Palm oil giant makes debut in global sustainability index

Golden Agri-Resources has come a long way since allegations of deforestation ravaged the Singapore-listed firm’s image. Now it figures in the world’s most scrupulous sustainability index—good news for the company and a vilified sector.

Singapore-headquartered palm oil company Golden Agri-Resources (GAR) has been featured in the Dow Jones Sustainability Indices (DJSI) for the first time.

GARthe world’s second largest oil palm producer—is listed in the food, beverage and tobacco category in what is considered to be the toughest sustainability index to qualify for. 

DJSI has assessed the sustainability credentials of the world’s largest public companies since it launched in 1999; GAR, which is owned by Indonesian conglomerate Sinar Mas, listed on the Singapore Stock Exchange that same year.

Though GAR is not the first palm oil producer to feature in the indices—Malaysian conglomerate Sime Darby has had a spot in the rankings since 2013, and is listed in the industrial conglomerates category—it is the first pure play palm oil firm to be included.

GAR joins a group of new additions to the indices this year that include British American Tobacco. The palm oil firm’s bigger rival, Wilmar International, is not included in the ranking.

GAR features in the Asia Pacific edition of DJSI, which tracks the performance of the top 20 per cent of the 600 largest companies in Singapore, Japan, Hong Kong, Korea, New Zealand in the S&P Global Broad Market Index.

After being invited to participate, companies must complete a 130-page questionnaire that probes them on issues ranging from supply chain management to human rights. The index helps investors make more informed decisions about the sustainability credentials of firms.

This is the first time that GAR has featured in any major global corporate sustainability rankings, a list that includes the Financial Times Stock Exchange’s FTSE4Good Index Series, Canadian media house Corporate Knights’ Global 100 index, and Newsweek’s Green Rankings.

Sustainability milestone

Its inclusion is a milestone in the history of a 30-year-old company which has come under fire from environmentalists for destructive forestry practices numerous times in the past decade.

In 2010, a campaign by Greenpeace called on consumers in Europe to stop buying Nestlé products because they contained palm oil produced by GAR, which the green group accused of razing rainforests in Indonesia to make way for plantations.

A gruesome video campaign featured a man eating a KitKat made from the fingers of an orangutan, the animal that has come to symbolise the environmental destruction wrought by oil palm companies.

The campaign paved the way for GAR to—in 2011—become the first agroforestry company in Indonesia to pledge to avoid cutting down forests on peat, carbon-rich land that is routinely drained and then burnt to clear it. The toxic fumes from burning peat have choked Indonesia and its neighbours annually for almost half a century. 

Another blight on GAR’s sustainability track record came in 2015, when United Kingdom-based non-profit Forest Peoples Programme accused the palm oil company of attempting to develop land without prior consent from local community groups.

While GAR admitted then that its processes for developing new oil palm plantations face shortcomings, the company has since introduced a slew of initiatives to strengthen its sustainability credentials.

It has set aside large areas of land for conservation, pledged to restore forest lost in the devastating peat fires of 2015, and has spent heavily on its fire suppression and prevention capabilities.

Key to this has been a programme to engage local communities living on its concessions on the importance of sustainable agriculture as an alternative to slash-and-burn forestry.

The company has also increased the proportion of its plantations that have been certified as sustainable by the Roundtable on Sustainable Palm Oil (RSPO), the industry association for responsibly grown palm oil.

To date, more than a half of its planted land of 482,228 hectares has been certified by RSPO; this certification means that palm oil is not grown on deforested land or on peat and that the palm oil company does not employ dangerous or exploitative employment practices. The company has pledged to have all of its plantations RSPO-certified by 2020. 

In 2015, GAR introduced methane capture facilities and processes to recycle waste from the palm oil to lower the company’s greenhouse gas emissions. Methane emissions from the waste water, which is produced during palm oil processing, account for about one third of the warming potential of greenhouse gas release from rainforest and peat swamp degradation in Indonesia.

The company’s chief financial officer, Rafael B. Concepcion Jr., said in a statement that its inclusion in DJSI shows that the company is “serious” about implementing responsible farming practices.

“Through our active participation in the assessment for DJSI, we are also trying to align what we do with global best practices,” he added.

GAR’s achievement is welcome news for a sector that has been heavily criticised for its environmental and social impact.

The trade has been blamed for destroying rainforests in Indonesia and Malaysia and violating the rights of communities and workers in areas where the versatile crop is grown. This has led some consumers and concern groups to call for a boycott of products containing oil palm.

But demand for the oil—which is found in everything from snacks to household cleaners to cosmetics—is huge and growing. The industry, which counts Indonesia and Malaysia the largest grower countries, is expected to be worth US$88 billion by 2022. 

Commenting further on GAR’s inclusion in DJSI, Agus Purnomo, managing director for sustainability and strategic stakeholder engagement, said the company was “proud” to be recognised for the effort and resource it had put into responsible palm oil production.

“This will help spur us to continue to make sustainability an integral part of how we do business,” he said.

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