Haze puts Indonesia pulpwood plantations in a hot spot

Singapore

THE haze is back, and along with it the witch-hunt for culprits reminiscent of the days in June 2013 when smog from raging forest fires in Indonesia last enveloped the region in an unwelcomed hug.

Amid the reduced visibility, what is obscured too is the change that has taken place quietly in the plantation sector in the last two years, with most companies having put in place new sustainability policies. But implementing these has been a challenge, they say - hazy regulations, coupled with the Indonesian government's lack of political will, make for a complex landscape to navigate altogether.

In the last two years, the palm oil industry reached a tipping point when Wilmar International and Golden Agri-Resources - which together trade about half the global supply - declared that their sustainability policies would apply not just to their own plantations, but also to those of their suppliers. This started a wave of similar pronouncements among other large palm oil players, bringing across the entire value chain of the industry aligned sustainability standards for the first time.

Already, this has borne fruit. Only 3 per cent of the hot spots between Sept 7 and Sept 14 were seen on oil palm concessions, according to data from the Global Forest Watch (GFW) programme by Washington-based advocacy group World Resources Institute (WRI); no such data was available in 2013, but palm oil firms had been widely blamed by the Indonesian government and non-governmental organisations.

"It is clear that the palm oil industry has taken a firm stance against slash-and-burn practices," said Wilmar chief sustainability officer Jeremy Goon. "The industry is transforming; over 85 per cent of the palm oil trade is now covered by sustainability policies that call for an end to deforestation, development on peat and exploitation of people and local communities."

Industry observers agree. Rabobank managing director of asset-based finance for Southeast Asia Geraldine Lim, who is also a director for the Roundtable of Sustainable Palm Oil (RSPO), told The Business Times that in the past three years there has been an increased focus by palm oil companies to commit to the RSPO's principles and criteria.

"As a result, we have seen many plantation companies intensifying their internal policies and being more transparent on these commitments to ensure they can meet global sustainable standards," she said.

Rabobank, like many international banks engaged in commodity trade financing, uses sustainability as a key criterion for lending. According to Ms Lim, the Dutch bank starts sustainability assessments in the first instance of dealing with potential clients.

This pressure from banks, as well as from large consumer multinational firms like Unilever, is seen as the key reason behind the change of heart in palm oil firms in recent years.

But while palm oil firms have gotten off relatively easily this time round, paper and pulp companies have come under heavy fire as 48 per cent of fire alerts were found to be on pulpwood plantations by GFW in its recent analysis.

Indonesia's national police chief General Badrodin Haiti was quoted by local media as saying on Wednesday that the police has charged 10 companies with violating the environmental law, though he refused to divulge their names due to ongoing investigations. Another government official added that if found guilty, these firms will be placed on the government's blacklist and have their permits revoked.

Said a senior plantation firm executive who declined to be named: "It's been quite hysterical. There are people looking for scapegoats to blame."

According to both palm oil and paper and pulp companies, the situation on the ground is much more complex than many understand.

Echoing the sentiments of many in the plantation sector, Aida Greenbury, managing director of sustainability at Asia Pulp and Paper Group (APP), said: "Fire is a hugely complex issue, involving the rights of local communities, illegal activity by small enterprises often with political links and fundamental complexities over land use rights, maps, ownership and protection."

APP is the largest paper and pulp company in Indonesia and, like Golden Agri, is a subsidiary of the Sinar Mas conglomerate.

What has emerged thanks to GFW's data is that smallholder farmers are behind many of the fire spots - 48 per cent of fire alerts were seen outside pulpwood, logging and palm oil concessions. And even when they are in concessions, these are sometimes carried by wind and topography from outside the concession areas, said plantation firms.

"Due to the El Nino phenomenon resulting in a prolonged dry season, fires have started outside of (our) concessions but have then spread into some of our concessions," said a Golden Agri-Resources spokesman. "Currently both vegetation and soil are extremely dry and water levels in rivers and streams have fallen, creating a conducive environment for fires to catch and spread."

Ms Greenbury observed the same for APP, which manages concessions covering 2.6 million hectares - or almost 35 times the size of Singapore - in Indonesia.

"The fires are usually started by illegal activity by individuals, whether inside or outside of our concession areas, usually to open land in order to claim the area. These practices are unfortunately very common, and occur not only in areas managed by companies but also in various protected forests managed by the government," she said.

The root problem, said the unnamed plantation firm executive, is rural poverty. "It is much easier for them to set fire to clear land than to use other mechanical means ... it's a way of life."

Recognising this, many companies have started community engagement programmes - on top of placing fire-fighting brigades, some numbering in the hundreds, and infrastructure in their concessions.

Golden Agri plans to start involving the community in several concessions in jointly managed conservation plans in the near future. "This will involve a holistic approach on managing the land and conserving forests which will also help mitigate fire incidents," said the spokesman.

Wilmar said it is working with reputable NGOs such as Wild Asia and IDH to help independent smallholders achieve RSPO certification, the benefits of which include improved yields and market access.

April Group, another large Indonesian paper and pulp company which produces the PaperOne brand of office paper, in July launched a village programme to work with the community through incentives, support to livelihood and capacity-building.

Even as large plantation companies pour millions of dollars into both fire-fighting capabilities as well as longer-term community engagement programmes, one of the biggest challenges they face, some privately say, is the Indonesian government's lack of political will.

Local provincial laws can sometimes differ from federal laws, allowing for burning of land up to two hectares, said the senior plantation executive.

And even when both are aligned, the lack of enforcement means that the laws have no impact. "The real culprits are still out there and will continue to be out there," he said. "If there was strict enforcement the whole dynamic will change."

Besides differing regulations, monitoring vast tracts of plantation land for fire is also challenging given their sheer size and the presence of small local communities with their own land within concessions.

And when fires occur, it is difficult to ascertain who the culprit is and how it started. "How do you absolutely determine who set the fire, and what was the actual cause of the fire?" said the executive, adding that companies would not set fire to their own crops.

The lack of a common map that governments, companies and non-governmental organisations can refer to further complicates matters, as everyone brings their own map to the table.

There are efforts being made toward a One Map initiative. Golden Agri, which supports the initiative together with WRI and other palm oil majors, said this is scheduled to begin in the near future in Riau, and that consultations with multi-stakeholders are currently ongoing as a preparatory step.

But some doubt that it will be completed any time soon, given the lack of political will. "It should have been done a few years ago," said the senior plantation executive.

"If Indonesia had a comprehensive One Map of the whole country, detailing exactly where the peat areas, the protected areas, and the high biodiversity areas are - and they can do it if they want - then the government can simply not give out peatland and high conservation value areas (to plantation companies)."

"But the government keeps dishing out licences like that," he added, "perhaps because they want to earn money."

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