Palm traceability sector (update 3a): GAR/Sinar Mas back in NGO focus, TFT suspends Golden Agri takes (and hours later a new chief sustainability officer is appointed for the plantation giant - Agus Purnomo)

21 May 2015: TFT suspends Golden Agri takes (and hours later a new chief sustainability officer is appointed for the plantation giant - Agus Purnomo)
 
Key issues and questions arising from Golden Agri / PT Smart's present situation:

• Despite innovative industry attempts to promote traceability as a more inclusive solution (versus RSPO which struggles to include small producers and independent smallholders) while heightening key pledges such as "no deforestation, no peat and no exploitation," recent events raise the question of whether producers can live up to promises ("hastily made" according to many key industry players). 
• Is palm oil entering a renewed phase of boycott risks? At the SIIA Singapore Dialogue, several IPOP members sat on a panel where Wilmar made a public pledge that it would (if told by other IPOP members) stop buying from any "errant suppliers" who were unable to make the necessary upgrade moves (and if it found such, it would stop buying; tell its fellows and request they would do likewise). Other panelists suggested more focus on constructively working with suppliers for improvement rather than boycott. If agreed, the IPOP "supplier boycott" proposal should give some teeth to the group. But it seems that IPOP members are not clear of the boycott risk themselves; with Golden Agri, a lead member itself now facing RSPO censure and TFT suspension.
• Many industry players regard the shift to TFT B2B traceability as part of a processor-trader led move to find a more business-ready solution (that now seeks to shift the centre of gravity to refinery "supply sheds"; away from the RSPO mill and supply base P&C and RSPO's relatively costly physical supply chain SCCS outlook). The palm oil supply chain has since the mid 2000s been spending time and effort via NGO service providers, auditors and their newly established sustainability teams.
• Industry watchers have been concerned about how widely known implementation gaps among the top highly rated traceable plantation groups will be treated by the broader NGO sector. Clearly, business life is hardly straight forward and the current issues suggest that there is no place for over-confidence and complacency while using new solutions. It seems we are entering a "third wave" where social issues and implementation will be primary - but have the big plantation groups put in enough resourcing to upgrade their implementation efforts to their pledges?  

Some background on IPOP group here: Tuesday, October 7, 2014 Indonesia Palm Oil Pledge (IPOP) http://khorreports-palmoil.blogspot.com/2014/10/indonesia-palm-oil-pledge.html. At the SIIA dialogue we had a useful chat with a Catapult Campaigns staffers who confirmed their key role in the New York Declaration and IPOP. On the risk of large dominant players establishing boycotts on smaller suppliers (raising question on economic interest suppression), there was no answer. A key consideration is on campaign advocacy efficiency and impact.

News link:

Golden Agri takes another hit as sustainability guru suspends its membership by Philip Jacobson May 20, 2015; The charity that Indonesia's Golden Agri-Resources has enlisted to devise and implement its zero-deforestation and community-engagement commitments suspended its cooperation with the palm oil giant yesterday, following "several breaches" of the policies they had designed together, according to The Forest Trust (TFT), which helps companies run responsible supply chains. A few hours after TFT announced the suspension, Singapore-listed Golden Agri said in a statement that its chief sustainability officer, Peter Heng, had resigned "to pursue new career opportunities." His replacement is Agus Purnomo, who has headed one of Golden Agri's Indonesian subsidiaries, Sinar Mas Agro Resources and Technology (Smart). Smart's own subsidiary, Kartika Prima Cipta, became the subject of a formal complaint against its operations last year after Golden Agri filed to expand its plantations in 18 of its subsidiaries including Kartika Prima, despite evidence that Kartika Prima had taken community land without residents' informed consent, failed to properly conduct a high-conservation value (HCV) assessment and more. The grievance was lodged by the Forest Peoples Programme (FPP), a UK-based NGO, with the Roundtable on Sustainable Palm Oil (RSPO), the industry's largest voluntary certification scheme. Though TFT was vague in its announcement, the suspension is almost certainly a response to what is apparently seen as Golden Agri and Smart's lackluster handling of the RSPO complaint, which takes on additional importance because Kartika Prima is piloting Golden Agri's sustainability commitments. The RSPO upheld the complaint in March and earlier this month prohibited Golden Agri from "acquiring or developing any new areas" pending its resolution.... Read more: http://news.mongabay.com/2015/0520-jacobson-tft-suspends-golden-agri.html#ixzz3aj9U4zFv


16 May 2015: It's not plain sailing for plantations who've gone in with the "second wave" of heightened "three nos" on peat, deforestation and exploitation

It's not plain sailing for plantations who've gone in with the "second wave" of heightened "three nos" on peat, deforestation and exploitation. Sector risk is of a "third wave" of rather tough to resolve social issues, which may be heightened due to the HCS / high carbon stock regimes coming into play.

