2017-09-05

FGV investments disregard cleaning up of supply chains



JAKARTA
(foresthints.news) - Felda Global Venture (FGV) has launched its updated sustainability policy (Aug 28) after intense pressure was put on the Malaysian state-owned palm oil company following the publication of a report revealing new peat development practices by two of its subsidiaries in Landak regency in the Indonesian province of West Kalimantan.

However, FGV has only pledged not to undertake any deforestation or convert high conservation value (HCV) and high carbon stock (HCS) areas in its own operations under the control of the FGV Group. These refer to FGV’s listed and non-listed subsidiaries worldwide in which it has a controlling stake as well as management control.

In other words, the FGV policy is not applicable to FGV’s joint venture companies such as PT Synergy Oil Nusantara (SON) which continues to source palm oil products from controversial suppliers.

“PT SON is not our subsidiary and we don't have management control (over it). Therefore it is not bound by FGV's Group Sustainability Policy,” Ida Suryati Ab. Rahim, FGV’s Vice President/Head of Sustainability and Environment, declared in a response to a question from foresthints.news (Sep 5) about whether PT SON’s operations are also subject to FGV’s updated sustainability policy

Despite these words and regardless of the fact that FGV does not have a controlling interest in and management control over PT SON, this joint venture company represents an investment on the part of FGV and should therefore also be bound by FGV’s Group Sustainability Policy.

In essence, this means that FGV continues to invest and have a stake in companies whose supply chains are linked to the deforestation of HCS areas or new peat drainage, even if it doesn’t have a controlling stake in and management control over these companies.

Through the operations of its joint venture companies like PT SON, which are not beholden to its updated sustainability policy, FGV thus damages its own reputation as a responsible agribusiness leader.

The new policy’s deficiencies are illustrated by FGV’s relationship with ANJT, a major palm oil sector player linked to the deforestation of HCS forests in West Papua province. As previously reported by foresthints.news (Mar 17), PT SON, an FGV joint venture company, is the largest buyer of CPO from ANJT.

Alarmingly, ANJT’s sustainability policy still allows the clearing of secondary forests which are classified as important parts of HCS forests. So, as ANJT continues to clear Papua’s HCS forests and PT SON keeps sourcing palm oil products from ANJT, FGV finds itself inextricably implicated in the deforestation of HCS forests through its stake in PT SON.

The omission in FGV’s updated sustainability policy of provisions stipulating the cleaning up of its supply chains from the deforestation of HCS forests means that the FGV’s investments will continue to be associated with the clearing of Papua’s HCS forests, as demonstrated by the following Google Earth images of ANJT's palm oil concessions.







No real business transformation

On one level, FGV’s updated sustainability policy can be considered a step forward in terms of the business transformation of its own operations which may no longer clear HCS forests or engage in new peat drainage.

Nevertheless, on another level, because FGV’s updated sustainability policy doesn’t apply to the operations of its joint ventures in which it doesn't have a controlling stake and which remain linked to supply chains involved in the deforestation of HCS forests and new peat drainage, the business transformation of FGV’s operations cannot be regarded as completely real.

“I am glad that FGV has finally committed to stopping peat forest clearance in Landak regency. We expect TH Plantations, FGV’s joint venture partner in PT SON, to follow suit soon,” Eric Wakker, a top executive at AidEnvironment, said in response to a question from foresthints.news (Sep 5) about the extent to which FGV’s updated sustainability policy would result in the cleaning up of supply chains.

Eric emphasized that PT SON’s sourcing practices will need to be cleaned up. Otherwise, he added, the refinery can expect to find itself banned by hundreds of buyers with NDPE (No Deforestation, No Peat, No Exploitation) policies, due to the fact that it currently sources palm oil products from highly contentious growers like the aforementioned ANJT, Duta Palma and others.

New peat development equals peat violation

As to its operations in Indonesia, the pledge in FGV’s updated sustainability policy to no longer engage in new peat development is nothing extraordinary given that this practice has been prohibited by President Joko Widodo’s administration since early December last year.

As such, if any of FGV's palm oil companies were to carry out new peat development (again), they would be committing a peat violation and, sooner or later, would be subject to a sanction from the government, as mentioned in a strongly-worded statement by Environment and Forestry Minister Siti Nurbaya reported by foresthints.news (Jul 18).

President Joko Widodo has shown a fierce determination to clean up supply chains in the business sector, including the palm oil and pulp & paper industries, from new peat development. This attempt at comprehensive business transformation has been initiated by the President on a nationwide basis.

Pulp and paper giant APRIL should serve as an example for any other company contemplating new peat development in contravention of the President’s ban. This Singapore-based company was caught red-handed by the government carrying out new peat development in Riau’s Kampar Peninsula landscape.

As a result, APRIL was forced to remove newly-planted acacia from these recently developed peat areas, and also had to close newly-constructed canals, as part of a sanction imposed on it by Minister Siti Nurbaya.