South-east Asia Palm Oil
Palm Oil: Adani’s involvement in an industry that has wreaked havoc across the rainforests of South-East Asia
Feb 04, 2020
Palm Oil: Adani’s involvement in an industry that has wreaked havoc across the rainforests of South-East Asia

Summary – rainforest destruction abroad and unrest at home

Through its joint venture with global palm-oil giant Wilmar, Adani has profited from the destruction of tropical rainforests in South-East Asia for over 20 years. In 1999, Gautam Adani partnered with Singapore-based palm-oil giant Wilmar to establish Adani Wilmar Limited for the purposes of importing, refining, processing, distributing and marketing palm-oil products in India. From a single refinery at Adani’s port of Mundra in 1999, the company’s operations expanded to encompass 17 refineries and the production of some of India’s best-selling palm-oil products. Meanwhile millions of hectares of rainforest in Indonesia and Malaysia – mostly on the islands of Sumatra, Borneo and New Guinea – have made way for sprawling tracts of oil-palm plantations. The habitats of orangutans, elephants and tigers have been destroyed; vast peat swamps have been drained and burnt; South-East Asia has been periodically blanketed in smoke from fires burning the mangled remains of the forests; groups of indigenous people have been displaced; and an unaccountable array of suppliers of raw product to the major palm-oil traders has been accused of exploitative labour practices, including child labour.

 

Palm-oil development destroys peatland forest, Singkil Swamp, Indonesia. The habitats of orangutans, elephants and tigers have been destroyed; vast peat swamps have been drained and burnt. Photo courtesy Rainforest Action Network.

 

Conservationists have brought the plight of the region’s rainforests to global attention, forcing big players, such as Wilmar, to adopt policies to protect forests and to reform labour practices. However, the implementation of these policies has been very patchy amongst the diverse players with their complex interrelationships. Groups such as Greenpeace have criticised corporations such as Wilmar in scathing terms for their inability to enforce their own standards, for effectively ‘laundering’ palm oil produced through dirty practices, and for their links to rogue palm-oil suppliers through family connections.

As India’s biggest single importer of palm oil, Adani Wilmar came under fire in a 2012 report by Greenpeace. The report, entitled Frying the Forest, said the company was contributing to the violation of policies designed by industry groups to protect forests and human rights. Since 2013, a series of reports has documented violations of environmental policy by Wilmar, the main supplier of Adani Wilmar. Stung by such criticisms, Wilmar adopted a policy of ‘no deforestation, no peat, no exploitation’ in 2013. In 2018 it announced that it would suspend dealings with suppliers that broke this policy. The company began publishing a ‘grievance procedure’ in which documentation of alleged policy breaches are posted on its website. The postings, mostly from environmental groups that use sophisticated analysis of satellite imagery, accuse many of Wilmar’s suppliers of destroying forests and peatlands. (In some cases, the clearing of forests is linked through chain-of-custody information to companies such as Ta Ann and Shin Yang that are involved in the logging of native forests in Australia) The company’s responses to these allegations are posted online.

However, the breaches of policy continued. In November 2019 a joint media statement by 15 environmental groups said that policy breaches remain ‘systemic and widespread’ with deforestation, fires and human-rights violations repeatedly exposed on certified plantation lands.

Meanwhile, Adani Wilmar in India has continued to import and refine ever increasing quantities of crude palm oil from Indonesia and Malaysia for processing in its network of refineries. This has coincided with decisions by Indian governments to reduce tariffs on imported oils. By 2016-17, almost 50% of all edible oils consumed in India were imported palm oil. The unprecedented influx of imports displaced traditional home-grown products, such as oils made from groundnut, sesame, mustard and sunflower. In Gautam Adani’s home state of Gujarat, for example, one of the main drivers of the local economy used to be the production oil from ground nuts. But over the last two decades, its share of the market has plummeted from 12% to 1%. In response to the crisis faced by local growers, the government has been buying groundnuts at a regulated price above that of the free market. But when this system is not implemented properly, impoverished farmers take to the streets in protest. Police have sometimes had to disperse angry crowds. And while governments take the heat, Adani Wilmar continues to enjoy expanding profits from the lucrative palm-oil trade.

Adani Wilmar’s palm-oil business has therefore contributed to unrest at home in India while helping drive the destruction of rainforests in South-East Asia. Nevertheless, through aggressive promotions, the company continues to expand its share of the massive Indian market for products manufactured from the rivers of palm oil flowing from the proliferating plantations of south-east Asia.

