WWF advisory to buyers and investors of the Sinar Mas Group/Asia Pulp & Paper (SMG/APP)
While WWF believes that Forest Stewardship Council (FSC) certification is the best way to get independent and objective verification of a company’s performance on environmentally responsible, socially beneficial and economically viable forest management, it cannot be used to verify the performance of SMG/APP companies, affiliates and their wood suppliers. This is because APP was disassociated by FSC in 2007 due to rampant deforestation, making it the first among a very small number of the most controversial companies in the world FSC has disassociated from.
In 2017, Associated Press (AP) reported on the many hidden corporate relationships of APP and highlighted the company’s links to deforestation, despite its public sustainability commitments. On May 16, Greenpeace announced that they were ending all engagement with APP after its investigation alleged that 8,000 hectares of natural forest and peatland were cleared in violation of APP’s FCP in two concessions which were previously undeclared by APP but are linked to APP and SMG. As early as 2015, WWF and other civil society organizations had already reported that one of the two concessions (PT. Muara Sungai Landak) had been clearing forest in high conservation value areas, in more than 3 meters deep peatland and orangutan habitat.
On May 30, the Anti Forest Mafia Coalition including WWF-Indonesia published a report that details how SMG/APP group uses corporate and individual proxies to expand its land banks. The Coalition has delivered this analysis to support the implementation of a recently published Presidential Regulation 13/2018 which requires all companies in Indonesia to declare their beneficial owners within one year. SMG/APP is by far the single biggest group in the Indonesian forestry sector, and as such, the Coalition considers SMG/APP´s transparency in compliance with the regulation as a critical step in better governance.
As these events have been unfolding over the last half year, APP has been in negotiations with the Forest Stewardship Council (FSC) to end its long running disassociation from the organization. FSC set up an APP Stakeholder Working Group (SWG), comprised of a group of NGOs, a workers’ union and corporate representatives, to help develop a roadmap for FSC with the aim to end disassociation from APP. WWF, which is a member of the SWG, believes that the roadmap must be credible and achievable to prevent any recurrence of violations to the Policy for Association and to remedy past environmental and social harm caused. For the roadmap to be meaningful, APP needs to disclose its whole empire of companies and suppliers and reveal its total environmental and social footprint.
APP has announced that it has committed to review all wood suppliers in Indonesia, including those not within its supply chain. It will also map out any relationship between the board members of these companies and APP shareholders, Board of Directors, Board of Commissioners and APP employees, to rule out any financial involvement between wood suppliers and APP. This process is to begin this month. WWF recommends that the announced review be conducted in a fully transparent, independent way, involving civil society organizations within the Anti Forest Mafia Coalition to provide a trustworthy assessment of all connections of APP, SMG and its employees, and other proxies which could then be used by FSC and SWG to reveal the company’s total environmental and social footprint. This is a critical time in the FSC-APP re-association process, where APP must fully disclose all information that is required by FSC to ensure that credible process can be undertaken.
WWF further recommends that companies and financial investors should avoid doing business with SMG/APP and its affiliates until the company is re-associated with FSC and a regular, truly independent third-party verification demonstrates significant progress against the FSC´s roadmap requirements.