Investigation: Neste still buying palm oil from mills caught in illegal rainforest harvests

A company in Sumatra that receives palm fruit from national park plantations, where elephants & tigers are critically endangered through habitat loss, is one of Neste's main suppliers.

A worker brings transports palm fruit bunches on his motorbike / Credit: Eyes on the Forest

State-owned Neste says it is still buying palm oil from an Indonesian company repeatedly caught sourcing illegally harvested fruit from a national park that’s home to endangered Sumatran tigers and elephants.

Standing on the edge of Indonesia’s Tesso Nilo National Park, the rainforest stretches out in front of you for a thousand square kilometres. The area was protected by the government more than a decade ago in a last ditch attempt to stop illegal logging by companies that clear the vegetation to plant palm oil crops, but it might be too late.

Indonesian authorities have belatedly woken up to the realisation that large scale deforestation is a serious threat to the country’s unique, dense biodiversity. Already an estimated 75% of the National Park is occupied by illegal plantations, further threatening critically endangered populations of Sumatran elephants and tigers.

But a coalition of environmental groups called Eyes on the Forest EoF which includes the World Wildlife Fund WWF, are fighting back against the palm oil barons by identifying mills owned by companies which deal with the illegal plantations inside Tesso Nilo. EoF has found five mills owned by Asian Agri Group still operating close to the National Park, but which use palm fruit illegally harvested inside the National Park. Finland’s Neste corporation tells News Now Finland that they continue to buy palm oil produced at the mills.

Neste says it considers the sustainability of Asian Agri operations to have been “sufficiently restored” despite the Indonesian company being caught in illegal harvesting three times between 2011 and 2017.

“We cannot say they are sustainable now until we can verify their claim such as traceabiality and other improvements. We must be prudent” explains Afdhal Mahyuddin from EoF, who says that more investigations would be needed to know if the Asian Agri Group mills are currently breaking the law, or not.

File picture showing exterior of Neste headquarters in Espoo, January 2019 / Credit: News Now Finland

Tracking Neste’s sustainability

Neste says it has ‘very strict criteria’ for suppliers and selects partners carefully, and as part of its ‘continuous commitment to transparency’ began publishing palm oil supply chain information in 2017.

The company’s online Palm Oil Dashboard includes the exact coordinates of all of its supplier mills, and although Neste has been praise by environmental groups for this transparency, the Dashboard allows EoF to link the mills which use illegally-sourced palm oil fruit as part of their production explicitly to Neste, which is majority-owned by the Finnish government.

An EoF investigation which followed illegally-harvested palm fruit from the National Park to one of Neste’s suppliers highlights how difficult it can be to guarantee supply chain integrity.

Tracking data from EoF report showing illegally harvested fruit going from Tesso Nilo to Ukui1 / Credit: Eyes on the Forest

On 17th June 2017 at 7:30am, palm fruit are harvested at an illegal plantation in the north-east corner of Tesso Nilo, according to an EoF investigation published last summer.

Two hours later, a yellow Mitsubishi truck with a white sticker on the front side loads 1.5 tons of palm fruit on board, and drives away.

EoF workers tracked the truck, carrying the illegal palm fruit from inside the National Park, with exact GPS location. At 12:50, the truck enters Ukui 1 palm oil mill, owned by PT Inti Indosawit Subur, which is in turn owned by Asian Agri.

The Ukui 1 mill, capable of processing 90 tons of palm fruit in an hour, is one of the 55 supplier mills Neste sources its palm oil from across Indonesia and Malaysia, to use in its renewable diesel product.

The EoF concluded that the traceability of Ukui 1 was “seriously flawed” and recommended Neste to “work closely with [Asian Agri] to make necessary improvements of their mills’ sourcing practices”. EoF also said in their report that due to the small scale of the investigation, it suspects the study identified only the tip of the iceberg, and represents a picture of widespread illegality in the palm oil sector in Sumatra as a whole.

“After learning about the EoF report findings, we investigated our own supply chain data in June 2018. We found that five of the 22 mills mentioned in the report had supplied palm oil to Neste and many other companies” says Sari Lehmuskallio, Neste’s Communications Manager for Sustainability.