 

Forest that was elephant habitat makes way for oil-palm plantations near Indonesia’s Leuser Ecosystem 2017.  The culprits had supply links to Wilmar, which, in turn, supplies Adani Wilmar. Photo Rainforest Action Network

 

Adani Wilmar in India

In 1999, Gautam Adani and Kuok Khoon Hong (the major businessman behind Wilmar) incorporated the Adani Wilmar joint venture in India. Wilmar is a Singapore-based agri-business that says that it is the ‘world’s largest processor and merchandiser of palm and lauric oils, with oil palm plantations in Indonesia, Malaysia and West Africa’. Adani Wilmar Limited refines thousands of tonnes of crude palm oil every day to make goods for the huge Indian market, including oils marketed under the brand ‘Fortune’, one of India’s biggest-selling brands.

 

Corporate video showing Gautam Adani, the head of the Adani group, with the head of Wilmar, one of the world’s biggest traders in palm oil.

 

According to a company presentation the company’s first development was a major palm-oil refinery next to Adani’s international container terminal at its Mundra port. The refinery processed crude palm oil imported from various suppliers, including Wilmar itself, mostly located in South East Asia. By 2014 the Mundra refinery was processing over 340 tonnes of palm oil a day, making it the biggest such refinery in India; and by 2015 Adani Wilmar had 17 refineries operating nationwide. According to company reports, Adani Wilmar is now India’s biggest refiner of edible oils with the country’s biggest-selling brands of cooking oil.

 

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Palm Oil – versatility at a terrible price

Adani Wilmar owes its commercial success to palm oil, an edible vegetable oil derived from the pulp of the fruit of oil palms. It is a prime ingredient found in everything from ice cream, chocolate and instant noodles, to household items such as laundry detergent, toothpaste and shampoo. Palm oil has become the most widely used vegetable oil on Earth. According to Wilmar, ‘Palm oil is ubiquitous in the global marketplace. It is an ingredient found in more than half of all supermarket products. Since 1990, global palm oil consumption has quintupled. Consumption is driven by emerging economies, such as India, Indonesia and China, where population growth and rising living standards are key factors for the exponential demand growth. Palm oil is the highest yielding crop on a per-hectare of land basis. Harvested all year round, oil palm yields five, eight and 10 times more oil per hectare than rapeseed, sunflower and soybean respectively’.

Yet this versatility and wealth have come at a great price.

 

Adani Wilmar’s palm-oil refining operation at Adani’s Mundra port (Google Earth)

 

The spread of oil-palm plantations has resulted in damaging exploitation of people and the environment. According to the USA-based Rainforest Action Network, the list of human-rights abuses carried out by palm-oil companies includes child labour, modern-day slavery and displacement of Indigenous Peoples. The production of palm oil is also one of the world’s leading causes of rainforest destruction. According to an industry body, there are more than 20 million hectares of oil-palm plantations globally, an area three times the size of Tasmania. Plantation expansion has devastated some of the world’s most biologically diverse ecosystems, particularly in Borneo and Sumatra, driving species such as orangutans, tigers and elephants to the brink of extinction. International conservation groups warn that deforestation and the draining and burning of carbon-rich peatlands associated with oil-palm expansion have released massive amounts of carbon into the atmosphere, making the world’s appetite for palm oil a major driver of climate change. These impacts have led to concerted campaigns by NGOs to reform the palm-oil industry.

The resulting international concern led to the creation of the Roundtable on Sustainable Palm Oil (RSPO), a forum in which growers, manufacturers, conservationists and non-government organizations have attempted to establish criteria for certifying sources of palm oil as ‘sustainable’. Criteria prohibiting the destruction of important forests and exploitation of people were developed. Both Wilmar International and Adani Wilmar have been members of the RSPO for many years. Adani Wilmar has documented an intention to increase the percentage of certified palm oil that it receives to 100%.

Failure of the palm-oil certification system

However, the certification system developed by the RSPO has itself led to serious concern by conservation groups. A 2013 report by Greenpeace, Certifying Destruction, said that RSPO members had participated in deforestation, that the RSPO had been slow to respond to complaints, was reluctant to suspend certification of members that had violated RSPO standards, and that the certification system was laundering ‘dirty palm oil’ into the global trade. Specific criticisms were levelled at Wilmar. It was alleged the company had purchased raw product from plantations illegally established inside a Sumatran national park and that the company had been overly reliant on obtaining raw product from uncertified suppliers whose operations were still destroying rainforests and peatlands.

 

Orangutan habitat on the islands of Sumatra and Borneo has been devastated by the palm-oil industry, from which Adani Wilmar has been profiting for two decades. Photo courtesy Rainforest Action Network and Paul Hilton.

 

This was just the beginning of a series of reports from 2013 to 2019 by Greenpeace targeting the failures of the RSPO in general and Wilmar in particular. With titles such as Licence to Kill and Rogue Trader, they comprise a devastating picture of the global palm-oil trade – particularly the record of players such as Wilmar and its joint venture with Adani that, despite participation in the RSPO, have accepted palm oil from questionable sources. Violations of the RSPO code documented by Greenpeace include deep peatland fires in oil-palm concessions; illegal oil-palm development within a Sumatran national park; and extensive clearance of the habitat of tigers and orangutans. The reports criticised Wilmar for being ‘sluggish’ in responding to evidence of habitat destruction by suppliers and for passing the buck to contractors when confronted with evidence of clearing of tiger habitat.

