Consumer goods supply chain linked to “anonymous” deforestation crisis in Indonesian Borneo

27 Mar 2024 --- Environmental organizations sound the alarm on pulpwood and palm oil deforestation in Indonesian Borneo, “driven by PT Mayawana Persada,” which reportedly destroyed habitats for endangered species such as the Bornean orangutan, helmeted hornbill, sun bear and white-bearded gibbon.

The newly released report, “Deforestation Anonymous,” looks at deforestation in the West Kalimantan province, where PT Mayawana Persada apparently cleared over 33,000 hectares of rainforest — “nearly half the size of Singapore” — in the past three years.

Although Mayawana’s ownership is unclear, Greenpeace International says evidence points to its association with the Royal Golden Eagle Group (RGE), a global palm oil producer of pulp, paper, tissue and packaging. 

RGE Group “refutes the existence of any links” to Mayawana. However, the environmental activist finds “corporate documents, operational management connections and supply chain links” between the two companies.

Previous criticism of RGE’s unsustainable practices was directed toward its subsidiaries.

“Among the buyers of RGE’s products are some of the world’s largest fashion brands, consumer goods manufacturers and mass retailers, many of which make sustainability claims to customers about not causing rainforest destruction or harming communities,” alleges Greenpeace.

Land clearing operations by PT Mayawana Persada in July 2023 (Image credit: Deforestation Anonymous report).The report was published by Auriga Nusantara, Environmental Paper Network, Greenpeace International, Woods & Wayside International and Rainforest Action Network. They call for Mayawana’s “immediate halt and conversion of peatlands within its concession, to resolve its conflicts with local communities and to disclose the names of its beneficial owner.”

Web of secrecy
The report suggests a trend in which corporations like Mayawana use “complex corporate” frameworks involving “offshore secrecy jurisdictions” to continue deforestation. The ownership structure of Mayawana is reportedly obscured by a web of holding companies that connect to offshore jurisdictions such as the British Virgin Islands and Samoa, making it difficult to pinpoint the real beneficiaries of the deforestation.

“This complex corporate structure, in effect, hides the ultimate beneficial owner(s) of the company and can shield them from the legal and reputational risks of destroying such vast tracts of tropical forest,” says forest campaign team leader Arie Rompas of Greenpeace Indonesia.

Campaigner Hilman Afif of Auriga Nusantara adds: “Over 55,000 hectares of rainforest remain in the Mayawana concession, making it a critical test case for efforts to control deforestation in Indonesia.”

Clouding accountability
The report states “shadow companies” are hindering accountability with “anonymous ownership [seen as] a common problem” in Indonesia’s pulp and palm oil sector.The Gensaok, Lelayang and Bagan Poring indigenous communities protested Mayawana’s destruction of forests that were considered sacred (Image credit: Deforestation Anonymous report).

The report claims there is growing evidence of “major firms involved in the production and trade of palm oil and timber products” who circumvent their policies and restrictions by creating shadow companies.

It states ambiguity could be created by family members owning the shadow companies with “artificial boundaries” but are, in fact, linked to one company. 

Deforestation developments
The EU deforestation regulation requires the traceability of products linked to non-deforested areas.

An EU official previously told Personal Care Insights that operators and traders have to prove that the products are deforestation-free (produced on land not subject to deforestation after December 2020) and legal (compliant with all relevant applicable laws in force in the country of production).

However, in September, Indonesia, Brazil and Malaysia sent a joint letter to the EU and the Commission, flagging “multiple concerns” regarding the deforestation regulation for being “inherently discriminatory.” 

The document accompanied signatures from ambassadors of Argentina, Bolivia, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Paraguay, Peru, Thailand, Nigeria, Ghana, Ivory Coast and Honduras.

In response, the EC told us they are aware of the concerns raised. The “EU is significantly stepping up its engagement, both bilaterally with producer and consumer countries and in relevant multilateral fora, to ensure the new law is effectively implemented while working in partnership with producer countries.

Major beauty players operate under the banner of transparency. Estée Lauder Companies BASF, RSPO, Business Watch Indonesia and the Indonesian Agency for Agricultural Extension each claim to maintain sustainable palm oil farming activities, speaking to Personal Care Insights about their farming methods, including “future-proofing supply chains” for sustainable oleochemicals.

By Venya Patel