Commodity Crimes Illicit Land Grabs, Illegal Palm Oil, and Endangered Orangutans
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Commodity Crimes Illicit land grabs, illegal palm oil, and endangered orangutans REPORT | FRIENDS OF THE EARTH EUROPE for the people | for the planet | for the future Friends of the Earth Europe Research: Aidenvironment, Publishers: Friends of the campaigns for sustainable Profundo, Milieudefensie Earth Europe, Friends of the and just societies and for (Friends of the Earth Earth US, WALHI (Friends of the protection of the Netherlands), WALHI KalBar the Earth Indonesia), environment, unites more (Friends of the Earth Milieudefensie (Friends of the than 30 national Indonesia, West Earth Netherlands), Les Amis organisations with Kalimantan) de la Terre (Friends of the thousands of local groups Earth France), Jordens vänner Primary research for this and is part of the world’s (Friends of the Earth Sweden) report was provided by largest grassroots AidEnvironment and Text: Aidenvironment, environmental network, Profundo. Initial case study Friends of the Earth Europe, Friends of the Earth research (GIS analysis, field Friends of the Earth US, International. investigation and company Milieudefensie, WALHI. analysis) was commissioned Publishing date: to Aidenvironment by November 2013 Friends of the Earth (*et al*). Friends of the Earth (*et al*) Design: This report has been ensured that a due hearing onehemisphere, Sweden produced with the financial procedure with the primary [email protected] assistance of the European affected parties was www.onehemisphere.se Commission’s DG followed to verify Cover image: © Jason Taylor Environment. The contents Aidenvironment's study of this publication are the findings. Friends of the Cover caption: Bumitama sole responsibility of Friends Earth (*et al*) have plantage LSM. New of the Earth Europe and can subsequently decided how development plantation under no circumstances be to process respondents' drainage channel regarded as reflecting comments and have in peatland. the position of the conducted additional Available for download at: European Union. document and field www.foeeurope.org research in October 2013. Friends of the Earth (et al) takes full responsibility for the text presented here. Friends of the Earth Europe Mundo-b building, Rue d-Edimbourg 26, 1050 Brussels, Belgium tel: +32 2 893 1000 fax: +32 2 893 1035 for the people | for the planet | for the future e: [email protected] www.foeeurope.org contents Commodity Crimes Executive summary 4 1. Introduction 6 2. Bumitama Agri 8 2.1 Irregular permits, clearing protected forest, and endangering orangutans: The case of PT Ladang Sawit Mas (LSM) 10 2.2 Ghost estates and illegal land grabs: The case of GY Plantation 12 3. Bumitama, Wilmar International and IOI 16 3.1 Bumitama Agri and Wilmar international 17 3.2 The Bumitama Agri – IOI partnership 18 4. Responses by European financiers 20 5. Conclusions and Recommendations 24 COMMODITY CRIMES | 3 executive summary Executive Summary 0 Two of the world's Our investigation used satellite imagery, trade data This investigation specifically documents that: leading distributors of and on-the-ground reporting to uncover how, at the > Bumitama has knowingly destroyed forest that is the palm oil, a staple other end of a long chain of culpability, unwitting home for endangered orangutans. In April 2013, in ingredient in many consumers are being sold products that are killing response to a complaint filed at the RSPO, Bumitama consumer food and orangutans and destroying some of the world’s last promised it would not clear land near forest reserves personal care products forested lands. in West Kalimantan until studies were completed to and an important Friends of the Earth has alerted the companies appraise the land's ecological importance. These feedstock for biofuels in involved about the problems detailed in this report. reserves host one of the largest, and last, populations Europe, are obtaining We have also alerted financiers to their role in land of the Central Bornean orangutan in the region. the commodity from grabbing previously. Their comments are summarized However, satellite imagery shows that hundreds of illegal sources – growers in this report. hectares of peatland and forests in the area were who are clearing vast cleared between May and September 2013. So while areas of rainforests, The chain extends thousands of miles, through Bumitama was negotiating with the RSPO to address including sensitive many actors: the complaint, the company continued to clear land, orangutan habitat > The producer, Bumitama Agri Ltd, one of the despite its pledge to stop the cutting. and protected forest largest owners of palm oil plantations in Indonesia. reserves, in violation of > Bumitama’s actions are unpermitted. The