Case Study on Friends of The Earth International (foei) V. Wilmar International Limited (wil)

Introduction

This case study aims to highlight the issue of accusation by Friends of the Earth International (FOEI) on Wilmar International Limited (WIL), for not being environmentally and socially responsible in their oil palm plantation situated in Sambas, Indonesia. Major allegations made by FOEI includes land clearing through burning, unlawfully rainforests logging, disregarding the rights and consent of the local community with customary rights as well as not adhering to the standards of forest conversion by the Round Table on Sustainable Palm Oil (RSPO).

WIL on the other hand strongly opposes the accusation and stand their ground by insisting that the findings by FOEI were unsupported since there was no official statement produced by the company’s spokesperson. The company’s obligation and determination towards sustainable oil palm development and production was misinterpreted and hence resulted in the misunderstanding of WIL.

Firstly, with regards to the issue of land clearing as a result of burning, FOEI pointed out evidence of unlawful burning practices has been carried out to pave the way for oil palm plantation. With that, WIL responded with claims that sabotaging their plantation together with allegations of 2,300 hectares of land being burnt down was not true. Furthermore, both the company and local authority provided documentation that the total area of forestry affected by the fire was significantly lesser as compared to what was previously reported by FOEI.

Secondly, the issue of illegal land clearing without prior notice given to both the local community was another accusation WIL faced. WIL addressed the accusation by highlighting the fact that they have approached several government bodies and experts of the field. In doing so, WIL managed to obtain mandatory legal and professional documents before the commencement of their development.

Thirdly, Environmental Impact Assessments (EIA) of the soil properties in WIL plantation was allegedly not done properly, and it contributes to the spreading of fire that increases carbon emission. WIL concluded that they had hired professional consultants to conduct the EIA, and with their cutting-edge R&D department, they found no evidence that links the soil properties to the spread of fire that causes deforestation and increases carbon emission. Fourthly, WIL denies they have developed their plantation in High Conservation Values (HCV) areas.

In the areas of riparian reserves that serves as the habitat for river organisms and filtration points of the river, development is strictly prohibited to preserve their ecological function, making them an HCV area. WIL contested the comment and insisted that there is no encroachment done to the larger Sambas river and they only build a drainage system in smaller streams that are practiced widely in agriculture. WIL strongly opposes all the above accusation, stating that they have approached multiple government bodies and experts in requiring the needed legal and professional document before commencing their development.

WIL insisted that an incident in Sambas only cannot standardize the company's social and environmental responsibility as a whole. There seem to be a lot of areas in the comments exchange between WIL and FOEI that could have been approached differently and more in-depth, especially when the activity has the involvement of the government.

Who are the stakeholders and what are their stakes?

There are a few stakeholders in the case study, and by using the stakeholder typology in the analysis of this case study, we can identify four major stakeholders. Typology focuses on three main attributes which are legitimacy, power, and urgency. However, when these attributes are superimposed, seven stakeholders can be identified.

Firstly, typology identified FOEI as the dependent stakeholder since it is the world’s largest grassroots environmental network. Globally, FOEI has over two million loyal supporters who campaigns on the current environmental and social problem. Not only that, FOEI garners support from international groups that can provide ombudsman services such as RSPO as well as International Finance Corporation (the private arm of the World Bank).

As such, FOEI can easily outnumber WIL when it comes to campaigning for a cause by gaining the necessary power and movement which could potentially influence business in plantation areas in both South East Asia and Europe. Secondly, European countries and corporations like Unilever and Nestle, are definitive stakeholders. European countries are one of the world’s largest palm oil importers. Fuel by the growing demand for palm oil-related products, the number of oil palm plantation had seen a significant increase, ultimately making the European countries one of the reasons for the increase of environmental and social destruction.

However, an increase in awareness of the environmental and social impact of palm oil plantation by FOEI Netherlands led to an increment in knowledge towards environmental issues. Thus, a vast majority of business leaders from different trades may choose not to important palm oil from WIL. Members of the European public may also choose, sometimes more costly alternative as a result of increased awareness of the impact of their consumer behavior. The shift of consumer preference and awareness result in significant economic repercussion on WIL which ultimately affects their businesses and tarnish their reputation.

Thirdly, Indonesian authorities are also a definitive stakeholder. Their role as law enforcers upholds the regulation on forest clearance and set approval of EIA for companies to deforest sustainably. If allegations towards WIL are found to be truthful, the Indonesian authorities have the rights to reject WIL’s operation on certain lands.

A new corporation that offers a harmonious relationship with nature and the local society can easily replace WIL in the affected plantation development area. The Indonesian government can also prevent WIL from penetrating and growing in the Indonesian market or conduct a more thorough check on the company’s environmental and social reputation, before allowing them to set foot in the local market.

