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Plantation Forestry in Indonesia:
The Greenspirit Strategies Perspective
An Assessment of Asia Pulp & Paper (APP) and
its Pulpwood Suppliers¶ Forestry Operations
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November 2010
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As the world faces the issue of climate change, myriad
environmental groups have sought ways to preserve our remaining
forests ± to capture greenhouse gases, clean the air and help restore
the environment. Among the forests of the world to attract
environmental attention are Indonesia¶s tropical forests.

After repeated allegations by environmental groups questioning the


environmental policies and behaviour of Indonesia-based Asia Pulp
& Paper (APP), the company asked Greenspirit Strategies Ltd. to
conduct a review of its operations to evaluate their sustainability
practices and determine if the company is behaving in an
environmentally responsible manner.

While Greenspirit Strategies is familiar with APP¶s operations


having visited some of the company¶s operations about a decade
ago, we agreed to take the current assignment only if we were given
Approximately 85 percent of APP's
free reign to investigate what we felt important. To that end, we:
fibre supply comes from fast
growing, high yield, renewable
àc Insisted that a Greenspirit Strategies team conduct an on- plantations like this one.
site, detailed inspection of APP¶s documents and operations
of our choosing in Indonesia.
àc Specified the locations and operations that we wished to see, including those in some
environmentally sensitive areas.
àc Demanded full access to employees and villagers affected by the operations we chose to
inspect.
àc ‰equired both on-the-ground and aerial tours of the areas we were interested in so that we could
determine real impacts of APP operations on nearby rainforest lands.

As a result of our inspection, we have concluded that APP is behaving responsibly and operating in a
sustainable manner.

It is clear that APP and its pulpwood suppliers¶ resources are helping to alleviate poverty in Indonesia
and ± directly and indirectly ± reduce illegal encroachment and habitat destruction. By targeting APP
and its pulpwood suppliers, Western environmental groups are making it that much more difficult to
reduce deforestation in the country.

The tragedy here is that, as our investigation made clear, Western environmentalists have ignored a
primary cause of deforestation in Indonesia ± poverty ± to focus on an easy but innocent target: a large
Indonesian pulp and paper company.

We do not suggest APP has operated flawlessly. Nor do we believe the company has done all it can.
However, we find that APP has consistently applied its resources both to improve its own sustainability
efforts and to create opportunity for communities around its Indonesian facilities.

The following document expresses conclusions based on our field research, current science and our
personal observations. APP has not shaped our conclusions or imposed its opinions.
G
 
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Within Indonesia, APP operates six pulp and paper plants, including two ± Indah Kiat and Lontar
Papyrus ± on the island of Sumatra.

APP¶s mills are state-of-the-art in terms of both their pulping processes and emission controls. As you
will see in this report, the mills remain a key engine of Indonesia's and Sumatra's economic, social
development and poverty alleviation efforts.

The virgin fibre supply for these mills is provided by APP's fibre suppliers in Indonesia who harvest
primarily on sustainably managed eucalyptus and acacia tree plantations. Contrary to the claims of
environmental activists, 85 percent of APP's virgin fibre comes from fast growing, high yield,
renewable plantations growing on less than two percent of Indonesia¶s total landbase. Approximately
15 percent comes from  "  mixed tropical hardwood, which comes from trees harvested
from government forests granted to APP companies for the establishment and management of pulp
plantations. APP forestry suppliers must clear patches of natural forest trees that can be found on these
concession lands that the Government of Indonesia describes as degraded (logged over areas, non old
growth and non high conservation value forests) or denuded wasteland. The removal of these remnant
trees is necessary to make room for plantation fields.

APP's mills have been configured in such a way that mixed


tropical hardwood is less useful and efficient to process.
Indonesia is facing serious Plantation fibre is strongly preferred and APP is rapidly
deforestation and habitat loss, moving toward the use of minimal mixed tropical
but our findings suggest it is hardwood. The company and its pulpwood suppliers have
not being caused by APP and adopted tough monitoring and enforcement rules, ensuring a
its pulpwood suppliers. zero tolerance policy for illegal forest fibre.
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In recent years Indonesia generally, and APP specifically,
have come under attack from Western environmental
activists such as Greenpeace, ‰ainforest Action Network, and ForestEthics, who accuse the country
and the company of many wrongdoings that range from illegal logging and habitat destruction to
fuelling climate change. Based on our detailed on-the-ground and aerial surveys of APP¶s and its
pulpwood suppliers¶ operations, there is no evidence to substantiate these accusations.

Doubtless, Indonesia is facing serious deforestation and


habitat loss. But this report will show that illegal
encroachment into parks and protected areas as well as Deforestation and habitat loss
forestry concessions is not being caused by APP and its are being caused by thousands
pulpwood suppliers, who are engaged in word-class of national migrants illegally
sustainable forest management. encroaching on forests in
search of better livelihoods.
Instead, as the Food and Agriculture Organization of the
United Nations (FAO) notes, a primary cause of
deforestation and habitat loss is poverty. This was
confirmed by our observations in Sumatra, where
deforestation and habitat loss are being caused in large part by thousands of national migrants illegally
encroaching on forests in search of better livelihoods. These small groups, spread across islands like
^
Sumatra, are ignoring Indonesia¶s National Spatial
Plan ± a plan APP and its pulpwood suppliers
must legally abide by ± by cutting and burning
forests, and replacing them with agricultural crops
and settlements. As is the case in many
developing countries, this illegal encroachment is
driven by poverty and the desire to make a better
life for one¶s family.

It is not without irony that many of the attacks


being levelled at Indonesia come from Western
nations that long colonized that country and others
like it. Indonesia and other emerging nations are
trying to modernize their economies and lift their The further away we went from APP and its
peoples out of poverty by, in part, taking pulpwood suppliers¶ forestry operations, the more
advantage of the natural resources that made them illegal encroachment and burning of forests we
a target for Western colonial powers. However, saw from the air.
environmental groups in developed nations seem
intractably committed to halting the progress of emerging nations ± apparently in an effort to preserve
the lifestyles enjoyed by the West.


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This report was written by Greenspirit Strategies Ltd., a Vancouver, Canada-based sustainability
consulting firm focused on the energy and natural resource sectors. Based on our ground site visits and
aerial surveys of Sumatra, this report looks at how forest management works in Sumatra and Indonesia,
highlights APP mill and pulpwood supplier plantation operations, describes the new research taking
place in Indonesian plantation forestry, explains how APP and its pulpwood suppliers engage with their
local communities and outlines what the impacts of de-selecting Indonesian pulp and paper products
would likely be. The appendix includes a pragmatic, science-based approach to policy and
procurement of Indonesian pulp and paper products for buyers worldwide.
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Greenspirit Strategies strongly believes that sustainable forest management is a primary component of
a more sustainable world and that sustainable forest management can greatly contribute to the
economic, social and environmental well-being of people in developing countries.

The Greenspirit Strategies team was composed of Dr. Patrick Moore, Chairman and Chief Scientist;
Tom Tevlin, President and CEO, and Trevor Figueiredo, Senior Vice President. Dr. Moore is a
Greenpeace co-founder and former leader with a PhD in ecology who departed Greenpeace, in part,
because of its poor understanding of science.

In August 2010, Greenspirit Strategies team members travelled to Sumatra, Indonesia to examine APP's
and its pulpwood suppliers¶ operations on the ground in ‰iau and Jambi provinces. We interviewed
employees and community leaders, toured both APP mills on Sumatra (Indah Kiat and Lontar Papyrus),
and assessed the plantation forestry concessions that provide pulpwood to the mills ± from both the air
and the ground. We conducted detailed aerial flyovers of the Bukit Tigapuluh National Park and
nearby plantation forestry concessions in Jambi province. We also conducted detailed ground and

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aerial flyovers of the Kerumutan Peat Swamp Forest,
including the national park.We further surveyed the Giam
Siak Kecil Biosphere ‰eservethe Kampar Peninsula and Indonesia has the opportunity
the surrounding region. to ³leapfrog´ past mistakes by
other countries and manage
The Greenspirit Strategies team also investigated APP and their forests to a world-class
its pulpwood suppliers¶ community initiatives and assessed standard.
a cutting-edge research and development facility.

