Asia Pulp & Paper


Asia Pulp & Paper is an Indonesian pulp and paper company based in Jakarta, Indonesia. It is one of the largest pulp and paper companies in the world. It was founded by Eka Tjipta Widjaja with the help of co-founder Singgih Wahab Kwik who was also the adviser of the previous owners of Indah Kiat and former head of commissary and deputy of Sinar Mas Group. With 14 major companies in Indonesia and China, APP has a current annual combined pulp, paper, and packaging-grade capacity of more than 18 million tons per year, and markets its products to more than 150 countries across six continents.

History

Asia Pulp & Paper has its roots in 1972 when Eka Tjipta Widjaja founded a small caustic soda manufacturer called Tjiwi Kimia. In 1978, Tjiwi Kimia commenced paper production of 12,000 tons/year. In December 1976, Indah Kiat was formed as a joint venture between CV Berkat, Chung Hwa Pulp Corporation, and Yuen Foong Yu Paper Manufacturing Company Ltd. from Taiwan. In April 1979, Indah Kiat Tangerang mill's Paper Machine 1 and 2 started with a production of 100 tons/day of wood free paper. By March 1984, Indah Kiat Perawang mill's Pulp Machine 1 started producing bleached hardwood kraft pulp with an initial capacity of 250 tons/day.
In May 1986, Sinar Mas Group acquired 67% of Indah Kiat's total shares by the order of Singgih Wahab Kwik. Chung Hwa and Yuen Foong Yu had 23% and 10% shares, respectively. In 1987, the first cast coating machine was installed at Tjiwi Kimia, and in April 1990 Tjiwi Kimia was listed on the Jakarta and Surabaya Stock Exchange.
In 1991, Tjiwi Kimia's PM 9 started operation with an annual capacity of 207,000 tons.
The following year, Indah Kiat acquired PT Sinar Dunia Makmur, a manufacturer of industrial paper located in Serang with a production capacity of 900 tons per day.
Tjiwi Kimia commissioned the Carbonless Paper Plant in March 1993 as an experiment.
Pindo Deli, a paper company affiliated with APP, was under the control of CPP in February 1994, and by 1997 its paper machines No. 8 and No. 9 began operating with a production capacity of 240,000 tons per year. In 1998, paper machine No. 11 started tissue production with an annual production capacity of 400,000 tons.
APP-China began investing in China in 1992, with an emphasis on the Yangtze and Pearl River Deltas. APP-China's pulp and paper mills now include Ningbo Zhonghua, Goldeast Paper, Ningbo Asia, Gold Huasheng, Gold Hongye, Hainan Jinhai Pulp and Paper, and Guangxi Jingui Pulp & Paper.
APP-China was registered in Singapore in October 1994. APP-China employs over 37,000 people and created 5,000 new jobs in 2009.
In June 2016, Asia Pulp and Paper contributed to an effort concerning "the conservation and promotion of primary forests and the protection of their biodiversity", which was discussed at a declaration in Milan, Italy with the Green Green management institute.
Asia Pulp and Paper has a close relationship with China Development Bank which has been a crucial backer for their modern operations. They have provided the funding for the recent pulp mill expansions in Indonesia.

Indah Kiat Perawang

Indah Kiat Perawang is APP's largest pulp mill in Indonesia. Its pulp is sold to APP paper mills in Indonesia and China. Indah Kiat Perawang increased its pulp production from approximately 2 million tonnes in 2009 to an estimated 2.3 million in 2010–2011. The mill has been cited by Greenpeace as significantly harming the survival prospects of endangered Ramin trees and Sumatran Tigers; however, the accusation was denied by the Ministry of Forestry who did an investigation regarding the report.

