“Talking Responsibility”

Review of IOI Group’s majority-owned active subsidiaries in Ketapang District, West Kalimantan Substance to formal RSPO complaint filed on 30 March 2015

Talking Responsibility: purpose

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The purpose of this review is to:

1.  Update the case raised by Friends of the Earth Netherlands and Europe in March 2010 in their “Too Green to be True” report on IOI Group’s operations in Ketapang District and the follow up on the RSPO complaint against IOI, backed by 11 international and grassroots NGOs;

2.  To verify whether IOI Group complied with RSPO’s standards and procedures, commitments made to RSPO and investors, the “Sustainable Palm Oil Manifesto” (SPOM) and the Group’s “Taking Responsibility” Policy of November 2014, and to ensure that non-compliances are addressed;

3.  To prevent palm oil from being certified as “sustainable” in future when

and where it is derived from land that was planted in violation of applicable law and RSPO’s standards and procedures.

The ultimate goal of this complaint is to see IOI Group contribute to the growth of RSPO’s credibility, by proactively resolving the problems in its own estates in Ketapang, Sarawak and where ever else. This is also an fundamental precondition to successfully requiring the Group’s Third Party Suppliers to the Group’s “Taking Responsibility” policy. The detailed background of the case history can be found on the websites below: http://www.onegrassroots.org/what-we-do/campaigns/palm-oil-land-grab http://www.rspo.org/members/complaints/status-of-complaints/view/4

“Sustainable Palm Oil Manifesto” (SPOM) Policy (signed by IOI’s CEO on 6 January 2014): •  “Protection of peat lands regardless of depth

in new developments.”

•  “No deforestation through the conservation of High Carbon Stock (HCS) forests”

IOI Loders Croklaan “Taking Responsibility” policy (13 November 2014):

10 years of IOI’s ambitious promises to deliver sustainable and responsible business

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IOI Corporate Responsibility Policy Statement (IOI website, 2009): •  “We strictly avoid encroaching forested or

peat land and/or develop new plantation estates that will result in deforestation.”

•  “IOI holds firmly to operating its business in ways that meet regulatory requirements on environmental impact in the countries or markets in which we operate.”

•  “..We conduct our operations with honesty, integrity, duty of care (…) in the countries or markets in which we operate.”

IOI Sustainability Policy, 2009:

Location: Ketapang district, West Kalimantan

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Image shows IOI’s majority owned active palm oil concessions in Ketapang. IOI did not report these concessions in its 2013-13 ACOP to RSPO, thereby failing compliance with RSPO GA Resolution 6g (2013) filed by ZSL, WRI and others. PT KPAM (East of PT BSS) was reported but is left out in this image for it is believed that the company’s Location Permit should already have expired.

IOI’s 2009 policy: “We strictly avoid” peat, forest and forestland

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Early 2010, “Too Green to be True” set out to verify IOI’s compliance with its own policies and RSPO in Ketapang district: Left: active peat land development by IOI’s subsidiary in PT Berkat Nabati Sawit (PT BNS) in February 2010. According the company’s own EIA study, 88% of the concession land bank comprises peat. Based on satellite imagery, Aidenvironment estimated that IOI had already opened up some 3,700 hectares of peat land in 2009. Left: One of the canals constructed in PT Bumi Sawit Sejahtera (PT BSS) between September 2009 and February 2010. This development was located in a designated forest reserve and occurred without Ministry of Forestry approval and HCV assessment. IOI’s public commitments on environmental management of 2009 were not implemented on the ground.

“We conduct our operations with honesty, integrity, duty of care”

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Land clearing in PT Sukses Karya Sawit (PT SKS) and PT Berkat Nabati Sejahtera (PT BNS) between 8 August 2009 and 14 December 2009. The highlighted are in the blue box shows the PT BNS’ illegal encroachment inside designated Production Forest between March and December 2009. This happened because the company started land clearing without Plantation Business Permit (IUP), which was only issued in December 2009. (the area in the green box will be discussed further below) Developing plantation land without IUP is a serious violation of Indonesia’s Plantation Act (2004). Similarly, encroaching into forestland without approval is a serious violation of the Forestry Act (1999). These violations could have landed IOI’s directors in jail. See the Milieudefensie report “Too Green to be True” to identify the directors of PT SKS and PT BNS. Both PT SKS and PT BNS had commenced land development without approvals of their EIA reports. The company had fraudulently issued sworn statements to the West Kalimantan government in July 2009, claiming that no activities were taking place on the ground. Even after these letters were issued, land clearing continued. Developing plantation land without an Environmental Permit is a serious violation of Indonesia’s Environmental Management Act (2009). IOI’s public commitments on responsible business were also not implemented.

