Policy, practice, pride and prejudice Review of legal, environmental and social practices of oil palm plantation companies of the Wilmar Group in Sambas District, West Kalimantan (Indonesia) A joint publication of Milieudefensie (Friends of the Earth Netherlands), Lembaga Gemawan and KONTAK Rakyat Borneo July 2007 Policy, practice, pride and prejudice Credits Research: Adriani Zakaria (KONTAK Raykat Borneo), Claudia Theile (Milieudefensie), Lely Khaimur (Lembaga Gemawan). Editing: Iris Maher Design and printing: Ruparo, Amsterdam Cover photo:Tropical Rainforest in Sambas District, West Kalimantan. On the background, denuded hills in the oil palm concession of PT Agri Nusa Investama, a subsidiary of the Wilmar Group. ©Policy, Amsterdam, June 2007 practice, Milieudefensie (Friends of the Earth Netherlands) Campaign Globalisation & Environment P. O. box 19199pride and 1000 GD Amsterdam, The Netherlands Tel. + 31 20 6262 620 [email protected] www.milieudefensie.nl/englisprejudiceh Lembaga Pengembangan Masyarakat Swadiri Jalan Dr. Wahidin Gg.Review Batas Pandang of legal, environ- Kompleks Kelapa Hijau no 18, Pontianak,mental West Kalimantan and social practices Indonesia Tel. +62 561 586891 [email protected] oil palmt plantation com- http://www.gemawan.orpanies ofg the Wilmar Group KONTAK Rakyat Borneo Jalanin Hasyim Sambas Ashari No 05/68 District, West Kelurahan Tanjung Hulu Pontianak,Kalimantan West Kalimantan (Indonesia) Indonesia [email protected] joint publication of Vereniging Milieudefensie, Lembaga Gemawan and KONTAK Rakyat Borneo The forest campaign of Milieudefensie is partly financed by the Dutch MinistryJune of 2007 Foreign Affairs, the Dutch Ministry of Housing, Spatial Planning and the Environment, Oxfam Novib, Hivos and from the Ecosystems Grants Programme from IUCN Netherlands. Printed on FSC certificated paper Policy, practice, pride and prejudice Review of legal, environmental and social practices of oil palm plantation companies of the Wilmar Group in Sambas District, West Kalimantan (Indonesia) A joint publication of: Milieudefensie (Friends of the Earth Netherlands) Netherlands Lembaga Gemawan Indonesia KONTAK Rakyat Borneo Indonesia June 2007 Foreword This report presents a review of the environmental, social and legal policies and actual practices of three oil palm plantation companies related to the Wilmar Group. The Wilmar Group is a large corporate conglomerate with its origins in Indonesia. Its primary acti- vities involve palm oil production, refining and trade. In recent years, the Wilmar Group has rapidly expanded its plantation land bank and in 2006, it publicly listed a large share of its member compa- nies under Wilmar International Ltd. in Singapore. In the course of 2007, Wilmar International intends to merge with the palm oil interests of the Malaysian Kuok Group, which will result in the formation of the biggest palm oil trading company in the world. The sustainability of palm oil production is of great importance to a growing number of buyers, finan- ciers and governments especially now that the recent biofuel boom has triggered renewed concerns about the possible negative environmental and social impacts of palm oil expansion. A report published by Milieudefensie in conjunction with this report demonstrates that the largest Dutch commercial banks, electricity producers and food products producers are involved as financiers and buyers of the Wilmar Group. Indirectly, the Dutch government supported Wilmar’s expansion plans through its (MEP) subsidies in support of green (biomass-based) electricity production. Wilmar prides itself as being a responsible corporate citizen and gained a reputation in the market place as having a good environmental record. Underlining this, Wilmar International announced in its Annual Report 2006 that the company was awarded a certificate representing that “crude palm oil from Wilmar’s plantations and used by its refineries in producing refined products, are sustainably produced and traceable for the entire production process and chain.” Milieudefensie, Lembaga Gemawan and KONTAK Rakyat Borneo have been monitoring Wilmar for some time. Contrary to sustainability claims in the marketplace, we have found quite a different rea- lity on the ground. This report is about that reality. Our study on three Wilmar related companies operating in Sambas District in West Kalimantan (Indonesia) since 2005 demonstrates evidence of illegal burning with the intention to clear land, illegal plantation development without approved Environmental Impact Assessments, land rights conflicts resulting from encroachment outside areas allocated and the absence of due consultation with relevant local communities, illegal encroachment in river buffer