Lastly, local community living in the affected area are also important dependent stakeholders. They are the ones directly affected by the activity of oil palm plantation, and if not handled properly, they may gain power through media and activist group, to investigate the business malpractice in the area. Even though they lack power as the mass population around the project area may be not well-educated, the sound of a united community addressing a common issue will bring a change to their stakeholder status, making them very powerful in the decision-making process.

Assessment of Wilmar’s responses to FOEI’s allegations

WIL is very defensive in their stand on the issue highlighted in FOEI’s draft findings. They claimed that most of the allegations were unsupported and are of a nature of defamation. Overall their response was not entirely transparent with much of the legal processes and evidence exempted.

For example, WIL claimed that they will not intentionally set fire on their plantation and that most of the fires are accidental due to the drought that made the field more fire-prone. Their claims were not substantiated with any official documentation of such incident, especially from the fire department or the Department of Environment and Forestry, making their response unable to de-escalate the uproar created by FOEI.

In the matter of Environmental Impact Assessments (EIA) report, WIL could have disclosed the profile of the professional consultant they employed and provide scientific data to support their response. WIL is proud of their R&D department achievement in soil management, but it did not address FOEI’s concern on carbon emission due to fire-prone soil properties, making the justification superficial and not informative.

The poor management of communication towards FOEI queries may spark more doubts about the transparency of WIL on their information control. WIL responses also show that they are taking the confrontational approach in engaging FOEI as they are repeatedly challenging the findings of FOEI. Furthermore, the handling of the issues was done on two separate occasions, leading to a lot of contradictions in both responses.

In a nutshell, lapses in the comments and also in the passing of legal documents by local government have made WIL’s attempt to resolve the issue harder. The company should seek to compile most of their information needed to make a better, complete and comprehensive report before replying to FOEI.

Recommendation to Wilmar in responding to FOEI’s allegations

In response to FOEI’s allegations, WIL should engage with FOEI and the local government and society collectively, conduct a constructive dialogue, mediation and discussion to find common ground and solutions more constructively and communicatively. This cooperative approach will provide a platform for the exchange of ideas and values, and ultimately a memorandum of understanding can be reached. WIL should resolve the issue by speaking to each affected stakeholder, understand their needs and motives to address the issue in the macro level.

Besides that, the inclusion of the government agencies will help to streamline the process of acquiring permits, EIA and also help to identify HCV areas prohibited from development. Most of the legal and political issues faced by WIL arise from the gaps of governmental bodies as WIL needs to account to different governmental agencies for different permits or licenses. A more centralized government body can be established with the help of WIL to increase the efficiency of legal adherence and enforcement. This implementation can also benefit both the government and WIL as documentation of data will be more accurate, and procedures will be more standardized, reducing contradictory laws and public confusion.

In the context of FOEI, they seek so sought justice for the community in Sambas and reduce the effect of global warming that arises from the carbon emission due to open burning in Sambas plantation area. On the contrary, WIL also seeks to improve their environmental and social impact at the project site, while at the same time clarify and resolve the issues highlighted.

The company should provide more evidence to justify their claims on the issue of sustainable business development. By being transparent about their work processes, providing scientific data from certified professional and proactively invite FOEI personnel and other third-party professionals to inspect the plantation site will promote mutual trust and respect that will help to alleviate the tension between the two parties.

What can Wilmar do to address the environmental challenges of its business operations?

To tackle the environmental challenges of its business operations, WIL has to collaborate with the government and the local society, constantly watch out for any signs of environmental issues arises in the plantation area. The local community can serve as a watchful eye for WIL and also whistle-blowers to ombudsman organization if any of WIL’s employee engage in unlawful operation. Education on the impact of their actions like open burning or illegal deforestation through workshops organized by WIL, which presumably will reduce a significant amount of unsustainable practice deforestation.

With the empowerment of knowledge, the local community will be able to exercise their rights and negotiate better in a dialogue with the development corporation. By working on the ground with the community, WIL can build a stronger relationship with the locals, effectively improve the communication and cooperation of both parties in issues like reducing open burning practices to mitigating boundary issues amongst villagers.

Mutualistic cooperation with the government is also very important as in the context of 2007, WIL has to account to multiple government agencies that led to miscommunication and practice lapses. With laws laid out smoothly and procedures standardized, WIL will be able to retrieve past permit approval records or any other legal documents easily if an incident like this happens again.

WIL is also advisable to engage with international organizations that focus on environmental issues and provide guidelines and certification. With the inclusion of an international environmental institution, it will allow WIL to gain a reputation of trust and the involvement of such a neutral institution will serve as the auditing firm, constantly keeping in check with the practices in the project area.