PALM OIL ALERT 02 / MAY 2017 1

PALM OIL ALERTINDOFOOD/INDOAGRI /SALIM GROUPGROUP: SALIM GROUP

HQ: INDONESIA

RSPO MEMBER: Partial membership for IndoAgri subsidiaries PT PP London Sumatra Indonesia (PT Lonsum) and PT Salim Ivomas Pratama (PT SIMP). No other Salim Group companies hold membership

PT Indofood CBP Sukses Makmur (Indofood) is a major vertically integrated food conglomerate, with interests from palm oil plantations to flour mills and a consumer products division that ranks as one of the world’s largest instant noodle manufacturers (Indomie), as well as interests including dairy, snack foods and beverages.

Indofood is part of the Salim Group, headed by Anthoni Salim, who holds a controlling interest in Indofood via First Pacific Company and CAB Holdings. The loosely structured Salim Group also holds extensive palm oil concessions via other companies (see below) responsible for considerable deforestation, including of peatlands and High Conservation Value forest.

WHAT’S WRONG WITH SALIM GROUP’S PALM OIL?

Illegality: breaches of labour laws, including child labour and paying below minimum wage

Deforestation: considerable forest clearance in 2013–2014, including 1,000ha

of primary forest; satellite-based alerts suggest active clearance continuing in 2016

Exploitation: child labour on plantations, paying below minimum wage and breaches

of health and safety standards

MARKET LINKSIndofood is a joint-venture partner with PepsiCo as the sole producer of PepsiCo branded products in Indonesia and has a 50/50 joint venture with Nestlé (PT Nestlé Indofood Citarasa Indonesia). It also operates the Australian food company Goodman Fielder as a joint venture with Wilmar International.

According to company data, Cargill, GAR, Musim Mas and Wilmar are sourcing palm oil produced by Salim Group companies.

According to company data, Olam is not sourcing directly from Salim Group companies but is sourcing from GAR, Musim Mas and Wilmar. It is unclear whether Olam has been supplied oil indirectly from the Salim Group via these traders.

AAK refused to confirm or deny any trader relations with Salim Group companies.

Astra Agro Lestari failed to confirm or deny any trade relations with Salim Group companies.

In February 2017, IOI issued time-bound conditions for the continuation of trading relations with Indofood. Indofood failed to meet these conditions. In April 2017, IOI requested trading partners to exclude Indofood from its palm oil supply.

02 / MAY 2017

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SHOULD YOU BUY THE SALIM GROUP’S SUSTAINABILITY COMMITMENTS?In February 2017, Salim Group subsidiary IndoAgri revised its Sustainable Palm Oil Policy. The new policy still lacks credible measures to prevent deforestation, peatland destruction or exploitation. It does not meet the ‘no deforestation, no peat, no exploitation’ (NDPE) standards adopted by most international companies and their suppliers.

The Salim Group has extensive palm oil interests, but the new policy only applies to IndoAgri’s concessions and its third-party suppliers. It does not cover the other Salim Group companies – a serious and significant loophole (see below). Additionally, the other Salim Group companies are not members of the RSPO and are thus not governed by its standards and protocols.

Although IndoAgri committed to ‘no deforestation’, it has refused to implement this commitment using the High Carbon Stock Approach, which industry and NGOs recognise as the global methodology for protecting natural forests from conversion. Similarly, IndoAgri has yet to endorse any specific standards to manage existing plantations on peat. It is unclear whether the company will protect undeveloped peatlands within its existing concessions.

Despite serious findings of exploitation in its plantations, IndoAgri has not agreed to follow sector-specific labour standards, as outlined in the Free and Fair Labor Principles. Its new policy only commits the company to ‘protect the rights of our workers according to local, national and international law’. The company has also failed to establish a mechanism for workers to bring grievances in accordance with UN Guiding Principles on Business and Human Rights.

HUMAN RIGHTS ABUSES ARE ENDEMIC IN INDOAGRI CONCESSIONSInvestigations by NGOs and auditors have identified human rights abuses and exploitation in IndoAgri concessions. A 2015 investigation of two PT Lonsum plantations in North Sumatra by OPPUK, Rainforest Action Network (RAN) and the International Labor Relations Forum (ILRF) found evidence of a range of poor labour practices. These included:

· use of child labour

· workers being paid below the minimum wage

· workers using pesticides in violation of RSPO’s protocol and criteria and without proper

safety equipment· quota systems that encourage increased use of informal workers (including workers

bringing along their wives and children to help meet the quota)

Image from Rainforest Action Network report ‘The Human Cost of Conflict Palm Oil’ detailing child labour in Indofood subsidiary PT Lonsum: ‘[a] young kernet worker pushes a heavy load of fresh fruit bunches on Indofood’s plantation’. ©Rainforest Action Network

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OPPUK, RAN, and ILRF published these findings in June 2016. The following month, Accreditation Services International (ASI), which oversees the performance of RSPO certification bodies, conducted a Compliance Assessment at a third PT Lonsum mill to verify the allegations. This confirmed breaches of health and safety standards and evidence of use of informal workers including harvesters’ family members, as well as gender discrimination in employees’ benefits and failure to pay some workers the minimum wage.

