Indonesian billionaire using ‘shadow companies’ to clear forest for palm oil, report alleges
Mongabay, 11 April 2018
by Daniel Pye
- Two plantation companies linked to Anthoni Salim, Indonesia’s third-richest man, are deforesting a peat swamp in Borneo, according to new research by Aidenvironment.
- In response to the findings, Citigroup said it was cancelling all lending agreements with IndoAgri, the Salim Group’s agribusiness arm.
- The Salim Group was previously accused of being behind four companies at the forefront of illegal oil palm expansion in Indonesia’s Papua region, employing a complex network of shared directorships and offshore companies to obfuscate its responsibility.
- “It is not just the Salim Group; most of the main palm oil groups have these ‘dark sides’ that continue to deforest,” said Selwyn Moran, founder of investigative blog awas MIFEE.
A piece of oil palm fruit. Palm oil is used in a wide variety of processed foods, cosmetics, detergents and biofuels.
photo by Rhett A. Butler/Mongabay.
The owner of Indonesia’s largest conglomerate has been accused of participating in the illegal deforestation of Borneo’s Ketungau peat swamp to make way for oil palm plantations.
The Salim Group, owned by tycoon Anthoni Salim, Indonesia’s fourth-richest man according to Forbes, is reportedly linked either by ownership or association with the two companies that cleared nearly 10,000 hectares of the protected rainforest.
The Salim Group notably includes Indofood, a joint-venture partner with major brands such as PepsiCo and Nestlé, as well as First Pacific, the joint owner of Goodman Fielder, a leading food producer in the Asia-Pacific region.
In a new report released today, Aidenvironment, a sustainability consultancy, said that the Salim Group’s continuing reliance on “shadow companies” to sidestep legal oversight also raised questions over the complicity of major banks, such as Citibank, Mizuho, Standard Chartered, BNP Paribas and Rabobank, that finance the Salim Group.
“This report provides clear evidence of shady business dealings and inaction at the highest levels of business, all while tropical rainforests continue to fall for Conflict Palm Oil,” said Gemma Tillack, forest policy director of Rainforest Action Network (RAN), which commissioned the research along with Rainforest Foundation Norway (RFN) and SumOfUs.
The report, titled “Palm oil sustainability assessment of Salim-related companies in Borneo peat forests”, also alleged that The Salim Group was made aware of the deforestation carried out by PT Duta Rendra Mulya — majority owned by Anthoni Salim — and PT Sawit Khatulistiwa Lestari — linked with the tycoon through business associates — in early 2016, but failed to act despite repeated attempts at government intervention.
It found that one of the companies, PT Sawit Khatulistiwa Lestari, had successfully applied for a change to the government’s peatland moratorium map to allow development, despite almost all of the concession being categorized as “peatlands prioritized for protection.”
“The Salim Group’s financiers and business partners – like PepsiCo – are complicit in the illegal deforestation, as they continue to do business with Salim without issue. PepsiCo, Nestlé and Wilmar must bring their business partner into compliance with Indonesian law and sustainability norms of deforestation-free development or exit their business relationships,” Tillack said in a statement.
The corporate structure of Salim’s conglomerate — a foundation of publicly listed companies with declared sustainability commitments and Salim Group-related shadow companies that allegedly continue to operate illegally — should be of serious concern to investors and business partners, the report argues.
“This isn’t the first time that companies in the Salim Group have been exposed for destructive practices,” Kiki Taufik, head of Greenpeace’s Indonesian forests campaign, said in the statement. “The Salim Group is one of the worst offenders and has gone out of its way to keep its destructive operations separate from the public face of the Indofood empire. That’s why companies need to take responsibility for ensuring that they only use palm oil from responsible producers that protect rainforests and respect human rights.”
The Salim Group did not immediately respond to a request for comment from Mongabay.
The Ketungau peat swamp in Indonesian Borneo’s Sintang district is subject to special protections under Indonesian law. Peat forests are at high risk of burning and are covered by specific rules as part of global climate regulations because they act as natural carbon storage areas. The annual CO2 emissions from the drained area of the Ketungau peatland will be equivalent to the annual emissions from 110,000 passenger vehicles, according to figures from the World Resources Institute.
According to new supply chain data analyzed by Greenpeace, major brands continue to do business with palm oil mills which are at high risk of sourcing from Salim Group-linked companies.
“Billions of dollars in corporate loans, and finance from bonds and shares, have all flowed to the Salim Group companies despite Mr Salim’s connection to ongoing illegal deforestation,” said Vemund Olsen from RFN. “Banks need to step up their commitments to climate change and stop bankrolling peat destruction.”
In response to the findings in the Aidenvironment report, Citigroup said it was cancelling all lending agreements with IndoAgri, the Salim Group’s agribusiness arm, effective immediately and conducting an investigation into its exposure to tainted palm oil through other lines of credit offered to Indofood.
Standard Chartered, HSBC, Rabobank and DBS said they remained committed to sustainable palm oil policies and would review lending arrangements where necessary. BNP Paribas and SMFG denied responsibility because PT Duta Rendra Mulya and PT Sawit Khatulistiwa Lestari are not their clients.
In 2016, The Salim Group was accused of being behind four companies that were at the forefront of illegal oil palm expansion in Indonesia’s Papua region, employing a complex network of shared directorships and offshore companies to obfuscate its responsibility.
Recent research by investigative blog awas MIFEE has also alleged that the Indogunta Group, a non-traditional corporate entity with numerous plantations in the Kalimantan and Papua regions, was controlled, through a series of beneficial ownership arrangements, by Salim.
Selwyn Moran of awas MIFEE said it was a challenge for the environmental movement to campaign against the financing of companies such as the Salim Group, which operate obscure supply chains.
“It is not just the Salim Group; most of the main palm oil groups have these ‘dark sides’ that continue to deforest,” he told Mongabay. “If trader and consumer companies genuinely want to commit to no-deforestation policies then they need to apply the principle of group-level responsibility to these groups where the ownership structure is obscure and there is a good reason to believe that there is a beneficial owner who is not on the shareholding list.”
“It should really be up to the trading companies to place the burden of proof on their suppliers to disprove the link with companies that deforest, especially if they are registered at the same address, as in the case of some of the Salim concessions.”
