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The Chain: One of Indonesia’s Largest Deforesters Raises Questions About NDPE Policy Scope

February 25, 2021

A new report by CRR member Aidenvironment puts deforestation for industrial trees in Indonesia in the spotlight and also highlights an issue of increasing concern in the sector: palm oil companies exposed to deforestation for other commodities.

Since 2016, the Nusantara Fiber group has converted 26,000 hectares (ha) of forest into industrial tree plantations in Kalimantan. The group is connected in various ways to the large palm oil and pulp/paper company Royal Golden Eagle (RGE). RGE is an NDPE palm oil company that manages several palm oil companies, including Asian Agri and Apical. Both Asian Agri and Apical also have NDPE policies.

In 2020, Nusantara Fiber cleared approximately 6,500 ha of forest. The Nusantara Fiber group is the top deforester for industrial trees, with an even bigger deforestation rate in 2020 than the number one deforester for oil palm. CRR recently published a list of 2020’s top deforesters for oil palm in Southeast Asia.

The Nusantara Fiber group has undisclosed owners, hidden through an offshore secrecy jurisdiction. However, the new report from Aidenvironment shows that historical ownership records and documents on the incorporation of Nusantara Fiber connect the group to RGE. The group’s directors are also linked to 27 palm oil businesses, all of which supply RGE. In response to outreach by Aidenvironment, RGE denied any connection to the Nusantara Fiber group.

This case and two other cases of deforestation linked to RGE, on PT Adindo Hutani Lestari and PT Permata Borneo Aba, indicate significant gaps in RGE’s implementation of its no-deforestation commitments. Approximately 50,000 ha of forest remain in Nusantara Fiber’s concessions, which are at risk of being cleared. Most of it is habitat of the critically endangered Bornean orangutan.

Another publication released this week, by Trase, signalled a decrease in deforestation in Indonesia’s pulpwood sector. However, the publication raised doubts about the strength of the no-deforestation commitments of the two main players in the Indonesian pulp and paper industry: Asia Pulp & Paper (APP; a subsidiary of Sinar Mas) and APRIL (a subsidiary of RGE).

Graphic 1: PT Industrial Forest Plantation, Nusantara Fiber’s largest concession of over 100,000 ha

Source: Aidenvironment, January 2021

The new reports raise shortcomings in the scope and implementation of palm oil industry NDPE policies. Significant parts of the palm oil industry are covered by NDPE commitments. Although implementation has been inconsistent, these policies have been key in transforming the sector and encouraging plantation companies to stop deforestation. However, policies are typically implemented at commodity level and therefore do not cover deforestation for pulp and paper development or other commodities. As a result, a company actively deforesting for one commodity could still supply NDPE supply chains.

RGE’s Asian Agri appears in the supply chains of several companies with NDPE policies, including Pacific Interlink Group, ADM, Oleon, Avon, Danone, MondelēzNestléPZ CussonsUnilever, Upfield,  Friesland CampinaJohnson & JohnsonKellogg’sL’Oréal,  COFCO International, Reckitt Benckiser, KLK, Lipidos Santiga, Neste Oil, Colgate, and Fuji Oil. Apical supplies to Avon, Danone, Mondelēz, Nestlé, Kellogg’sL’Oréal, and COFCO International.

Precedent already exists for palm oil buyers to suspend palm oil suppliers for deforestation for other commodities (for example, Samling in Sarawak) and of palm oil buyers pressuring plantation developers to halt developing a timber concession (United Malacca in Sulawesi). The case of Nusantara Fiber, its links to RGE, and RGE companies’ presence in NDPE covered supply chains show the need for NDPE policies to be consistently applied across commodities and for all deforestation to be removed from these supply chains.

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