Country Focus: Indonesia’s rubber sustainability at a crossroads

Deforestation in Indonesia, the world’s second largest natural rubber producer, is an issue to reckon with. According to Greenpeace, the country has one of the highest rates of deforestation globally, with over 74 million ha cleared for agriculture, as well as mining concessions. Thus, rubber sector stakeholders are shuffling to build solutions grounded on sustainability, says Angelica Buan in this article.

Michelin/WWF: making responsible rubber sourcing a priority

Rubber is Indonesia’s golden goose, with most of the rubber production coming from South and North Sumatra, Jambi, Riau, and West Kalimantan.

The Indonesian market, according to TechSci Research, was valued at US$3.35 billion in 2019, and is poised to grow at a CAGR of nearly 6% through 2025.

Indonesia-domiciled tyre maker Gajah Tunggal, despite a sales decline in the pandemic period, remains the largest producer in Southeast Asia, followed by Bridgestone.

Meanwhile, French tyre maker Michelin is a prominent figure in the Indonesian tyre market space, having acquired Indonesian tyre manufacturer Multistrada Arah Sarana in 2019.

The company was the first tyre maker to commit to responsible rubber sourcing, according to the World Wide Fund (WWF), which in 2016 cooperated with Michelin on the sustainable rubber sourcing policy, since rubber plantations are a major cause of deforestation in Southeast Asia.

To enable success of this objective is to develop responsibly-managed plantations on degraded land with full consent by tenure-holding local communities, instead of grabbing land and clearing high quality natural forests, WWF commented.

In 2015, Michelin entered into a joint-venture with PT Chandra Asri Petrochemical subsidiary, Barito Pacific Group (BPG), to produce rubber. Known as Royal Lestari Utama (RLU), the joint venture, 53% for BPG and 47% for Michelin, involves the reforestation of three concessions, representing a total area of 88,000 ha. On half of these areas, located in Jambi and North-East Kalimantan-Timur, rubber trees will be planted to produce an estimated 80,000 tonnes/year; while the remaining land will be allotted for re-creating a natural environment and community crops, Michelin said in a press statement.

The company’s four-year partnership with WWF is to ensure that best practices are observed throughout the RLU project, with WWF having presence on concessions bordering those of Michelin/Barito in Jambi. The local coordination also aims to protect the Bukit Tigapuluh National Park and Limau Protected Forest, which are at risk of deforestation.

Mighty Earth puts RLU’s sustainability under the spotlight

The RLU project, however, has come under scrutiny from environmental expert Mighty Earth. The US-based firm has said that Michelin has “coveredup” industry-scale deforestation of over 2,500 ha of rainforest.

In a new report, “Complicit: An Investigation into Deforestation at Michelin’s Royal Lestari Utama Project in Sumatra, Indonesia”, Mighty Earth said that the “industrial deforestation” has been carried out over a 33-month period to January 2015 to make way for natural rubber plantations in Jambi. Of this, Mighty Earth also found 1,298 ha of rainforest was industrially deforested in a Wildlife Conservation Area (WCA), and which is now planted with thousands of rubber trees.

Mighty Earth also found that the Michelin RLU project has since attracted financing from Asia’s first US$95 million corporate sustainability ‘Green bond’, as well as public funds from Norway, the UK and the US, and is slated to receive further financing from a second US$120 million green bond.

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Alex Wijeratna, Campaign Director at Mighty Earth, said that Michelin was aware of the “terrible forest destruction”, but “didn’t do enough to stop it, and instead chose to provide green cover to the project in order to attract green bond investors that have since sunk millions of dollars into the scheme.”

Mighty Earth’s report also claimed that PT Lestari Asri Jaya had “perpetrated much of this destruction through industrial forest clearance”. According to their findings, in 2012, there was 3,966 ha of intact forest covering almost the entire case study area. By the time the joint venture project began in January 2015, only 138 ha of that forest remained. Mighty Earth furthered that high-resolution satellite images point to large-scale rubber planting replacing this natural forest.

Mighty Earth, voiced by Wijeratna, is calling for an independent investigation “to get to the bottom of the murky business during the run-up to this so-called green rubber project, and believe the second ‘green bond’ offering shouldn’t go ahead until all the facts about what happened in Jambi are in the public domain”.

German researchers collude with Mighty Earth

Meanwhile, researchers from Germany’s University of Göttingen shared Mighty Earth’s view. A study, published in the Journal of Land Use Science, verified claims of Michelin regarding sustainability, including conservation, which were then compared with the effects described by local people in the village of Muara Sekalo in Indonesia.

A press statement released recently by the researchers relayed the detrimental effects to land-ownership, ecosystems and biodiversity as claimed by villagers. The researchers also found that salaries at the rubber plantation were lower than the minimum wage for the province.

The research team, working with Indonesian researchers (as part of the collaborative German- Indonesian research project, EFForTS (Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems), interviewed villagers in the surveyed areas as well as carried out intensive qualitative content analysis, studying press releases and media coverage about Michelin’s plantation project.

Wijeratna, taking a swipe at Michelin’s reservations not to disclose the companies it is sourcing rubber from, challenges the tyre maker to be more transparent.

“If Michelin is to live up to its stated zerodeforestation and human rights aspirations, it needs to come clean about what happened in Jambi, and use its industry leadership position to become a champion for greater transparency across the whole rubber supply chain,” he said.

RLU: we follow the rules!

RLU, meanwhile, offered its response to the Mighty Earth report and refuted Mighty Earth’s allegations of “illegal deforestation in the Jambi concessions held by BGP subsidiaries, between 2012 and 2014, before RLU was formed”.

RLU stated that the subsidiaries fully respect and comply with all prevailing Indonesian laws and with proper forestry permitting.

RLU also stressed that since its establishment, the partners “have all issued their own No Deforestation, No Peatland Development, No Burning, and No Exploitation (NDPE) policies”.

It went on to explain that in 2017, a 9,700-ha WCA was established by the company and partners, adjacent to the 143,000-ha Bukit Tigapuluh National Park to protect wildlife habitat through the concessions. RLU also clarified other concerns such as livelihood, health, and community issues.

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