offshore tax havens hide rainforest destruction

  • Post last modified:March 20, 2024
  • Reading time:9 mins read

Since 2021, a single company has cut down biodiverse rainforest in Indonesia equivalent to nearly half the size of Singapore. Crucially, the corporation involved in the rampant deforestation is utilising a complex structure of shell companies and a tax haven to obscure ownership and evade accountability. Yet companies like Unilever and Nestlé still buy its products.

Deforestation of endangered species’s vital habitat

These are the findings of a new report by a coalition of leading environmental organisations published on Monday 18 March. Titled “Deforestation Anonymous”, the research sheds light on the alarming resurgence of deforestation in Indonesia. Notably, it documented the largest current case of deforestation among all pulpwood and oil palm plantation companies in the country.

In the last three years, PT Mayawana Persada, which operates a forestry concession in Indonesia’s West Kalimantan province on the island of Borneo, has cleared more than 33,000 hectares of rainforest.

There, the biodiverse rainforest ecosystem is home to multiple endangered species. For example, these include Bornean orangutans, helmeted hornbills, white-bearded gibbons, and sun bears.

Green groups Auriga Nusantara, Environmental Paper Network, Greenpeace International, Woods & Wayside International, and Rainforest Action Network used a combination of satellite imagery, corporate structure mapping, and supply chain tracking to conduct their analysis.

Hilman Afif of Auriga Nusantara said of the findings:

Over 55,000 hectares of rainforest remains in the Mayawana concession, making it a critical test case for efforts to control deforestation in Indonesia

Clearing sacred Indigenous forests

On top of destroying a vital habitat, the deforestation has also catalysed a conflict between the company and a local Dayak Indigenous community.

Crucially, a local Indigenous People’s organisation has said that Mayawana’s concession overlaps with 3,650 hectares of Dayak ancestral land.

Originally, the report noted that in May 2020, community leaders negotiated an agreement with the company. Specifically, Mayawana would exclude parts of the Kuanan Hilir community’s ancestral land from pulpwood development.

However, in April 2022 community leaders alleged that Mayawana had proceeded to clear sacred forests. Alongside this, they claimed it had encroached on agroforestry sites the Indigenous community depended on as a vital source of household income.

As a result, the community fought back. Initially, they imposed customary fines on the company. Yet, when the company refused to pay up, the Indigenous community stepped up their response. In June 2023, community members blocked the company’s bulldozers from clearing the forest.

However, despite the Dayak community’s efforts, the company’s opaque ownership structure makes it difficult to know who should be held accountable for its destructive activities.

Obscuring ownership, evading accountability

The report revealed that Mayawana is using complex corporate structures involving offshore secrecy jurisdictions to continue clearing tropical forests.

Mayawana is owned by a chain of holding companies that leads to the offshore tax havens of the British Virgin Islands and Samoa. Neither country requires companies to disclose the names of shareholders to the public.

Arie Rompas of Greenpeace Indonesia said that:

This complex corporate structure, in effect, hides the ultimate beneficial owner(s) of the company and can shield them from the legal and reputational risks of destroying such vast tracts of tropical forest

In the case of Mayawana, corporate documents, operational management connections, and supply chain links indicate the company is related to the Royal Golden Eagle Group (RGE).

RGE is a global producer of pulp, paper, packaging, tissue, viscose, and palm oil. Moreover, it is the parent conglomerate of APRIL, Asia Symbol, Sateri, Apical and Asian Agri. In 2015, RGE – and several of its subsidiaries including APRIL – initiated a policy of “zero deforestation” in its supply chain.

Indonesian tycoon Sukanto Tanoto owns RWE. Tanoto presently sits at 982 on the Forbes Billionaire list and has a net worth of $3bn. It is one of Indonesia’s largest pulp and paper producers and a significant player in the palm oil industry

Companies complicit

Naturally, some of the world’s largest fashion brands, consumer goods manufacturers, and mass retailers, purchase products from RGE. These include major brands like Colgate-Palmolive, Kao, Mondelēz, Nestlé, Nissin Foods, PepsiCo, Procter & Gamble, and Unilever. Banks like Mitsubishi UFJ Financial Group (MUFG) also finance RGE’s operations.

Of course, many of these corporations make sustainability claims to customers about not causing rainforest destruction or harming communities. As such, the report now calls these sustainability claims into question over Mayawana’s continuing deforestation in Borneo.

Senior forest campaigner with Rainforest Action Network Fitri Arianti said that the report showed that:

Despite promises to end deforestation, major brands and banks continue to do business with the Royal Golden Eagle Group, turning a blind eye to its destructive practices

More specifically, the report highlighted how RGE, through its shadow company PT. Toba Pulp Lestari (PT. TPL), has continued to clear forests.

Notably, this was after its stated cut-off date for deforestation in 2015. Satellite imagery analysis commissioned by RAN showed that it cleared significant natural forests within PT TPL concessions after the cut-off date.

Of course, this violated commitments made by RGE Group, as well as its customers like Procter & Gamble and Nestlé.

Certification scheme greenwashing environmental destruction

What’s more, the reports findings made a mockery of key sustainable forestry accreditations.

In particular, RWE subsidiary Asia Pacific Resources International Holding Ltd (APRIL) is seeking to re-establish its Forest Stewardship Council (FSC) certification. Supposedly, the FSC is the “world’s most trusted forest certification system”. Ostensibly, the FSC claims that its label confirms that a company is managing a forest:

in a way that preserves biological diversity and benefits the lives of local people and workers, while ensuring it sustains economic viability.

The FSC disassociated APRIL from its certification over a decade ago for destructive forestry practices. Now, however, the FSC has engaged in a years-long effort to facilitate APRIL’s re-entry to the scheme.

Given this, authors of the Mayawana report have called on the FSC to suspend the untenable “remedy” process for APRIL. Crucially, they demand that the FSC should do so, at the very least until Mayawana stops deforestation, and resolves its conflicts with communities in an equitable and accountable manner.

Naturally, through a statement issued by APRIL, the RGE Group denied any association with PT Mayawana Persada.

Moreover, the organisations argued that the deforestation it has documented since December 2020 should not only prohibit APRIL’s and PT. TPL’s association with FSC, it should also preclude PT. TPL products from being imported into the EU market under new European Union Deforestation Free Regulation (EUDR).

The EU adopted the new law in May 2023. It aims to prevent the import of commodities that resulted in deforestation after December 2020.

RGE “wreaking havoc on our planet”

Therefore, the report organisations are calling on brands and banks to publicly announce immediate suspensions of their relationships with RGE. Moreover, they are urging these actors and the Forest Stewardship Council to thoroughly investigate their findings, and ensure that they are no longer complicit in environmental destruction and human rights abuses.

Arianti said:

We cannot allow companies like RGE to continue wreaking havoc on our planet while profiting from unsustainable practices. It is time for brands and banks to take a stand for the environment and forest-dependent communities on the frontlines of commodity expansion.

Ultimately, the report underscored the challenge in holding opaquely-owned corporations to account for driving the biodiversity crisis, and threatening Indigenous communities. However, the coalition’s research goes some way to disentangling these duplicitious corporate structures that allow companies to elude consequences for their ecocide.

Feature image via National Geographic/Youtube

Source link