Follow up on the TGTBT report

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In 2010/11, IOI Group paid RSPO accredited Certification Bodies – SGS and Moody’s/Intertek – to ‘verify’ complainants’ claims. The CBs took up these consultancies, even though this work was outside the scope of their RSPO accreditation. To give its report credibility, SGS artificially moulded its report into a RSPO “New Planting Procedure” (NPP) report. The report omitted IOI’s gross law violations and fraud, and yet concluded that IOI operations conformed with RSPO’s NPP (SGS conveniently reported that permits were secured post hoc law violations and thus it concluded “compliance”). The SGS assessor in charge is currently employed as Technical Director at RSPO. He is aware of this case and he has declared he will not in any way be involved in the handling of this case.

In 30 March 2011, RSPO’s Executive Board/Complaints Panel ruled on IOI’s case. Based on RSPO’s own formal rules (Certification Systems article 4.2.4 –version 2007), IOI should have had all of its current certificates suspended. However, RSPO only suspended IOI from obtaining new RSPO certifications (CoC not included). This ‘amicable’ arrangement would have no material impact on IOI’s trade in Certified Sustainable Palm Oil (CSPO). In spite of what stories the company (and MPOB) handed to the mainstream Malaysian media, IOI’s complaint cases in Sarawak and Ketapang remain unresolved four years later. .

The evidence that IOI’s estates in Ketapang were knowingly and deliberately proceeding to clear land without being in possession of all permits required was simply overwhelming. Yet, in an apparent attempt to justify its unwillingness or inability to enforce RSPO’s written rules on IOI Group, RSPO’s Grievance Panel frivolously invented language that does not exist in RSPO’s standards and procedures (“deliberately” and “knowingly”). The complainants perceived RSPO’s final decision as an unfair unilateral dismissal of their documented case. However, complainants were effectively blocked from seeking redress: RSPO had no independent appeal body. Consequently, several complainants whom thought that RSPO would offer a mechanism where environmental justice could be sought, disengaged from the process. Remaining complainants proceeded with formulating General Assembly Resolution 6f, which would be adopted by an overwhelming three-quarter majority of RSPO’s membership in November 2013. Because RSPO had let the company off without demanding systemic change, it was expected that IOI would fall back into non-compliance. Hence this update of the TGTBT report.

RSPO’s dismissal of complainants’ Ketapang case: May 3, 2012

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3 May 2012

Talking Sustainability? Recent non-compliances with RSPO and SPOM

Aerial image of active fires besides a drainage canal constructed outside PT BSS’ IPKH boundary. Coordinates: 478984.67 m E; 9679561.81 m S; alt. 49m. Image: Aidenvironment, 23 February 2014

Landsat 11 February 2014

Top left: PT BSS development plan for 2014 – 2015 for the southern section (source: NPP, March 2014); top right: development status as of January 2014; bottom left: PT BSS development as of November 2014

•  PT BSS was in a rush to fully open PT BSS in 2014, and ignored its management plan, as published in its NPP on the RSPO website (March 2014);

•  The rapid development of PT BSS resulted in several non-compliances with IOI’s sustainability commitments

Land development in PT BSS, 2014: conspicuously well ahead of schedule

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Developed prior to NPP 2014

2015

November 2014

A whole HCV site was lost in PT BSS in 2014

After already having constructed a canal through HCV Site #2 early 2014, practically all forest in HCV site #2 disappeared between November 2014 and February 2015. Although no estate blocking is visible within the site, the clearing sharply follows boundaries.