Greenspirit Strategies team members' helicopter flight


plans and full itinerary are shown in the appendix.

We often forget that many developed countries, including the United States, Canada and those in
Europe built their high living standards on a foundation of natural resource extraction. In the past,
those extraction processes were often environmentally damaging. Yet, given technological progress
and today's immensely better understanding of how to manage forests in an environmentally sound
way, developing countries like Indonesia have the opportunity to ³leapfrog´ past mistakes and manage
their forests to a world-class standard.

Our focus in this report is to assess how well APP is doing that.

We encountered this elephant near the APP Lontar Papyrus mill in Jambi Province, Sumatra. As
you will see in this report, APP and its pulpwood suppliers are working on a range of wildlife and
habitat protection programs.

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Indonesia is the world¶s fourth most populous
country, with its more than 220 million people
spread across a relatively small land mass of
individual islands. Indonesia consists of 1Œ,508
islands scattered over both sides of the equator,
about [,000 of these islands are inhabited. The
largest are Java, Sumatra, Borneo (shared with
Brunei and Malaysia), Papua (shared with
Papua New Guinea), and Sulawesi.

Approximately [0 percent of Indonesia¶s


population lives in rural areas where forestry
and/or agriculture are the main source of
economic livelihood. Pristine marshland as seen from the air,
Sumatra, Indonesia
According to the Indonesian Central Bureau of
Statistics, as of March 2008, nearly G5 million Indonesians live below the poverty line and are unable
to afford food amounting to 2100 calories per day.

Indonesia has extensive natural resources, including forests,


crude oil, natural gas, tin, copper, and gold. Indonesia¶s
Approximately 60 percent of major imports include machinery and equipment,
Indonesia¶s population lives in chemicals, fuels, and foodstuffs.
rural areas where forestry
and/or agriculture are the ‰ecent history
main sources of livelihood.
A Dutch colony for more than G00 years, Indonesia¶s first
free parliamentary election took place in 1999. Indonesia is
now the world¶s third-largest democracy, the world¶s
largest archipelagic state, and home to the world¶s largest Muslim population.

Its current priorities include:

àc Alleviating poverty Nearly 35 million Indonesians


àc Improving education live below the poverty line and
àc Preventing terrorism are unable to afford food
àc Consolidating democracy after four decades of amounting to 2100 calories
authoritarianism per day.
àc Implementing economic and financial reforms

The country has weathered the global financial crisis well out of its heavy reliance on domestic
consumption as the driver of economic growth. The economy slowed significantly from the [ percent-
plus growth rate recorded in 200Πand 2008, expanding at ^ percent in the first half of 2009, but still
outperformed its regional neighbors and joined China and India as the only G20 members posting
growth during the crisis.

Œ
The government made economic advances under the first
administration of President Susilo Bambang Yudhoyono
and introduced major reforms in the financial sector.
Indonesia¶s debt-to-GDP ratio has declined recently
because of strong growth in GDP and sound fiscal
stewardship.

The Greenspirit Strategies team¶s first visit to Indonesia


as researchers engaged by APP was 10 years ago, and in
those 10 years we have witnessed firsthand the rapid
economic advances the country has made. The country¶s
infrastructure has improved enormously, and standards of
living have risen substantially.

Signs of this new wealth can be seen in the newer cars


being driven on Jakarta roads and the cellular phones and
digital cameras being used even in the most rural villages.
Plantation-grown pulpwood being
Indonesia¶s unloaded from barges, Sumatra,
forest sector has
Indonesia
been a driving
The Greenspirit Strategies factor in the country¶s increasing standards of living. World
team¶s first visit to Indonesia Bank figures show that agriculture, forestry, and mining
as researchers engaged by contribute about 25 percent of Indonesia¶s GDP and about G0
APP was ten years ago. In percent of overall government budget revenue.
ten years, we have witnessed
firsthand the rapid socio- The government currently faces the challenge of improving
economic advances the Indonesia's insufficient infrastructure to remove impediments
country is making. to economic growth, while addressing climate change
mitigation and adaptation needs, and conserving forests.c
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National Spatial Plan

Unlike the United States, where much


production forest is in private hands, Indonesia's
forest sector operates more like that of Canada,
where the government owns most production
forests and private companies pay fees to harvest
fibre from public land.

Given most production forest land is


government owned, it is the Indonesian
government that determines how production
forest is allocated and managed. Although This photo illustrates the clear delineation between
environmental activists make it appear as if a plantation forest on the right and a natural
Indonesian forest companies are operating forest of mixed tropical hardwoods on the left.

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without any oversight and developing concessions wherever they so choose, the opposite is in fact true.

It is clearly visible from the Greenspirit Strategies team¶s air and ground observations on Sumatra that
the Indonesian government has placed a priority on balancing sustainable development and
conservation within its tropical forests.

Indonesian forest companies are, by law, required to adhere to strict land use planning and
environmental regulations. The Government of Indonesia's National Spatial Plan is the overarching
planning tool that determines land-use priorities in the country, balancing development and poverty
alleviation goals while protecting high conservation value forests.

From a policy and planning perspective, the Indonesian


Ministry of Forests is actively engaged in enhancing its
Total forested area in spatial plan for the country, rehabilitating forest and riparian
Indonesia is 110 million zones, conserving biodiversity, and enhancing fire protection
hectares, roughly the size of and control. Measures are also well underway to revitalize
Spain. Fifty-one million forest development and industry, enhance forest community
hectares of this forest (about empowerment, improve climate change mitigation and
the size of Sweden) is set aside adaptation and further develop forestry corporate
for conservation and the rest governance.
is allocated for agriculture,
forestry and other uses. The total forested area in Indonesia is 110 million hectares
(2Œ1 million acres), roughly the size of Spain. Based on the
National Spatial Plan, 51 million hectares (12[ million acres)
of this forest (about the size of Sweden) is set aside for
conservation and the rest is considered production forest to be used to alleviate poverty and drive
sustainable economic development for the more than 220 million Indonesians.

Of the total 110 million hectares, just over G percent (roughly G.5 million hectares or 8.[ million acres)
can legally be used for sustainable pulpwood plantation development to support the pulp and paper
sector.

This fact alone should make it clear that, contrary to the allegations of Western environmental groups,
it is impossible to ³destroy Indonesia¶s biodiversity´ by
converting G.5 million of 110 million hectares to plantation
forests.
The National Spatial Plan
Within the G percent set aside for sustainable pulpwood, allocates only three percent of
APP fibre suppliers¶ projected plantable area is around 1.^ Indonesia's total landmass to
million hectares (G.5 million acres). Of the 1.^ million pulpwood plantation forestry.
hectares, according to government mandated studies, around This fact alone makes it clear
^00,000 hectares (988,^21 acres) are considered degraded it is impossible to destroy
and low-value forestry area and 1 million hectares (2.5 Indonesia¶s natural forests
million acres) are ³denuded wasteland.´ through conversion.

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Within the gross area of pulpwood
plantation concessions, the government
requires that G0 percent be retained as set
aside areas.

Beyond production, the Government of


Indonesia has made a significant
commitment to rainforest restoration.
Specifically, it has committed to riparian
rehabilitation of 2.5 million hectares or [.2
million acres (500,000 ha/yr or 1.2 million
acres/yr), industrial and community
plantation forest of G million hectares or Œ.^
million acres ([00,000 ha/yr or 1.5 million
acres/yr), and forest ecosystem restoration
of 2 million hectares or ^.9 million acres The Greenspirit Strategies team flew over thousands of
(^00,000 ha/yr or 988,^21 acres/yr). hectares of natural forest in conservation.

Assessment Process

While the government's overarching National Spatial Plan determines where plantation concessions
can be located, Indonesian forest companies must further undertake detailed and rigorous socio-
environmental assessment processes before they can operate on any concession area.