The Roundtable on Sustainable Palm Oil (RSPO) has prohibited Golden Agri-Resources (GAR), one of its most prominent members, from "acquiring or developing any new areas" pending the resolution of a formal complaint against the palm oil giant in Indonesia's West Kalimantan province.  The decision by the RSPO, the world's largest voluntary certification scheme for palm oil, is a stern directive from an organization that has been criticized for failing to take action against companies that flout its standards....  Read more: http://news.mongabay.com/2015/0508-jacobson-rspo-complaint-gar-fpp.html#ixzz3a19AYBFj<<a%20href=>">http://news.mongabay.com/2015/0508-jacobson-rspo-complaint-gar-fpp.html#ixzz3a19AYBFj

16 Jan 2014:

Khor Reports comment: Plantation partnership deals with some NGOs does not preclude good implementation and monitoring by other NGOs. GAR/Sinar Mas had faced boycotts and enlisted TFT-Greenpeace to help (Wilmar is now also signed up on TFT-Greenpeace HCS Approach and other principles). Now, plantation planners should prepare for larger set-aside areas for their new plantings.

The latest news on GAR from a study by Forest Peoples Program / FPP (see news links) highlights some problems of high carbon stock (HCS)/social implementations of the new policies of TFT-Greenpeace for GAR. GAR said, “We thank FPP for their additional findings which have assisted our own full field audit of PT KPC, conducted in partnership with The Forest Trust.” Separately, APRIL and RGE are under pressure from Greenpeace.
News: http://www.eco-business.com/news/golden-agri-april-under-fresh-scrutiny-unsustainable-practices/ 

RSPO RT12: New GHG emission reduction scenarios for new plantings - Bumitama and Musim Mas case studies (update 1a)

RSPO’s Melissa Chin reported on how RSPO growers need to predict emissions from different development scenarios for their new plantings. In 2013, the Emission Reduction Working Group (ERWG) was set up to help companies on this new reporting requirement. The policy to assess and predict GHG emissions reductions is in RSPO Principles & Criteria 7.8. Previously required from 1 Aug 2014 it was shifted to mandatory on 1 Jan 2015. This needs to be submitted alongside New Planting Procedure but it is not required to be made public until 1 Jan 2017. Soil carbon, above and below ground carbon estimates are needed.....

Bumitama case study. GAR and Wilmar are key buyers requiring high carbon stock (HCS) policies. A mid-year discussion led to a pilot HCS assessment using their approach. Bumitama then committed on 12 September 2014 to use this on four target concessions. Concession KML had a base case plantable area of about 12,500 but was reduced to about 6,600 hectares on the planting scenario chosen. There was no planting on any peat (base case was plant on shallow peat). Significant areas of rubber agro-forest areas could not be replanted due to social or adat issues. Local people expect economic projects. They lodged a complaint with the regional government or Bupati on why Bumitama stopped development. Aidenvironment was hired to work on participatory mapping. Locals wanted to stop access to this NGO until it was shown that it worked with company to develop the land. The halt in development it also gave third parties the opportunity to approach the masyarakat to suggest a takeover so that the concession could return to faster development and some 1,000 hectares was “lost.” Planting less than the 12,500 hectares originally envisaged also means that the 20 percent area for plasma smallholder development is so much smaller under the new planting scenario. Bumitama has also engaged a lawyer to check if it has the right to conserve area to reforest. Can this really be done. However, a company still has to be run economically.....

 

 

Musim Mas case study. Using the RSPO carbon assessment procedure, Musim Mas presented two case studies, one already in new planting status and one before planting. The result was a GHG balance of -5 and -14 respectively; which means there was carbon sequestration from the two new estates. The company notes that the current default value for conservation areas is nil, but this is being reviewed and this will likely add on to the positive carbon balance of planting oil palm. Musim Mas is also doing mill POME biogas capture for all its facilties. These efforts will minimise its net GHG emissions........

