Asia Pulp & Paper under fire for links with suppliers - Supply Management

Asia Pulp & Paper under fire for links with suppliers

6 June 2018

Asia Pulp & Paper (APP) and its owner, Indonesian conglomerate Sinar Mas, have come under fire from an NGO that claims the company has close links with many of its controversial wood suppliers.

In a report Auriga argues that dozens of individuals who “appear to be current or past employees” of Sinar Mas and APP are also listed as directors, commissioners and shareholders of the supplier companies.

Wood plantation companies are often blamed for the fires that burn annually across Indonesia’s vast peat swamp zones.

This is because they drain swampy land on a massive scale in order to prepare it for planting which makes the peat highly flammable.

Auriga said that in 2015, following Indonesia’s disastrous forest and peatland fires, APP denied owning or controlling two forest plantation companies in Sumatra that were held responsible for some of the worst burning.

APP admitted that PT Bumi Mekar Hijau and PT Sebangun Bumi Andalas Wood Industries were suppliers of wood fibre to the group’s pulp mills, but said the companies were “independently owned and operated.”

The Auriga report analyses the ownership and management structures of APP’s 33 declared pulpwood suppliers in Indonesia and of two companies that APP has recently named as prospective suppliers.

It said that of the 27 forest plantation companies that APP has described as being “independent” partners, at least 24 companies show apparent close links with the Sinar Mas Group.

In March 2018, Indonesian president Joko Widodo issued a new which will clarify corporate ownership in the country.

The law, which is designed to curtail money laundering and terrorism financing, promises to have significant impact on Indonesia’s natural resource sectors by stemming the loss of tax revenue and raising corporate accountability, according to Auriga.

It says that law, along with its latest report, will “trace out the corporate network of Asia Pulp & Paper – which, until now, has largely been hidden behind a mask of corporate secrecy”.

In May Greenpeace ended a five-year truce with APP, accusing it of cutting down tropical forests in Indonesia during the entire time the two were cooperating on conservation.

An Associated Press investigation in December 2017, which claimed APP had closer ties to its suppliers than it let on, led to the suspension of a 2013 agreement in which Greenpeace halted a global campaign against  Sinar Mas in return for commitments to end deforestation, land grabs and conflicts with local communities.

Greenpeace then conducted its own investigation, which included analysis of satellite imagery, that showed companies connected to Sinar Mas cleared almost 8,000 hectares of forest and peatland on Borneo during the five-year truce.

APP said the issues uncovered by Greenpeace were actions by businesses outside its control. It said it would engage a third party auditor “to look into the shareholding of all forestry businesses in Indonesia to determine if any APP employees are involved in businesses that present a conflict of interest”.

“We will be organising a workshop to discuss the results of this audit with interested parties when the report is complete. We hope this will put an end to unmerited aspersions once and for all,” said the firm.

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