Response to the IOI Group-Aksenta verification of Aidenvironment s RSPO complaint

Response to the IOI Group-Aksenta verification of Aidenvironment s RSPO complaint 25 June 2015 IOI s verification exercise In April 2015 a team of IOI, Loders Croklaan and Aksenta staff jointly set out to verify the RSPOcomplaint against IOI Group raised by Aidenvironment on 30 March 2015. The team had selected five allegations : 1. Rapid development of PT. BSS resulted in several non-compliances with IOI s sustainability commitments 2. HCV site was lost in PT. BSS in 2014 3. After IOI signed up to the peat restoration project in writing, PT. BSS still cleared all peat forest in the restoration project area 4. In spite of public policy commitments, IOI continued to deforest in PT. BSS throughout 2014 5. PT. BNS: illegal forestland occupation On 10 June 2015, IOI posted on its website a report by Aksenta titled: Talking Sustainability: Seeking the Truth. Findings on the Aidenvironment Allegations to PT. BSS and PT. BNS. May 2015. The website of IOI Group states: These complaints are found to be unproven and unsubstantiated except for complaint no. (2). Aidenvironment s position This assessment is IOI s own. The Aksenta report does not conclude that the allegations are unproven and unsubstantiated. Careful review of the information contained in the report, in fact, confirms that the allegations are true. Aidenvironment upholds its full complaint. Considering that IOI s non-compliances come at the expense of the credibility of the RSPO brand, Aidenvironment sustains its expectation that RSPO enforces Article 4.2.4(k) of RSPO s Certification Systems (June 2007, revised August 2011) upon IOI Group, its subsidiary Loders Croklaan included. Our updated overview of detailed complaint elements and expectations is presented in an Annex below. This replaces the overview in the complaint form filed on 30 March. Aidenvironment s substantive response the Aksenta verification report is presented directly below: 1

1. Hasty land development Aksenta s report confirms Aidenvironment s claim that IOI s subsidiary PT BSS commenced land development in an area scheduled for planting in 2015. In fact, one month after the NPP notification period was closed, PT BSS s management decided to drain the area to counter flooding. The report proceeds to show that much of the area was subsequently burnt, after completion of the drainage works. Aksenta does not question whether the extensive drainage and stacking activities could be plausible cause of the outbreak of these severe land fires that affected the concession area in 2014. No information is provided as to whether fire prevention recommendations listed in the NPP documentation were implemented. Instead, the report repeatedly suggests - but fails to prove - that local farmers are responsible for the fires. 2. Loss of HCV site #2 The Aksenta report affirms that High Conservation Value (HCV) site Nr. #2, measuring ~90 ha, was lost. The report confirms that company management had ordered the construction of a drainage canal through the HCV area to mitigate flooding outside the HCV area. The verification team cared to calculate that the canal affected only 1% of the HCV area. However, the HCV site was lost to fire in November 2014. Again, the report attempts to place the blame of the loss of the HCV area on local farmers. The possibility that the drainage canal contributed to the fire that destroyed the HCV area in November 2014 is not considered. 3. Peatland degradation Following confirmation that PT BSS had cleared deep peat in contravention with RSPO P&C and Group policy, IOI s Senior Environment, Health and Safety signed up to a deep peat restoration project in PT BSS on 30 January 2014. From Aksenta s report, it can be deducted that no instructions were issued to stop any further deep peat clearance or that such instructions were not followed until weeks later in February. It is now confirmed that at least 25 ha of forested deep peat was cleared after the commitment was signed on to. In addition, satellite imagery presented in Aksenta s report reveals that the company has also constructed drainage canals inside several other conservation areas, including peatlands (<3m depth) identified by Aksenta in its previous role as HCV/HCS assessor. The verification report does not note this. Obviously, there is no conservation benefit to be gained from saving peatland from oil palm planting when the water contained therein is drained out: subsidence and greenhouse gas emissions will occur regardless of vegetation cover. RSPO BMP Manual for peatland management points out that a major factor for peat fires is the drying out of peatland. Fires usually occur because of drainage being carried out for plantations (or other reasons). 2

Drainage canals and peat areas (white) in PT BSS western section overlaid (27 June 2014). 4. Continued deforestation Aksenta s report confirms that deforestation (outside HCV areas) continued in PT BSS throughout 2014. This includes forests identified by Aksenta as holding high carbon stock (HCS with>40 t/c/ha). The Aksenta report states that the forest that Aidenvironment had highlighted as having been cleared after November 2014 was confirmed not a forest. This statement contradicts the results of Aksenta s own ground truthing and carbon stock inventory survey of June 2014, which had identified some 100 ha of HCS forest in and around the disputed area. It is merely that the assessor later decided, on grounds not justified in the verification report, that some 80 ha of the identified HCS forest was not a forest. Landsat image of February 2014 showing Aksenta s 20 ha consolidated HCS plot (white boundary) near Jelai river after consolidation by Aksenta. Compare the small plot to the surrounding vegetation (dark green) that remained before PT BSS cleared it. 3