 

Note: inherent in the RSPO carbon assessment are default values that will steer new plantings to minimize planting in high carbon stock areas. Under RSPO's Palm GHG calculator for carbon assessment, the default value for the oil palm is not bad ie. well above the earlier much bandied 35tC/ha measure. It is 55-65tC/ha of above and below ground carbon over a 25 year cycle.

 

Liberia says "no more land will be taken"

Is Liberia's president going cold on the palm oil industry? TrustLaw, Source: FERN - Fri, 21 Mar 2014;  http://www.trust.org/item/20140320153254-aep4f/?source=hppartner; Liberian President Ellen Johnson-Sirleaf speaks during an interview with Reuters in Brussels, Nov. 25, 2013. REUTERS/Francois Lenoir; ...Johnson Sirleaf’s decision appears to signal a dramatic change of heart for a leader who has signed 30 percent of Liberia’s land over to foreign investors - with 1.5 million acres allotted to palm oil companies - in a country where, as one NGO worker put it, ministers seem “drunk with the idea that international investment will bring economic recovery”.....The dispute with EPO, which began two years ago, was the latest clash between rural Liberians and companies rushing to acquire land to feed the growing global market for palm oil – a product found in around a third of products on supermarket shelves, according to one jaw-dropping estimate.....Widely reported complaints have been made against the Singapore-controlled Golden Veroleum (GVL), which holds a 350,000-hectare oil palm concession in south-western Liberia, and the Malaysian corporation Sime Darby, whose 311,187 hectare operation is in the north, and was recently the target of a suspected arson attack..... Allegations against EPO surfaced in 2012, when villagers living by the company’s Palm Bay Estate in Grand Bassa County accused the company of clearing their land and planting oil palm there without their consent. EPO insists all the land it has used has been legally acquired.
....Now, with the promise that no more land will be taken, the mood in Grand Bassa is one of elation. Whatever motivated the president’s decision – a political calculation driven by upcoming Senatorial elections, pressure from local and international NGOs, or maybe even the strength of the villagers’ case - any reversal of her position in a land where four fifths of the rural population endure hunger and malnutrition would mean trouble..... In November, the U.N.’s Panel of Experts on Liberia concluded that “large-scale palm oil development continues to pose significant challenges to peace and security in rural areas.” It’s a view echoed in the villages around EPO’s plantation.

UN report here: http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/s_2013_683.pdf

Also read: Sime Darby: Liberia fire and doubt on Olam interest...  http://khorreports-palmoil.blogspot.com/2014/03/sime-darby-liberia-fire-and-doubt-on.html

"RSPO+9", new TFT / Climate Advisers-led policies for Wilmar

New  The Forest Trust or TFT / Climate Advisers-led policies for Wilmar include these nine (9) substantive policies, which adds on to existing RSPO commitments, hence we can call it "RSPO+9" for now:

(i) non-use of peat land of any depth;
(ii) likely 35 tonnes carbon per hectare ceiling for land development;
(iii) progressive GHG reductions;
(iv) restoration and enrichment of forest and peatlands (similar to RSPO HCV compensation?);
(v) no forced labour,
(vi) 60-hour work week with 1 day off inclusive of overtime,
(vii) 3.8 square meters / 32 square feet of individual living space,
(viii) trade unions and collective bargaining;
(ix) grievance procedure where advisers and stakeholders have a say in banning suppliers.

Khor Reports blog exclusive comment: The independent advisers to Wilmar are TFT of Switzerland and Climate Advisers of the USA. TFT-Greenpeace was instrumental in putting forth the high carbon stocks ceiling principle for Golden-Agri / Sinar Mas which ran into severe NGO campaigning. This resulted in various global buyers suspending palm oil purchases from the large Singapore-based Indonesian conglomerate. Wilmar did not run into such market problems, although it was obviously facing increasingly negative comments about its "problematic" third-party purchases and land deals in the international news and NGO websites. It is notable and interesting that Wilmar also chooses to be led by the strong principles of TFT-Greenpeace. Presumably, Wilmar (also Singapore-based but with operations globally; and large plantation area in Sarawak and Indonesia and a very big refinery market share in China) expects good outcomes from adopting the approach of Golden-Agri and doing much more to boot. Climate Advisers is a relative newcomer to setting market access policy for palm oil. Palm oil companies, mostly owned by Southeast Asian entrepreneurs, have been quite readily accepting NGO-led standards on a voluntary basis. Palm oil is one of the 15 global (mostly tropical) commodities targeted by the WWF, which focuses on the very largest companies to push for more rapid change. However, WWF's Roundtable on Sustainable Palm Oil (RSPO), now finds itself superseded by the new RSPO+9 effort led by TFT-Greenpeace principles.