Left: ‘indicative HCV map’ of PT BSS. Site #2 highlighted with red box. Source: NPP documentation/Aksenta

•  During a resurvey of peatlands in PT BBS, Aksenta found:

•  On 30 January 2014, IOI’s Senior Environment, Health and Safety manager signed up to a peat land restoration for the deep peat area identified by Aksenta:

PT BSS ‘accidentally’ cleared deep peat forest

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•  Deep peat (>3m) identified by Aksenta field survey (white and orange line). Image left: January 2014; image right: March 2014:

One day before IOI committed to the peatland restoration project, this deep peat block was still fully forested (WorldView2 image, 29-1-2014):

After IOI signed up to the peat restoration project in writing, PT BSS still cleared all peat forest in the restoration project area

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Northern section of PT BSS, east of the nursery Clockwise: June 2013; January 2014; August 2014; February 2015.

In spite of public policy commitments, IOI continued to deforest in PT BSS throughout 2014

“Manifesto” or SPOM Policy (6 January 2014): “Protection of peat lands regardless of depth in new developments.” “No deforestation through the conservation of High Carbon Stock (HCS) forests”

•  IOI Loders Croklaan’s new policy “Taking Responsibility” was first released online on 13 November; •  Even thereafter, deforestation continued •  The clearance of 113 ha of forest was confirmed on the ground in February 2015;

IOI continued to deforest in PT BSS throughout 2014

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Still forested on 18 November 2014

Landsat 20 February 2015

Landsat 18 November 2014

Deforested by 20 February 2015

Set to be deforested

Talking Responsibility?

New forestland occupation by PT BNS

Picture of forestland and peatland encroachment by PT BNS: Aidenvironment, May 2011

The TGTBT report highlighted that IOI’s subsidiary PT BNS had illegally occupied some 1,000 ha of designated Production Forest. On April 29, 2011, IOI’s Chief Executive Officer Dato’ Lee Yeow Chor: •  Admitted that PT BNS had been “overplanting” (clearing

outside concession boundaries), measuring 800 ha; •  Stated that “IOI has discontinued the operational

activities in the overplanted production forestland and allowed natural vegetation to grow”;

•  Promised that in future, “IOI will follow the legal process in a sequential manner and ensure that the different maps from different government departments are in order prior to planting.”

Right: map showing PT BNS’ Location Permit boundary (black) and IUP boundary

(red) and adjacent designated forestland (733/Menhut-II/2014).

PT BNS: illegal forestland occupation

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Yes: the “overplanted” area previously highlighted in the TGTBT report of March 2010 appears to be abandoned (but not restored): WorldView1, 29 January 2014 However, PT BNS did not just “overplant” 800 ha inside forestland, it encroached into an area three times larger: 2,300 ha (area marked with blue boundary on the image right).

Did PT BNS abandon the “overplanted” land?

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No: PT BNS now actively manages plantations inside designated Production Forest further to the south, a new development since the TGTBT report. This is land within its Plantation Business Permit (IUP) boundary which overlaps with designated forestland (white in image below). In spite of the Group CEO having publicly committed to abide by Indonesia’s laws, PT BNS did not conduct due ground verification process with the responsible government authority (BPKH). There are no records to show that PT BNS has applied for or had seen approved a forestland exchange (tukar menukar) arrangement under Government Regulation (PP) 60/2012. Consequently, PT BNS still violates Indonesia’s Forestry Act nr. 41/1999. In September 2014, local media cited an anonymous source in September 2014 whom raised that PT BNS had planted oil palm outside its IUP boundary (suspected sites shown in red, image below). A local BNS manager had reportedly denied the allegation to Jawapos earlier on. If confirmed, PT BNS would still be in violation of Indonesia’s Plantation Act nr.18/2004 (revised 2014). Total contested area of forestland occupation covers some 850 ha.

Did PT BNS abandon all forestland (kawasan hutan)?

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PT BNS’ plantings inside forestland (kawasan hutan), Feb. 2015

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Landsat 18 November 2014

Forestland release boundary

IUP boundary

Old clearing outside IUP boundary?

