean up supply chain

In our last update, we reported that Golden Agri-Resources’ (GGR:SP) PT Smart affiliate had its membership with implementation partner The Forest Trust (TFT) suspended due to serious breaches of the company’s Forest Conservation and Social and Community Engagement policies. GAR was also banned by the RSPO from “acquiring or developing any new areas” after an investigation of one its subsidiaries operating in Kalimantan.

GAR has now taken several steps to suspend and investigate suppliers that violate its sustainability policies. GAR announced that it had joined Wilmar in stopping purchases from PT Austindo Nusantara Jaya (ANTJ:IJ) after an analysis by Greenomics showed that the company was clearing extensive High Carbon Stock forests in Papua, home to one of the largest stretches of intact forest in all Indonesia.

Also, this week, GAR announced that it was suspending all new purchases from PT Sawit Sumbermas Sarana Tbk (SSMS:IJ) until it has “thoroughly investigated” allegations of the company’s sustainability violations. Wilmar International (WIL:SP) has also cut purchases from the company.

Greenomics said in a report that an SSMS subsidiary, Kalimantan Sawit Abadi (KSA), was clearing forested peatlands and orangutan habitat in Central Kalimantan province. A separate report by the Environmental Investigation Agency (EIA) accuses SSMS subsidiary Sawit Mandiri Lestari (SML), of failing to consult communities with a stake in the land it meant to clear and failing to properly identify High Conservation Value (HCV) areas in Central Kalimantan. In a forthcoming report, Chain Reaction Research will provide a full sustainability risk assessment of SSS as updated on our initial risk analysis from December 2013.

Together, the moves show continued movement by major traders to stop doing business with irresponsible producers.

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