Palm oil giant Golden Agri moves to “no deforestation” policy

February 09, 2011

Golden Agri-Resources Limited (GAR, SGX: E5H), the world's second largest palm oil  company, says it will work with multi-stakeholders, including the government of Indonesia and The Forest Trust (TFT), to find solutions towards forest conservation, including the creation of a fully sustainable palm oil industry.

GAR said in a press statement that it had developed a Forest Conservation Policy (FCP) in collaboration with TFT which is aimed "at creating long-term sustainable growth for GAR and the palm oil industry."

The statement said the FCP aims to ensure GAR has a "no deforestation footprint and focuses on no development on High Carbon Stock forests, High Conservation Value forest areas and peat lands; respect for indigenous and local communities and compliance with all relevant laws and National Interpretation of Roundtable on Sustainable Palm Oil Principles and Criteria."

The FCP, the company said, is part of GAR's continuous improvement of its sustainability commitments and will form the basis of the company's engagement with stakeholders.

The news was cautiously welcomed by environmental groups such as Greenpeace, which said that it hoped the ambitious plan would encourage other palm oil producers to adopt similar agreements, but only if GAR lives up to its commitments.

"The agreement sets a precedent. No other company on the Roundtable on Sustainable Palm Oil has done this, despite the fact they've been discussing it for the last three years," a spokesman from Greenpeace said. He added that the agreement is likely to be motivated by GAR's ambition to lead the palm oil market in the face of customer demand for more sustainable products.

GAR and its parent company Sinar Mas have been targeted by Greenpeace and other NGOs for their role in the devastation of Indonesia's rainforests. NGO campaigning resulted in cancellation of major contracts with GAR from palm oil buyers like Unilever, and more recently, Nestlé and Burger King. GAR began working with TFT after Nestlé food giant Nestle said it would no longer accept palm oil that led to the destruction of forests.

GAR's plantations are all in Indonesia and it recognizes that to protect forest, the government has a critical role to play. GAR is calling for the adoption of new regulations and enactment of relevant legislation that will enable the transformation of the palm oil industry; including establishing and implementing a land swap process.

Mahendra Siregar, Vice Minister of Trade of Indonesia said: "The Government of Indonesia welcomes the cooperation between GAR and TFT on sustainable palm oil development that embraces the environmental conservation and social concerns in promoting economic growth.

This initiative is an example to find concrete solutions and model for resource-based sectors which is very key to Indonesia's sustainable development. We are supportive of this 'lead by example' partnership that would encourage all players to participate in this process, at this stage and beyond."

Franky Widjaja, Chairman and CEO of GAR said, "This is the first step towards a wider collaboration with players in the palm oil industry and other independent experts. We look forward to a constructive dialogue and it is only with this multi-stakeholder participation that we can succeed.

 "Palm oil is a strategic product for Indonesia and we are committed to taking a leadership role in finding solutions to ensure the long-term growth of the palm oil industry, the growth of the Indonesian economy and to improve the lives of our people."

TFT executive director Scott Poynton welcomed the agreement as a milestone in the global campaign to protect forests. "It's about going to the root causes of deforestation," he said. "We have shown that the destruction of forests is anchored deeply in the supply chains of the products we consume in industrialized nations and we are showing we can do something about that."