the law, the criteria of > The palm oil industry's “sustainability” association, plantation in West Kalimantan that is managed by the Roundtable on the Roundtable on Sustainable Palm Oil, which Bumitama was cleared in violation of national Sustainable Palm Oil does little to prevent illegal activity and has proven laws, without permits or proper approval of the (RSPO) and their ineffective at providing comprehensive protections Ministry of Forestry and the Environmental financiers’ investment for the environment and human rights. Monitoring Agency. This land bank consists of at policies. least 7,000 hectares of “ghost estates”1 – > The traders, such as Wilmar International, who plantations that lack valid permits. Selling palm oil distribute palm oil to a global market, which is from unpermitted plantations is illegal. expected to more than double by 2030 – a serious and growing threat to human rights and tropical forests. > Bumitama’s investors knowingly or unknowingly purchased shares of an illegal operation. Prospective > The financiers and investors – including HSBC, investors were informed through Bumitama’s Rabobank, Deutsche Bank as well as the largest prospectus in April 2012 that Bumitama’s expansion pension funds in the Netherlands and Sweden – plans included preferential rights to manage and who provide the needed capital for Bumitama’s key harvest from a plantation that was operating illegally, shareholders like IOI and clients like Wilmar. All without the required licenses for its operation and three companies are violating not only voluntary management, and that the Hariyanto family – the standards like RSPO and the financiers’ own majority owner of Bumitama Agri – would bear the Environment, Social and Governance (ESG) policies, liability risk while the permits were sorted out. Despite but also national legislation. this admission of illegality, all the shares were sold. Bumitama Agri Ltd, (BUMI.SI) is headquartered in > After gaining control over thousands of hectares of Jakarta, Indonesia and operates through a number of unpermitted plantation landbank Bumitama subsidiaries. Bumitama controls over 200,000 continued the illegal production of palm oil without hectares of plantation land bank in Central the necessary permits and engaged in further illegal Kalimantan, West Kalimantan and Riau, Indonesia. land grabbing and clearing. Wilmar International Since 1990, development of palm plantations by and IOI Corp. bought shares of Bumitama despite Bumitama and others has cleared about 16,000 their likely knowledge of the illegal landgrab. Before square kilometers of forested land in Kalimantan. The Bumitama's public offering in April 2012, IOI Corp. company has been a member of the Roundtable on became one of Bumitama’s controlling shareholders, Sustainable Palm Oil since 2007, and sells to global with a current stake of 31 percent of the company. At palm oil traders including IOI Corp. of Malaysia and the same time, Wilmar bought between 0.9 percent Wilmar International of Singapore. and 4.3 percent of shares of Bumitama’s stock. This makes IOI and Wilmar not just purchasers of the palm oil illegally produced by Bumitama, but significant investors in its illegal operations. 1 “Ghost estates” (“Kebun hantu” in Bahasa Indonesia) are estates that are operating without the necessary permissions. 4 | COMMODITY CRIMES executive summary > The RSPO provides greenwash for the industry's illegal, unethical We therefore call on all banks and financiers of Bumitama Agri Ltd, and environmentally harmful practices. The Bumitama Group, IOI, and Wilmar International to use their influence over these IOI Corp. and Wilmar International are all members of the companies to bring an end to the problems with PT Ladang Sawit Roundtable on Sustainable Palm Oil. They have been involved in Mas and PT Gemilang Makmur Subur, the Bumitama-associated several illegal landgrabs in Kalimantan over the past five years, companies named in this report. If this does not happen but the RSPO has been unable to prevent this, nor has it taken immediately, they should cancel their loans or withhold from any effective enforcement action. providing other financial services and commit to issue no more loans and purchase no more shares in Bumitama or any company The revelations about Bumitama Agri in this report illustrate how associated with it and take steps toward public divestment from palm plantation companies and commodity traders use the lack of these companies. legal enforcement, complicated transfers of land and assets, and inter-company agreements to take illegal control over land, We call on Bumitama to halt all activity on land without location regardless of its legal status, traditional use or ecological permits and to return illegally hold concessions to the Ministry of importance. The report