By Fergus Jensen and Bernadette Christina Munthe
JAKARTA (Reuters) - Palm oil sourced from illegally cleared rainforest areas in Indonesia has flowed through traders to major consumer goods brands despite widespread commitments to cease purchases of non-sustainable oil, a new report says.
Palm oil companies Royal Golden Eagle (RGE), Wilmar (WLIL.SI), Musim Mas Group and Golden Agri Resources (GAGR.SI) sold oil from 21 "tainted" mills to more than a dozen global brands including Nestle (NESN.S) and Unilever (ULVR.L) (UNVR.L), according to the report by Eyes on the Forest (EoF), a coalition of environmental NGOs including WWF-Indonesia.
In spot checks since 2011, EoF used GPS tracking to follow trucks carrying palm oil fruit, known as Fresh Fruit Bunches (FFBs), to mills from plantations within the Tesso Nilo National Park and Bukit Tigapuluh protected forest areas in central Sumatra.
"All companies bought directly or indirectly from at least some of the 21 implicated mills," according to the report, which calls for traceability on palm oil to be improved and to be extended to plantations that supply mills.
Forest cover on Indonesia's Sumatra island, home to endangered tigers, orangutans and elephants, had declined by more than half to 11 million hectares in 2016 from the 25 million hectares it had in 1985, as palm oil and other plantations have expanded and encroached on protected areas.
Nestle said in an emailed response it was "committed to tackling" deforestation. A company spokeswoman said the firm was working with partners to transform the palm oil industry "further down the supply chain".
Unilever said by email it publicly disclosed suppliers and mill details and was committed to increasing traceability in the palm oil supply chain "and to working with our suppliers and partners to resolve issues."
Unilever also said it was examining "details behind the investigation to determine the right approach and next steps".
Indonesia's Environment Ministry spokesman Djati Witjaksono Hadi said smallholders, "not companies", owned plantations in national parks.
Hadi referred further questions on the mills to the ministries of agriculture and industry, which did not immediately respond to requests for comment.
Similar issues were highlighted in earlier EoF reports including in 2016, but a lack of strict supervision by traders has led to more forest clearing and illegally grown palm oil entering global supply chains despite their commitments to improve traceability and stop deforestation, the report said.
"We acknowledge that it's really challenging to get traceability beyond the mill and going right down to the plantation source," Elizabeth Clarke, WWF global palm oil lead, told Reuters. "But it's absolutely paramount that they do this."
Among those mentioned in the report, Wilmar International (WLIL.SI) was accused of buying palm oil from PT Citra Riau Sarana (PT CRS) whose three mills were found to have bought FFBs from Tesso Nilo in 2011, 2012, 2015 and 2017, even though Wilmar sold its 95 percent stake in PT CRS in 2014.
"Whatever action they've been taking, it hasn't fixed that particular mill, and this is what we're asking these particular individuals to do," WWF's Clarke said.
Responding to the report, Wilmar said it had "continued to engage with PT CRS and to monitor their traceability system" from 2014. "While there was progress made on traceability, we have stopped purchasing from them since June 2018 for other reasons," Wilmar said in an emailed statement.
But Wilmar said it had not received "a clear confirmation from the authorities which companies are illegal in the landscape" despite making a request to the Environment Ministry.
PT CRS could not immediately be reached by phone for comment.
Sime Darby Plantation, also named in the report, said it had 94 percent visibility of its supply chain "which provides key customers access to traceability information that can help them make informed choices about the palm oil products that they purchase."
It also said it was working with non-governmental organisations (NGOs) to eradicate deforestation for the remaining 6 percent.
Daniel A. Prakarsa, head of downstream sustainability at Sinar Mas Agribusiness and Food, a subsidiary of Golden Agri, said the company considered 39 percent of its output to be fully traceable, and was targetting full traceability from the 427 mills of its suppliers by 2020.
"Our policy is to help suppliers to comply. Not just (saying) 'this is our standard, you must comply, otherwise we stop (buying)," he said.
Musim Mas Group did not immediately respond to a written request for comment. On its website, the group says it is working with smallholders and other stakeholders along the supply chain to achieve sustainable palm oil production.
Clarke from WWF said trading firms "need to make it very clear to the mills that they won't buy from them until they can provide assurance that it is 100 percent legal."
(Reporting by Fanny Potkin and Bernadette Christina Munthe in Jakarta, Aradhana Aravindan in Singapore and Emily Chow in Kuala Lumpur; Writing by Fergus Jensen; Editing by Edmund Blair)