Specifically, a detailed environmental impact and socio-economic assessment referred to as an


AMDAL must be undertaken by a government certified independent auditor. Additional assessments
by independent, third-party auditors referred to as micro-
and macro-delineation assessments must also be
undertaken. This rigorous assessment process ensures: All concession areas are
subject to random inspections
àc Protection of high conservation value areas and and audits by the Ministry of
wildlife habitat Forests to ensure they are
àc Detailed community and stakeholder engagement complying with sustainable
and consultation forest management principles.
àc ‰eview and protection of cultural heritage sites
and values
àc Impact assessment to improve surrounding
community's standard of living and health

Even after these assessments are completed satisfactorily, and a concession is granted, pulpwood
suppliers must commission ± as required by law ± a feasibility study and a long-term management
plan.

Additionally, every year, a working plan must be developed for each concession area that incorporates
core sustainable forest management criteria. And every month, pulpwood suppliers must provide a
detailed report to the Indonesian Ministry of Forests, advising on areas they plan to plant and/or
harvest.

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In addition to these rigorous legal requirements and
APP pulpwood suppliers are
assessments, APP pulpwood supplier plantations and APP
responsible for planting more
mills have gone the extra step of getting certified by
than 200 million trees per year
independent, third party auditors to the ISO 1^001 standard
and, by planting more trees
as well as to the Indonesian Eco-labelling Institute (LEI)
than they harvests, they are
and the Programme for the Endorsement of Forest
progressively contributing to
Certification (PEFC) chain of custody scheme (  %&
an increase in the forested
+  +    ).
area.
The vast majority of APP¶s fibre supply comes from
sustainable plantation forestry, which means the trees are
planted expressly for the purpose of pulp production. In Indonesia, APP pulpwood suppliers are
responsible for planting more than 200 million trees per year and, by planting more trees than they
harvest, they progressively contribute to an increase in the forested area.

Finally, APP pulpwood suppliers in Indonesia only develop least-valuable degraded forests and
denuded wasteland, as defined by the government.

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Founded in the 19Œ0s, APP is a brand umbrella for
paper products manufactured by several pulp and paper
companies in Indonesia.Headquartered in Jakarta,
APP Indonesia is one of the world¶s leading pulp and
paper producers. With current annual combined pulp,
paper and packaging grades capacity of over seven
million tons, the eight independently owned pulp and
paper production facilities manufacture a wide range of
tissue, towel, office and graphic paper products under
the APP brand as well as a number of proprietary
brands and private labels. This tree nursery is owned by a local
community in ‰iau Province, Sumatra.
Within Indonesia alone, APP operations include: The tree seedlings are purchased by APP
pulpwood suppliers for use on their
àc ÷ 3    (‰iau Province, Sumatra) plantations. Profits go directly to the
àc ÷ 3*   (Banten Province, Java) community.
àc ÷ 3'    (Banten Province, Java)
àc (3 '4 3+ (near Surabaya, East Java)
àc  ,  (Karawang, West Java), and
àc  " (Jambi Province, Sumatra)


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The APP Lontar Papyrus mill in Jambi Province, Sumatra. This mill is among the most
advanced and environmentally-friendly in the world.

APP markets its products in more than [5 countries on six continents. APP¶s major paper mills are
certified under the ÷   .  ÷  5 +.( ÷  6.÷7 and
++  .  + ! $  5.!$7Chain-of-Custody standards.

Greenspirit Strategies assessed APP mills Indah Kiat in ‰iau province and Lontar Papyrus in Jambi
province. We note that these production facilities are among the most advanced and environmentally
efficient in the global pulp and paper industry, enabling cleaner production.

4arbon Footprint

In 200Œ, APP partnered with the independent, UK-based


sustainability consultancy, Environmental ‰esources APP¶s weighted average
Management (E‰M), to carry out the world¶s first Carbon-Socio carbon footprint for 2006 was
Footprint Assessments for a pulp and paper company. 1.56 tons of 4O2 produced per
ton of paper, excluding
In undertaking the Carbon footprint calculation on APP¶s pulp pulpwood plantation
and paper mills, E‰M used existing industry-standard tools and sequestration. This is on the
guidelines (including ICFPA¶s 2005 calculation tools for low end of the 1.46 to 2.20
estimating GHG emissions from pulp and paper mills; W‰I¶s tons of 4O2 produced per ton
200^ Greenhouse Gas Protocol, IPCC¶s 200[ guidelines for of paper range of the North
national GHG inventories, and NCASI¶s 2001 technologies for American paper industry.
reducing carbon dioxide emissions, as well as other tools
approved by the UNFCCC).

According to E‰M¶s 2008 report which evaluated eight production facilities in Indonesia, APP¶s
weighted average carbon footprint for 200[ was 1.5[ tons of CO2 produced per ton of paper, excluding
pulpwood plantation sequestration. This is on the low end of the 1.^[ to 2.20 tons of CO2 produced per
ton of paper range of the North American paper industry.

This was the first assessment to determine opportunities for improvement. Currently APP is working
with E‰M to conduct Carbon Footprint Monitoring (CFM), which includes the following assessments:

àc Best-practice carbon footprint assessments in compliance with international standards, such as


the GHG Protocol and ISO 1^0[^; and

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àc ISO 1^0^^ consistent assessment of the entire gate to end-use emissions of most common paper
products.

The objective is for tangible emissions to be reduced through


It is our view that APP has
the Clean Development Mechanism (CDM) ± and other
taken the government¶s 4O2
initiatives ± and the production of carbon neutral paper in the
emissions reduction policy,
long-term.
seriously and continues to
show improvement in the area
Mill 4O2 mitigation that is comparable to North
American mill results.
During our visit to Indah Kiat Pulp & Paper we were briefed
on a number of CO2 emissions reductions measures,
including:

àc Methane recovery and utilization of methane for heat generation through improved wastewater
treatment (Serang)
?c Potential carbon emission reduction = 59,0[Œ.[9 CE‰ (Certified Emission ‰eduction) for
next 10 years
?c Status : Validated on 9 December 2009

àc Fuel switch to biomass (oil palm bunch waste)


(Perawang)
?c Potential carbon emission reduction =
225,[2[.0^ CE‰ for next 10 years
?c Status : Draft PDD (Project Design
Document)

àc Methane recovery and utilization of methane for heat


generation through improved wastewater treatment
(Ekamas Fortuna)
?c Potential carbon emission reduction = 1Œ,000
CE‰ for next 10 years
?c Status : Data collection

It is our view that APP has taken the government¶s CO2


emissions reduction policy seriously and continues to show Plantation forests, like this APP
improvement in the area that is comparable to North American pulpwood supplier plantation in
mill results. Sumatra, act as carbon sinks.
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Indonesian GHG emissions

In 2005, UNDP reported that Indonesia¶s CO2 emission per capita was only 1.Œ tons. These emissions
are significantly lower than its neighboring developed country of Australia, which emits 1[.2 tons of
CO2 per capita, or that of the USA, which emits 20.[ tons of CO2 per capita.

‰ightly, we think, Indonesia ± along with most Asian countries ± views as national priorities economic
development to alleviate poverty, social welfare, and environmental protection (including protection of
high conservation value forests, biodiversity, and endangered species), with the need for a balanced
1G
approach to GHG emissions reductions.

President Yudhoyono, during post-Kyoto


negotiations, pledged that Indonesia would
reduce carbon emissions by 2020 to 2005
levels.

As noted above, APP has indicated that it is


committed to making its carbon footprint as
small as possible and is working with credible, ‰ightly, we think Indonesia is looking to balance
independent environmental consultants to GHG emission reductions while encouraging
monitor its progress toward GHG emissions economic growth to alleviate poverty.
reductions.

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APP¶s two pulp and paper mills in Sumatra, Indonesia -- Indah Kiat and Lontar Papyrus -- are fed by
its pulpwood suppliers in Sumatra and Kalimantan, Indonesia.