Particularly telling were Greenpeace’s descriptions of the family ties binding Wilmar to uncertified suppliers responsible for deforestation and fires. One such company, Gama, was established by the same man who helped found Wilmar. Greenpeace said ‘although Wilmar adopted a policy of no deforestation, no peat and no exploitation in December 2013, Gama has no such policy and continues to clear rainforest and violate the rights of communities across Indonesia’. Greenpeace’s report also documented significant cases of worker exploitation (in some cases amounting to forced labour), violent evictions of indigenous peoples from ancestral lands, destruction of orangutan habitat, and draining of peatlands. In 2016, Amnesty International also published its findings on the exploitation of palm oil workers on Wilmar’s own palm oil plantations.

Meanwhile, the Environmental Investigation Agency had produced a devastating critique of the entire certification system. Who Watches the Watchmen revealed major flaws in the system of scrutiny that underpinned the RSPO’s claims of environmental sustainability, documenting cases of fraud and conflict of interest.

 

Greenpeace activists unfurl a banner challenging Wilmar International to choose forest protection over forest destruction. Wilmar is a major supplier of Adani Wilmar’s Indian operations. Photo Paul Hilton / Greenpeace.

 

Palm-oil industry standards repeatedly broken

In December 2013, Wilmar adopted a ‘No Deforestation, No Peat, No Exploitation Policy’ and established a ‘grievance procedure’ devoted to formal complaints about the company’s performance in implementing its policy. But the failings – and resultant criticism – continued. In a 2018 report, Greenpeace again documented Wilmar’s propensity to accept products from companies violating the policy and questioned the value of the grievance procedure itself.

In December 2018, Wilmar announced a ’Suspend then Engage’ approach: ‘Under this approach, new grievances with verified proof of deforestation and/or peat development will result in an immediate suspension of the supplier at a Group level’. Culprits would have to meet certain minimum criteria for Wilmar to consider resuming sourcing. The announcement was hailed by Greenpeace, which said the ‘world’s largest palm oil trader leaves forest destroyers nowhere to hide’.

Yet within a year, Wilmar was under attack once again for sourcing products from oil-palm concessions linked to the spate of fires across Indonesia. The fires of 2019 caused greenhouse emissions equivalent to those of the United Kingdom for a year. According to yet another Greenpeace report Burning down the house, Wilmar’s suppliers were responsible for more than 140,000 ha of burned land between 2015 and 2018 and nearly 8000 hot spots in 2019. Again, the palm-oil industry was condemned for having ‘dithered’ for a decade in implementing its much-trumpeted policies. Wilmar had, quite simply, ‘failed’.

This grim assessment was echoed by other investigations into the palm-oil industry. A second iteration of Who Watches the Watchmen found that the RSPO system remained ‘severely lacking’, its responses to continued criticisms being ‘disorganised, unprofessionally managed’ with ‘chronically missed deadlines’. In November 2019, fifteen conservation groups issued a scathing summation of the palm-oil industry, saying that ‘violations of the RSPO’s standards and procedures remain systemic and widespread’ with deforestation, fires and human-rights violations repeatedly exposed on certified plantation lands. The US-based Rainforest Action Network was one of the signatories and has recently documented a link between Wilmar and an Indonesian company (PT Nafasindo) involved in serious land conflicts in the Leuser Ecosystem. Since 2014, the group has released evidence of Wilmar’s connections to numerous palm-oil companies responsible for the destruction of rainforests in this global biodiversity hotspot, also known as the orangutan capital of the world. 

Grievances against Wilmar

In December 2019, there were dozens of grievances listed on Wilmar’s website. Many were lengthy reports itemising destruction in literally dozens of locations in South-East Asia. They utilised satellite imagery to present authoritative before-and-after photographs. Plantation owners and logging companies were identified from maps of concessions. Supply-chain information identified the food corporations that are the major end-users. The images paint a picture of an industry which, despite attempts to regulate itself, is still having a devastating effect on tropical ecosystems.

A major contributor to Wilmar’s grievance list is the USA-based organisation Mighty Earth. Its ‘rapid response’ reports use satellite photographs to document forest destruction virtually as it happens. At least 10 such reports have been uploaded by Wilmar to its grievance list. As of December 2019, only 28% of Mighty Earth’s grievances against Wilmar had been successfully resolved through moratorium or suspension of sales.

