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HSBC Drops Indonesian Palm Oil After Illegal Deforestation Report

Bill DiBenedetto | Tuesday July 13th, 2010 | 1 Comment

HSBC, the international and emerging markets bank based in London, last week said it has sold-off its shares in the Indonesian palm oil producer Sinar Mas following a Greenpeace report of alleged illegal forest clearance practices.

Meanwhile, other companies, including Unilever, Kraft and Nestle, are backing out of palm oil contracts with Sinar Mas. (See May 19 3p story on Nestle’s action.)

Sinar Mas Group is a conglomerate with extensive interests in both the palm oil and pulp and paper industries.

A December 2009 Greenpeace report, “Illegal Forest Clearance and RSPO Greenwash: Case Studies of Sinar Mas,” asserts that Sinar Mas and its palm oil companies are engaging in “land clearance without environmental impact statements and land clearance without timber cutting permits.” In addition the group is engaging in land clearance of deep peat.

All of those activities “are in breach of Indonesian law and the principles and criteria of the Roundtable on Sustainable Palm Oil (RSPO) of which a number of Sinar Mas companies are members,” the report says. Sinar Mas Group is responsible for about 10 percent of Indonesia’s palm oil production. Its interests are controlled largely through a Singapore-based holding company, Golden Agri Resources (GAR), which owns a number of other companies in the palm oil sector, including PT Smart. GAR has denied Greenpeace’s forest clearance allegations with respect to PT Smart.

“Sinar Mas is engaging in widespread illegal deforestation and peatland clearance in Indonesia, practices which release vast amounts of carbon dioxide into the atmosphere and help Indonesia win the title of the world’s third largest greenhouse gas emitter, after China and the US,” Greenpeace says. The report estimates that the annual CO2 emissions from the company’s palm oil concessions in Indonesia’s Riau province amount to 2.5m tons.

HSBC’s decision to dump its Sinar Mas shares came under Greenpeace pressure and viral campaigning; the bank received nearly 10,000 emails following the Greenpeace report. In addition to HSBC, Unilever and Kraft have announced suspension of Sinar Mas contracts for palm oil. Nestlé recently followed suit and has adopted an anti-deforestation policy.

Tesco last week said it would stop buying pulp and paper from Sinar Mas after Greenpeace released a report, ‘How Sinar Mas is Pulping the Planet’.

Sinar Mas is busted apparently on two fronts: According to Greenpeace, it’s engaging in illegal deforestation practices while misusing its RSPO membership as a buffer and shield. Or as Greenpeace says, “crafting an illusion of commitment to sustainability” while doing exactly the opposite, namely destroying forests and peatlands.


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