Indonesian palm oil company Astra Agro Lestari (AAL) illegally cultivated the crop inside national forest estates, seized land from farmers and intimidated human rights defenders as it has expanded its plantations, according to an investigation by environmental groups.
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The report, released on Tuesday by Friends of the Earth (FOE) teams in Indonesia, the United States and the Netherlands, noted that previously investigated violations “appear to be more extensive than initially documented”.
AAL and its subsidiaries have been under scrutiny for environmental and human rights misdemeanours since 2022, following an earlier publication from FOE on the company’s impact, which have included land grabbing, and soil, air and water pollution.
AAL has denied the allegations, citing inadequate data used in the investigations.
“Astra Agro and all its subsidiaries operate by applicable laws and policies in Indonesia. The company has identified limitations in the data sources, which resulted in inaccuracies that do not reflect the actual conditions [on the ground],” said Fenny Sofyan, vice president of investor relations and public affairs at the company, which is Indonesia’s second largest palm oil grower.
According to the FOE report, close to 18,000 hectares (ha) of AAL’s palm oil concessions overlap with Indonesia’s forest estates, infringing on protected areas.
These overlaps are in six of Indonesia’s provinces, with the most prominent transgressions in Sulawesi, where over 2,000 ha of protected forests have been encroached upon by AAL’s plantations, the report finds.
AAL has been accused of failing to obtain free, prior and informed consent (FPIC) from impacted communities before converting their land into palm oil plantations, resulting in land conflicts in Central and West Sulawesi.
Additionally, two of AAL’s subsidiaries – PT Sawit Jaya Abadi and PT Rimbunan Alam Sentosa – have been flagged for operating without the required permits, a claim AAL disputes.
Under Indonesian forestry laws, the conversion of forest areas into plantations can only proceed when the company has obtained all the necessary permits, including a forest release letter and a cultivation permit, known as a Hak Guna Usaha (HGU) in Bahasa Indonesia.
Contentions over claims and data
AAL has refuted FOE’s claims regarding deforestation, marginalising local communities, and operating illegal plantations.
“Astra Agro’s sustainability policy was formally implemented in 2015, and it has not undertaken any expansion or new land clearing since then,” said Sofyan.
Instead, observed land clearance has been attributed to the replanting of existing plantations, she said.
The investigation was criticised for inadequate data use, relying on spatial data and satellite mapping to determine overlaps instead of government maps.
Yayasan Genesis Bengkulu, the Indonesian non-profit that carried out plantation research and analysis on behalf of FOE, also did not have access to verified HGU data, which AAL claims is essential for accurately determining plantation boundaries.
The palm oil producer has therefore called the conclusions “misleading”.
However, AAL did not share its official concession coordinates, and the government has not published HGU permits for public review.
To complicate matters, some of AAL’s plantations are situated on lands where valid permits were initially granted but the area has since been designated as a forest estate by the government.
According to company data, 14 subsidiaries were issued permits before the decree that designated the area as a forest estate, known in Bahasa Indonesia as Surat Keputusan Penetapan Kawasan Hutan.
“Regulatory changes always occur over time. Thus, there have been many cases of returning part of the HGU area to a forest area, even though the HGU was obtained long before,” said Sofyan.
However, FOE has highlighted irregularities surrounding AAL’s permit validity, noting that under Indonesian law, the government cannot designate areas with existing permits as forest estates. The environmental organisation has called for the government to provide more clarity and legal certainty.
Regarding the allegations of human rights violations, AAL maintains that while FPIC principles were not applicable when the plantations were established, the company had adhered to the best practices of that time, including community consultation processes closely aligned with current FPIC principles.
Consumer brands and financiers implicated
Ten brands have suspended sourcing from AAL and its subsidiaries, though many others continue to engage with the conglomerate, including major consumer goods corporation Unilever, one of the world’s biggest buyers of palm oil.
Based on Unilever’s 2022 mill list data, AAL is listed as one of its mills, though not as a direct supplier to the brand, which has publicly committed to using sustainable and deforestation-free palm oil.
A spokesperson for the company confirmed this. “Astra Agro Lestari is not a direct supplier of Unilever. The palm oil from the AAL sites in question is not indirectly linked to our supply chain via a third party.”
The spokesperson added that the company is assessing the situation under its grievance process and will not be able to comment on the report’s conclusions.
Agribusiness supplier Olam, also flagged for sourcing from mills associated with AAL’s subsidiaries, did not comment at the time of going to press.
Global financial firms including Vanguard and HSBC have also been implicated.
BlackRock has been singled out in the FOE report for its holdings, despite having voted against the re-election of AAL’s board of directors and commissioners in April 2023 due to concerns over the allegations.
The world’s largest asset manager holds 11 per cent of shares in the AAL group of companies as of September last year.
Others have chosen to divest from the group over climate and environmental concerns.
The Norges Bank joins 28 other financiers in the exclusion. In February, the financial institution excluded AAL’s parent companies, Jardine Matheson Holdings, Jardine Cycle & Carriage, and Astra International from the Norwegian Government Pension Fund Global (GPFG), which it manages.
FOE has criticised Jardine Matheson, which holds a majority stake in AAL’s parent company Astra International, for not using its leverage to seek redress.
In response to queries from Eco-Business, a Jardine Matheson spokesperson directed attention to AAL’s public statements on the matter, as well as AAL’s action plan which addresses the grievances raised.
The spokesperson also clarified that AAL is open to dialogue with both FOE and WALHI, the Indonesian chapter of FOE, and has offered to meet with the organisations to discuss additional measures to strengthen its systems and processes.
“Jardine Matheson firmly supports AAL’s commitment to transparency and its efforts to actively engage on this issue,” the company said in a statement.
Governance gaps, murky supply chains
AAL’s violations are reflective of wider governance and supply chain management issues in the palm oil industry, environmentalists say.
“The systemic problem is weak law enforcement and monitoring. This condition is what AAL continues to exploit,” said Uli Siagian, forest and plantation campaigner at WALHI.
A closed permit issuance process has also enabled AAL to deforest and convert Indonesia’s forests to monoculture plantations at a shocking pace, said the report.
Indonesia is the world’s largest palm oil producer, accounting for 40 per cent of the global market as of 2023. Palm oil has been identified as one of the main culprits for deforestation in the country, to which the Joko Widodo administration has responded with a ban on palm oil plantation expansion in 2018.
The moratorium has contributed to an overall declining trend in deforestation since 2012, though the exact reasons for the decline have been contested.
The moratorium has since expired, and deforestation rates have increased for the second year consecutive, reaching 30,000 ha in 2023. There are no plans to renew the moratorium.
Broader efforts to increase the sustainability of palm oil production have also faced hurdles, because monitoring and regulating palm oil is notoriously complex, with traceability a key concern across the supply chain.
While certification schemes from organisations like the Roundtable on Sustainable Palm Oil have sought to enhance traceability and transparency, institutional loopholes continue to undermine the process, placing such schemes at risk of exploitation.
“Companies can make rhetorical commitments to upholding human rights and achieving environmental sustainability, but talk is cheap. Accountability is required,” said Gaurav Madan, senior forest and land rights campaigner at FOE United States.
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