Indonesia Sinar Mas Denies Greenpeace Deforestation Charges

Sinar Mas, Indonesia's biggest palm oil producer, Tuesday said the company remains committed to following sustainable practices while producing palm oil, a product widely used as a cooking medium as well feedstock for bio-diesel production.

In a statement, the company said it won't cultivate oil palms on land with high carbon stock or land with high conservation value.

Sinar Mas, the parent company of the Jakarta-listed PT Sinar Mas Agro Resources and Technology Tbk (SMAR.JK) and the Singapore-listed Golden Agri-Resources (E5H.SG), came under fire recently after environmental group Greenpeace charged the company with failing to follow sustainable plantation practices required by the Roundtable on Sustainable Palm Oil (RSPO).

The report said Sinar Mas was widely involved in clearing rain forests and draining peatlands for developing oil palm plantations.

The campaign forced global giants such as Nestle N.V (NESN.VX), Unilever Plc. (ULVR.LN) and Cargill Inc. (CRG.XX) to stop sourcing palm oil from Sinar Mas, despite the company being a member of RSPO, an industry-sponsored certification body.

The offtake by these companies isn't exceptionally large, but their international visibility has helped Greenpeace push the message that Indonesian palm oil producers continue to be a threat to the country's rainforests and several endangered species of animals. Indonesia is the world's biggest palm oil producer, with output reaching 20.5 million tons in 2009.

Nestle, which uses around 4,000 tons of crude palm oil annually, stopped buying CPO from Sinar Mas in February.

Prior to that, in December 2009, Unilever suspended palm oil purchases from Sinar Mas, estimated around 47,000 tons or $32 million annually. Unilever has also stopped buying palm oil from another Indonesian producer, Duta Palma.

Unilever, which uses palm oil in products ranging from soap to ice-cream has said it would review the boycott if independent auditors provide proof that Sinar Mas is following sustainable practices.

Sinar Mas has appointed Control Union Certification and the BSI Group to carry out independent audits and verify Greenpeace's reports, the company said earlier this month.

While the result of the audits will be known only by June, Sinar Mas said it viewed "any breach of its sustainability practices seriously and has suspended the plantation manager responsible for the area highlighted in the Greenpeace report."

But at a news conference Tuesday, Greenpeace said Sinar Mas continues to break sustainability commitments made earlier.

"Evidence shows that Sinar Mas continues to lie to its shareholders and customers about its environmental standards. Whatever new promises it makes today, it is clear the company intends to continue trashing rainforests and destroying orang-utan habitat. We will continue to press Sinar Mas' customers to stop all business with this forest destroyer until it cleans up its act," Greenpeace Southeast Asia Forest Team Leader Bustar Maitar said.

According to Greenpeace, Indonesia has one of the fastest rates of forest destruction on the planet, with palm oil and pulp and paper plantations being major causes. As a result, it is now the world's third largest greenhouse gas emitter, after China and the United States, the group said.

By Shie-Lynn Lim & Sameer Mohindru, Dow Jones Newswires; [phone]; [e-mail]