High carbon stock forest in PT BSS, according to Aksenta June 2014: based on ground truthing and carbon stock inventory, pre-consolidation High carbon stock forest in PT BSS, according to Aksenta June 2014: post consolidation 4

High carbon stock forest (shown in red) based on Aksenta s ground truthing and carbon stock inventory near Sungai Jelai, prior to consolidation (source: Aksenta) PT BSS stacking progress and the consolidated HCS set aside (source: Aksenta) Aidenvironment s claim that forest was still being throughout 2014 and in 2015 is thus confirmed. Aksenta s report also confirms that company management only halted forest (>40 t/c/ha) clearance in the far north of PT BSS (east of the nursery) in February 2014, a month after the company CEO (re-) committed the group to No Deforestation. The area had been opened up by roads/canals. Maps in Aksenta s report suggest that this area too, was burnt in October 2014. 5

5. Permits and forestland occupation The issue of PT BNS forestland encroachment is must be understood in relation to the issuance of the company s Plantation Business Permit (IUP): In March 2010, IOI s response to Milieudefensie s Too Green to be True report claimed that plantation business permits (Izin Usaha Perkebunan or IUP) have been issued to all the three (3) operating companies. (p.2). In February 2011, the SGS (M) verification/npp report remained silent on the question whether PT BNS held an IUP when it commencing land clearing in early 2009. In May 2011, Aidenvironment found that PT BNS s IUP was on 4 December 2009, nine months after land development had commenced. This finding was reported to RSPO on 18 May 2011, on page 16 of Complainants response to IOI Corporation proposed action plans for Long Teran Kanan and Ketapang. In May 2015, Aksenta now claims that PT BNS was re-issued a Plantation Business License (IUP) on 4 December 2009. Re-issued means that an IUP licence had been previously issued. However, no evidence is presented that PT BNS and PT SKS were ever issued IUPs prior to 4-12-2009. 1 It is confirmed that PT SKS and PT BNS cleared some 10,o00 ha of land without having first secured their IUPs and Environmental Permits. From an administrative point of view, the post issuance of these permits may have been whitewashed the land clearing in violation of plantation and environmental laws; from the perspective of the public interest palm oil produced by a founding member of RSPO from such land grab cannot reasonably be marketed as sustainable without seeing the credibility of the RSPO brand undermined. Furthermore, PT BNS continues to violate Indonesia s forestry law. Aidenvironment s allegation that PT BNS manages oil palm inside the production forest of Manis Mata where its IUP overlaps the forestland is confirmed by Aksenta s report. Pictures on p.48 of the report show a company tractor and a boundary marker inside the forest reserve. Aksenta offers no further relevant legal analysis. No evidence is presented that PT BNS had applied for compensation settlement with the Indonesian Ministry of Forestry under Government Regulation Nr. 60/2012. IOI s previous defence is repeated by Aksenta that PT BNS did not knowingly encroach inside the forest reserve in 2009. At present, however, IOI knowingly occupies the forestland where its IUP area overlaps with the forest reserve. IOI Group is thus a confirmed repeat offender. Finally, Aksenta claims that PT BNS has not planted or managed any area outside its IUP boundary, as reported by local media in November 2014. The assessors did not, however, visit all sites of interest. It remains to be confirmed that the site shown below was/is not opened up and/or occupied by PT BNS. 1 In 2011, it had already surfaced that IOI operated on the basis of an irregularly issued local government permit. It was also confirmed that the terms of this permit were not complied with. The list of IUPs issued in West Kalimantan does not mention any prior issuance of IUPs to PT BNS and PT SKS, other than 4-12-2009 (http://ditjenbun.pertanian.go.id/pascapanen/tinymcpuk/gambar/file/kalbar.pdf). 6

Contested site: red line centre image Potential land development outside PT BNS IUP boundary (white line). Image: Landsat April 2014 Canals/roads constructed in 2009 or 2010. Contested land Aksenta s report suggests that IOI Group accepts responsibility for a mere 0.9 hectares of non-compliance, namely the canal constructed in HCV site #2 in PT BSS. Aidenvironment, on the other hand, contests approximately 1,000 ha of land in PT BSS and PT BNS as being non-compliant with RSPO and company policy, adding to the previous ~10,000 ha that PT SKS and PT BNS had cleared in 2009 without IUPs and Environmental Permits. Thus, Aidenvironment contests 11,000 ha of IOI s land bank in Ketapang district. Of this contested land, a portion to be determined will have to be abandoned and/or be restored, whilst land that remains in production shall comply with RSPO s P&C but remains ineligible for RSPO-certification unit until the leases expire. 7

