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As we applaud the new forest conservation policy announced by Sinar Mas subsidiary Golden Agri Resources, it’s important to remember that the big challenge facing palm oil traders like Cargill, watchdog groups, and international customers is to make sure that GAR’s promises to protect Indonesian rainforests on paper are turned into real change on the ground.
The Tropical Forest Trust, which will be working as consultants with GAR on this, will certainly have their hands full.
Key to building confidence with stakeholders will be high transparency and regular independently-verified and robust reporting throughout 2011 and beyond that demonstrates if GAR is in actual conformance with their policy goals or not. GAR is not known for following through on its commitments and it has failed to follow RSPO criteria where required in the past. An independent audit in 2010 found numerous problems and serious violations of many GAR commitments, leading to the first ever censure of a member by the RSPO.
GAR’s business plan, meanwhile, calls for continued expansion by 40-50,000 hectares a year of its current 435,000 ha palm oil plantation estate in Indonesia. GAR has stated that it does not believe the new conservation agreement will have any material impact on its business. Indonesian government figures calculate the area of degraded and deforested lands in Indonesia that could be planted to palm oil as up to twice the size of the total area in the country currently under palm oil production. Clearly implementing a no deforestation and peatland expansion policy is feasible, even by palm oil companies with ambitious expansion plans. Nonetheless, GAR’s ongoing palm oil expansion will need to be closely monitored both in terms of how degraded lands are selected for planting and the potential for social conflict in cases where these “degraded lands” in fact are being used to meet basic livelihood needs of local communities.
GAR also just announced it will invest $500 million to build two new crude palm oil refining plants in Indonesia with 740,000 tons capacity per year, which will be on top of the one million tons per year plus that it is processing in its three current plants. About 30% of the palm oil it crushes comes from third party growers. Like Cargill, therefore, the impacts of GAR’s palm oil business encompass two roles: as plantation grower and as purchaser, processor and trader of palm oil. In this latter role, it is important that GAR, like Cargill and other major palm oil traders, move to clean up its supply chains if it is to effect the system-wide change in palm oil production practices it claims it wants to promote.
GAR is considering investments in palm oil plantation expansion projects in other countries as well, including a $1.6 billion joint venture involving a 200,000 ha palm oil expansion project in Africa. GAR should apply its rainforest conservation policy across all its plantation operations and expansion plans wherever they occur, not just in Indonesia.