Sustainability Roadmap

NGO and activist criticism

As a result of the announcement of its zero deforestation plan, Greenpeace, Rainforest Action Network and other NGOs expressed cautious optimism and welcomed the company's Forest Conservation Policy. Greenpeace also agreed to halt its global campaign against APP and open discussions to ensure that the company properly implements its policy.
Various NGOs have criticized APP on environmental grounds. According to a Friends of the Earth report from 2005, APP has cleared over 280,000 hectares of rainforest in the past decade and planned to cut another 300,000 over the next five years. APP has launched a Forest Conservation Policy to restore and support one million hectares of Indonesian Rainforest.
The company has been at the center of many environmental controversies and has been accused of being involved in illegal logging in Indonesia. The company is also known for defaulting on debt repayments in 2001, during a period of wide-scale financial problems in the South East Asia region.
In 2003, APP signed a Memorandum of Understanding with the World Wildlife Fund, but this ended six months later after WWF refused to approve the environmental management plan.
Despite the failure of the WWF partnership, APP entered into a five-year partnership with Rainforest Alliance in 2005. This partnership was supposed to allow Rainforest Alliance to identify and monitor high conservation value forest within four concessions managed by APP in Pulau Muda, Serapung, Siak, and Bukit Batu, and provide independent "verification statements" to attest to the scope and results of the company's efforts to protect these high conservation value areas. Rainforest Alliance made several requests for changes in the management of these areas in the first year of the contract and found that the situation had deteriorated by late 2006 and some areas had been cleared, leading Rainforest Alliance to terminate the agreement in February 2007, stating, "The company has not demonstrated a comprehensive, consistent or dedicated approach toward conservation management necessary to maintain or enhance the forest ecosystems fundamental to the survival of the High Conservation Value Forests present there."
In February 2014, the Rainforest Alliance announced it would evaluate the progress of APP's forest conservation policy and commitments, including its pledge to stop clearing natural forests across its supply chains in Indonesia. Upon re-engaging with APP, Richard Donovan, the organization's Vice President of Forestry said: "There is strong commitment at the highest levels of the organization, and also welcomed by Greenpeace, which signals that APP is serious this time around."
In November 2007, Forest Stewardship Council formally disassociated itself with APP, rescinding the rights of APP to use its logo. On the termination of all ties with the FSC in 2007, a spokesman for WWF commented, "Apparently the company has decided to run a global propaganda campaign rather than protect forests with high conservation values. "
In March 2008, an investigation by an environmental coalition called Eyes on the Forest showed evidence of a new road built by APP, heading through the Kampar peninsula, one of the world's largest contiguous tropical peat swamp forests, with more carbon per hectare than any other ecosystem on Earth. The investigation found tracks on the new road of the critically endangered Sumatran tiger, whose wild population has been reduced to less than 500 individuals. APP claimed that it was building this state-of-the-art, paved highway for the benefit of the local communities, though satellite imagery shows that the road does not go anywhere near the two settlements. The authors of the report stated, "We strongly urge APP to join the ranks of responsible businesses and conduct its operations within the law."
Since 2016, NGOs have raised their concern of the new 3 million tons capacity PT OKI mill that APP planned to build in South Sumatra, highlighting the risk of growing demand for fiber becoming an obstacle to a proper zero deforestation policy implementation. In response, APP insisted to have enough long-term fiber supply for the pulp production increase by referencing an assessment report that the company refused to share with NGOs and the public.

Sustainability Roadmap Vision 2020

On June 5, 2012, APP announced its Sustainability Roadmap Vision 2020 plan, in which the company pledged to be wholly reliant on raw materials from plantations and that all its suppliers must operate by High Conservation Value Forest standards by 2015 following independent audits. This program led to:
In September 2015, the Singaporean National Environment Agency, under the Transboundary Haze Pollution Act, named APP as its biggest target in the fight against illegal forest fires, which were alleged to have caused the 2015 Southeast Asian Haze. APP later received the Singapore Environment Council’s enhanced Green Label certification, heralding the return of its products to Singapore shelves.
On December 20, 2017, Associated Press reporter Stephen Wright revealed exclusive news that Asia Pulp & Paper has extensive behind-the-scenes ties and significant influence over wood suppliers linked to fires and deforestation that have degraded Indonesia's natural environment. Soon after the report, ten international NGOs such as Wetlands International, Rainforest Action Network, and World Wide Fund for Nature released a joint statement that APP did not make enough progress as they promised in their Forest Conservation Policy right before APP released the fifth-anniversary report on February 5, 2018.
On May 17, 2018, Greenpeace International ended all engagement with Asia Pulp & Paper because according to their research APP destroyed around 8000 acres of virgin forests in Indonesia.
On May 30, 2018, Auriga, an environmental organization, reported PT Bumi Mekar Hijau and PT Sebangun Bumi Andalas Wood Industries, which APP claimed are “independently owned and operated”, actually have apparent close links with the Sinar Mas Group, APP's parent conglomerate on their corporate registry documents. On June 5, 2018, Mongabay also reported: "One of the world’s biggest paper producers continues to deny that it secretly owns most of the companies supplying it with wood, despite mounting evidence to the contrary." On July 10, 2018, Mongabay interviewed two of APP's ex-employees and they said APP management used their names for a secret company in Borneo.
On August 16, 2018, Forest Stewardship Council decided to suspend the process of re-associating with Asia Pulp & Paper.

