Asia Pulp & Paper

Asia Pulp & Paper, based in Singapore, is one of the largest pulp and paper companies in the world. It can produce about 2 million tons of pulp and more than 5 million tons of paper and packaging materials per year. Part of the Sinar Mas Group, it operates plants in Indonesia and sells to clients in more than 60 countries around the world [ [http://www.hoovers.com/asia-pulp-&-paper/--ID__51079--/freeuk-co-factsheet.xhtml Company overview from Hoover's] ] , though their record of consistent breaches of environmental laws and agreements has lead many Western companies to terminate contracts with them [http://online.wsj.com/article/SB120240874246651263.html?mod=googlenews_wsj Staples Cuts Off Paper Supplier - WSJ.com ] ] .

The company has been at the centre of many environmental controversies and has been convicted of being involved in Illegal Logging in Cambodia, Yunnan province in China, and in Indonesia.

Financial Issues

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. [ [http://www.businessweek.com/magazine/content/01_33/b3745003.htm "Asia's Worst Deal", Business Week, August 13, 2001] ] In March 2001, it announced that it would stop repaying its debt, leading to a collapse of confidence in assets in South East Asia. [ [http://forests.org/archive/asia/aspulpan.htm "Asia Pulp & Paper to Default on $12 Billion in Debt" Bloomberg, March 12, 2001] ] In November 2003, Jakarta-based subsidiary Indah Kiat sued the underwriter and holders of an issue of debt (in United States dollars) 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. [ [http://www.financeasia.com/article.aspx?CIaNID=45672&r=rss Can Indonesian corporates get away without repaying bonds?] ]

Environmental Issues and Illegal Logging

In November 2007, Forest Stewardship Council (FSC), cut all ties with APP citing the company's earlier history of bad practices and legally questionable logging in Sumatra, Indonesia ["Why a 'Green' Logo May Mean Little," Wall Street Journal, 30 Oct 2007] .

A investigation published in March 2008 by an environmental coalition called Eyes on the Forest [ [http://www.worldwildlife.org/news/pubs/eof_news_on_app_in_kampar_final_english_25mar08_1.pdf WWF - Latest Press Releases ] ] showed evidence of a new illegal road built by APP, heading into the heart of 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. Until that time, the world's paper buyers and investors should stop doing business with APP." [ [http://www.sciencedaily.com/releases/2008/03/080325203442.htm Logging Road Threatens Rare Peat Dome, Tigers ] ]

APP was also found to be conducting illegal logging in Yunnan Province in China in 2005, [ [http://english.peopledaily.com.cn/200503/31/eng20050331_178828.html People's Daily Online - Forestry authorities charges Singaporean paper giant with illegal logging ] ] , while a subsidiary of the firm called "Green Rich" was caught illegally logging in Cambodia, leading a 2005 investigation into the company to conclude

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. By the time communities and governments lodge complaints and lawsuits, APP has divested itself of local interests and assets. [ [http://www.atimes.com/atimes/Southeast_Asia/GA06Ae01.html Asia Times Online :: Southeast Asia news and business from Indonesia, Philippines, Thailand, Malaysia and Vietnam ] ]

The firm has made efforts to improve its green image, hiring the PR firm Ogilvy & Mather, and ran advertisements in The Times and the New York Times claiming that the company was committed to "conservation beyond compliance" [http://www.printweek.com/news/764431/FSC-rules-upheaval-green-groups-level-accusations-APP/ FSC rules in upheaval after green groups level accusations at APP | printweek.com | Latest Print Industry News, Jobs, Features, Product Reviews, Used Printing and Packaging Machinery ] ] . 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 2003, APP signed a Memorandum of Understanding with the World Wide Fund for Nature, but this ended six months later after WWF refused to approve the environmental management plan, and questioned the figures APP was supplying. WWF then began lobbying buyers worldwide to boycott APP products [ [http://www.ft.com/cms/s/0/3815312a-a27e-11da-9096-0000779e2340.html?nclick_check=1 FT.com / Home UK / UK - The usefulness of scholarships and tigers ] ] . APP responded to early boycotts and protests with threats of legal action. Zhejiang Hotels Association announced in 2004 that it would no longer purchase APP products because of the firms illegal logging activities in Yunnan province, leading APP to threaten sue to company. The suit was later dropped because of a major publicity campaign by Greenpeace China, who claimed

“APP was wanting to scare the hotel association to revise its green procurement policy, but it didn’t count on the huge public support (for the defendant).. [ [http://www.ethicalcorp.com/content.asp?ContentID=3529 Ethical Corporation: Archive - APP decision a “landmark” for China’s environmentalists ] ] .

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 a number of 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 [http://www.rainforest-alliance.org/forestry/documents/app.pdf]

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" [Bloomberg.com Staples Ends Contracts With Asia Pulp on Environment. 7 February 2008. http://www.bloomberg.com/apps/news?pid=20601087&sid=acXOtxbg7KDs&refer=home] . Other companies including Office Depot and Wall-Mart had cut ties previously on environmental grounds , and these have been followed more recently by Australian retailer Woolworths Limited [ [http://news.mongabay.com/2008/0810-hance_woolworths.html Woolworths drops contract with APP, activist group remains wary ] ] .

References

External links

APP Watch Blog. NGO-Exchange of information about the the ecological, social and economic record of Asia Pulp & Paper (APP)In Indonesia and elsewhere http://appwatch.blogspot.com/

Friends of the Earth Briefing on APP's record http://www.foe.co.uk/pubsinfo/briefings/html/20010619164305.html