A surge in illegal deforestation by palm oil growers in one of Southeast Asia’s most biodiverse national parks has been linked to companies with no-deforestation commitments that have recently been granted multi-million dollar sustainability-linked loans.
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An investigation by Rainforest Action Network (RAN) using satellite imaging and field analysis identified a four-fold increase in forest clearance in the Rawa Singkil wildlife reserve in Indonesia’s Leuser ecosystem in the last three years.
The study found that 2,577 hectares of forest had been cleared inside the reserve since 2015, the year that much of the palm oil industry committed to stop clearing natural forests. Three-quarters of the recorded forest loss has occured after 2020 – the cut-off date for forest loss stipulated by the European Union Deforestation Regulation (EUDR).
The findings would mean that the implicated companies are technically not eligible to sell palm oil to European markets when the EUDR – which has been delayed following pressure from palm oil lobbying groups – comes into force.
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The evidence clearly shows that palm oil sourced from illegally cleared land is infiltrating global supply chains, putting iconic species like the Sumatran orangutan at grave risk.
Gemma Tillack, forest policy director, Rainforest Action Network
Rawa Singkil wildlife reserve is part of the Leuser ecosystem, the only habitat on Earth where orangutans, rhinoceros, elephants and tigers co-exist, in a 2.6 million hectare expanse of forest on the island of Sumatra. It is also among the world’s priority conservation landscapes because of its carbon-rich peat soils.
While deforestation in Indonesia is often blamed on smallholders that use traditional slash-and-burn techniques to clear land for planting, RAN found that those responsible for chopping forests in the reserve are powerful “land speculators”. The report did not disclose their identities, although RAN has done so in previous investigations.
It said land speculators are locally influential individuals who often have formal positions that enable them to trade land titles with outside parties and typically have multiple land ownership certificates.
RAN suggested that the land development is an attempt to clear peat forests before the national government finalises a field validation of the reserve boundaries to reduce its size and “normalise” the illegally cleared areas.
Rainforest Action Network’s investigation found increased deforestation in the Rawa Singkil wildlife reserve between 2016 and 2024, with an acceleration in forest loss post-2020 – the cut-off date for deforestation stipulated by the European Union Deforestation Regulation. Source: RAN
The mills that received fresh fruit bunches (FFB) from land cleared in the Rawa Singkil wildlife reserve were identified as owned by PT Global Sawit Semesta (PT GSS), which was implicated in deforestation in a report by RAN in 2022, and PT Aceh Trumon Anugerah Kita (PT ATAK). These mills received the FFB from a broker named UD Iqbal Jaya.
PT GSS supplies Apical, owned by Royal Golden Eagle (RGE), and Musim Mas, another palm oil giant headquartered in Singapore. These companies, which supply oil to global brands such as Procter & Gamble, Nestlé, PepsiCo and Unilever, have had no deforestation, no peat, no exploitation (NDPE) commitments in place since 2015 and 2014, respectively.
A Musim Mas spokesperson said that it shared RAN’s concerns about encroachment in the reserve and has been engaging with its suppliers in Aceh in recent years “to increase their awareness about, and capacity to comply with, our no deforestation requirements.”
“Some suppliers have been excluded from our supply chain. We are currently investigating the findings from RAN, engaging both with RAN and with our suppliers,” it said.
Musim Mas suppliers, as well as those of rival palm traders including Permata Hijau, Golden Agri-Resources and Wilmar, have been linked to illegal forest clearing in the Rawa Singkil wildlife reserve over the last five years in other investigations by RAN.
RAN highlighted a failing in traceability systems that establish exactly where a palm oil plot was grown as key to companies struggling to weed deforestation out of their supply chains. Granular traceability is a key compliance requirement of Europe’s anti-deforestation law.
An Apical spokesperson said that after engaging with RAN, it engaged with PT GSS, which it confirmed as a supplier, to look into its dealings with UD Iqbal Jaya, the broker that sourced the oil from the reserve. It said it has no supplier arrangement with PT ATAK.
“PT GSS has informed Apical that as a precautionary measure, it has suspended UD Iqbal Jaya as of 25 October 2024, and any crops delivered from this supplier have been rejected through PT GSS’ weighbridge system until investigations are concluded. We will continue to monitor the measures taken by PT GSS to ensure strict adherence to its traceability and sustainable sourcing standards,” the spokesperson said.
Apical said it remains committed to responsible production through its sustainability and sourcing policies and is in discussions to develop a project for the Aceh Sustainable Palm Oil Roadmap, which was launched last year to promote deforestation-free palm oil farming in Aceh.
Deforestation-linked loans?
RAN’s report noted that Musim Mas and RGE had recently been granted sustainability-linked loans (SLLs), which give companies access to low-cost finance on the condition that they meet certain sustainability criteria.
In August, RAN called out Mitsubishi UFJ Financial Group (MUFG), a Japanese banking giant, for “sustainable finance greenwash” for lending millions in SLLs to RGE, despite the resources firm’s alleged links to deforestation through suppliers. RGE denied any connection to the implicated growers.
The key performance indicators (KPIs) that underpinned RGE’s loans included increasing the number of suppliers carrying out independent traceability verification to 100 per cent by 2025.
MUFG, which is RGE’s major lender, declined to comment on RAN’s report.
In September, Musim Mas announced its first SLL through Dutch lender Rabobank, which analysis by Eco-Business found did not sufficiently verify who would be tracking progress that underpins the loan, according to industry best practice. Among the KPIs for Musim Mas’ SLL was for the company to maintain a deforestation-free supply chain.
Rabobank, Musim Mas’ major lender, said it was unable to comment in response to the report.
The environmental campaign group said that in order to arrest forest loss in the Rawa Singkil wildlife reserve, investment is needed in “low-carbon, community-led, small-scale” agriculture that respects community rights.
The deforestation in the Rawa Singkil wildlife reserve is consistent with a national spike in palm oil-linked deforestation in the world’s biggest producer of the edible oil seen last year. However, the trend jars with a decline in deforestation observed elsewhere in the Leuser ecosystem.