Greenpeace campaigns

Mattel

On 8 June 2011, Greenpeace launched , an international campaign criticising Mattel's use of Asia Pulp & Paper products in its packaging, particularly in its line of Barbie products. Within two days of the campaign's start, Mattel ordered its packaging suppliers to stop buying from Asia Pulp & Paper pending an investigation into Greenpeace's deforestation allegations and further ordered its suppliers to report on how they source materials. Asia Pulp & Paper welcomed Mattel's response, believing that Mattel's investigation would conclude that its "packaging materials are more than 95% recycled paper sourced from around the world."
On 5 October 2011, Phil Radford of Greenpeace announced that Mattel stated that it would no longer purchase pulp and paper products from Asia Pulp & Paper due to the effects that its logging practices had on the Sumatran tiger population. Greenpeace has been working together with APP from 2013 to the present.

Sumatran tiger incident

To help conserve the critically endangered Sumatran tiger, APP has created a 106,000-hectare sanctuary, Senepis Buluhala Tiger Sanctuary from four companies logging concessions. The sanctuary is surrounded and protected by production forests, where workers are continually on guard for illegal logging and wildfires that threaten the endangered Sumatran tigers' habitat. However, this conservation effort has been proven to be ineffective.
During late July 2011, Greenpeace revealed images and footage on their website that showed a Sumatran tiger than had become trapped by an animal snare at the edge of an APP concession. The tiger is reported to have been there for at least seven days, without food or water. Attempts to tranquilize and rescue the tiger failed due to its poor condition of health. APP stated that the trap was set by local villagers and was intended to target small mammals.
In February 2012, WWF listed US toilet papers that may have a direct impact on the 400 Sumatran tigers left in the wild.

Ramin logging

trees are legally protected under Indonesia's laws and its national CITES regulations. Sumatra's peat swamp forests are a key ramin habitat. In 2012, Greenpeace did an exposé video on APP's illegal logging practices. In the video, they show logs from ramin trees sitting in an APP pulp yard.
According to Greenpeace in March 2012, APP's main pulp mill in Indonesia mixes illegal ramin logs regularly with other rainforest species in its pulpwood supply. APP denied the allegations, stating "APP is grateful to Greenpeace for bringing this report to our attention. We take very seriously any evidence of violation of the regulations concerning the protection of endangered tree species…APP maintains a strict zero-tolerance policy for illegal wood entering the supply chain and has comprehensive chain of custody systems to ensure that only legal wood enters its pulp mill operations." Since Indonesia banned the logging and trade of ramin in 2001, more than one-quarter of this ramin habitat has been cleared – much of this from areas currently supplying APP. Government maps show that 800,000ha of Sumatra's peat swamp forests were cleared between 2003 and 2009. In 2003, 80% of Sumatra's peat swamp forests, a key ramin habitat, were also identified as a critical habitat for the survival of Sumatran tigers.