Look out of Khor Reports' Palm Oil Newsletter #6, Jan/Feb 2014 for more! This is a sneak preview of our review of Wilmar's bold move. Many ask how they will implement this while NGOs say that this is "just the beginning..."

45% area usable for Kalimantan plantations?

Khor Reports: HCS implies net area of 45% for Kalimantan plantations?

This morning, GAR and SMART made an announcement on its implementation of its pilot on High Carbon Stock (HCS) forest conservation. Here is Khor Reports’ quick review of GAR/SMART’s HCS issues and implications for the palm oil industry.

For the pilot, “HCS is defined as comprising BT, HK1, HK2 and HK3 areas”. Thus, all types of forest (high, medium and low density) as well as old scrub lands cannot be developed. Only “young scrub” and “cleared / open land” can be utilized. Thus, despite industry rumours of a higher ceiling that would be less of a constraint for oil palm development, it appears that the NGO-preferred 35tC/ha ceiling still applies. GAR/SMART’s preliminary study in June 2012, which was done together with certification facilitator The Forest Trust and Greenpeace, found the weighted average carbon stock in four Kalimantan concessions in degraded lands in tC/ha: 17 in cleared / open land, 27 in young scrub, 60 in old scrub, 107 in low density forest, 166 in medium density forest, and 192 in high density forest.

The indicative numbers for GAR/SMART’s pilot in eight concessions areas:

a)      In unplanted areas, 19,103 ha to be set aside for HCS (highlighted with yellow marker on slide #18). Add on 25,567 ha unplantable for reasons of HCV, peat and government regulations (slide #17). Total of 35% set-aside area of total concession.

b)      Add on (minimum) 20% area for smallholder / plasma schemes. The net area for the plantation / nucleus could be 45%?*

* And this is in partially developed concession areas; area usable in “new” concession areas could be lower assuming some HCS inadvertently cleared in the past.

source: "GAR and SMART implement pilot on High Carbon Stock forest conservation"  

With this ground-truthing of satellite image mapping for Kalimantan degraded areas, NGOs may be more confident to make advanced (and even historical) studies to inform plantation companies on estimated HCS set asides they should have (or might have had) in place. As we have mentioned before, we think this is a pre-cursor to a push for rural land use planning which has been generally lacking in Southeast Asia. NGOs appear well advanced in using satellite imagery for studying oil palm developments. Other issues arising would be connectivity of HCS areas and the need for 100 meter connectivity buffer corridors (see slide #31 below).

 

source: "GAR and SMART implement pilot on High Carbon Stock forest conservation" 

The HCS ceiling is fundamental to arresting deforestation. It seems a low key issue, but it will be a thorny question for plantations on the usability of their land banks. Elsewhere, Norway (population 4.9 million) has also been highlighting concerns about palm oil’s impact on deforestation, perhaps in less impactful but highly symbolic ways; weblink:http://khorreports-palmoil.blogspot.com/2013/03/norway-goes-cold-on-palm-oil.html

Also refer to Khor Reports on details of preliminary HCS report findings in GAR/SMART-TFT-Greenpeace report: Khor Reports Palm Oil Strategic Analysis #7, 11 June 2012, "Carbon Stocks Study Presages Problems for Plantations." Ask for a copy if you don't have it yet.
 

Info source: Golden Agri-Resources Ltd: "GAR and SMART implement pilot on High Carbon Stock forest conservation," 13 March 2013.

100tC/ha ceiling?

Khor Reports: Palm oil rumour-mill reckons that a 100tC/ha carbon stocks ceiling is now being considered by GAR-TFT for new land development by oil palm plantations.

This is up from the initial ceiling of 35tC/ha mooted in the Nestle-GAR-TFT deal, where GAR or Golden-Agri-Resources, part of the Sinar Mas Group, also agreed to no planting on any peat land.

Behemoths' land banking efforts stutter?

