Salim Group, Pepsico and Nestle connected to illegal rainforest clearance in Borneo

Major international banks and brands connected to company controlled by notorious Indonesian business tycoon, knowingly clear-cutting tropical rainforests  

A new report exposes one of the largest cases in recent years of ongoing, illegal clearance of tropical rainforests in Borneo. Currently, approximately 10,000 hectares of peat forest have been cleared illegally for future palm oil plantations, despite Indonesian regulations and company commitments against further peat development and deforestation.

Two palm oil plantation companies are responsible for the clearance, and both are controlled by or associated with business tycoon Mr. Anthoni Salim.

Mr. Salim heads Indonesia’s largest conglomerate, The Salim Group. A broad network of companies, The Salim Group most notably includes Indofood, the joint venture partner of major snack food companies PepsiCo and Nestle, and First Pacific, the joint owner of Goodman Fielder.

The Salim Group was first made aware of the ongoing deforestation in February 2016, but failed to intervene despite repeated government instructions to halt peat forest development. Instead, as the report shows, one of the subsidiary companies had the Indonesian government’s peatland moratorium map changed, even as the maps prepared by the Indonesian Peat Restoration Agency (BRG) marked most of the land bank as “peatlands prioritized for protection”.

“This report provides clear evidence of shady business dealings and inaction at the highest levels of business, all while tropical rainforests continue to fall for Conflict Palm Oil,” said Gemma Tillack, Forest Policy Director with Rainforest Action Network (RAN). “Meanwhile, The Salim Group’s financiers and business partners––like PepsiCo––are complicit in the illegal deforestation, as they continue to do business with Salim without issue.

PepsiCo, Nestle and Wilmar must bring their business partner into compliance with Indonesian law and sustainability norms of deforestation-free development or exit their business relationships.

The Salim Group companies are marred by ongoing conflict. Major banks, including Citibank and Rabobank, are connected to the illegal deforestation through their financing of the Salim Group, despite having policies against it. Japanese and Indonesian banks, including Mizuho and Bank Central Asia, stand out as the top lenders most exposed due to their lack of policies prohibiting such destructive activities.

“Billions of dollars in corporate loans, and finance from bonds and shares, have all flowed to the Salim Group companies despite Mr Salim’s connection to ongoing illegal deforestation,” said Vemund Olsen from Rainforest Foundation Norway. “This report exposes the failure of large banks––including those that have been repeatedly warned about the Group’s environmental, social and governance risks––to address their role in facilitating carbon-intensive peat destruction. Banks need to step up their commitments to climate change and stop bankrolling peat destruction.”

The report shows how the business dealings of Mr. Salim have come into question. The business empire is split into publicly listed companies controlled by The Salim Group that have declared, although failed to uphold, commitments to transparency and sustainability, and Salim-related shadow companies––or “business-on-the-side” companies as they are known in Indonesia––that continue to clear tropical forests and drain protected peatlands.

“This isn’t the first time that companies in the Salim Group have been exposed for destructive practices,” said Kiki Taufik, head of Greenpeace’s Indonesian forests campaign. “The Salim Group is one of the worst offenders and has gone out of its way to keep its destructive operations separate from the public face of the Indofood empire. That’s why companies need to take responsibility for ensuring that they only use palm oil from responsible producers that protect rainforests and respect human rights.”

A summary of the findings of this report was sent to Mr. Salim, members of his management teams and the executive director of PT Indofood Agri for their response. No response was received from them at the time of writing. The banks and investors named in this report were also given an opportunity to comment on the findings of this report, and responses have been incorporated in the body of the report.

Citigroup later advised that it is cancelling its loans to IndoAgri and its subsidiaries, with immediate effect, and was assessing its exposure to the palm oil companies named in this report.

Peatlands are critical carbon sinks, safely storing greenhouse gases out of the atmosphere.

Peat forests are particularly protected by Indonesian legal regulation because of its high fire risk––it is almost impossible to put out once on fire––and its importance in global climate regulation. Each hectare of tropical peat drained for plantation development emits an average of 55 metric tons of CO2 every year, roughly equivalent to burning more than 6,000 gallons of gasoline. The 10,000 ha of peatland clearance is equivalent to 550,000 metric tons of CO2 emissions every year. For comparison, the average passenger vehicle emits about 5 metric tons of CO2 each year.

“Consumers around the world are demanding deforestation-free products, and are calling for urgent action from banks and brands,” said Fatah Sadaoui with SumOfUs. “We can not stand by and watch the continued deforestation and growing climate chaos caused by banks’ investments or brands demand for Conflict Palm Oil.”

The report, based on research is compiled by AidEnvironment, was commissioned by Rainforest Action Network (RAN), Rainforest Foundation Norway (RFN), and SumOfUs.