Operational criticism

In 2004, Zhejiang Hotels Association announced that it would no longer purchase APP products because of the firm's illegal logging activities in Yunnan province, leading APP to threaten to sue. The suit was later dropped because of a major publicity campaign by Greenpeace China.
In 2005, APP was also found to be conducting illegal logging in Yunnan Province in China, while a subsidiary of the firm called "Green Rich" was caught illegally logging in Cambodia.
According to Asia Times Online, APP's business model is a tactically aggressive one: it turns huge profits by quickly stripping forests bare, exploiting age-old forests and indigenous peoples, and leaving town before the environmental consequences are felt.
The authors of the report stated, "We strongly urge APP to join the ranks of responsible businesses and conduct its operations within the law."
In January 2008, the office retailer Staples ended their 11-year relationship with APP, which had formerly supplied between 5 and 9% of the paper sold at the chain "due to their clear lack of progress in improving their environmental performance." Other companies including Office Depot and Wal-Mart had cut ties previously on environmental grounds, and these have been followed more recently by Australian retailer Woolworths Limited.
In 2010, APP hired the public relations firm Greenspirit Strategies, run by former Greenpeace activist Patrick Moore, to boost their image. Moore, in turn, authored a report that describes APP as not responsible for deforestation but that it is caused mostly by locals "illegally encroaching on forests in search of better livelihoods. By employing Indonesian people, APP is reducing deforestation, as more employment means less poverty, which means less pressure to move into the forest.” The Guardian reported that Moore plagiarized large sections of the report from an APP public relations brochure.
In 2011, when asked if he believes APP is sincere in reforming its logging practices, Dorjee Sun, CEO of Carbon Conservation, stated that: "Change in large organizations always takes time, so our goal by 2020 is to build sustainability practices, targets and a roadmap with accountable milestones which will result in true sustainability throughout the entire corporation."
APP continues construction and logging in Sumatra's Kampar peninsula. In February 2013, APP committed to improving forest conservation, which it dubbed its Forest Conservation Policy. However, from 2013 to the present, APP also planned and/or implemented several major expansions to increase production capacity. Because overcapacity has been linked to negative environmental and social impacts, APP partners raised concerns that the commitments outlined in the Forest Conservation Policy could not be met.
In response to these concerns, APP commissioned an independent study to analyze whether it would be able to meet its commitments. According to APP, the September 2014 unpublished results from The Growth & Yield – Wood Supply Study "confirmed that Asia Pulp and Paper Group has sufficient plantation resources to meet the pulp requirements of its existing mills as well as its future mill in OKI, South Sumatra.” However, since the results were never published it is not possible to verify the results of the study, nor can the claim of independence be verified.
A 2016 study "by twelve international and Indonesian NGOs shows that in spite of its high-profile sustainability commitments, Asia Pulp & Paper is building one of the world's largest pulp mills in the Indonesian province of South Sumatra without a sustainable wood supply."
"In March 2014, the former governor of Indonesia's Riau province was sentenced to 14 years in prison and ordered to pay almost USD90,000 in fines for illegally issuing logging permits to APP subsidiaries. In addition, three wood suppliers of APP are among 14 companies which the Ministry of Environment has under examination for possible liability suits over environmental damages." With high-profile criminal cases linked to the corporation, concerns remain about APP and its conduct in relation to environmental and social issues, including the prevention of "catastrophic fires in the region" and "severe land subsidence, increasing flooding".

Controversies

In 1994, the company moved its headquarters from Indonesia to Singapore and began to borrow money to expand aggressively. It was soon heavily leveraged; from 1996 to 1998, it only produced 1.5 times as much cash flow as its interest costs.
In March 2001, during the Asian Debt Crises, APP declared a moratorium on U.S.$13.9 billion in debt, resulting in one of the largest debt defaults in the Asian market. Most of the debt was subsequently rescheduled at lower values. In November 2003, Jakarta-based subsidiary Indah Kiat sued the underwriter and holders of an issue of debt it had issued in 1994 under New York law; it sued, however, in Indonesia, and in February 2007 the Indonesian court declared the debt invalid.
The resulting bankruptcy in what was the biggest missed bond obligation by an Asian company to date. Bloomberg later commented that the affair was, “A cautionary tale of greed, blind optimism, and the East-West divide.”
In 2001, APP was the subject of a probe by the Commercial Affairs Department in Singapore, after creditors and investors cried foul when APP defaulted on the US$13.9 billion of debt earlier that year. But the case, along with a parallel probe by the CAD into APP's sister company, Asia Food and Properties, was closed two years later without any disclosure as to why the firms were investigated.
In November 2003, Jakarta-based subsidiary Indah Kiat sued the underwriter and holders of an issue of debt it had issued in 1994 under New York law; it sued, however, in Indonesia, and in February 2007 the Indonesian court declared the debt invalid.
In 2017 an Associated Press investigation found the company to have consistently reneged on the terms set by itself as part of non-deforestation promises throughout the entire period of the relationship with Greenpeace. The NGO responded by issuing a statement calling on APP customers to cancel their contracts.
The firm today has operations in several countries across Southeast Asia and China, and regularly reports more than a billion US dollars in revenues.