Cultivating conflict: How AAL, Brands and Big Finance capitalize on Indonesia’s Governance Gaps

Blog originally published by FoE US.

Today, Forests & Finance members Friends of the Earth US and Milieudefensie (Friends of the Earth Netherlands), together with WALHI (Friends of the Earth Indonesia), released a new report detailing how protracted land conflicts, governance failures, and a lack of accountability define Astra Agro Lestari’s operations in Indonesia. The report reveals that AAL’s environmental and governance violations appear to be more extensive than initially documented, including: illegal palm oil cultivation inside Indonesia’s forest estate; ongoing intimidation and criminalization of environmental human rights defenders; and several AAL subsidiaries operating without required permits.

The report – Cultivating Conflict: How Astra Agro Lestari, Brands and Big Finance Capitalize on Indonesia’s Governance Gaps – also details how consumer brands and agribusiness traders that source from AAL, and financiers that bankroll AAL, all take advantage of weak governance and administrative failures in Indonesia to maintain business as usual.

Key findings include: 

• 17 AAL subsidiaries’ palm oil concessions overlap with 17,664 hectares of Indonesia’s forest estate. 74 percent of AAL’s concessions in the forest estate are in Sulawesi, where 7 AAL subsidiaries’ concessions overlap with more than 13,000 hectares of Indonesia’s forest estate. 
• At least 1,100 hectares of AAL’s palm oil plantations in Indonesia’s forest estate appear to be illegal.
• Three AAL subsidiaries in Sulawesi are operating without the required cultivation permit (HGU).
• Agribusiness traders ADM, Bunge, Cargill, Olam – amongst others –  continue to source palm oil from mills associated with implicated AAL subsidiaries.
• At least 18 global consumer brands, including Unilever, Barry Callebaut, and General Mills, have a recent history of sourcing palm oil from AAL.
• Financiers including BlackRock, Vanguard, HSBC and Dutch pension fund ABP continue to provide substantial financing to AAL and its parent companies.

“AAL’s land grabbing, human rights abuses, and illegal operations should be a wake-up call,” said Uli Arta Siagian, Forest and Plantation Campaign Manager at WALHI National. “The Indonesian government should ensure the return of land to communities and farmers taken by AAL without consent. The Ministry of Agrarian Affairs and Spatial Planning should investigate AAL’s maps and permits and ensure open access to this data. Komnas HAM (Indonesia’s national human rights commission) should investigate AAL’s environmental and human rights abuses and transparently report on the results of this process. Plantation companies that are in violation of Indonesia’s permitting laws and regulations should have their permits revoked or reduced. In order to protect Indonesia’s last standing forests, plantation expansion inside the forest estate should be halted.” 

Today’s report comes two years after Friends of the Earth groups published evidence of AAL’s environmental and human rights violations, including violent land grabbing, criminalization of environmental human rights defenders, and degradation to rivers. As a result, consumer brands and financiers have had to rethink their increasingly risky business relationships with AAL. Since 2022, ten consumer brands have suspended palm oil sourcing from the company in some capacity. Norges Bank announced in February that it had excluded AAL’s parent companies Jardine Matheson and Astra International from the Norwegian Government Pension Fund Global. BlackRock – the world’s largest asset manager – has voted against directors at AAL and parent company Astra International due to ongoing environmental and human rights abuses. 

Instead of resolving protracted conflicts with communities and redressing long-standing grievances, AAL claims that Friends of the Earth’s allegations are “baseless.” In 2023, AAL embarked on a flawed process of unilateral investigation that failed to examine the majority of violations published in the 2022 report and ignored the fact that AAL never received the Free Prior, and Informed Consent (FPIC) of communities to operate on their lands. AAL continues to incorrectly assert that FPIC is not relevant because of when company operations began, however numerous international laws and frameworks make it clear that FPIC applies throughout the lifetime of operations, and is particularly applicable when communities are in conflict with a company and are being displaced from their lands. 

“Companies can make rhetorical commitments to upholding human rights and achieving environmental sustainability, but talk is cheap – accountability is required,” said Gaurav Madan, Senior Forest and Land Rights Campaigner at Friends of the Earth US. “It’s clear that AAL never received the consent of communities to operate on their lands and is ignoring the right to FPIC. Consumer brands and agribusiness traders should suspend palm oil sourcing from AAL and use their leverage to ensure land is returned. Financiers should adopt agribusiness exclusion policies that shift investment away from the dominant, destructive model of monoculture plantations.”

AAL’s abuses will be a notable concern for companies placing products on the European market. Starting in January 2025, the European Deforestation Regulation (EUDR) will require companies to demonstrate supply chains free of deforestation and illegalities, including respect for human rights protected under international law and the right to FPIC. In cases of noncompliance, companies can face significant sanctions, including fines, confiscation of goods, and a prohibition against placing commodities on the market.

“To halt deforestation and human rights violations we need to see a shift to community forest management. Financiers and palm oil buyers should stop promoting the expansion of industrial plantations,” said Danielle van Oijen, International Forest Program Coordinator at Milieudefensie (Friends of the Earth Netherlands). “Continued sourcing from AAL carries  risks of associated deforestation, illegalities, and human rights violations. Law enforcement bodies in the EU should thoroughly investigate all shipments with AAL products for compliance with the European Deforestation Regulation.”