New investigation raises questions over corporate links to Indonesian palm oil deforestation
LONDON: A new investigation by the London-based Environmental Investigation Agency (EIA) and Indonesian partner Kaoem Telepak (KT) has uncovered evidence raising serious questions about whether corporate separation is allowing major palm oil businesses to distance themselves from companies associated with extensive deforestation in Indonesia.
The investigation, Corporate Connections and Unanswered Questions – The links between KAS Group and the Fangiono palm oil empire, examines the highly opaque KAS Group, previously known as New Borneo Agri (NBA) or the Sulaidy Group.
Companies associated with the group have repeatedly ranked among Indonesia’s largest palm oil deforesters.
The central concern is simple – while KAS is presented as a separate corporate group, EIA and KT have identified a pattern of apparent operational, commercial and personnel connections from KAS to First Resources and FAP Agri, two major palm oil businesses controlled by members of Indonesia’s Fangiono family.
This matters because corporate separation can potentially place environmentally damaging operations outside the sustainability commitments, scrutiny and accountability applied to a larger corporate group. If companies are genuinely independent, they should operate as such. The evidence raises questions about whether that is the case.
Among the findings, EIA and KT identified recent instances in which KAS group companies are described as part of First Resources. We also found indications that the KAS group was involved in First Resources palm oil concessions (PT PMP and PT PPM) which were acquired and subsequently sold in South Sorong. These concessions are now owned by a company (PT HAM) which has the same ultimate beneficial owner, a British Virgin Islands company (Zarvex Global Ltd), as a shipping company (PT BMS) associated with First Resources.
Also identified were apparent personnel and commercial overlaps involving KAS and FAP Agri, including evidence indicating that a Commissioner of KAS companies is also FAP Agri’s Commercial Head and documents recording transactions between companies in the two groups.
KAS itself has an extraordinarily limited public corporate presence despite reportedly controlling about 70,000 hectares of land, operating six palm oil mills and employing about 15,000 people. Its corporate structure ultimately leads to entities registered in the British Virgin Islands whose beneficial owners are not publicly disclosed.
EIA Forests Campaigner Ben Melling said: “This is about accountability. A company cannot simply be judged by the environmental record of the businesses which formally carry its name if, behind the corporate structure, there are significant links to other companies which are clearing forests.
“We are not alleging that corporate separation is in itself illegal. We are saying that the evidence raises serious questions about whether these companies are as independent as they have been presented – and whether corporate structures are allowing deforestation to fall through an accountability gap.”
First Resources has previously rejected allegations that KAS/NBA is a “shadow company” and told EIA it is not a subsidiary, associated company, related party or interested person of KAS. It also said it has neither purchased palm oil products from, nor entered into other transactions with, KAS.
FAP Agri has disputed our interpretation of evidence concerning transactions and personnel links and said that commercial relationships do not demonstrate corporate control.
EIA and KT are calling on First Resources and FAP Agri to provide full public disclosure of their historical and current relationships with KAS, including transactions, management and staffing links, procurement, logistics and financing arrangements as the evidence raises significant concerns that First Resources and FAP Agri may not be publicly disclosing the true nature of their relationship with the Group – creating a serious risk of misleading investors and buyers.
Melling added: “Until these questions are satisfactorily answered, we are also calling on buyers and other stakeholders to suspend identified sourcing, trading and other relationships with the KAS Group.”
CONTACTS FOR MEDIA
- Ben Melling, EIA Forests Campaigner, via benmelling[at]eia-international.org
- Paul Newman, EIA UK Senior Press & Communications Officer, via press[at]eia-international.org
EDITORS’ NOTES
- The Environmental Investigation Agency (EIA) investigates and campaigns against environmental crime and abuse. Our undercover investigations expose transnational wildlife crime, with a focus on elephants, pangolins and tigers, and forest crimes such as illegal logging and deforestation for cash crops such as palm oil. We work to avert climate catastrophe by investigating the criminal trade in refrigerant gases, strengthening and enforcing regional and international agreements that tackle fossil fuels and climate super-pollutants, including ozone-depleting substances, hydrofluorocarbons and methane, and advocating corporate and policy measures to promote sustainable cooling. We work to safeguard global marine ecosystems by addressing the threats posed by plastic pollution, bycatch and commercial exploitation of whales, dolphins and porpoises. Our findings are used in hard-hitting reports to campaign for new legislation, improved governance and more effective enforcement. Our field experience is used to provide guidance to enforcement agencies and we form partnerships with local groups and activists and support their work through hands-on training.
- Kaoem Telapak (KT) is an environmental non-governmental organisation (NGO) working across forestry, agriculture, fisheries, and the rights of indigenous peoples and local communities. KT is working to strengthen governance in these broad overlapping areas, including monitoring illegal and illicit activities and communicating the findings. In 2016, KT grew out of Telapak, which was originally founded in 1996. KT is a member-based organisation.
- Read and download The Kalimantan Agro Sejahtera (KAS) Group – New Name, Old Tricks at https://eia-international.org/wp-content/uploads/EIA-Corporate-Connections-and-Unanswered-Questions-report-MEDIA-COPY.pdf
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