A new report by Chain Reaction Research (CRR) member Aidenvironment highlights 133,000 hectares (ha) of deforestation since 2016 committed by 10 companies in the industrial tree sectors of Indonesia and Malaysia. These ten companies all supply palm oil to some of the world’s largest palm oil trader/refiners, which operate under No Deforestation, No Peat, No Exploitation (NDPE) policies that commit them to removing deforestation from their supply chains.

The report highlights issues of increasing significance as the palm oil sector continues to adopt and implement NDPE policies. One of the chief issues is suppliers to NDPE-covered palm oil supply chains actively deforesting for other commodities. CRR previously covered two such cases in 2020. One case involved the Malaysian palm oil company United Malacca and its plans to develop a 60,000-ha industrial timber plantation in Sulawesi, Indonesia. The second involved the Malaysian company Samling and its deforestation for planting of industrial trees in Sarawak. Analysis by Aidenvironment shows that the issue is widespread and poses a significant threat to efforts to delink the palm oil sector from deforestation.

Aidenvironment’s analysis of Indonesian and Malaysian forestry permits indicates that the industrial tree sectors are the second largest plantation sectors in their countries, after palm oil. A large overlap exists between companies owning industrial tree and oil palm plantations. The report covers deforestation cases by seven such companies in Indonesia (Nusantara Fiber, Djarum, Adindo Hutani Lestari, Alas Kusuma, Jhonlin, Hardaya and Sampoerna) and three companies in Malaysia (Rimbunan Hijau, Samling and Shin Yang).

These plantation companies have supply chain links to one or more of the world’s largest palm oil refiners. Djarum, for example, cleared 10,833 ha of forest from January 2016-March 2021 on its industrial timber concessions in Indonesia. PT Silva Rimba Lestari (PT SRL) was the group’s biggest deforester, accounting for 5,064 ha of deforestation during that timeframe. PT SRL operates an 88,000-ha concession in Kutai Kartanegara District, East Kalimantan. Djarum’s deforestation for industrial tree plantations prompted the Indonesian NGO Auriga Nusantara to file a complaint against the group with the Forest Stewardship Council (FSC) in December 2019. In December 2020, Djarum’s FSC-certified subsidiary withdrew its FSC certificate, removing the basis of the complaint.

Despite these well known deforestation issues, Djarum supplies to the following palm oil trader/refiners: Wilmar, Wings, AAK, ADM, BASF, Bunge, Cargill, Fuji Oil, HSA Group/Pacific Inter-Link, Itochu Corporation, Neste Oil, Oleon NV, and Pertamina. It also supplies to the downstream companies Avon, Colgate-Palmolive, Danone, Friesland Campina, General Mills, Grupo Bimbo, Johnson&Johnson, KAO, Kellogg’s, L’Oreal, Mars, Mondelēz, Nestle, P&G, PepsiCo, PZ Cussons, Reckitt Benckiser, Hershey, Unilever, Upfield, and Vandemoortele.

Since all of these palm oil buyers have NDPE commitments, Djarum’s recent deforestation should make it a non-compliant supplier. However, as Djarum’s deforestation was not for oil palm but for another commodity outside of the scope of palm oil NDPE policies, it continues to benefit from access to NDPE supply chains while actively clearing forests.

Aidenvironment argues that NDPE policies need to be strengthened for the industry to make authentic no-deforestation claims. If not, buyers with NDPE policies will continue to face reputational risks from their suppliers’ activities. There is precedent for palm oil buyers to act. For instance, in the beforementioned cases of United Malacca and Samling, United Malacca agreed to stop work on the industrial timber concession after pressure from palm oil buyers, and Samling was suspended from palm oil supply chains.

Palm oil buyers also have opportunities to contribute to forest conservation, as Aidenvironment’s report shows. The seven deforesting Indonesian companies still have 373,000 ha of intact forests inside their concession areas, with much of it the habitat of the Critically Endangered Bornean orangutan. By including industrial trees in their no-deforestation policies and applying pressure on these business partners to comply with company-wide policies, palm oil refiners could help reduce deforestation and contribute significantly to increased sustainability in both Indonesia and Malaysia’s two most significant land-use sectors.