Illegal palm plantations and illicit land grabs threaten the worlds last forests

Illegal palm plantations and illicit land grabs threaten the worlds last forests

Illegal palm plantations and illicit land grabs threaten the worlds last forests

Donate Now!

Your contribution will benefit Friends of the Earth.

Stay Informed

Thanks for your interest in Friends of the Earth. You can find information about us and get in touch the following ways:

Name(Required)
Hidden
Opt-in
This field is for validation purposes and should be left unchanged.

Illegal and destructive production of palm oil in Indonesia is continuing, with a chain of culpability that spreads worldwide, from Southeast Asian rain forests to supermarket shelves and Wall Street board rooms. Our new report, Commodity Crimes: Illicit Land Grabs, Illegal Palm Oil and Endangered Orangutans, offers yet more evidence of the vast harms the palm oil industry is causing to forests, endangered species and the Earth’s climate. Critically, the report uses the case of a single company and two of its illegal plantations to show how the palm oil industry takes advantage of corrupt bureaucracy and government negligence to carry out its blatant abuses of forests and community rights.

The report is accompanied by a beautifully shot video that cuts through the haze surrounding palm oil to show the reality: a devastated forest landscape and the local people left to make a living there.

Commodity Crimes used on-the-ground investigation and satellite mapping to how the company, Bumitama Agri, wiped out as many as 15,000 acres of forest in and around several protected forest reserves; how the company sold itself to its shareholders on the basis of illegal assets; and how the company’s actions may skirt Indonesia’s tax laws and forest crimes code – issues that, if investigated, could have serious implications not just for the company, but for its financiers.

In the U.S., a company like Bumitama Agri is an unknown entity; but Bumitama is a leading supplier to global palm oil traders like Wilmar International, a company that, in turn, supplies Kellogg’s and other popular U.S. brands.

Eighty-six percent of the world’s palm oil comes from industrial plantations in Indonesia and Malaysia. Since this summer’s controversial fires in Indonesia, triggered in part by illegal burning to forests for palm oil, international scrutiny of these companies has reached an all-time high. Earlier this year, activists rescued four starving orangutans, including a pregnant mother and a baby, from small patches of forest in one of Bumitama’s plantations, leading to widespread complaints against the industry.

Despite this destruction, there is growing incentive to grow more palm oil. In Europe, palm oil demand is tied to its government-mandated use in biofuels. In the U.S., it’s used mostly for food: since 2006, the U.S. Food and Drug Administration has required that all food labels list trans fat content, leading to a market-wide switch to palm oil (low in trans fats but high in similarly unhealthy saturated fats). Now, the FDA is considering banning trans fats altogether, which could boost palm oil imports. Although this is a laudable attempt to address the over-consumption of unhealthy foods, it has had the perverse impact of destroying millions of acres of rain forest. As our friends at Rainforest Action Network have said, a healthy diet is one that also contributes to a healthy environment.

But consumer choice and government mandates are not the only factors driving palm oil demand. Palm oil is extremely cheap to produce largely because producers disregard environmental and human rights standards to grab huge swaths of land in countries where governments eagerly open their doors to industry, regardless of social and ecological concerns.

Another key driver of the palm oil boom is the ready availability of financing: every 10,000 acres of new palm oil plantations requires roughly $100 million in capital investments — money that banks and investors have been more than willing to put up. According to a recent report from HSBC Global Research, acreage for palm oil is getting more expensive as land grows scarce and regulators clamp down on questionable practices. This has led palm oil companies to scramble for financing from banks to cover higher capital costs. In 2002, the Southeast Asian palm oil sector sought $3 billion in external financing; in 2012, it sought $55 billion.

This is why, in the fight to save the rain forests, we’re going after the banks. The same HSBC report predicts that sustainability is becoming more important for financiers in evaluating risk. (Ironically, HSBC itself is one of Bumitama’s biggest financial backers, and is in for its own share of criticism for that.) This year the Government Pension Fund of Norway divested from 23 palm oil companies, including Wilmar International. But Wilmar still receives financing from Citigroup and Bank of America, among others; North America’s largest pension funds, including the California Public Employees Retirement System, TIAA-CREF and the Canada Pension Plan Investment Board, also hold stock in Wilmar.

With few exceptions, the palm oil industry depends on regulatory failure, corrupt bureaucracy, secrecy, land-grabbing, deforestation, human rights abuses in cutthroat efforts to maintain low costs, high production, and the land required for growth. These practices, questionable in themselves, are not just bad for investors’ reputations, but can lead to financial, regulatory and even legal risk.

Asset managers, banks and institutional investors have a clear responsibility to end the kind of rapacious practices that Bumitama Agri and Wilmar routinely carry out. By bringing these commodity crimes to the attention of regulators, government officials, and the banks themselves, we think we can make them face up to that responsibility.

Related News