Is This Palm Oil Company Operating on Protected Forestland?

Deep within the forests of Indonesia’s Sulawesi island, a white plume breaches the lush treetops. It’s the byproduct of a factory owned and operated by Astra Agro Lestari, Indonesia’s second largest palm oil company. 

Palm oil firms must get government permits to operate in the country’s forest estate, and certain areas cannot be developed. But a new report from the environmental group Friends of the Earth contends that at least 1,100 hectares of AAL’s plantation—roughly 2,700 acres—appear to be in no-development areas in violation of Indonesian law.

“We find that AAL has a significant footprint in Indonesia’s forest estate, which is concerning,” said Gaurav Madan, senior forests and lands campaigner with Friends of the Earth U.S. 

The report said that’s one example of broader problems in an industry whose product is used around the world in items ranging from snacks to detergent. Friends of the Earth said “permitting irregularities, corruption, and a flagrant lack of transparency continue to plague Indonesia’s palm oil sector.”

AAL disputes that it operates in no-development areas, arguing that the publicly available data Friends of the Earth relied on through Nusantara Atlas, a platform that tracks palm oil compliance, did not accurately reflect its sites. In a statement, the company said, “Astra Agro and all its subsidiaries operate by applicable laws and policies in Indonesia.” 

Friends of the Earth’s report notes the data contention but says Indonesia does not make cultivation permits public and “the company is not able to provide the necessary evidence to substantiate all its claims.” The dispute “should compel the Indonesian government, including the Ministry of Agrarian Affairs and Spatial Planning, to examine AAL’s maps and permits,” the report argues.

AAL runs 41 subsidiaries across eight provinces in Indonesia, according to the report. They operate on about 358,000 hectares of land, according to the Nusantara Atlas data. Sulawesi, an island shaped like the letter K, is home to seven of these operations. 

The AAL plantations are massive, said Danielle van Oijen, a forestry program coordinator with Friends of the Earth Netherlands. On a trip to some of them, van Oijen discovered she and her crew could “literally drive for hours amongst endless rows of palms and get lost. We did get lost.”

Each subsidiary must acquire a Hak Guna Usaha, a cultivation rights permit known by its shorthand of HGU, in its own name to begin planting. Then workers can cut down swaths of forest to prepare the land for palm oil trees. But certain parts of Indonesian forest are off-limits for such work, even if a company obtains permits—which Friends of the Earth said is the case for some of AAL’s operations.

Uli Siagian, a forest and plantation campaigner from Friends of the Earth Indonesia, said in one such example, AAL said it obtained an operating permit for a site in the 1970s. But Ministry of Environment and Forestry records suggest the land is protected forest that cannot be used for palm oil production, Siagian said. 

Part of that complexity, AAL said, has to do with which sections of the forest the Indonesian government deemed protected in the past versus the present. In its statement, the company said “the Indonesian Ministry of Forestry and Environment has been redesignating forest areas in stages. Thus, there have been many cases of returning part of the HGU area to a forest area, even though the HGU was obtained long before.”

Deforestation and Environmental Hazards 

Deforestation slowed in Indonesia between 2016 and 2021. But it picked up again in 2022 and 2023, partially as a result of palm oil production, the report said. “Sulawesi, Kalimantan and Papua are deforestation frontiers,” van Oijen said.

Greenpeace, an independent global campaigning network that is unaffiliated with the report, noted that deforestation varies by industry. Most don’t take down all the original trees on their sites, but “in palm oil, you can fully clear the forests to create palm oil plantations,” said Refki Saputra, a forest campaigner for Greenpeace. 

For its part, AAL said it has not cleared new land for expansion since 2015.

With production has come new environmental hazards, Friends of the Earth said. 

According to Siagian, before AAL conducted business in areas like Sulawesi or Kalimantan, local communities could get their water from nearby rivers and streams with little worry about contamination. 

“But after Astra operating there,” Siagian said, “the source of the water is polluted by the palm oil plantation.” Pesticides and herbicides, both commonly used in Indonesian palm oil plantations, have made surface water unusable for cooking, bathing and drinking, she said. 

AAL did not respond to Siagian’s contention that its operations were responsible for water pollution. A 2023 report conducted for the company by EcoNusantara, hired to investigate complaints about AAL, said water tests in one Sulawesi village found nitrite pollution in one well and good conditions elsewhere in that community.

EcoNusantara’s report added that “all parties must be assertive and collaborative in the process of revealing the truth through a further study.”

Siagian said she’s also concerned about groundwater scarcity. Siagian said some families who pull their water from shallow wells have had to dig deeper, often at least 50 feet, to find anything clean.

These mounting environmental challenges come as the climate crisis worsens flooding here. That’s pushing Indigenous people from lands they’ve called home for generations, Siagian said. 

Group Turns Spotlight on Investors

Earlier reports on AAL, including one from Friends of the Earth in 2022, have prompted major consumer goods companies to exclude the firm from their supply chains.

Friends of the Earth is pressing big investors to step away, too. Shareholders of AAL’s parent company, PT Astra International Tbk, include BlackRock, Vanguard and Capital Group.

“These multi-billion-dollar companies and even more powerful financiers continue to enable AAL’s conflict palm oil to be sold on the global market,” said Madan, using a term that refers to palm oil from areas with alleged environmental or human rights violations. 

But some of the investments are through index funds, AAL’s parent automatically included as a major Asian company. That’s the case for BlackRock, which voted against Astra International’s directors and commissioners in 2023 as a result of “how management was addressing material palm oil production-related risks.” Vanguard, meanwhile, is a top investor through two international index funds. 

“As a matter of company policy, we do not comment on the portfolio companies in which our funds invest outside of the published insights available on our Stewardship website,” Vanguard said in a statement.

Neither BlackRock nor Capital Group provided comments for this story. 

Still, some investors have cut ties. Norway’s central bank announced in February that it would no longer include the company in its Government Pension Fund Global “due to unacceptable risk of the company contributing to or being responsible for severe environmental damage.” 

“This is a company that has a problem and needs to be held accountable,” Madan said about AAL. “They take advantage of these administrative loopholes and weak governance structures to exploit the land and exploit the communities that live there.”