Concerned about Climate Change and Deforestation, Companies Ditch Sinar Mas

Forestry and palm oil giant Sinar Mas has become nearly synonymous with runaway deforestation in Southeast Asia, which threatens endangered species and local communities while contributing to climate change. In response, global companies have been dropping Sinar Mas products right and left. As environmental groups call attention to the social and environmental impacts of the Sinar Mas group’s activities, major market players are finding business with Sinar Mas to be incompatible with their social responsibility commitments.

Global demand for paper pulp and palm oil (a substance used as both a food ingredient and a biofuel) has led to skyrocketing deforestation in Indonesia, Malaysia, and surrounding countries. New timber farms and oil palm plantations have often displaced traditional farming communities, and are biting into the remaining habitat of dozens of endangered species—most famously the orangutan. Even more significant on a global level, deforestation has helped make Indonesia the world’s third largest contributor to climate change, second only to China and the United States in terms of annual carbon emissions.

Environmental groups have launched emergency efforts to slow deforestation in Southeast Asia. These campaigns have tended to target Sinar Mas and its subsidiaries, like Asia Pulp and Paper. Sinar Mas is responsible for a large part of the deforestation going in countries like Indonesia, and environmental groups have urged global supply chains to cease business with the conglomerate. Many major brand names have already responded.

Food companies like Unilever, Kraft, and Nestle have pledged to cut ties with Sinar Mas’ palm oil arm unless the company implements conservation policies in Southeast Asia. Many of these corporations have also vowed to eliminate paper pulp from Sinar Mas in their packaging materials. The fashion industry is getting in on the action, with many players saying they will eliminate paper from Sinar Mas branches in their packaging. One of the largest victories so far occurred last fall when the Gucci Group, whose brands include Stella McCartney, Yves Saint Laurent, Balenciaga, and Alexander McQueen, announced it would eliminate all paper from non-sustainable sources by December of 2010.

Most recently, in response to pressure from Greenpeace, the international bank HSBC phased out holdings in Sinar Mas from the company’s global asset management groups. The move is significant, as HSBC is probably the first major player in the banking industry to have joined the new tide of companies unwilling to do business with Sinar Mas. With concern growing over deforestation’s contribution to the causes of climate change, fewer and fewer companies are willing to associate with one of the top destroyers of Southeast Asia’s rainforests.

What company will be next? Building on victories with Nestle and HSBC, Greenpeace is gearing up to pressure fast food companies like Burger King and Pizza Hut to cut the Sinar Mas connection. Meanwhile the Rainforest Action Network is asking children’s book publisher to phase out paper from companies that destroy Indonesian rainforests. More market players are certain to abandon ties to Sinar Mas in the future, good news for those concerned about deforestation and the causes of climate change. It’s also a remarkable example of how actions taken by companies to fulfill their social responsibility obligations can have a direct impact on climate change and planetary health.

What’s your opinion? Do more companies need to cut their ties to Sinar Mas, assuming the conglomerate doesn’t alter its forestry practices? What other ways can market players reduce deforestation and the causes of climate change?

Photo credit: Ben Sutherland