Some Australian connections to forest destruction

Conservation groups detailing destruction of forests in South-East Asia also uncovered a link with Australia. The Ta Ann group is one of the logging companies identified by Mighty Earth as clearing rainforest to make way for oil-palm plantations. Ta Ann owns two mills in Tasmania that process native-forest logs to make veneer. (One of these mills has been out of action since February 2019 due to damage from bushfires) Shin Yang, the company behind a proposed new veneer and plywood mill in northern Tasmania, has also been accused of breaches, though not involving Wilmar or Adani Wilmar.

Wilmar also has direct connections with the Australian food industry, having acquired sugar company CSR in 2010 and the processed food company Goodman Fielder in 2019.

 

Some of the products of Goodman Fielder, an Australian food company owned by Wilmar

 

Adani Wilmar (India) and the destruction of rainforests

As the biggest importer of palm oil into India, Adani Wilmar came under scrutiny by Greenpeace India in 2012. In its report Frying the Forest, Greenpeace cited official statistics to show that India was already the world’s biggest consumer of palm oil, outstripping China and the EU, and still undergoing massive growth. Adani Wilmar was one of the main importers of crude palm oil, receiving 90% of its supplies from Wilmar, but according to Greenpeace India, the company’s actions were insufficient to prevent deforestation. Serious violations of RSPO policy by one of Wilmar’s suppliers were documented. The notoriously Adani-friendly government of Nahendra Modi has since cracked down on Greenpeace India, preventing it from raising funds from outside the country, severely impacting its Indian operations.

Four of Adani Wilmar’s mills in India have had their supply chains certified under the RSPO. The palm oil used by Adani Wilmar in its certified facilities falls into two categories: the first is ‘segregated’, meaning that it comes from multiple certified sources and has been segregated from non-certified palm oil. The second category is described as ‘mass balance’, meaning that mixing with uncertified palm oil has occurred between the certified source and the end-user. Greenpeace has been severely critical of the ‘mass balance’ chain, describing it as a way of ‘laundering’ palm oil from dirty sources into the certified system. A promotional video by Adani Wilmar boasts of Wilmar’s ‘major operations’ in Indonesia. As Indonesia has been the region with the most severe and widespread destruction of forests for palm oil, Greenpeace’s suspicion of the supply chain is understandable.

Such criticisms mean that Adani Wilmar, despite its certification and policies, cannot claim to be buying palm oil exclusively from 100% sustainable sources. The Adani Wilmar joint venture – and through it, the Adani Group – is therefore implicated in the destruction wrought by the palm-oil industry over the past 20 years. It remains to be seen whether recent commitments by the likes of Wilmar will halt the destruction of rainforests and orangutan habitat in the world’s tropical regions.

Impacts in India

A book on the Adani Group that is being written and edited by Paranjoy Guha Thakurta, Abir Dasgupta and others which will be published in 2020 has outlined the impacts of Adani Wilmar’s edible-oils business in India. It says that the rise in palm-oil imports driven by Adani Wilmar has coincided with the decline of India’s domestic oilseed industry. The period 1994 to 1999 saw tariffs on imports of edible oils reduced from around 80% to 15%. The share of palm oil in the Indian market grew correspondingly – from zero in the 1970s to 38% in 2001. Tariffs have subsequently gone up and down but meanwhile, a trend had been established. India is now the world’s biggest importer of palm oil, consuming 21% of the crude palm oil produced globally. Leading the sales in India is Adani Wilmar’s flagship brand, ‘Fortune’.

This growth in the fortunes of Adani Wilmar has come at the expense of traditional producers of edible oils in India’s countryside. Growers and processors of groundnut, mustard, sesame and sunflower were heavily impacted, their market share falling from close to 100% to about one third. The market share of groundnut oil, for example, is said to have fallen from 12% to 1%. This collapse has led to unrest amongst the farming communities that have historically been dependent on groundnut. Under political pressure, at least one state government began procuring groundnuts at a set price above that paid by the free market.

However, the implementation of government procurement policies has not occurred smoothly, resulting in frustration and anger amongst farmers and demonstrations on the streets. In 2017, for example, groundnut farmers in Gujarat protested, claiming that the state government had stopped buying groundnuts once elections were safely out of the way. In 2019, a blockade by groundnut farmers had to be dispersed by police.

While governments copped the flak from farmers angry at the loss of their traditional markets, Adani Wilmar continued to profit from escalating sales of the imported oils responsible for the farmers’ plight.

As well as helping drive the destruction of rainforests in Indonesia and Malaysia, therefore, Adani Wilmar’s palm-oil business has contributed to unrest and impoverishment at home in India. Nevertheless, through aggressive promotions, the company continues to expand its share of the lucrative Indian market for cooking oil, snack foods and other consumer products manufactured from the rivers of palm oil flowing from the expanding oil-palm monocultures of South-East Asia.