Has this Singapore-listed palm oil firm been concession laundering?

An investigative report from Greenpeace claims that RSPO member Bumitama, which supplies the likes of Unilever, Mars and Mondelez, concealed connections to firms that cleared Indonesian forests illegally with an elaborate cover-up ploy.

A report from non-governmental organisation (NGO) Greenpeace has claimed that a Singapore-listed palm oil grower that has used an elaborate cover-up scheme to avoid responsibility for illegal forest clearing.

Jakarta-headquartered Bumitama Agri is alleged to have concealed connections to companies that have cleared forests illegally through what the report Dying for a cookie calls “concession laundering”.

That is when companies hide ownership of a concession to enable them to get away with environmentally destructive practices, while still controlling and profiting from that land free from the scrutiny of consumers and buyers.

Bumitama and the family of resources magnate Lim Hariyanto, the company’s chief executive, passed control of forest-clearing operations to supposedly unconnected third parties, said the Greenpeace report, which was released on Monday.

It said these companies obtained the permits they needed to develop the plantations, and sold the land back to Bumitama—often at a very low price—after the forest had been cleared.

Between 2011 and 2017, 18 plantation companies identified by Greenpeace were run by third parties that were later acquired or reacquired by Bumitama. 

The US$6 billion palm oil company’s clients include consumer goods giants Unilever, Mars, Johnson & Johnson and Mondelez that have made made public commitments to cut deforestation out of their supply chains. But the report claims that when Bumitama listed on the Singapore Exchange (SGX) in 2012, it did so having cleared an area the size of Singapore of forest to develop plantations without the necessary permits.

This process of concession laundering appears to be designed at least in part to hide Bumitama’s interests in and control of these concessions while they are developed in breach of regulations as well as RSPO rules.

Arie Rompas, forest campaigner, Greenpeace Indonesia

In response to the allegations, Bumitama has said that it stands by a commitment to no deforestation, no peat development and no exploitation made in its sustainability report in 2015, and operates according to the principles and criteria of the Roundtable on Sustainable Palm Oil (RSPO) of which it is a member, and firms listed on the Singapore stock exchange.

Concession laundering?

Bumitama: A history of deception?

January 2008: Bumitama acquires PT Hati Prima Agro (PT HPA).

March 2008: Forestry ministry orders PT HPA to stop work for failing to obtain land agreements.

2010-2012: PT HPA continues clearing forests.

June 2012: PT HPA’s plantation permits are revoked.

2012: Sawit Watch lodges complaint with RSPO for PT HPA’s illegal deforestation. RSPO orders Bumitama to stop work.

November 2013: Bumitama associates Tommy Santoso and Djoni Rusmin set up PT Langgeng Makmur Sejahtera (PT LMS). 

December 2013: PT HPA challenges permits’ revocation, but it is upheld by the supreme court. 

August 2014: PT LMS applies for location permit covering same land as PT HPA. It is accepted.

January 2015: Bumitama sells PT HPA to PT LMS for US$32 million.

February 2015: RSPO closes complaint against Bumitama.

June 2016: Bumitama buys PT LMS for US$18,500.

One example of what the report refers to as concession laundering is the case of PT Hati Prima Agro (PT HPA). The Bumitama-owned company cleared forests unlawfully from 2008 to 2012, and as a result had its plantation permit revoked by the forestry ministry and a complaint to RSPO lodged against it by local NGO Sawit Watch in 2012.

Subsequently, Tommy Santoso and Djoni Rusmine—plantation developers who had been involved in numerous dealings with Bumitama—set up a new company, PT Langgeng Makmur Sejahtera (PT LMS), and secured a permit for the same land area as PT HPA. Bumitama then sold PT HPA’s land to PT LMS. 

As a result, Bumitama was able to have the RSPO complaint against it closed on the grounds that it no longer controlled the concession.

Bumitama reacquired the same plantation in 2016, leading to Sawit Watch filing a new complaint against Bumitama to RSPO in 2017.

The complaint is still under investigation by RSPO.

Greenpeace’s report suggests that the presence of a Bumitama executive on the RSPO complaints panel, head of corporate secretarial services and corporate social responsibility Lim Sian Choo, may have helped the company to quash complaints levelled against it. 

RSPO told Eco-Business that Lim is not involved in the current complaint investigation, and that it is the body’s standard procedure to exclude panel members where there is a conflict of interest.

According to mapping analysis in the Dying for a cookie report, 11,100 hectares of forest was cleared in Bumitama concessions considered laundered since 2005 and 2,300 ha of this clearance took place 2014.

As Bumitama cleared forest illegally, the company should be expelled from RSPO and is liable for US$85 million in compensation for breaching RSPO rules on illegal deforestation, Greenpeace claims. 

RSPO said that while it has systems in place to ensure that certified plantations keep to RSPO standards, “we acknowledge that every system can be improved.”

Bumitama said in a statement that the acquisition of third parties was not designed to conceal development without permits or to breach the RSPO rules. However, it admitted that there was “a period of time” before the company had a sustainability policy when its adherence to RSPO rules “displayed a gap.”

“Given that the process of licensing in Indonesia can be very long and tedious, Bumitama has at certain occasions preferred acquiring companies furnished with permits for planting,” the company said, reiterating that it has always played by SGX listing rules.

“None of the acquisitions were not (sic) intended to create any artificial value that would defraud our investors by skimming off something first and then selling to the listed company,” the statement reads.

Burmitama added that it would compensate for illegally deforested land, even if it had happened before it acquired the company responsible, according to RSPO rules.

As an example of its compensation plans, the company said that one concession, PT Damai Agro Sejahtera, had been acquired for “conservation purposes” as it contains sizeable orangutan habitat.

A common problem

Arie Rompas, forest campaigner for Greenpeace Indonesia, said that concession laundering is widespread in the plantation sector and presents a real challenge to law enforcement.

“Big companies are hiding their ownership and control of land and the Indonesian Government, which has new regulations on beneficial ownership that will come into force next year, must urgently address this,” he told Eco-Business.

Greenpeace’s report comes as RSPO concludes its Annual Roundtable Conference on Sustainable Palm Oil in Malaysa. On the agenda was a revised standard that brings in stricter environmental and social criteria, including no future planting on peatlands and stronger labour rights protections, and a review of its investigation and monitoring unit, which was set up in July this year.

The report emerges a week after RSPO sanctioned one of Indonesia’s biggest palm oil growers, IndoAgri, for 20 violations of RSPO principles and criteria and 10 violations of Indonesian labour laws.

RSPO found “grave” violations of international labour standards on IndoAgri’s plantations, such as low pay and exposure to hazardous pesticides, following a complaint from NGOs.

Meanwhile a new report from the Zoological Society of London found that although 49 of the world’s 70 most powerful palm oil companies have made zero deforestation pledges, many were lacking in scope and on the ground verification.

In the in-depth study released on Thursday, palm oil companies were found to be best at producing sustainability reports, but particularly bad at sticking to certification standards.

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