"Sime Darby’s expansion into Liberia may have hit some road blocks. It was reported that citizens from more than 15 towns and villages near Sime Darby Plantation in Grand Cape Mount County have threatened that the company would face stiff resistance if it intends any further extension of its concession. Not yet known at this point is the size of the area affected as portion to Sime’s 200,000ha concession land." (ECMLibra research report, 18 July 2011)

Khor Reports comments:

a) SE Asian plantations have taken a great interest in West Africa, Papua and other 'tougher' regions, to extend their land banks. Various problems have been reported with these major expansion efforts.

b) Sime Darby is reported facing some resistance from locals in Liberia (article above). The plantation behemoth had also sought to extend its interests in Sarawak, Malaysia, by offering larger stakes to local landholders - but we hear that some of these efforts may have gone 'on hold' for various reasons.

c) Golden Agri is also looking to develop 220,000 ha in Liberia via the USD1.6 billion deal with Golden Veroleum (the land area was initially reported as a 500,000‐acre palm oil plantation in the southeast of the country).3 September 2010: Golden Agri said its “subsidiary Golden VerOleum would form a partnership with the Government of Liberia in a palm oil project… for the cultivation of sustainable palm oil by the company and by Liberian smallholders and farmers, mill processing and value‐added manufacturing…The investment is expected to total USD1.6 billion” (source: http://www.reuters.com/article/2010/09/03/goldenagri‐liberia‐idUSSGC00373720100903). In October 2010. Golden Agri reported it disposed of its entire shareholding comprising one share of HK$1 in Golden Veroleum Limited. A clear status update is needed.

d) Sometime in 2009‐2010, Golden Agri’s “in progress” acquisition of 1 million ha in Papua falls through. Now, players like Wilmar are looking to Papua for major cane sugar projects. Will they have a happier outcome in the low-lying and seawater-flood prone region?

Golden Agri -TFT deal sets 35 tonnes carbon stored per ha ceiling

I sent out an alert via email to readers on 9 Feb 2011: BBC article on GAR deal with TFT. Weblink: http://www.bbc.co.uk/news/science-environment-12397427 (please scroll down for excerpts).

This initially sets the ceiling on land bank development at 35 tonnes of carbon stored per hectare.

Feedback to Khor Reports: Subsequently, we hear that the deal may be dependent on a) further research to validate claims that there is plenty of degraded land available for new plantings and b) the creation of a mechanism for Golden Agri to swap out of current licenses on forested land for degraded land. *This information needs to be checked and validated.

Khor Reports comment: Analysts of plantation land banks will find publicly available information to be frustratingly limited. The companies do not disclose the high risks to the 'usability' of their land banks for plantation development i.e. what proportion is on forested land, on peat land, with high biodiversity and so forth?



Snippets from "Palm oil deal aims to save forests and carbon," 9 Feb 2011, BBC news :

"A major palm oil producer is joining forces with environmental campaigners in a bid to ramp up forest protection. The giant Indonesian company Golden Agri-Resources (GAR) has agreed to work within new standards aimed at saving forests that store a lot of carbon. International environment group The Forest Trust (TFT) is partnering the company and will monitor compliance. The palm oil industry has regularly been accused of destroying old-growth forest as demand rockets. The new deal expands on existing standards agreed under the Roundtable on Sustainable Palm Oil (RSPO), an international alliance of producers, processors, retailers and environment groups...."

"...Already, RSPO rules forbid clearing old-growth forest or land with high conservation value, and developers are also supposed to obtain informed consent from local people before initiating new plantations. Under the new deal, GAR will go further, vowing not to plant on peat, and not to clear forest where significant carbon is locked up in trees. This should mean that large tracts of forest that have been partially logged will now be off-limits to the company. Initially, the figure of 35 tonnes of carbon stored per hectare will be used as a ceiling; but that could change as research progresses. "We're not trying to undermine the RSPO - we're saying 'this is something you guys need to look at and maybe move towards,'" said Scott Poynton, TFT's executive director...."

"...Earlier in the year, TFT finalised a deal with Swiss-based food giant Nestle designed to "ensure that its palm oil procurement had no deforestation footprint". This led to discussions with suppliers such as GAR - and the conclusion that in order to preserve their markets, growers would have to purify their operations. Greenpeace, which has taken the lead on the issue among international NGOs, sees the deal as a potential step forwards. "This is really throwing a gauntlet down to the rest of the palm oil sector, and to other players," said campaigner Phil Aikman. "It's setting a threshold for carbon, and that's pretty good - it'll protect a lot of orangutan habitat and other important areas that have been threatened by palm oil plantations. "It challenges the rest of the sector to increase its productivity rather than target new areas over and over again, and that's been the main issue." With RSPO, another issue has been compliance, with a number of companies accused of failing to live up to their promises...."

Source: BBC news article.