- A new report highlights systemic social and environmental problems that continue to plague the Indonesian palm oil industry and ripple far up the global palm oil supply chain.
- The report looked at local and Indigenous communities living within and around 10 plantations and found that their human rights continued to be violated by the operation of these plantations.
- The documented violations included seizure of community lands without consent; involuntary displacement; denial of fundamental environmental rights; violence against displaced Indigenous peoples and communities; harassment; criminalization; and even killings of those trying to defend their lands and forests.
- The problems have persisted for decades due to ineffective, and sometimes lack of, due diligence by buyers and financiers along the global supply chain, the report says.
JAKARTA — Human rights abuses continue to fester in the Indonesian palm oil industry as global brands and financial institutions and investors turn a blind eye to the problem, a new report says.
The report by a coalition of NGOs documents the human rights and environmental impacts of 10 oil palm plantations in Indonesia that are currently supply to markets in the EU, U.K. and U.S., with consumer goods giants such as Nestlé and PepsiCo rounding out the supply chains.
The report found that local and Indigenous communities living within and around these 10 plantations continue to have their human rights violated by the operations of these plantations, which are the declared holdings of the Astra Agro Lestari, First Resources, Golden Agri-Resources/Sinar Mas, and Salim (Indofood) conglomerates.
The documented violations include seizure of community lands without consent; involuntary displacement; denial of fundamental environmental rights; violence against displaced Indigenous peoples and communities; harassment; criminalization; and even killings of those trying to defend their lands and forests.
“It is scandalous that Indigenous and rural communities endure years and sometimes decades without redress for harms inflicted by the palm oil industry, that continue to this day,” said Norman Jiwan, a Dayak Indigenous leader and co-author of the report.
Palm oil from these 10 plantations end up in the supply chains of numerous global brands, including Cargill, Nestlé, PepsiCo, Unilever, Wilmar International, Archer Daniels Midland and AAK.
And funding the operations of these plantations are prominent institutions and investors, including BlackRock, ABN-AMRO, Rabobank, Standard Chartered, Citigroup, Lloyds Banking Group, JP Morgan Chase, as well as various other banks and pension funds, according to the report.
“Our report is just the latest in a whole set of independent studies showing the Indonesian plantation sector and associated global palm oil trade are not complying with industry sustainability standards nor applicable laws,” Norman said.
Selling off problem assets
One of the cases highlighted in the report is the ongoing conflict between the Indigenous Dayak Hibun communities in the western part of Indonesian Borneo and plantation firm PT Mitra Austral Sejahtera (MAS).
The conflict started in 1996, when MAS obtained a location permit for the lands of the Dayak Hibun without their free, prior and informed consent, or FPIC. Despite that, MAS went on to obtain, in 2000, a right-to-cultivate permit, or HGU — the last in a series of licenses that oil palm companies must obtain before being allowed to start planting.
The HGU permit, valid until 2030, covers 8,741 hectares (21,600 acres) of land, of which 1,400 hectares (3,460 acres) overlap with the ancestral lands of the Dayak Hibun. As a result, the communities’ lives have been impacted by the plantation, with their sacred sites damaged and their environment degraded.
The land conflict has also led to injuries, threats, harassment and intimidation, and the criminal prosecution of four farmers seeking land justice.
Despite the conflict being well-documented over the years, MAS continues to be a supplier to Cargill, Nestlé, Unilever and Wilmar, and also supplies AAK via Cargill, according to the report.
Cargill had the case logged as “under investigation” in July 2019 without details and no updates in 2020.
Wilmar had also registered the case in its Grievance Dashboard.
Although MAS was named on Unilever’s 2018 mill list, Unilever said in May 2020 via its grievance tracker that MAS was now “outside” of its palm oil supply chain, though it precise status in 2021 is unclear.
Nestlé had not logged the conflict at the time the NGOs compiled their report.
In an attempt to seek remedy, the communities and the NGO Sawit Watch filed a formal complaint to the Roundtable on Sustainable Palm Oil (RSPO) in 2012, as MAS at the time was owned by Sime Darby, an RSPO member.
This complaint remains unresolved and still “under investigation,” eight years after the original grievance was lodged.
In 2019, Sime Darby sold MAS to PT Inti Nusa Sejahtera (INS), despite strong objections and pleas from the communities for Sime Darby to remain engaged.
The report says this shows how powerful palm oil conglomerates like Sime Darby are still permitted to wash their hands of responsibility for remedying community grievances by divesting “problematic” subsidiaries, even as formal complaints remain unresolved.
At the end of 2020, INS allegedly sold its majority stake in MAS to PT CAPITOL, citing difficulties in getting bank funding to finance acquisition, consolidation and operational activities. The communities affected by MAS’s operations have still not received any official notification of changes in the company’s ownership, according to the report.
The communities are also insisting that Sime Darby honor its earlier commitments to assist in resolving the case, the report says.
They say this can be done by providing funds to the Indonesian land agency to compensate MAS for relinquishing the disputed land to the Dayak communities, or to cover their legal costs to seek land restitution through the courts, the report adds.
The communities are also demanding the RSPO investigate Sime Darby’s divestment of MAS, given that RSPO members are discouraged from selling any subsidiaries subject to ongoing complaints, according to the report.