Greenspirit team members assessed APP pulpwood supplier plantation operations near the Indah Kiat
mill in ‰iau Province, Sumatra, as well as near the Lontar Papyrus mill in Jambi Province, Sumatra.
c

c An APP eucalyptus plantation, Sumatra, Indonesia

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In reviewing APP pulpwood supplier plantation operations on peatlands, including those near the
Kerumutan National Park, Greenspirit Strategies
learned about the specific processes that pulpwood
suppliers are undertaking to ensure these peatlands
are managed sustainably.

Contrary to environmental activist claims,


Greenspirit Strategies found that APP pulpwood
suppliers have adopted a range of best practices to
ensure sustainable forest management on peatlands,
including:

àc Ensuring responsible water management in


peatlands to enable strong tree growth while
limiting peat subsidence.

àc Educating and providing livelihoods to 4ontrary to environmental activist claims,


communities that, faced with joblessness Greenspirit Strategies found that APP pulpwood
and poverty, resort to the illegal clearing and suppliers have adopted a range of best practices
burning of peatlands for agricultural to ensure sustainable forest management on
production. peatlands.

àc Proactive fire prevention and suppression with active involvement and engagement from local
communities.

àc Voluntarily setting aside vast swaths of natural peatland forest considered to be of special merit
for permanent conservation and protection.

Environmental activists often act as if companies like APP operate in a vacuum. If these companies
simply stopped operating, some activists argue, conservation efforts would improve enormously. But
this is a false argument.

Our observations from the air confirm the FAO¶s general finding that a root cause of natural forest
clearing is the encroachment and burning of forestland for conversion to crops and settlement. We saw
firsthand the illegal encroachment and burning that result in the deforestation of tens of thousands of
hectares of land annually in Indonesia.

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c Encroachments like these by migrant nationals are the root cause of illegal conversion of natural
forest in Indonesia. We witnessed hundreds of these encroachments strewn across the Sumatran
c
landscape.
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The best means of avoiding this illegal encroachment is to provide communities with economic
opportunities they would not otherwise have ± opportunities that APP and its pulpwood suppliers are
currently providing. APP and its pulpwood suppliers are engaged in active monitoring in areas where
they operate and work to educate communities about the benefits of preserving forest and peatlands.c
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That¶s why the further away we flew from APP¶s pulpwood
suppliers¶ operations, the more illegal encroachments we saw.
Contrary to activist claims, if these pulpwood suppliers halted APP¶s pulpwood suppliers¶
operations in their areas, illegal encroachment and forest presence on peatlands helps
burning would likely increase dramatically. protect them from illegal
c encroachment.
For more information on peatlands, please see Appendix A.
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1[

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During our assessment, the Greenspirit Strategies team flew over vast areas of wilderness that have
been voluntarily set aside by APP¶s pulpwood suppliers to ensure biodiversity and habitat protection ±
the expanse of this area cannot be understated. In total, these
suppliers have voluntarily set aside close to ^00,000 hectares
(over 988,000 acres) of allocated production forest for
conservation purposes ± that¶s roughly the size of ‰hode In many parts of the
Island. developing world, a protected
area is often protected in
But in many parts of the developing world, a protected area is name only because of illegal
protected often in name only. Because of illegal encroachment.
encroachment, these areas often succumb to deforestation and
habitat destruction.

APP and its pulpwood suppliers work with government, local communities and NGO partners to ensure
these protected areas remain truly protected through active monitoring, management and education
efforts.

The Greenspirit Strategies team flew over vast areas of wilderness in


Sumatra. APP and its pulpwood suppliers indicated to us they have initiated a
range of projects to help protect untouched regions like these, including
voluntary set-asides that total close to 988,000 acres ± the size of ‰hode
Island.


Conservation areas that APP and its pulpwood suppliers have set aside and are assisting in protecting,
include:

àc The UNESCO designated Giam Siak Kecil-Bukit Batu (GSK-BB) Biosphere ‰eserve in ‰iau
province, Sumatra.

APP and its pulpwood suppliers initiated development of


this UNESCO reserve. And of GSK-BB¶s 1Œ8,Œ22
hectares (^^1,[G1 acres), almost half ± Œ0,Œ21 hectares APP and its pulpwood
(1Œ^,Œ55 acres) ± came from APP¶s suppliers¶ voluntary suppliers told us they were
set-aside. behind the first and only
UNES4O biosphere reserve
According to UNESCO, the reserve serves to protect a created by the private sector
multitude of species, including many endangered flora anywhere in the world.
and fauna.

The reserve also acts as an enormous carbon sink. A


2008 estimate by the engineering firm U‰S suggests that Giam Siak Kecil alone stores some
1.Πbillion tons of carbon underground.

This is the first and only UNESCO biosphere reserve created


by the private sector anywhere in the world.

àc The core zone of Taman ‰aja Nature Preserve is a 10,000


hectare (2^,Œ10 acre) protected area that includes Sumatran
tiger habitat. APP and its suppliers say they are working
together with government and community leaders to develop
a wildlife corridor on concession lands between Taman ‰aja
and Bukit Tigapuluh National Park so tigers and other
wildlife have access to the entire region.

àc APP pulpwood suppliers and other concession holders have


voluntarily set aside 10[,000 hectares (2[1,9G1 acres) of
production forest for a Senepsis Tiger Sanctuary in ‰iau
province, Sumatra. This sanctuary will help to protect the
Sumatran tiger ± listed as an endangered species by
APP and its pulpwood
the International Union for the Conservation of
suppliers are working with
Nature ± by expanding existing wildlife reserves.
well-known Indonesian
wildlife conservationist
APP and its pulpwood suppliers are working
Bastoni to help protect and
together with well-known Indonesian wildlife
expand tiger populations on
conservationist Bastoni (many Indonesians have
Sumatra.
only one name) of the wildlife conservation group
BKSDA to help protect and expand tiger populations on Sumatra.

In our interview with Bastoni, he noted that APP is one of the few organizations that funds and
supports his vital work to ensure the survival of the Sumatran tiger.
18
Bastoni is more than a tiger researcher. He is actively involved in projects aimed at increasing and
protecting tiger populations.

Bastoni and his multi-stakeholder working group act as intermediaries when villagers come into
conflict with tiger populations. The working group as been formed out of concern that illegal logging
and encroachment are major causes of tiger population decline. Bastoni works with villagers to educate
them on the need to protect tigers and he acts quickly to move tigers away from populated areas where
they may come into conflict with humans.

The Tiger Working Group, which APP and its suppliers fund, has developed a range of programs to
enhance tiger survival, including education and monitoring efforts to combat illegal logging and
encroachment, tiger surveillance and research using radio collars and camera traps, and enhanced
signage and fencing to clearly mark tiger areas and prevent human intrusion. It¶s important to note that

APP is working together with government and community leaders at this village near Taman
‰aja to develop a wildlife corridor on concession lands to link Taman ‰aja with Bukit Tigapuluh
National Park, so tigers have a larger wilderness area to roam.
APP pulpwood supplier plantation concessions in this area act as a buffer between the tiger sanctuary
and further human encroachment. The Greenspirit Strategies
team found no evidence to support environmental activist
claims that suggest APP suppliers are destroying tiger habitat APP supplier plantation
in this area. To the contrary, our examination and interviews concessions act as a buffer
with community leaders and APP employees suggest that between the tiger sanctuary
without operations on these concessions, it¶s likely that tiger and further human
habitat would be further destroyed by illegal encroachment. encroachment.

According to APP, 50 percent of the company¶s pulpwood


supplier concession of ^^,GG0 hectares (109,5^1 acres) in
Dumai, ‰iau, are already occupied by migrant settlers. The company works with these settlers, hires
many to work on the plantations, and educates them on sustainable forestry practices. Providing these
settlers with jobs and training means they are much   likely to encroach into the natural forest and
19
tiger sanctuary surrounding the concession. If APP¶s pulpwood supplier abandoned this area, as many
environmental activists demand, it¶s likely the tiger
sanctuary and surrounding natural forest would be further
encroached upon by migrant settlers looking for better
Bastoni told us that no
livelihoods for their families (See what has happened in Teso
Western NGOs are involved in
Nilo, for example, in Appendix A).
the kind of active tiger
protection work that he does
Bastoni is also working on breeding projects to increase tiger
and that is so vital to the
populations. In one such project, he relocates injured tigers
future of the Sumatran tiger.
to a sanctuary area where they can breed. When newly born
tigers are sufficiently grown and ready, they are released into
the wild to grow the population.