Annex: Updated complaint elements and expectations SNA Group subsidiaries PT Sukses Karya Sawit (PT SKS) Commenced land development in Jan. 2009 PT Berkat Nabati Sawit (PT BNS) Commenced land development in March 2009 Complaint No NPP Notification published Substandard review of Time-Bound Plan (TBP) by CBs Land clearing without Environmental Permit (2009) Land clearing without Plantation Business Permit (IUP) in 2009 Fraudulent statement on activity on the ground issued to Provincial authority No concession boundary filed in ACOP 2013-14 No NPP Notification published Substandard review of Time-Bound Plan (TBP) by CBs Land clearing without Environmental Permit (2009) Land clearing without Plantation Business Permit (IUP) (2009) Fraudulent statement on activity on the ground issued to Provincial authority (2009) Encroachment in Manis Mata Production Forest (2009) New encroachment in forestland (present) Local media report alleges encroachment outside IUP boundary (September 2014) Applicable Standard/ Procedure/ policy 4.2.4(e) 4.2.4(b) RSPO Code of 2.1 RSPO General Assembly Resolution 6g (2013) 4.2.4(e) 4.2.4(b) RSPO Code of 2.1 IUP 4.2.4(h) Unconfirmed, 4.2.4(h) IOI s previous response Publicly committed to follow NPP (April 2011) IOI commited to submit revised TBS IOI s current response Complainant s expectations RSPO CP to state whether the SGS (M) verification report (2011) qualifies as an NPP for SNA Group and whether a new NPP is required. RSPO CP and/or ASI to state whether IOI s CBs conducted due review of IOI s TBPs and RSPO s Partial Certification requirements IOI commits to not submit land cleared in violation of environmental IOI commits to not submit land cleared in violation of the plantation IOI commits to not submit land cleared in violation of environmental Not applicable IOI to explain why its ACOP did not report the relevant concession boundary Publicly committed to follow NPP (April 2011) IOI commited to submit revised TBS Permit was reissued RSPO CP to state whether the SGS (M) verification report (2011) qualifies as an NPP for SNA Group and whether a new NPP is required. RSPO CP and/or ASI to state whether IOI s CBs conducted due review of IOI s TBPs and RSPO s Partial Certification requirements IOI commits to not submit land cleared in violation of environmental IOI to demonstrate that PT BNS held a valid IUP prior to 4 December 2009. IOI commits to not submit land cleared in violation of the plantation IOI commits to not submit land cleared in violation of the plantation Aide s observation that the land was abandoned confirmed IUP overlaps with forestland Aksenta confirmed no company planting in one out of two disputed sites Unless IOI can demonstrate it applied for tukar menukar (compensation) under Government Regulation Nr.60/2012, the overlapping area planted up must be abandoned. Suspect site remains to be verified. 8

PT Bumi Sawit Sejahtera (PT BSS) Commenced land development in 2009; recommenced in 2014 No concession boundary filed in ACOP 2013-14 Substandard review of Time-Bound Plan (TBP) by CBs HCV site #2 lost, no buffer zone RSPO General Assembly Resolution 6g (2013) 4.2.4(b) RSPO C.5.2; 4.2.4(e) Not applicable IOI to explain why its ACOP did not report the relevant concession boundary IOI commited to submit revised TBS RSPO membership Loss of HCV site acknowledged. IOI is not responsible RSPO CP to state whether PT BSS NPP was rightly categorized as ongoing planting (i.e. not subject to public consultation) RSPO CP to state whether IOI complied with RSPO C5.2.2. Guidance: "Avoiding damage to and deterioration of HCV habitats such as by ensuring that HCV areas are connected, corridors are conserved, and buffer zones around HCV areas are created". Canal constructed through HCV #2 prior to NPP, not reported in NPP RSPO C.5.2; 4.2.4(e) RSPO membership IOI is responsible. RSPO CP to state the consequences when RSPO members with certified units clear or degrade indentified HCV areas, if any, other than art. 4.2.4(k). Deep peat clearance, after signing up to a peat restoration project RSPO C7.4; RSPO Code of 2.1 Company committed to avoid deep peat (2009 onward) Drainage canals in forest and peat setasides Fire/burning RSPO C7.7 RSPO membership; various Indonesian laws Land scheduled for development in 2015 already cleared in 2014 RSPO Code of 2.1; NPP RSPO membership NPP acknowledged noncompliance; Aksenta report affirms that land clearing was not immediately stopped. It is repeatedly suggested that local farmers are to be blamed for land fires. In April 2014, PT BSS management decided to drain the area scheduled for development in 2015. RSPO CP to verify whether PT BSS complies with the guidelines of RSPO s BMP Manual for peat management and restoration. RSPO CP to verify whether PT BSS complies with the guidelines of RSPO s BMP Manual for peat management and restoration. RSPO CP to clarify what the consequences are when management plans published in NPPs are not followed. If necessary, it may have to be confirmed that no planting took place in areas stacked in 2014, scheduled for planting in 2015. Incorrect categorization of NPP as 'on-going' planting No concession boundary filed in ACOP 2013-14 NPP DPAS 5(iv); RSPO Code of 2.1 RSPO General Assembly Resolution 6g (2013) Publicly committed to follow NPP (April 2011) RSPO CP to identify whom decided on the categorization and to state whether the NPP was appropriately categorized for notification only Not applicable IOI to explain why its ACOP did not report the relevant concession boundary NPP DPAS: Detailed Process and Action Steps for RSPO New Planting Procedure. 20.11.2012 RSPO Technical : RSPO Certification Systems (revised August 2011) RSPO CP: Complaints Panel SNA: Sawit Nabati Agro (holding of IOI s plantation subsidiaries) 9