Neste sought clarification from Asian Agri about the report findings and any plans for corrective action.

“Asian Agri has since reinstated their commitment to not source any palm fruit bunches from Tesso Nilo region or other illegal areas” Lehmuskallio says.

File picture of truck carrying illegally-harvested palm fruit from Tesso Nilo enters Ukui1 mill / Credit: Eyes on the Forest

Sufficiently sustainable palm oil

Over the last decade, Neste has taken a strong market position as a green energy company combating climate change, deriving more than half of its profits from renewable products. It is now one of the world’s biggest producers of renewable diesel.

But the company’s green image has faced challenges, even as palm oil continues to be a major raw material in their renewable products. In 2017, Neste used 663,000 tons of palm oil, accounting for 27% of its overall raw material usage.

Neste argues that sustainably produced palm oil is a good raw material and has ‘significant positive impacts for people locally.’ The company believes that remaining involved in the palm oil industry gives them leverage to contribute to lasting transformation to sustainability.

Despite having been caught conducting illegal harvests in Tesso Nilo for over half a decade, Neste believes the sustainability of the mills is at a sufficient level now.

“After Asian Agri reinstated their commitment to not source any fruit bunches from Tesso Nilo and started collaborating with WWF, we felt that sustainability of the operations at these mills had been sufficiently restored” Lehmuskallio says.

EoF says there are many loopholes in the monitoring processes and little political, legal or customer pressure to maintain higher standards of production, and guarantee that fruit from illegal plantations inside the National Park don’t get into the legitimate palm oil supply chain.

“Illegal activities can go on if watchdogs loosen the monitoring and no engagement and communications of previous commitment made by the industry. There is no also pressure from buyers and consumers to require sustainable palm oil. Response from the Government and Law enforcers are also needed despite in Indonesia or Malaysia this could be sensitive issues” EoF’s Afdhal Mahyuddin tells News Now Finland.

File picture of illegal palm fruit plantation inside Tesso Nilo National Park, January 2015 / Credit: Eyes on the Forest

Mounting pressure against palm oil

As a product, palm oil has faced an increasing amount of opposition in recent years. It’s most commonly associated with consumer campaigns to boycott products which contain it, as it has been linked to issues like deforestation; habitat loss for orang utans, Asian elephants and Sumatran tigers; climate change; and indigenous rights issues.

Earlier in December, Norway voted to heavily restrict the use of palm oil in its biofuel industry, a decision applauded as a victory in the fight against deforestation by environmentalists.

In June 2018, the European Union agreed to entirely cut the use of palm oil in transport fuels by the year 2030. A study by the European Commission found that the palm oil, although the raw material of the supposedly green biofuels, has the highest indirect greenhouse gas emissions because of deforestation and the drainage of peatlands.

Although the role of palm oil in Neste’s raw material portfolio has become less significant over the years, there are no plans to stop using it either. Earlier in December Neste announced a €1.4 billion investment in its Singapore refinery, one of the locations where the Indonesian palm oil is refined.

“No, we do not [have plans to phase out of palm oil], but our raw material focus is elsewhere. Waste and residues account for nearly 80% of our renewable raw material usage annually” Lehmuskallio says.

One of the key factors in the growing resistance to palm oil is the lack of confidence in the certification system used by the producers. Even the Ukui 1 mill observed in the EoF report boast a ‘fully certified’ status by the Roundtable on Sustainable Palm Oil RSPO.

However, the Eyes on the Forest environmental group highlights that RSPO’s Supply Chain Standard covers only operations downstream from the individual palm oil mills, but not upstream from the mill to the plantations. Another study published in October suggests that palm oil forests certified as sustainable by RSPO are being deforested faster than non-certified land.

Despite all this, Afdhal Mahyuddin believes that palm oil can be sustainably produced, if everyone along the chain signs up to making it happen.

If the government polices the regulations. If illegal planters are prosecuted. If there’s better traceability for the palm oil fruit. If businesses play a constructive role and promise no more deforestation, no more illegal plantations.

For Mahyuddin and other environmental campaigners that’s a lot to ask, yet they still have hope that it’s possible.

File picture of palm fruit bunches waiting to be weighed in Sumatra / Credit: Eyes on the Forest