Surprisingly, Bastoni told us that while Western NGOs are well known for their political activism and
basic research, none are involved in the kind of active tiger protection work that he and his
organization are involved in and that is so vital to the future of the Sumatran tiger.

àc Bukit Tigapuluh National Park is an area rich in biodiversity. Surrounding this 1^G,000 hectare
(G5G,G[0 acre) park are APP pulpwood supplier concessions located in areas the Indonesian
government has declared as production forest in addition to other land use such as mining and
agriculture.

A multi-stakeholder panel made up government, industry and NGOs such as the World Wildlife
Fund (WWF) and the Frankfurt Zoological Society have reviewed the ecological value of these
concession areas.

APP management committed to abide by any decision made by the Indonesian government
based on the findings of the multi-stakeholder panel.

In the interim, APP says they have voluntarily agreed to not receive any pulpwood from the
production forest surrounding the national park until the multi-stakeholder panel has completed
its assessment.


 c

In addition to the detailed assessments and regulations APP and its pulpwood suppliers must follow by
law (see the section on ÷       ), the Greenspirit Strategies team learned that
APP and its suppliers have pursued additional independent, third-party verified certification to
demonstrate their commitment to sustainable forest management.

The four largest APP pulpwood suppliers, PT Arara Abadi (‰iau), PT Wirakarya Sakti (Jambi), PT
Satria Perkasa Agung (‰iau) and PT Finnantara Intiga are all EMS certified under ISO 1^001.

20
Lembaga Ekolabel Indonesia (LEI) is the
national standard for sustainable forestry in
Indonesia. LEI is a rigorous, independent
forest certification standard that has been
accepted by other forest certification schemes
and customers around the world. APP
pulpwood supplier PT Wirakarya Sakti (Jambi
Province) achieved LEI certification from the
independent, accredited certification body, PT
TUV International Indonesia in September
2008 for an area covering 2^[,^82 hectares
([09,0Œ0 acres). This represents the largest
An APP pulpwood supplier has the largest LEI LEI certified plantation in Indonesia.
certified plantation in Indonesia.
In 2009, APP mills ± including both Sumatran
mills, Indah Kiat and Lontar Papyrus ± were also certified to the LEI Chain of Custody, so pulpwood is
tracked from the forest floor, to the mill, and through the transportation chain in order to verify
sustainable forest management.

Separate from the LEI chain of custody certification, APP mills have also been certified to a range of
other world class sustainability standards, including Indonesia Ecolabel, European Ecolabel, Japan
Ecolabel and Programme for the Endorsement of Forest Certification (PEFC) chain of custody.

Pulpwood must meet rigorous, independent chain of custody requirements that track it from
the forest floor to the mill and through the transportation network to ensure it comes from
well-managed forests.

So, in addition to the efficiencies and emissions reductions gained through the use of modern facilities
(APP¶s mills are among the most up-to-date we have seen), these chain of custody systems and
protocols are crucial to APP¶s sustainability program, and are improved continuously based on external
audits.

To achieve all these third-party, independent certifications, over the past five years, APP has
restructured and improved its sourcing and chain of custody policies.

21
Chain of custody certification protocols in use by APP include:

àc Pulpwood: Indonesian Ecolabelling Institute (LEI) chain of custody/legal origin verification (200Œ)
& LEI sustainable forest management standard

àc Pulpwood: SGS Timber Legality & Traceability Verification (Stage 1: Verified Legal Origin)

àc Pulp & Paper Products: Green Purchasing Law


?c ‰evised on April 1, 200[ in Japan, conforming to ³Green Purchasing Method,´ Ministry of
the Environment of Japan
?c To certify the legality and sustainability aspects of pulpwood
Ëc Standard & Procedures
Ëc Fiber Procurement & Sustainability Policy
Ëc GPL Certification Policy & Code of Conduct

àc Pulp & Paper Products: LEI certified

àc Pulp & Paper Products: PEFC certified & Non-Controversial

Since most APP production facilities are PEFCchain of custody certified, regulations and guidelines
under PEFC principles are rigorously implemented. APP officials demonstrated to Greenspirit
Strategies during our site visits that the company evaluates and conducts risk assessment analysis on all
of its pulpwood suppliers according to PEFC guidelines. APP¶s procurement policy, both in HQ and at
each mill, has been restructured to accommodate this implementation.

  cÔ
c  c
 c

Because APP mills are PEFC and LEI chain of custody certified, its pulpwood suppliers must meet
rigorous legal origin verification criteria in order to ensure only legal pulpwood of known origin is
processed at these mills. To meet these criteria, APP and its pulpwood suppliers are independently
audited against Indonesian law and Ecolabel Institute and Timber Legality and Traceability Verification
(TLTV-VO) standards by one of the world¶s leading auditors, SGS.

As the Greenspirit Strategies team witnessed during our review of Indah Kiat and Lontar Papyrus mills,
APP takes such detailed measures as to check the door serial numbers of logging trucks seeking entry
into its mills in order to match each truck to its pulpwood load and legal documentation. APP officials
indicated to us that these serial numbers are much more difficult to forge than licence plates and are
simply another means of ensuring each truck entering its mills is carrying legally harvested fibre.

SGS has independently verified that these tough measures are working and that no illegal pulpwood is
being harvested by APP pulpwood suppliers or being introduced into APP mills.

22
Truck loads are matched against legal documentation. SGS has independently verified that
tough measures like those pictured above are working and that no illegal pulpwood is being
harvested by APP suppliers or being introduced into APP mills.

V
c c
Over the past two years, APP¶s pulpwood
consumption in Indonesia has roughly consisted of
85 percent sustainable plantation wood and 15
percent mixed wood residues from pulpwood
plantation development in degraded areas.

However APP¶s target from 2011 forward is


consumption of approximately 10 percent of mixed
wood residues and other waste wood materials
(wood shavings, trimmings and others ± a common
practice in pulp mill operations worldwide).

Additionally, APP pulpwood suppliers are


Today, roughly 30 percent of APPs fibre supply
working to have all their forestlands certified to
originates from certified sources such as PEF4
the LEI standard.
and LEI, another 35 percent originates from
independently audited, legally harvested
c sources, with the balance being recycled
c materials.
2G
 
c  cc
Travelling to a range of APP and its pulpwood suppliers¶ operations across Sumatra, the Greenspirit
Strategies team encountered some of the thousands of hard-working employees that make up APP and
its pulpwood supplier companies.

APP directly employs more than [2,000 workers


while its suppliers directly employ an estimated
8,500 workers ± together direct employment for
these companies totals more than Œ0,000 workers in
Indonesia.

Notably, most of the people who work for APP


pulpwood suppliers are local hires from rural areas
surrounding forestry concessions.

If indirect jobs are also considered, total


employment by APP and its pulpwood suppliers
leaps to over one million jobs worldwide according
to a 2008 study by IMB Bogor University of
APP is working on a range of poverty Agriculture (Indonesia). That a single company and
alleviation efforts. its fibre suppliers could facilitate the employment of
over a million people demonstrates the substantial impact APP and its suppliers are having on poverty
alleviation efforts in developing countries such as Indonesia.

As the FAO indicates, poverty alleviation is a key factor in improving environmental protection. In
Indonesia, illegal encroachment and burning of forests for agriculture, settlement and oil palm
conversion remain critical issues and are at the heart of the
deforestation in Sumatra and other parts of the country.
These issues are driven by poverty. As the FAO notes in its APP and its suppliers directly
200Œ *  8! / 9 ³the countries that employ more than 70,000
face the most serious challenges in achieving sustainable people in Indonesia. If
forest management are, by and large, the countries with the indirect jobs are also
highest rates of poverty and civil conflict.´ considered, these companies
employ more than one million
When people have to feed their families, environmental people worldwide.
protection becomes a distant priority.