Well fertilized palms

Comparable land use pattern

Field images 24 February 2015

More broken promises: still no NPPs for PT BNS and PT SKS

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On April 29, 2011, Dato’ Lee Yeow Chor stated to Bursa Malaysia and RSPO: Over six years after PT SKS and PT BNS commenced planting, five years after NPP came into force (1.1.2010) and four years after IOI’s CEO committed to follow the NPP, IOI has yet to publish its NPPs for these subsidiaries. In its ACOP 2013-2014, IOI reported that it faced challenges upstream: “NPP for new development in Indonesia takes too long to implement with Indonesian SEIA and HCV assessments.” This disclosure is not credible, considering that the company spared no opportunity in April 2011 to argue that all RSPO requirements were already complied with:

No credible review of IOI’s Time Bound Plans

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CB Report date Reported TBP Comments/evaluation

SGS (MY) May ‘08 2011 latest Correctly reports: no activity on the ground in Ketapang. However, no assessment of TBP appropriateness.

SGS (MY) Feb ‘09 Dec. 2012 Reports that PT SKS and BNS aim to clear 10,000 ha by the end of 2009. "Without any immediate undesirable circumstances, the plan is considered within reach”. No TPB, no review of appropriateness.

SIRIM Apr. ‘10 None reported Biased reporting on FoE NL-IOI dialogue, favoring company interest. No review of TBP appropriateness.

2012: Accreditation Services International (ASI) takes over the role of accreditation of CBs from RSPO

Intertek Sep. ‘13 Dec. 2016 No reference to PT BSS. No review of TBP appropriateness.

Intertek Dec. ‘13 Dec. 2017 Claims to have verified by due diligence that IOI complies with art. 4.2.4 of Certification Systems and found no non-compliance. No review of TBP appropriateness.

BSI Feb. 14 “Audit date pending uplifting suspension”

BSi has reviewed IOI’s Time Bound Plan and considers the programme to be challenging to implement as it will require a uniform, across the geographic spread of its operations in Peninsular Malaysia, Sabah and Indonesia.

March 2015: ASI de-accredits SGS (Malaysia) under the RSPO program

In spite of of dedicated workshop for IOI’s CBs, organized by Tenanganita and Aidenvironment in May 2011, RSPO’s accredited Certification Bodies never seriously reviewed IOI’s TBPs for Ketapang for ambition and compliance.

Summary of IOI’s non-compliances with art. 4.2.4 of RSPO Certification Systems (version June 2007, revised 30 August 2011)

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1.  HCV site #2 in PT BSS was cleared some time between April 2014 and February 2015, i.e. after the HCV study and NPP was completed. Furthermore, deep peat forest was cleared even after the company committed in writing to restore deep peat clearance. Active fires in PT BSS in early 2014.

2.  No NPPs for PT SKS and PT BNS as of March 2015, four years after the CEO promised to follow

RSPO’s rules. PT BSS’s NPP was wrongly categorized for notification only. IOI could not present documentary evidence that approvals for developing the land were obtained before 1st January 2010. At the time when PT BSS entered its NPP, it had already undertaken activities on the ground in at least 2,700 ha. Once the public Notification was cleared in March 2014, PT BSS quickly cleared most of the concession and thus abandoned the management plan presented in its NPP documentation.

3.  Evidence suggests that PT BNS still actively manages plantations inside forestland, regardless of

the Group CEO having promised to abandon all forestland encroached, which was also found to be much larger than previously thought. Additionally, media have recently reported that PT BNS also operates plantations outside its IUP boundary. Small encroachments outside PT BSS boundary suspected.

4.  Complainants were never consulted by any Certification Body in a target manner, not even after NGOs had invested in a workshop dedicated to IOI’s CBs in March 2011. ASI’s role in CB accreditation from 2012 onward has not led to improvement: there are no credible CB reviews of Time Bound Plan for any of IOI’s subsidiaries in Ketapang.

5.  Furthermore, in its 2013/14 ACOP, IOI failed to comply with RSPO GA Resolution 6g (2013) filed by ZLS, WRI and others, on the submission of concession maps.

Based on RSPO’s Partial Certification rules, noting that IOI is a ‘repeat offender’, why should the RSPO Complaints Panel not suspend all current CSPO certificates held by IOI Group this time?

PT SKS, PT BNS and PT BSS are all majority owned by IOI Corp.