APP ACKNOWLEDGES LINKS TO CONTROVERSIAL SUPPLIERS, BUT FAILS TO RELEASE AN AUDITOR’S REPORT

Seven Takeaways From a New Report by Asia Pulp & Paper on Links to its Pulpwood Suppliers in Indonesia

  1. The Executive Summary was prepare by APP/Sinar Mas and is not an independent auditor’s report.
  2. APP/Sinar Mas does not deny claims that current and/or former employees are shareholders, directors, and commissioners of pulpwood suppliers that APP previously described as “independent”.
  3. APP admits that four wood suppliers involved in the 2015 fires are partners over which it has “significant influence”, including possible ownership and management links.
  4. APP acknowledges wood purchses from PT Fajar Surya Swadaya, an East Kalimantan supplier engaged in deforestation.
  5. Following previous denials, APP acknowledges a partner relationship with PT Sarana Bina Semesta Alam, an East Kalimantan chip mill, which sourced rainforest wood from deforestation.
  6. Ownership of PT Muara Sungai Landak (MSL), a plantation company found to be responsible for deforestation and peatland destruction, is attributed to a few rogue ex-employees, when even APP’s current Sustainability Director is a former shareholder.
  7. The declared list of APP companies does not cover the full scope of the APP/Sinar Mas Group’s corporate structure.

These are the key takeaways from APP Assessment on Its Link With Industrial Forest Plantations in Indonesia that the company released on March 15, 2019.

The Executive Summary is presented as fulfilling APP’s commitment to involve an independent auditor to review its corporate structure and linkages to suppliers, which was communicated in response to the Koalisi Anti Mafia Hutan’s report Removing the Corporate Mask.

30/05/2018

Koalisi Anti Mafia Hutan published Removing the Corporate Mask

 

May 30, 2018, Koalisi Anti Mafia Hutan published Removing the Corporate Mask, a report showing that 24 of APP’s 27 wood suppliers it described as “independent” in fact had links through managament and ownership to APP and Sinar Mas.

This report also examined the corporate ownership structure of APP/Sinar Mas, finding that 20 offshore companies in tax haven jurisdictions were involved.

31/05/2018

One day later, APP issued a press release responding to Removing the Corporate Mask report

 

One day later, APP issued a press release responding to Removing the Corporate Mask report.

It stated that APP would involve an independent auditor to review possible linkages with all forestry businesses in Indonesia.

05/08/2018

Deforestation-tainted wood entered APP’s industry

 

While APP/Sinar Mas had yet to report any progress on this review, on August 5, 2018 Koalisi Anti Mafia Hutan found that a supply of deforestation-tainted wood entered APP’s industry at its Indah Kiat Pulp & Paper Mill in Riau, Sumatra from the concession of PT Fajar Surya Swadaya (FSS) in East Kalimantan.

  • Before-APP
    After-APP
    Before APP After

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    After-APP
    Before APP After

APP confirmed this finding and said the purchase of wood was an “administrative lapse”. It acknowledged using some of the wood to make pallets and as fuel for its boilers.

 

This is not in accordance with APP’s “zero deforestation” commitment.

15/08/2018

APP denied ownership or control of SBSA

 

In the above finding, Koalisi Anti Mafia Hutan indicated that another mill affiliated with APP/Sinar Mas, PT Sarana Bina Semesta Alam (SBSA), a wood chip mill in East Kalimantan, received wood as well from PT Fajar Surya Swadaya. PT SBSA also bought wood from the clearance of tropical rainforests from PT Silva Rimba Lestari.

August 15, 2018, APP denied ownership or control of PT SBSA, the wood chip mill that bought rainforest wood. In fact, PT SBSA had exported its wood chip supplies to APP’s pulp and paper mill Hainan Jinhai in China.

 

In March 2019, seven months later, APP acknowledges it has “significant control” over its “partner” PT SBSA.

16/08/2018

the Forest Stewardship Council (FSC) suspended the roadmap process to end APP’s disassociation

On August 16, 2018, the Forest Stewardship Council (FSC) suspended the roadmap process to end APP’s disassociation, citing concerns regarding APP’s corporate structure and links to unacceptable forest management activities.

15/03/2019

APP published a report regarding its relationship to HTI (pulpwood plantation) companies in Indonesia

But it does not cover the entire corporate structure of APP. Nor is it transparent about APP’s relationship with companies that destroy forest and peatlands.

The Koalisi Anti Mafia Hutan again encourages APP/Sinar Mas to comply with Presidential Regulation 13/2018 on beneficial ownership of suppliers in Indonesia, and to be transparent about all companies under its control globally. In addition, APP/Sinar Mas should release audited financial reports of its “partner” pulpwood suppliers.

FULL REPORT