The link between poverty alleviation and forest protection


is a link that environmental activists simply ignore. In fact, in January 2010, Greenpeace called for a
total moratorium on forestry in Indonesia. This would put hundreds of thousands of people out of work
and, consequently, likely    deforestation in the country. In response, Indonesian Forestry
Minister Zulkifli Hasan told the Jakarta Globe: ³What should we do with our industry? Can
[Greenpeace] provide any solutions for the logging industry and people who make their living from the
forestry sector?´

According to Zulkifli, the moratorium would cause economic stagnation. Besides, he said, the country
already had programs in place for sustainable forestry management: ³If we want to blame somebody
2^
because of deforestation, blame the illegal loggers and
their buyers,´ he added.
Deforestation is driven by
poverty. When people have to
In 2008, the United Nations recognized APP¶s
feed their families,
contributions to poverty alleviation and sustainable
environmental protection
development by honouring its Tjiwi Kimia paper mill on
becomes a distant priority.
East Java. The mill was recognized for its efforts in
meeting the UN Millennium Development Goals
(MDGs). The MDGs are core goals focused on
sustainable development that the UN hopes the world will achieve by 2015. These goals include the
eradication of extreme poverty and hunger, achieving universal primary education, promoting gender
equality, reducing child mortality and
ensuring environmental sustainability.

Providing people with sustainable livelihoods


is critical to meeting the MDGs and ensuring
forest protection in much of the developing
world. We saw that APP and its pulpwood
suppliers are playing no small part in this
vital effort.

It is a tragedy that Western environmental


activists attack the very industries that are
engaged in poverty alleviation efforts while
ignoring the unsustainable agricultural
practices, illegal forest encroachment and
illegal logging and poaching that are the true
Providing people with sustainable livelihoods is cause of Indonesia¶s forest destruction and
critical to meeting United Nations poverty only give people a short-term fix to escape
reduction goals and ensuring forest protection in the miseries of poverty.
much of the developing world.
c
c
c
c
c
c
c
c
c
c
c
c
c
c
c
Indonesia has made enormous strides in increasing
standards of living in the last 10 years. Much is left to do
and the forest industry is helping. We thought the 25
message on this truck said it all.
 c cc
APP has made substantial investments
in development projects in areas and
villages surrounding their operations
to reduce poverty by:

Ëc Supporting education
Ëc Developing skills training
Ëc Providing medical care
Ëc Establishing entrepreneurial
community enterprises
Ëc Providing environmental
protection and education
Ëc Assisting with disaster relief
The Greenspirit Strategies team visited this village near
The Greenspirit Strategies team
the Taman ‰aja Nature ‰eserve. APP suppliers PT
assessed a range of these community
Wirakarya Sakti and PT ‰imba Hutani Mas are working
development projects and sites and
closely with some 600 families on development projects
we were impressed by how involved
aimed at poverty alleviation.
and engaged APP and its suppliers
are with their surrounding communities.

Near the Taman ‰aja Nature Preserve, APP¶s pulpwood supplier is working closely with the local
community and some [00 families on development projects aimed at poverty alleviation. As noted
previously, an important additional benefit of reducing poverty in this area is that people are less driven
to illegally encroach on protected areas in search of an income.

In our visit to this region, village leaders told us they


are working with APP, government and NGOs in a
range of areas including building schools, providing
healthcare, and developing an organic fertilizer
business for local farmers in the region.

Local leaders indicated that with the help of APP¶s


pulpwood supplier, they are educating villagers on
the need to conserve the Taman ‰aja Nature
Preserve, including a nearby water catchment area
that has high biodiversity values.

In coordination with local leaders and an NGO, a


An APP pulpwood supplier financed
wildlife corridor between Taman ‰aja and Bukit
aquaculture program is teaching villagers
Tigapulah National Park is being developed so
to become fish farmers so they can provide
Sumatran tigers and other wildlife have access to the
a livelihood for their families without
entire region.
destroying the surrounding forests.
In another example of APP¶s commitment to
community development, its supplier has funded an aquaculture program to provide economic and
2[
educational opportunities for the people of four villages living along the Batanghari ‰iver in Jambi
Province, Sumatra.

This boy¶s family is learning to farm fish and produce honey to earn an income.
Prior to development of the aquaculture project, many of the people in the surrounding region lived
nomadic lives, using the forest for subsistence and cutting down large areas of forest to plant crops.

As local leaders indicated to the Greenspirit Strategies team during our visit, the APP pulpwood
supplier financed aquaculture program is teaching villagers how to become fish farmers so they can
provide a livelihood for their families without destroying the surrounding forests. Some ŒŒ families are
participating in the project, managing their own fish ponds, and harvesting and marketing the fish to
the surrounding communities.

Local leaders told us the project has resulted in decreased illegal logging, forest burning and
conversion to agriculture. In demonstrating the effectiveness of the program, one local leader
paraphrased the well-known Chinese proverb, saying ³give a man a fish and he eats for a day, teach a
man to fish and he will eat forever.´

During our visit to Sumatra, the Greenspirit Strategies team also visited two Community Development
Centres (CDCs), one located near the APP Indah Kiat mill in ‰iau and the other located near the APP
Lontar Papyrus mill in Jambi.

These centres play a vital part in the social, educational and economic development of surrounding
communities. The CDCs provide training in a variety of fields such as aquaculture, honey production,
farming and fertilizer production from cattle, weaving, and computer training as well as access to
books, internet and library services. The CDCs also help farmers market their products in different
areas.

Based on our experience, these community development programs compare favourably with those of
other leading companies around the world.


c
c
c
c
c
c
c
c
c
c
APP funds community development centres (4D4s) to provide training for local
c
communities in a variety of fields such as aquaculture, honey production,
c farming and fertilizer production from cattle, weaving, computer training, and
c access to books, internet and library services.
c
c
c
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28
 c c  
c  c
 c
c
Contrary to the portrayal promoted by
Western environmental groups, APP and its
fibre suppliers are using cutting edge
research and technology to grow more fibre
on less land ± thus reducing the impacts on
natural forests and habitat.

An in-depth meeting with APP supplier PT


Arara Abadi¶s Vice Department Head Evi
Eriana in ‰iau allowed Greenspirit
Strategies staff some impressive insight
into the way in which APP and its pulpwood
suppliers plan to meet the challenge of increasing
pulp and paper output on a restricted landbase.

APP pulpwood suppliers are emphasizing genetic,


technological and environmental research to
produce the best planting material in the world.

We learned ‰&D at PT Arara Abadi is focused


through six departments:

àc Tree Improvement Department


àc Silviculture Department
àc Nursery Department
àc Biotechnology Department
àc Plant Protection Department, and
àc Technical Extension Department

The mission is to ensure sustainable plantation


development by performing research to
overcome problems encountered in plantations,
to provide genetically improved plant material
(tissue culture plants and seed), to provide
technical training to districts (e.g., nursery
training), to support plantation activities, to
contribute to pest and disease control, and to
advise on all activities including best planting
methods. The main species under research are APP pulpwood suppliers are emphasizing
Eucalyptus pellita, Eucalyptus hybrids, Acacia technological and environmental research
mangium, and Acacia crassicarpa. in order to produce the best planting
material.

Alternative species include Eucalyptus urophylla, Acacia hybrids, Eucalyptus camaldulensis,

29
Eucalyptus grandis, Eucalyptus tereticornis, and Eucalyptus brassiana.

As Greenspirit Strategies learned on our review of the


research facility, APP has now developed one of the fastest
growing trees in the world.
As Greenspirit Strategies
This clone, a ." , grows tall and straight, and learned on our review of
produces fewer branches. In combination with cutting edge the research facility, APP
silvicultural practices, this tree grows at more than 50 has now developed one of
mG/ha/yr MAI and has the potential to reach 110 mG/ha/yr the fastest growing trees in
MAI. By comparison, in 1991, the fastest growing tree grew the world.
at 20 mG/ha/yr MAI.