Despite this, IndoAgri continued to plead ignorance, telling the RSPO Secretariat in October 2016 that it ‘remains in the position to wait for the complainants to provide enough evidence before taking further decision’.

In October 2016, OPPUK, RAN, and ILRF submitted a formal complaint to the RSPO. PT Lonsum then undertook corrective actions and was re-audited by the body that had certified its operations, SAI Global. Although SAI Global deemed PT Lonsum’s actions adequate, ASI disagreed; it suspended SAI Global in December 2016.

Despite this, IndoAgri continued to insist that more proof was needed. It wrote to the RSPO in January 2017, to ‘request the complainants provide all and any evidences they have to substantiate their allegations so that we may fully investigate’. The company has yet to provide any evidence that the complainants’ allegations were unfounded.

In addition to these well-documented labour abuses, there have been several reports of social conflicts involving IndoAgri and its subsidiaries. For an overview, see Palm oil sustainability assessment of Indofood Agri Resources by Aidenvironment.

CORPORATE STRUCTURE DESIGNED TO OBSCURE DEFORESTATION

Indonesian tycoon Anthoni Salim maintains control of a complex network of companies known as the Salim Group. The true management of some Salim Group companies is deliberately obscured through pyramids of companies, which keeps destructive or controversial operations separate from the more well-known, public face of the empire, which includes Indomie instant noodles.

In February 2013, the Centre for Orangutan Protection filed an RSPO complaint against Indofood subsidiary PT SIMP alleging destruction of orangutan habitat in the PT Gunta Samba Jaya (PT GSJ) concession. The RSPO Complaints Panel decided there were ‘reasonable grounds to believe that … RSPO Principles and Criteria has been breached’.

In June 2013 Indofood CEO Mark Wakeford denied any responsibility on the grounds that ‘[IndoAgri does] not have shareholding in PT Gunta Samba Jaya and [it] is not part of the IndoAgri or SIMP Group.’ However, an investigation by Greenpeace International shows a clear link between PT GSJ and the Salim Group, including Indofood / IndoAgri and RSPO member PT SIMP. Our findings suggest Anthoni Salim has deliberately structured his businesses in a way that obscures ownership and responsibility.

A young orangutan rescued by the Centre for Orangutan Protection from the PT Gunta Samba Jaya concession in East Kutai, East Kalimantan, peeps out at the world. ©Centre fo r Orangutan Protection

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PT GSJ was established by three men who have spent their careers in the Salim Group. One is the current President Director of Indomarco Prismatama; another is a Director of PT SIMP. PT GSJ shares an address with several Indofood subsidiaries. PT GSJ and its parent companies are still managed by people who are Directors or Commissioners of other companies associated with the Salim Group.

A comprehensive explanation of the links between PT Gunta Samba Jaya and the Salim Group can be found on pages 47-53 of Greenpeace International’s Dirty Bankers report.

In November 2016, the RSPO amended its rules to require all RSPO member companies to register at group level, including all companies controlled, managed or operated by the parent group. All members are to have complied by March 2017.

Greenpeace submitted its findings to the RSPO in January 2017. In April, the RSPO Secretariat undertook to ‘seek for explanation from the company’ and give them 2 weeks to respond. It pledged to continue with ‘forensic investigation’ if the company did not provide a satisfactory explanation.

RECENT DEVELOPMENTS SUGGEST YET MORE PROBLEMS IN SALIM GROUP COMPANIES

Due to the corporate structure of the Salim Group, neither the RSPO P&C nor IndoAgri’s new policy apply to PT Gunta Samba Jaya or other Salim-associated companies (see above). This loophole has serious implications for workers, communities and forests in Indonesia.

In October 2016, PT Aneka Reksa International (PT ARI), which holds a 13,000ha concession in West Kutai District, obtained an Izin Pemanfaatan Kayu (IPK – land clearing permit) covering over 3,000ha of forest. Although not a direct subsidiary of IndoAgri, PT ARI is a sister company to PT GSJ. Company deeds show it is owned and controlled by senior executives of Indofood companies.

Local media report that in October 2016, around 200 workers lodged a complaint against PT ARI with the Indonesian Labour Union, alleging the company had not followed Indonesian labour laws.

Another controversial concession reportedly controlled by the Salim Group is PT Malisya Sejahtera (PT MS). Company deeds show that PT MS is owned and managed by individuals who claim to work for PT SIMP and PT Indofood Sukses Makmur. According to the website of the government research institute Balit Palma, PT MS is the location for a hybrid coconut pilot project on behalf of IndoAgri subsidiary (and RSPO member) PT SIMP. Photographs taken at an event to announce the pilot project show Indofood Director Paulus Moleonoto shaking hands with the head of the institute.