zones, (facilitating) illegal removal of forest products and deforestation without a proper assessment of High Conservation Values which may result in the further destruction of the habitat of, among other endangered species, the orangutan. Anne van Schaik Laily Khainrur Adriani Zakaria Head of Campaign Globalization Executive Director Executive Director and Environment Milieudefensie/ Lembaga Gemawan KONTAK Rakyat Borneo Friends of the Earth Netherlands Summary Brief background Through the takeover of the oil palm-related subsidiaries of the Malaysian Kuok Group in 2007, the Indonesian/Singaporean Wilmar Group is transforming itself into one of the world’s largest palm oil companies. Upon completion of this transaction, the Wilmar Group will handle at least a quarter of all global palm oil output. In addition, with the delivery of three biodiesel factories presently under construction, the Wilmar Group will also be the world’s biggest producer of palm based biodiesel. As a result of the merger, Wilmar’s oil palm plantation land bank will encompass over 570,000 hectares in Indonesia, Malaysia and Uganda, at least two-thirds of which is yet to be cleared and planted with oil palms. The Wilmar Group considers itself a responsible corporation whose policy is to conduct its operations with due regard to environmental and social responsibilities. Objective and methodology Although industry proponents try to counter the decline of the palm oil industry’s image in the mar- ketplace, there is an ongoing worldwide debate on the sustainability of oil palm expansion, associa- ting the industry with an array of sustainability concerns: tropical deforestation, fires and haze, peat and carbon emissions, illegality, social conflicts and human rights violations, and misleading market claims. This study contributes to that debate. It does so through comparing policies with the practice on the ground. For this purpose, the practices of three oil palm plantation companies were studied: PT Wilmar Sambas Plantation (PT WSP), PT Buluh Cawang Plantation (PT BCP) and PT Agro Nusa Investama (PT ANI) in Sambas District in West Kalimantan, Indonesia. These companies have been owned or managed by the Wilmar Group since 2005. Gathering the data for this study involved numerous field visits, working with local communities, part- ner NGOs and government representatives, review of media clippings, participating in and reviewing the minutes of public meetings and court hearings regarding the activities of the Wilmar Group in Sambas District. In comparing policy and practice, this study analyzed: 1) The public Corporate Social Responsibility (CSR) policies of the Wilmar Group; 2) Indonesia’s legislation and 3) The Principles and Criteria of the Roundtable on Sustainable Palm Oil (RSPO), to which Wilmar has been a member since 16 August 2005. Main findings This review identified significant gaps between policy (Wilmar’s CSR policy, Indonesia’s laws and RSPO) and the practices of the three Wilmar plantation companies studied: 1. Land clearing by the use of fire • Policy: Wilmar’s policy states that the company has in place a zero-burning policy. Such land clea- ring practice is also required by Indonesian law and the RSPO Principles and Criteria. 5 • Practice: PT WSP and PT BCP in Sambas District and PT ANI in Landak District are presently being sued by the Indonesian authorities for “intentional and systematic burning with the pur- pose to clear land for plantation development”. Some main arguments in support of this case are that PT BCP reported the outbreak of fires to the wrong authorities and PT WSP did not report the outbreak of fires at all. During field investigations, it was furthermore observed that newly burnt areas were immediately planted with oil palms. In such areas, the ash fertilizes and neutralizes the acidity of the soils, making the otherwise poor and acid soils suitable for oil palm growth. No recently planted areas were destroyed in the fires. See Chapter 3. 2. Environmental Impact Assessments • Policy: Wilmar’s policy stipulates that forest land is cleared for its oil palm plantations in accor- dance with all Indonesian regulations, which is also a primary requirement of RSPO. One of the legal requirements is that plantation companies must obtain approval from the Provincial govern- ment for their Environmental Impact Assessment (EIA) reports before large-scale land clearing commences. • Practice: Review of the PT WSP and PT BCP EIA reports showed that these documents have some important gaps as regards environmental and social impacts of the envisaged operations. Because PT BCP and PT WSP were clearing land and planting oil palms without the legally required approval of its EIA report, the Ministry of Environment in Jakarta