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Last update: 2016-09-22 10:45:29 BankTrack & Environmental Paper Network
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About Asia Pulp and Paper - APP
APP is the pulp and paper susbidiary of the Sinar Mas Group, and is one of the largest pulp and paper companies in the world. The Sinar Mas Group was founded in 1962 by Eka Tjipta Widjaja. It is an Indonesian conglomerate with activities in the pulp and paper, palm oil, food, and finance sectors. APP's first paper mill, Tjiwi Kimia, started production in 1978. This was followed by the 1986 acquisition of the pulp and paper producer Indah Kiat. The APP Group produces more than 19 million tons of pulp and paper annually, and operates in Indonesia and China.
In February 2013, after two decades of severe environmental conflicts, and many high profile companies breaking their commercial ties with APP, the company announced a new Forest Conservation Policy. Among other commitments, the policy extended an immediate moratorium on logging in natural forests and peatlands to all its suppliers. The company also committed to protect high conservation value areas and high carbon stock forests and recognized that indigenous and local communities may have customary rights to land, overlapping with its pulp plantations. APP's new policy was cautiously welcomed by many organisations like Greenpeace, but they also said they will continue to monitor its implementation. They have suggested a set of milestones to assess whether APP effectively implements and adequately improves its policy commitments.
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APP is part of the Sinar Mas Group, a large conglomerate with interests in forestry, coal mining, palm oil and banking companies. Sinar Mar is owned by its founder Eka Tjipta Widjaja.
APP has a well-documented legacy of adverse social and environmental impacts associated with its operations. In February 2013, after widespread public criticism of the company, community opposition and pressure from customers and investors, APP released a Forest Conservation Policy that, along with other public commitments made by the company between 2012-2014, set out the company's intention to reform its practices and address its legacy of destruction and conflict. In January 2014, APP announced that the Rainforest Alliance (RA) would conduct an independent evaluation of the company's performance in implementing its social and environmental commitments.
A joint NGO submission report to the RA, found that APP was not responding adequately to conflicts brought to its attention in at least four provinces. The report also states that, though the exact number is not available publicly, hundreds of unresolved land and other disputes with communities across APP's and its suppliers' land bank still remain. APP responds that they have done conflict mapping and are developing action plans to address conflicts across their land bank, however, affected communities and other key stakeholders have not had the opportunity to participate in the conflict mapping process or in the development of action plans that concern their own future and interests.
The 2015 Rainforest Alliance report confirms that APP has made moderate progress in completing a full inventory of the many conflicts that exist with communities, and developing action plans and priorities. In March 2015, security guards of an APP affiliate company were accused of brutally murdering a villager. APP has condemned the murder.
APP has been criticized for massive deforestation in the past. In February 2013 it adopted a Forest Conservation Policy and significant improvements have been noted since.
In its 2015 evaluation report, Rainforest Alliance found that APP had met its commitments to halt the cutting of natural forest for the purposes of establishing new plantation areas, stop the building of new canals in peatlands by its suppliers and stop all transport of MTH for its own pulp supply by August 2013. Rainforest Alliance also found that as of August 15, 2014 APP pulp mills in Indonesia are receiving only plantation fiber from its supply sources in Indonesia. APP has also met the commitments to develop measures to assess its global supply chain by developing an association procedure for future pulpwood suppliers and ensuring existing suppliers meet APP's Responsible Fibre Procurement and Processing Policy (RFPPP). APP has also eliminated one non-cooperative supplier.
In the past, the company has been accused of illegal logging and of building illegal logging roads. APP has also been criticized for clear-cutting in seven out of the existing eight natural forest landscapes in Sumatra: Senepis, Giam Siak Kecil, Kampar, Kerumutan, Bukit Tigapuluh, Tesso Nilo and Libo. APP was considered responsible for massive conversion of peatlands into pulp plantations, with the release of 67-86 million tonnes of CO2 in 2006. In 2012, a Greenpeace study found that APP was illegally logging ramin, a tree species that is protected under Indonesian law as well as the CITIES convention. In 2013, the Sumatra-based NGO coalition Eyes on the Forest, estimated that APP/SMG had pulped more than 2 million hectares of tropical forests in Sumatra since it started pulp production in 1984.
APP has also been linked to illegal deforestation in Cambodia.
Expansion plans Past environmental and social impacts of the massive destruction of natural forests are linked to past and current over-capacity in pulp mills in Indonesia. Expansion of production capacity in this delicate and sensitive phase could pose a serious threat to the improvement and implementation of APP’s new Forest Conservation Policy, undermining the opportunity for a major change in the Indonesian pulp & paper sector.
In the last two years APP has announced a number of new production lines in China and Indonesia, increasing paper production capacity by almost 3 millions tonnes/year:
•APP is building the Oki pulp and paper mill in South Sumatra, with a capacity of 2 million tons/year. APP argues that an unpublished report by the TFT, from September 2014, confirms it does have enough plantations to source from. Subsequent reports by Greenomics and Forest Trends contradicts this.
•According to RISI, APP announced in 2012 that it would build 42 tissue paper machines with a huge combined capacity of more than one million tonnes per year in China.
• In 2013 APP has unveiled plans to erect 15 large tissue machines with a combined capacity of 900,000 million tonnes pulp per year at two of its mills in Indonesia, most of them to be installed at its Perawang mill, in Sumatra.
A sudden increase of production capacity by APP could bring the company to face severe fibre shortage, discouraging it from reforming its practices on the ground. This scenario could even lead the company to fail to adequately implement its new policy.
A 2015 joint NGO submission report to the RA found that APP has not fully respected the right of communities affected by the proposed OKI Pulp and Paper mill to give or withhold their consent (FPIC). APP has already started construction of the mill, yet the company has not followed key elements of its own SOP/protocol relating to FPIC.
Companies that ended their contracts with APP By December 2009, Staples, Office Depot and Woolworths had stopped selling APP products, following the release of the Greenpeace reports Burning up Borneo and Illegal Forest Clearance and RSPO Greenwash (they resumed commercial relationships in 2014). In 2010, after the publication of the report Pulping the Planet, other large multinational groups like Carrefour, Gucci, H&M, Hugo Boss, Volkswagen, Fuji Xerox, Ricoh, Sainsbury’s, Marks & Spencer and Tesco also ended their contracts with APP. The Greenpeace campaign led to over 100 countries to cut ties with APP. In response, APP published its Forest Conservation Policy in February 2013.
Police Investigation In 2007, the Riau Police and the Indonesian National Police probed 14 companies as part of a widespread illegal logging case. Half of those cases were APP/SMG-associated companies.
In March 2014, the former governor of Indonesia's Riau province was sentenced to 14 years in prison and ordered to pay almost USD90,000 in fines for illegally issuing logging permits to APP subsidiaries. In addition, three wood suppliers of APP are among 14 companies which the Ministry of Environment has under examination for possible liability suits over environmental damages.
Will Asia Pulp & Paper default on its “zero deforestation” commitment?
This study by twelve international and Indonesian NGOs shows that in spite of its high-profile sustainability commitments, Asia Pulp & Paper (APP) is building one of the world's largest pulp mills in the Indonesian province of South Sumatra without a sustainable wood supply. The USD2.6 billion OKI Pulp & Paper Mills project will expand APP's wood demand by over 50%, with much of this coming from plantations on high-carbon peatlands.
For more detailed information about the financing of the project see the Profundo report "European banks financing controversial companies" (page 2).