Another tree, 9which is specifically planted in wetland or peatland has also shown
an astounding improvement in growth, from 1Œ.5 mG/ha/yr MAI in 1990 to greater than Œ0 mG/ha/yr
MAI today.

This research means that APP pulpwood suppliers can grow more fibre on less land, allowing for the
preservation of more natural forest. APP¶s research is conducted in collaboration with both Indonesian
institutions and universities and academics around the world, including:

÷   
àc $  ! #  ":' 
÷+ + /  :, + 9
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àc #.,5.  + , + 9/9
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àc ÷#9#
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 This research means that APP¶s
÷     pulpwood suppliers can grow more fibre
àc =("" on less land, allowing for the
àc  (   " preservation of more natural forest.
àc  '    "@
àc '  $ ;   "
àc $   +"! "
àc $÷/,9!  2  %&&
àc 3"  "
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This collaboration with academic institutions around the world has made APP a leader in plantation
research and development.
c
G0
  c
Greenspirit Strategies¶ view after extensive assessment of the region is that [legal or government
sanctioned] paper and pulp suppliers such as APP in Indonesia have made exceptional progress in the
10 years since Greenspirit Strategies last assessed the region. During the time the team spent on the
ground and in the air viewing Sumatra, plantations, mills, forest
communities and also interviewing management, we saw
dramatic improvements in:
Our view after an extensive
àc Sustainable peatland operations assessment of the region is
àc Habitat protection and voluntary set asides for parks and that the scare-stories
protected areas created and marketed by
àc CO2 emissions reduction programming activist groups like
àc Community engagement and poverty alleviation efforts Greenpeace, ‰ainforest
àc Cutting edge plantation research and development Action Network and
ForestEthics are often
That is not to say there aren¶t serious challenges facing the false.
region with respect to deforestation and habitat loss. Again, our
view is the company has had a significantly beneficial effect on
curtailing deforestation and habitat loss, which are the result of
poverty in the form of national migrants illegally encroaching on forests in search of a better life.

In spite of the fact some activist groups would prefer you ignore this point completely, the company
operates on the basis of achieving full legal compliance with the national and provincial governments
where it operates. The country¶s National Spatial
Plan allocates just over G percent of Indonesia's total
1l0 million hectares of forest (roughly G.5 million
hectares or 8.[ million acres) to pulpwood plantation
forest. Of this, APP¶s plantable area is only around
1.^ million hectares.

Contrary to the claims of Western environmental


groups, it is impossible to destroy Indonesia¶s
biodiversity by converting G.5 million of 110 million
hectares to plantation forests.

Second, and importantly, the company¶s


performance is based on the three classic pillars of
After our extensive assessment of the region, sustainability ± economic strength, environmental
we believe APP and its pulpwood suppliers compliance and social responsibility. However, in a
are managing their forests sustainably. developing country where US$Πbillion a year is
collected by the state in forest industry taxation,
there¶s little doubt the sector helps support millions of families.

G1
Third, conservation beyond compliance means APP is focussed on a wide range of large landscape
forest protection and sustainable forest management
activities that promote third-party certification of practices,
chain of custody, CO2 emissions reductions and recycling.
There are 35 million
Indonesians living below And finally, the importance of the social aspect of the
poverty line, and many of company¶s activities as we viewed them cannot be
them are driven to desperate overstated.c
measures, including
encroachment into protected There can be no doubt that poverty and social and
areas in a bid to provide a environmental degradation in developing countries are
decent life for themselves and closely linked. As we have reported earlier in this piece,
their families. there are G5 million Indonesians living below the poverty
line, and many are driven to desperate measures, including
encroachment into protected areas and forest plantations, to
provide a decent life for themselves and their families. A far
better option would be for a robust forest sector,
supported by western activists, to contribute
support toward poverty alleviation, community
empowerment, and education.

We are discouraged that the activities and rhetoric


of certain activist groups have a negative impact
on important efforts toward poverty alleviation in
a developing country, and consequently, hurt
environmental protection in Indonesia.

While there remains little doubt Western


environmental activists have decided to target
APP, our ground and aerial surveys of APP¶s and
its pulpwood suppliers¶ operations indicate to us Greenspirit Strategies team with APP staff in
the anti-APP campaign is groundless. Sumatra, Indonesia.

We hope this view will influence Western environmentalists to focus on the right target ± poverty
alleviation in Indonesia ± which will in turn help to reduce illegal encroachment and habitat destruction
in the country. We are convinced APP and its pulpwood suppliers are making a positive contribution in
that regard. However, by targeting APP and its suppliers, Western environmental groups are, in real
terms, making it much more difficult to reduce deforestation in the country.

G2
 !c"cc#cV  c cc

c
After spending 10 days reviewing APP operations in Indonesia, we feel it is important to offer a
summary of our observations:

1.c As we noted previously, 85 percent of APP's


pulpwood supply comes from fast growing, high
yield, renewable plantations. Approximately 15
percent comes from  "  mixed tropical
hardwood. APP's mills have been configured in
such a way that mixed tropical hardwood is less
useful and efficient to process. Plantation fibre is
strongly preferred and APP is rapidly moving
toward minimal mixed tropical hardwood.

2.c APP¶s pulpwood suppliers are not seeking any new


concessions apart from what has already been
applied for ± period. Cutting edge advances in
research and technology mean APP pulpwood Eighty-five percent of APP's pulpwood
suppliers can grow more fibre on less land, resulting supply comes from fast growing, high
in increased fibre supply without requiring an yield, renewable plantations like this
increased land base. one.

G.c Detailed aerial surveys of areas in which APP pulpwood suppliers are located, such as PT Bina
Duta Laksana (PT BDL) and PT Mutiara Sabuk Khatulistiwa (PT MSK) in the Kerumutan area and
PT Artelindo Wiratama outside Bukit Tigapuluh National Park ± and interviews with local
community leaders ± show they are operating within the confines of government approved land use
plans. These companies have also undertaken social and high conservation value forest assessments
based on a national protocol. In Kerumutan, more than 52 percent of the companies¶ concessions
are set asides. *   %   +  +  +   3+  @

^.c APP supplier concession operations help to protect natural forest by acting as a buffer against
further illegal encroachment of the natural
forest area.

5.c Pictures can often be misleading.


Greenpeace¶s reports    
and .+ ,  are replete
with photos purportedly showing APP
pulpwood supplier clear-cuts, leaving the
impression that these are recent clear-cuts
of natural forest, the better to stir outrage
against APP. In fact, many of these
pictures have been taken after a pulpwood
plantation concession ± not a natural
forest ± has been harvested.
Greenpeace fails to indicate that once This is not a clear-cut of a natural forest, but rather
harvested, these concessions are rapidly a recently harvested plantation forest. This area will
be rapidly replanted and in a few short years, a new
forest will grow here. GG
replanted and in few short years, a new forest will grow ± ready once again for harvesting. We call
this a renewable resource.

[.c Contrary to some environmentalists¶ allegations, APP


pulpwood suppliers are not endangering Sumatran tiger
habitat. On the contrary, and as we have already noted, Illegal encroachments ± not
without such operations, Sumatran tiger habitat would APP¶s supplier plantation
likely be further endangered. operations ± are at the heart of
Sumatran tiger habitat
Œ.c As the FAO makes clear in its State of the World¶s destruction.
Forests ‰eport (200Œ), deforestation and habitat
destruction are driven primarily by urbanization and the
clearing of land for agriculture. In this sense, all of
Sumatra would once have been considered tiger habitat. Much of this habitat has been destroyed
by the growth of cities.

8.c As the FAO also notes, plenty of deforestation is driven by poverty. Our detailed aerial flyovers of
Sumatra made this very clear. We saw large numbers of illegal encroachments where natural forest
had been destroyed. These areas were mostly located away from APP supplier concessions because
these suppliers carefully monitor their areas and the surrounding region. The companies work with
local communities to prevent illegal encroachment. As we saw from the helicopter, the further
away you go from company owned concessions, the more illegal encroachment you find ±because
there is little monitoring of these areas.

