Deforestation, stop work orders and acquisition review at Asian Plantations

As shown in Figure 1 (below), Felda Global Ventures’ wholly-owned subsidiary, Asian Plantations, has deforested at least 270 hectares (ha) of potential High Carbon Stock (HCS) forest since September 2017 on its Grand Performance concession. Neither Felda Global Ventures or Asian Plantations have verified Grand Performance concession’s carbon stock, conducted patch analysis, or integrated this analysis into their plantation’s operational plan.

Figure 1: Felda Global Ventures’ Asian Plantations recent deforestation of 270 hectares.

Asian Plantations’ 270 ha deforestation occurred despite Felda Global Ventures (FGV) updating and expanding its sustainability policy in August 2017 to include all areas ‘irrespective of when the lands are acquired or owned by FGV Group’. After Chain Reaction Research partner Aidenvironment notified FGV that Asian Plantations was non-compliant with FGV’s policy, a stop-work order was put in place January 8, 2018. The case illustrates that implementation of FGV’s group-level policy at subsidiary-level remains a challenge, but that corrective action is taken when FGV’s sustainability team is notified. Upon review and completion of High Conservation Value (HCV) and HCS assessments, Chain Reaction Research expects FGV will present its stakeholders a corrective action plan for the Grand Performance concession.

This non-compliance comes at a time when FGV’s board is undertaking an investigation into the company’s acquisition of Asian Plantations in 2014. As reported in The Edge Markets, FGV’s current management is assessing the high price paid for Asian Plantations, the large amount of non-plantable land and the development of 700 ha of land that the company did not own. The investigation could result in charges pressed against some of the directors who were holding office at the time of the acquisition.

FGV paid MYR 628 million and assumed MYR 388 million in liabilities in October 2014 for Asian Plantations 24,622 ha five wholly-owned oil palm concessions — Incosetia Estate, Grand Performance Estate, Fortune Estate, Kronos Estate and BJ Corp Estate — all located in Sarawak, Malaysia. But according The Edge Markets, “7,300 ha were unplantable and close to 2,600 ha were encumbered with Native Customary Rights claims. This means that as much as 9,900 ha of Asian Plantations’ 24,000 ha could not be planted.” As recently as 2013, the year before purchase of Asian Plantations, Asian Plantations had an after-tax loss of MYR 32.76 million from MYR 74.85 million in sales.

In 2016, Chain Reaction Research assessed that ‘[FGV] would not be able to access Wilmar’s Bintulu Edible Oils and Sime Darby’s Austral refineries should AP proceed to clear the remaining ~5,600 ha forest without HCS assessment.

FGV reports on peat restoration progress at PT TAA and PT CNP

In April 2017, Chain Reaction Research presented video evidence that FGV continued to clear peat forest on the two concessions, contrary to the group’s own policies and industry standards. In response to Chain Reaction Research’s reporting, FGV updated its sustainability policy in August 2017, and committed to the restoration of 1,000 ha of peatland.

On January 12, 2018, FGV’s Group President and CEO Dato’ Zakaria Arshad updated its business partners and stakeholders on the progress of the peat restoration at PT Citra Niaga Perkasa (PT CNP) and PT Temila Agro Abadi (PT TAA).

The CEO letter describes the field investigation and verification it is conducting together with the RSPO on Chain Reaction Research’s findings. It has also requested an ‘Independent Verification of the Community Conflict’, as it perceives a high risk of conflict on the basis of letters it has received from community members.  Furthermore, it has consulted with two relevant Indonesian government agencies to understand the legal requirements for the peat rehabilitation program.

The update indicates that FGV is taking active steps to deliver on its commitment to peat restoration, but also reveals some of the difficulties it is facing in the process. As Chain Reaction Research has reported previously, unless FGV resolves the issues surrounding its management of PT CNP and PT TAA subsidiaries, FGV’s palm oil buyers may cease buying from FGV.