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Report: Illegally produced palm oil is financed by European banks

21 / 11 / 2013, Euractiv

Biofuels giants Bumitama and Wilmar have knowingly traded illegally-extracted palm oil from plantations that encroach on and threaten orangutan habitats, says a report released today (21 November). European banks are amongst the firms' biggest investors.The report, commissioned by Friends of the Earth (FoE), alleges that the Indonesian palm oil company Bumitama and subsidiary firms operated 'ghost estates' in plantations spread across 7,000 hectares which they lacked permits to run.
The plantations were based in West Kalimantan, a province on the Indonesian part of the island Borneo, but were not registered with the Indonesian forestry ministry of forestry, the report says.
Anne van Schaik, finance campaigner of FoE Europe and co-author of the report, says: “We have written to Bumitama and asked them repeatedly to prove the legality of the plantations, but they could not offer this so far.”
The FoE investigation, which utilised satellite imagery, trade data and on-the-ground report claims to have established that the land for the plantations was acquired from growers who unlawfully cleared vast tracts of rainforests, including sensitive orangutan habitat and protected forest reserves.
After the palm oil had been harvested, it was reportedly bought by Wilmar, a Singapore-based agribusiness company ranked as the world’s worst environmentally performing company by Newsweek magazine for the last two years.
Selling palm oil from unaccredited plantations is illegal, but van Schaik said that “this palm oil finds its way into the global supply chain of international trading in the product.”
It could then end up being used in Europe, where a target for providing 10% of fuel from renewable sources by 2020 encourages the use of biofuels.
The FoE report stresses the danger of deforestation in West Kalimantan. The Kalimantan province’s large rainforests are a vital habitat for orangutans – an endangered species. But Bumitama disregarded warnings that their plantations were encroaching on the jungle.
The International Animal Rescue filed a complaint in April with the Roundtable on Sustainable Palm Oil (RSPO), a platform organisation which sets voluntary guidelines on the cultivation of palm oil. Bumitama promised to halt its de-forestation – a promise they did not keep, according to the report, in which satellite imagery shows continuous deforestation of the area between May and September 2013.
In a reaction to EurActiv's questions, Bumitama put out a statement, saying the company and its subsidiaries "did not destroy the forest or kill any orang-utans", but acknowledged that "after conducting its own investigation, [we] noted that there were compliance gaps found in [our] adherence to the strict RSPO Principles and Criteria, mainly in the New Planting Procedures".
European investors involved
Bumitama Agri is based in Indonesia and controls around 200,000 hectares of plantation land banks. Amongst the main investors in the company is the British bank HSBC and Dutch bank Rabobank.
Both HSBC and the Dutch bank Rabobank provided significant loans to Bumitama. In an effort to increase pressure on Bumitama, FoE has flagged the issue with the European investors. “Both Rabobank and HSBC are very much looking into what comes out of the complaint at RSPO,” van Schaik says.

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