PT MS has a long-running social conflict with Tiberias village and local government reportedly tried to revoke the company’s permit. In May 2017, police and military reportedly used force to clear residents from the site, burning down homes and arresting several dozen community members.

COMPANY REPLY

Prior to the publication of this bulletin and our previous two reports, Greenpeace contacted Indofood to verify our findings of deforestation and other activities.

Each time, the company failed to reply.

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WHAT DOES THE SALIM GROUP NEED TO DO TO COMPLY WITH NDPE?

1. Implement an immediate moratorium on all plantation development and expansion across the entire Salim

Group and all third-party suppliers.

2. Publish a credible, time-bound No Deforestation, No Peat, No Exploitation policy that applies to the

entire Salim Group and its third-party suppliers. The policy should include a commitment to:

a. Identify and protect all remaining High Conservation Value areas and High Carbon Stock forests in Salim Group

company concessions and those of third-party suppliers.

b. End all development on peatlands and adopt a science-based approach to responsible peatland management

that mitigates the impact of Salim Group companies and third-party suppliers on critical peat landscapes.

c. Uphold the principles of Free, Prior and Informed Consent (FPIC) as outlined in the UN Declaration on the Rights

of Indigenous Peoples and comply with all international human rights treaties.

d. Adopt the Free and Fair Labor Principles in Palm Oil Production: Principles and Implementation Guidance.

e. Establish a credible grievance mechanism in accordance with the UN Guiding Principles on Business and Human

Rights.

f. Publish annually independent third-party verification of compliance against its NDPE policy for its operations,

including third-party suppliers.

3. Publish and implement a workplan to meet its NDPE policy commitments, including measurable milestones and

a deadline by which its own operations and those controlled by third parties need to achieve third-party verification

of policy compliance.

4. Disclose the names and locations of all concessions controlled by the Salim Group, including those

controlled by executives within Salim Group companies, and publish concession maps in shapefile format.

5. Conduct peat surveys and HCV and HCS assessments (using the High Carbon Stock Approach methodology)

prior to commencing any development or expansion in existing or new concessions and require its suppliers to do

the same.

6. Acknowledge labour issues identified in their operations and publish a time-bound action plan and progress

reports on efforts to address documented labour violations. Independent assessments must be conducted by

labour experts to demonstrate compliance with the Free and Fair Labor Principles.

7. Map out all peatland landscapes affected by Salim Group operations and third-party suppliers using

appropriate technology including LiDAR, and make this data publicly available. Re-flood and implement other water

management measures to halt subsidence, ensure protection of peatland forest and mitigate fire risks, based on

mapping and advice from independent peat experts

8. Provide redress to communities that did not give their Free, Prior and Informed Consent to development on

their lands or have unresolved conflicts with the Salim Group, including but not limited to the six grievances outlined

in Palm Oil Sustainability Assessment of Indofood Agri Resources.

9. Re-apply to join the RSPO as the Salim Group, commit that all Salim Group companies will comply with RSPO’s

Principles and Criteria and Code of Conduct, and achieve RSPO certification for all Salim Group companies.

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WHAT DO COMPANIES SOURCING FROM INDOFOOD / SALIM GROUP NEED TO DO?

Given the Salim Group’s persistent refusal to address deforestation and exploitation, despite sustained engagement from traders, joint-venture partners, financiers and other companies, anyone sourcing directly from Indofood or other Salim Group companies should immediately suspend all trade with the group.

The Salim Group should be excluded from supply chains until it has implemented a moratorium on plantation development and expansion, published a comprehensive NDPE policy and time-bound implementation plan, and taken meaningful steps to address the issues raised in this bulletin. Confirmation of compliance should be provided through independent third-party verification.

Companies that indirectly source from Salim Group companies should insist their trading partners exclude the Salim Group, and set appropriate, time-bound conditions to determine whether business can resume. This should include immediate action to address documented labour violations and independent third-party verification of compliance with NDPE across the entire Salim Group.

FURTHER READING

Indofood Agri Resources palm oil policy 2017

RSPO Case Tracker

Complaint submission to the RSPO (OPPUK, RAN, and ILRF)

ASI Final Assessment Report RSPO Accreditation Program - SAI Global Indonesia - Compliance Assessment (RSPO P&C)

Chain Reaction Research’s critique of Indofood Agri Resources’ new palm oil policy

The Human Cost of Conflict Palm Oil Indofood: PepsiCo’s Hidden Link to Worker Exploitation in Indonesia (OPPUK, RAN, and ILRF)

Palm oil sustainability assessment of Indofood Agri Resources (Aidenvironment)

Dirty Bankers (Greenpeace)

Deadly Trade-off (Greenpeace)

Published by Greenpeace International

Ottho Heldringstraat 5 1066 AZ Amsterdam The Netherlands

palmoilalert.int@greenpeace.org