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The Chain: Bumitama Clarifies Sourcing Policies After Palm Oil from Deforestation-Linked PT Permata Sawit Mandiri Enters Its Mills

December 14, 2022

On November 24, 2022, the palm oil company Bumitama Agri Ltd issued a statement clarifying its commitment to its No Deforestation, No Peat, No Exploitation (NDPE) policy. The statement came after it was uncovered that a non-compliant supplier, PT Permata Sawit Mandiri (PSM), had entered Bumitama’s supply chain. Fresh fruit bunches (FFB) from PT PSM entered Bumitama’s Bukit Belaban Jaya mill in West Kalimantan.

PT PSM, which controls a 17,022-hectare (ha) concession in Ketapang, West Kalimantan, has been one of the largest deforesters in Indonesia in the last few years. Analysis by Chain Reaction Research (CRR) has shown that PT PSM cleared 2,022 ha and 450 ha of forest in 2020 and 2021 respectively. In the first half of 2022, the company cleared 1,300 ha of forest. In total, PT PSM has cleared around 5,400 ha between 2018 to July 2022.

The concession has a checkered history, which is well known in the palm oil sector and initially developed as PT Sawit Murni in 2005. A year after the company was built, a group company called PT Bintang Harapan Desa took over the concession via PT Sawit Mandira and changed its name into PT PSM. In 2010, the majority shares of PT PSM were bought by Genting Plantations Berhad, a Malaysian oil palm company, through Palma Citra Investama Pte Ltd. PT PSM became a joint venture between Genting Plantations and PT Bintang Harapan Desa.

Genting Plantations Berhad has been a member of the Roundtable on Sustainable Palm Oil (RSPO) since 2006. By the time Genting Plantations owned the majority shares of PT PSM, the concession operated as a foreign investment (Penanaman Modal Asing/PMA) company in Indonesia. In 2014, Genting Plantations proposed a new planting area in PT PSM’s concession to the RSPO.

In 2018, CRR covered PT PSM in a report about the use of shadow companies by some of Southeast Asia’s most significant palm oil firms. CRR found that after Genting concluded that PT PSM could not be fully developed without compromising NDPE policies, it pulled out of the concession and sold its shares in PT PSM in 2017. The concession’s ownership moved to PT Suryaborneo Mandiri and PT Sawit Mandira (part of PT Bintang Harapan Desa). Not long after that, PT Mulia Agro Investama acquired the shares from PT Sawit Mandira, which led to PT PSM being entirely controlled by PT Mulia Agro Investama, as PT Suryaborneo Mandiri was also a subsidiary of PT Mulia Agro Investama. By late 2017, PT Mulia Agro Investama was owned by a former director and a then employee of PT Bintang Harapan Desa, Kurni Samsudin.

Clearing of High Carbon Stock (HCS) forest started soon after Genting sold its shares to PT Suryaborneo Mandiri. PT PSM quickly became part of a grievance case on the grievance lists of several palm oil buyers, including Apical, Cargill, Sime Darby, and Unilever in late 2017. Genting was immediately asked for a clarification from its buyers. But since it had already sold its shares in PT PSM, Genting was unable to offer much assistance or explanation.

As of 2018, PT Mulia Agro Investama has been owned by an individual named Ikhsanudin, who does not have a public profile. There are no further links that can be drawn between Ikhsanudin and other mills or concessions as well.

Despite the issues with PT Perrmata Sawit Mandiri being covered by CRR, Mighty Earth’s Rapid Response, and Greenpeace, Bumitama says its due diligence: “…established that PT PSM had sufficient legality (ILOK, AMDAL, IUP and HGU), and as an RSPO member conducted an NPP assessment, whereby any land clearing in this PT would follow the requirements on HCV, HCS, peat, SIA and FPIC. As part of our sourcing policy requirements, PT PSM also signed a declaration, stating that its FFB does not originate from areas of deforestation, HCV & HCS or peat.”

However, Bumitama says that PT PSM’s non-compliance was detected during a routine check in which they uncovered the massive scale of ongoing deforestation. Bumitama also found that the company is no longer registered as an RSPO member. Its last purchase from PT PSM took place in August 2022. As an initial step of engagement, Bumitama asked PT Perrmata Sawit Mandiri for clarification, but has yet to receive a response.

News of Bumitama’s purchases of FFB from PT PSM follows CRR’s discovery that Goodhope was also purchasing FFB from PT PSM. After it was alerted to the concession’s deforestation, Goodhope suspended purchases from PT PSM in January 2022. The fact that two companies with NDPE sourcing policies did not detect the deforestation by this company despite it was covered and discussed in the industry for several years raises questions about the strength and quality of FFB due diligence methods. Palm oil buyers can ensure all suppliers, at both mill and trader level, are compliant with NDPE policies. As a demonstration of the risk to the industry, a list of Bumitama’s buyers show that many have been exposed to PT PSM’s deforestation. Bumitama supplies to AAK, ADM, Avon, BASF, Bunge, COFCO, Colgate-Palmolive, Danone, Evonik, Ferrero, Friesland Campina, Fuji Oil, Golden Agri Resources (GAR), Grupo Bimbo, Innospec, Johnson & Johnson, Kellogg’s, KLK, Mondelēz, Nestlé, Nisshin OilliO, Olam, Oleon, PepsiCo, P&G, Permata Hijau Group, Unilever, Vandemoortele, and Wilmar.

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