9.c As we were told by many experts in Sumatra,


national migrants generally encroach on forested
and protected forest areas in search of an income.
According to the Indonesian Central Bureau of
Statistics, as of March 2008, nearly G5 million
Indonesians live below the poverty line, unable to
obtain food amounting to 2100 calories per day.

They clear land and plant crops or oil palm. In


many cases, these migrants do not bother with the
illegal selling of cleared mixed tropical hardwood
since they do not have the resources to remove it ±
instead, they simply burn it on site. Often, the fires
spread uncontrollably, destroying nearby In many cases, migrant nationals do not
plantations, protected forest and peatlands. Peatland bother with the illegal selling of cleared
fire is the major cause of carbon emissions. mixed tropical hardwood since they do not
have the resources to remove it ± instead,
10.cIt is these illegal encroachments ± not APP supplier they simply burn it on site.
plantation operations ± that are at the heart of
Sumatran tiger habitat destruction. As we have
already noted, APP and its pulpwood suppliers are engaged in a range of programs to prevent
illegal encroachment and protect tiger habitat, including poverty alleviation and specific tiger
conservation initiatives. These are important initiatives that, as Indonesian wildlife conservationist
Bastoni noted, are not being funded by Western NGOs. Without support from APP, the tiger would
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likely be much worse off.

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This is an example of the real risks


associated with passive conservation in
Sumatra. These maps based on satellite
data show illegal encroachment is the
root cause of deforestation in Sumatra.
The yellow portion of the map indicates
the extent of illegal encroachment.
Neither APP nor its pulpwood suppliers
operate here. Consequently, there is
inadequate monitoring and little attempt
at poverty alleviation. In only eight years
(2000-2008), encroachment into the park
has risen rapidly. If this rate of
encroachment continues, Teso Nilo will
likely be entirely deforested by 2020.
Teso Nilo encroachment, May 2000 Western environmental groups ignore the
root cause of deforestation because it
much easier to blame a large forest
company than it is to do the difficult
work of poverty alleviation and
sustainable development

Teso Nilo encroachment, April 2008

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11.cGrowing plantation forests on peat soil makes sense from an environmental perspective because as
acacia leaves and tree matter fall to the ground and are cut during harvesting, they add to the depth
of the peat.

12.c‰ecently, APP announced that it will create the Kampar Carbon ‰eserve -- an area
one quarter the size of Singapore ± on concession land held by its pulpwood
supplier PT. Putra ‰iau Perkasa (P‰P). Working in partnership with the Singapore-
based NGO Carbon Conservation, APP will turn more than 15,000 hectares
(GŒ,0[5 acres) of critical peat forest from concessions allocated for pulpwood
plantation to conservation land acting as a carbon reserve. In coordination with the
United Nations Collaborative Programme on ‰educing Emissions from
Deforestation and Forest Degradation in Developing Countries (‰EDD), the
program will use ‰EDD credits to provide education, job training and community
development programs to local villagers.

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In 200Œ, the Forest Stewardship Council (FSC) revoked APP¶s FSC chain of custody for its mills even
though APP had complied with all chain of custody requirements and received its Forest Stewardship
Council certification from an independent, world-class
auditor, SGS.

SGS told the 8* = that FSC¶s behavior Independent auditor SGS noted
would likely make other producers in the tropics wary of that the Forest Stewardship
pursuing FSC certification, since it could be arbitrarily 4ouncil decision ³will truly drive
taken away. away most of the big players in
tropical forestry.´
SGS was quoted as saying that this ³will truly drive away
most of the big players in tropical forestry.´

A major flaw of the FSC system is that it is heavily influenced by environmental activists who appear
to have a strong bias against large companies ± whether or not those companies are operating
sustainably. It is likely the FSC received substantial pressure from members to pull APP¶s certification.

Greenspirit Strategies believes this was a purely political and trade-related decision based on zero
scientific grounding.

Nonetheless, based on our interviews with APP management, the company remains open to further
discussions with the FSC on restoring its certification.

By the same token, we strongly urge the FSC to reconsider its unfortunate decision to revoke APP¶s
chain of custody logo and rather to engage constructively with the company in a manner that is fully
transparent.
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Certification systems based on principles of sustainable forest
management emerged in the past two decades as a means of
giving customers the assurance that a forest product was
derived from sustainably managed forests. In short, the We urge procurement policies
certification system takes a highly complex subject involving be evaluated on the basis of
environmental and social sciences and economics and whether they are ³inclusive´
condenses it down to the simplest market signal ± a stamp or or ³exclusive´ ± that is,
marquee designating the product¶s sustainable production. whether or not they give
preference to range of
As new, credible certification systems have entered the independent, third-party forest
sustainable forest management marketplace, procurement certification standards.
officers have looked to these various systems in order to filter

sustainable forest practices from unsustainable ones.

Given the variety of systems now available, procurement


As one UK-based procurement officers must create procurement policies squarely based on
executive explained, ³We have performance in order to ensure those policies endure.
not been able to buy otherwise
competitive products from We urge an inclusive approach to procurement rather than
well-managed forests, for the an exclusive one
sole reason that they have the ± that is,
wrong label on the package.´ procurement
policies should
give preference
to a range of independent, third-party forest certification
standards rather than favouring any one certification label
in particular.

As one UK-based procurement executive explained during


the early days of this debate: ³We have not been able to buy
otherwise competitive products from well-managed forests,
for the sole reason that they have the wrong label on the

package.´ APP pulp from well-managed forests ready


for shipment
More recently, companies have adopted procurement
policies that appear to satisfy NGO concerns while remaining inclusive by giving preference to a range
of independent, third-party forest certification standards.

Sample Procurement Policy

Below is a sample procurement policy that we provide as a reference for pulp and paper buyers
worldwide. This type of policy, focused on environmental criteria rather than on geo-political locations
or brand-specific requirements, provides enhanced flexibility to buyers while ensuring the procured
forest products are from well-managed forests:
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  "  " +9    B   + 
 + @÷   9   + 9   4  C

àc $     "D


àc $       E " E"D
àc        " 5  " 7D
àc         (   D
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àc ÷   + B     B+    5 @@   9
++ " "7

8          9    "C

àc ÷   .  ÷  2 +.( ÷  5.÷7


àc ' ++  .  + ! $  5.!$7
àc ! * $ 5!*$7
àc
   "  A    +  +  

8          + + "
+   @
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Greenspirit Team Flight Plans

Day 1

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Day 2

^1
Day 3

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Greenspirit Strategies Itinerary

The Greenspirit Strategies team conducted assessments in the following key areas:

àc Aerial helicopter flight over GSK-BB


àc Plantation forest mosaic on the way to GSK-BB
àc Giam Siak Kecil - Bukit Batu Biosfer ‰eserve
àc Fly from GSK-BB to ‰UJ
àc Discussion with Pak Bastoni, head of BKSDA
àc Aerial flyover Senepis Tiger Sanctuary
àc Land at IKPP Perawang
àc Forestry discussion in Arara Abadi Office
àc ‰eview IKPP chain of custody, mill gate, log yard, chip yard
àc ‰eview ‰&D Center
àc ‰eview tissue culture laboratory, eucalyptus nursery, eucalyptus trial plot
àc Assess Acacia/Eucalyptus plantation
àc Assess community nursery
àc ‰eview IKPP community development center
àc Aerial helicopter flight from Perawang to Kampar Peninsula ± land and review at Kampar
àc Aerial helicopter flight over Kerumutan -- See aerial view of BDL & MSK. Check boundary of
Kerumutan National Park
àc Land at BDL and interview community
àc Aerial helicopter flight to TT
àc Car ride to Sungai Tapa
àc Assess community forest and interview locals
àc Aerial helicopter flyovers and ground assessments: TNBT, Eks-dalek, access road, Artelindo,
Taman ‰aja
àc Interviews with community in Taman ‰aja
àc Assess Lontar Papyrus mill chain of custody system
àc Management interviews in Jakarta

^G