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The Chain: Sampoerna Agro Fined $81 Million for Fires, RSPO Reaching Out to Africa and Latin America

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August 29, 2016

Sampoerna Agro Fined $81 Million for 2014 Fires

On August 15, the Government of Indonesia fined Sampoerna Agro $81 million for 2014 forest fires on 3,000 hectares on its concessions in Riau Province, Indonesia. The $81 million fine is slightly less than Sampoerna Agro’s revenue in the first six months of 2016.

Currently, Indonesia is pursuing at least five lawsuits connected to forest fires. In September 2015, the Indonesian Supreme Court upheld a $25.6 million fine against PT Kallista Alam for burning 1,000 ha in Aceh, Indonesia. In December 2015 a judge in rejected a $565 million government-led lawsuit against PT Bumi Mekar Hijau for allegedly setting fires and clearing 20,000 ha in 2014.Elsewhere, some Indonesian business leaders are rejecting a proposal in the Indonesian House of Representatives for a mandatory requirement for corporate social responsibility requirements and reporting. The requirement could help mitigate future fines by informing leaders of their firms’ actions.

RSPO Reaching Out to Latin America, Africa

The Roundtable on Sustainable Palm Oil (RSPO) held its 6th Latin American Conference August 25 to 26, 2016 in Guatemala. More than 200 growers, buyers, investors, auditors and NGOs were represented during the conference. According to RSPO, 19% of certified sustainable palm oil originates in Latin America.

At the conference, private discussions revealed that much of the certified sustainable palm oil (CSPO) supply from Latin American producers is now bought by U.S. corporations with zero-deforestation commitments. Large regional growers indicated that their CSPO sales are now dominated by U.S. buyers, a change from earlier years when EU companies were top CSPO customers.

Other large regional corporate producers and consumer goods companies indicated privately that applying RSPO in Central America supported their ability to secure lower cost funding from regional banks and large multilateral development banks. They also discussed how applying RSPO regionally in Central America mitigates reputation risk in the region, while encouraging investment by U.S. institutional investors.

Finally, many regional corporate producers and buyers mentioned privately that RSPO needs to improve its regional outreach and engagement with smallholders, to support sustainable corporate and smallholder growth. The majority of palm oil in the region is currently grown by smallholders. In Latin America, it is very difficult for regional governments to grant corporate growers large concessions – a very different situation from in Southeast Asia. This means that corporate buyers rely upon smallholder growers to produce CSPO to meet regional and global demand.

The Latin American meeting will soon be followed by RSPO’s Africa Sustainable Palm Oil Conference 2016, which will be held in Ghana in early September 2016.

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