“It’s regrettable that the RSPO, Unilever, Sime Darby, PT Inti Nusa Sejahtera, PT CAPITOL and PT Mitra Austral Sejahtera have failed to remedy the human rights of Dayak Hibun communities in Kerunang and Entapang,” said Redatus Musa, a member of the Dayak Hibun community and the head of Entapang hamlet in West Kalimantan province.
On the issue of Sime Darby’s divestment from MAS, the RSPO pointed Mongabay to the resolution passed in November 2018 “discouraging” members from divesting units with active complaints.
“However, it is pertinent to note that the above resolution looks into measures to discourage members from divesting, and not to prohibit or refrain members from doing so as the RSPO recognizes its members’ rights to divest as part of its ongoing business dealings,” the RSPO told Mongabay in an email.
The RSPO added that its complaints panel may investigate the divestment “based on the independent legal review and the final comments from the parties of the complaint.”
Sime Darby did not respond to Mongabay’s questions on the issue.
Weak due diligence
Most of the companies in the supply chains of the plantations linked to human rights abuses, and some of the investors, are prominent members of the RSPO and other sustainability initiatives.
“Yet, despite the fact that the violations uncovered are clearly contrary to RSPO standards, as well as the companies’ own ‘No Deforestation, No Peat and No Exploitation’ [NDPE] policies, the trade and investment continues unchecked,” the report says.
This is because existing industry accountability mechanisms, such as the RSPO complaints system, are typically slow and ineffective, according to the report.
It highlights this lack of effectiveness in the case of the Dayak Hibun communities, whose complaint against MAS has languished for more than eight years at the RSPO.
Most of the businesses were also found to have ineffective due diligence systems in place to uphold their human rights responsibilities and commitments.
In 2019, the Corporate Human Rights Benchmark (CHRB) initiative found that 49% of 195 large global companies surveyed scored between 0 and 10% against a set of human rights due diligence indicators, while only one scored above 80%.
Responding to the criticisms, the RSPO said some cases could take a long time to resolve since its complaints system “follows a rigorous process to ensure the highest standards of assurance and integrity are upheld.”
“At times, this may result in lengthy investigations, especially for complex cases,” the RSPO told Mongabay in an email, adding that it continues to address any inefficiencies in its system and expedite the resolution of complaints.
The due diligence failings are even more prevalent among global and local financiers and investors of the palm oil industry. Many global financiers and the corporate agribusiness groups in Indonesia and elsewhere that they finance or control don’t have public grievance logs, according to the report.
Financiers should step up their game, said Linda Rosalina, a campaigner from TuK Indonesia, an NGO that advocates for social justice in the agribusiness sector.
“Banks and investors should have looked at these cases and taken an active role to ensure that their clients could improve [the situation on] the ground,” she said. “It’s important for banks and investors to improve their regulations to ensure the mitigation of impacts [of their clients’ activities] on the ground.”
The report also calls for greater transparency in the finances of the plantation sector, with many corporate groups failing to disclose their beneficial owners. This opacity has allowed the persistence of offshore financial jurisdictions and shadow companies to enable investments in the sector, according to the report.
This study and related investigations indicate that beneficial ownership of subsidiary companies associated with land conflicts and deforestation is not being disclosed by RSPO members like First Resources in potential violation of RSPO rules on transparency.
As a result, companies and their financiers are evading accountability for violations against the rights of local communities and the public.
“Our research in 2019 shows that less than 1%, or 0.7% to be exact, of companies have disclosed who their beneficial owners are,” Linda said. “This is a far cry from companies’ responsibilities to be transparent, and I think responsibilities are key.”
Falling through the cracks
While many conflicts are still awaiting resolution before the RSPO and other sustainability mechanisms, many others aren’t even picked up at all.
Tom Griffiths, responsible finance coordinator at the Forest Peoples Programme and co-author of the report, said those cases that come to the fore are only a sliver of the total conflicts brewing on the ground.
“The main finding [of the report] is that the impacts and grievances are not being picked up,” he said at the virtual launch of the report. “We know that companies increasingly have grievances logged or registered, but they only touch the tip of the iceberg of the grievances and harmful impacts.”
Most of the time, companies only respond to cases that are reported to the RSPO or documented in reports by major NGOs, Griffiths said.
“But other impacts that we have documented here are not being picked up or certainly not disclosed,” he said.
This is because companies further down the supply chain from these plantations appear to apply a flawed approach to the definition of community “grievances,” limited to formal complaints only, according to the report.
“This narrow focus is failing to identify numerous outstanding community concerns and grievances, which should be picked up and addressed through due diligence, thus overlooking unresolved human rights abuse cases in their operations and palm oil supply chains,” the report says.
These ongoing cases of human rights violations fall through the cracks despite companies and global food and beverage brands continuing to market their green credentials and claim to support due diligence and “environmental, social and governance” (ESG) principles.
The report calls for strengthening the due diligence process to identify the impacts that the whole supply chain has. Without it, affected communities will continue to be denied remedy, according to Griffiths.
“Many of these [communities], sometimes [they are] waiting for years or even decades, they have no remedy,” he said. “They’re still suffering from harmful impacts, and these are still ongoing.”