Pulp giant in centre of storm around ‘shadow companies’

Wednesday, August 29th, 2018

An investigation by Mongabay has unearthed new evidence indicating that companies the pulp and paper giant Asia Pulp and Paper has sought to distance itself from are in fact controlled by the plantation giant.

The findings suggest that APP took deliberate measures to disguise its ownership of a controversial company engaged in deforestation. The revelation comes after repeated denials by APP that it owns the company, as its opaque corporate structure has been dragged into the spotlight.

Two of APP’s ex-employees interviewed by Mongabay said management had used their names on official filings for the company, PT Muara Sungai Landak, which has been cutting down tropical forest on the island of Borneo to make way for a pulpwood plantation now half the size of Manhattan. One said that he had received a monthly payment to compensate for the arrangement, and that he had been afraid to protest for fear of losing his job.

Their accounts, and that of a third ex-employee who provided insight into APP’s inner workings, contradict assertions made in recent months by the paper giant that it has “no relationship” with Muara Sungai Landak.

The findings place APP squarely in the middle of an emerging debate about the presence of “shadow companies” among the holdings of the family-owned conglomerates that dominate Indonesia’s plantation sector. Under pressure from civil society groups, many of these business groups have promised to stop deforesting. But it is becoming increasingly clear they are using a variety of methods to conceal their control of troublesome assets.

The paper giant is also under fire over its relationship with 24 other plantation companies supplying its mills with raw materials. APP has always referred to these companies, which have been linked to illegal fires and deforestation, as “independent,” not owned by or otherwise affiliated with it. But recent NGO and media reports indicate they are owned by a handful of APP employees in what has the appearance of a concerted scheme. The paper giant denies secretly owning these companies.

Read the investigation in full on Mongabay here.