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Bumitama willing to lead industry-wide sustainability efforts

Pauline Wong
Pauline Wong • 6 min read
  Bumitama willing to lead industry-wide sustainability efforts
SINGAPOER (Sept 16): It was a video that went viral across the world — an evocative tale of an orang utan that ends up “moving into” a little girl’s bedroom because its home in the forest had been destroyed by oil palm plantations. Commissioned b
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SINGAPOER (Sept 16): It was a video that went viral across the world — an evocative tale of an orang utan that ends up “moving into” a little girl’s bedroom because its home in the forest had been destroyed by oil palm plantations. Commissioned by the environmental group, Greenpeace, in collaboration with the British supermarket chain, Iceland, the video was subsequently banned for being “too political”, but not before almost a million people had seen it on YouTube and Facebook between August and December last year.

Then, in March this year, the European Union decided to limit the types of vegetable oils that could be used for biofuels and, most surprisingly, only palm oil was deemed to cause deforestation and got taken off the approved list of vegetable oils that can be counted as renewable energy. The move prompted protests from both Malaysia, Indonesia and other palm oil- producing countries.

Across the world, the tide is turning against palm oil, which is one of the most efficient oils in terms of land utilisation and yields. As the world’s most traded and most ubiquitous vegetable oil, its derivatives are found in almost everything from soaps to shampoos, but its perception for deforestation and pollution has been hard to shake off.

Yet, Gunawan Hariyanto Lim, executive chairman and CEO of crude palm oil (CPO) and palm kernel producer Bumitama Agri, is undeterred. He acknowledges that the industry has an image problem because many players have different standard operations and there is a lack of government enforcement of the rules. So, negative publicity is an uphill challenge. Nevertheless, he is facing it head-on by doing things right.

Bumitama, which was listed on the Singapore Exchange in 2012, has expanded quickly. Established in 1996 by the Harita Group through the acquisition of 17,500ha in Central Kalimantan, it now has a total planted nucleus and plasma smallholders of 185,000 ha. With a cohesive and experienced management team that has strong industry experience, it has grown to become a leading producer of CPO and palm kernels and has a market capitalisation of more than $1 billion.

Knowing there are challenging times ahead, Gunawan Hariyanto Lim wants to show that oil palm is not only sustainable, but it can also be an industry norm, starting with a crucial component in oil palm production: smallholders.

The World Resources Institute says independent smallholders — small-scale farmers who are not linked to any particular company or mill — manage about one-quarter of Indonesia’s oil palm plantations. It says researchers have even predicted that smallholders will double their production capacity over the next decade, managing a 60% share of Indonesia’s total oil palm plantation area by 2030. This means independent smallholders are critical to making sustainable palm oil a reality. The problem with that, however, is that smallholders in general, not just independent ones, simply lack the resources to do so.

Bumitama’s commitment to the “plasma” smallholder scheme sets the company on the path towards making oil palm truly sustainable. It currently owns and operates 14 CPO mills in Indonesia — 13 in Kalimantan and one in Riau — milling fruits from 185,100ha of planted land. The good news is that about a third of this land has been allocated for plasma smallholders, much higher than Indonesia’s regulatory requirement of 20%. A plasma scheme is when a company plants and sometimes manages these planted areas for smallholders organised into cooperatives and offers them regional government-controlled prices for their crops, along with helping them raise productivity and adopt sustainable practices such as zero burning.

“Our smallholders do sometimes struggle, especially when their yields are low. Through their cooperatives, we help them by providing them with an advance [in funds] and support with their crop production,” Gunawan Hariyanto Lim tells The Edge Singapore. In addition, Bumitama distributed US$24 million ($33.3 million) in dividends to its 28,000 associated plasma scheme smallholders last year.

Of these, Gunawan Hariyanto Lim says, 1,899ha of plantation land from its first group of plasma scheme smallholders have achieved the Roundtable on Sustainable Palm Oil (RSPO) certification, and its aim now is to reach full RSPO certification for all its plasma smallholders by 2024. Bumitama is also assisting independent smallholders with yield improvement, land permit application and certification. Last year, the company assisted a group of more than 50 smallholders called Tenera in obtaining their RSPO certification.

The RSPO is the most widely and globally accepted standard for palm oil certification, which is essentially a set of outcomes and criteria for ecological, environmental and social protections in palm oil production. Bumitama is also working towards being fully RSPO-certified — as at March, it had obtained six RSPO certifi cations, which produced an annual volume of 206,608 tonnes of CPO and palm kernels. More than 30% of all the palm oil the company produces is RSPO-certifi ed.

Gunawan Hariyanto Lim believes in instilling accountability at the core of the company.“We have to be resilient and quick to adapt to change, and that begins with ensuring that the leadership sets the tone,” he says. “I think no company, and certainly not Bumitama, will allow the reckless killing of wildlife and allow their governance policies to lapse. We have much to lose if we don’t comply. Besides, it is a criminal act. This is not just about business, but about taking care of the environment we are in.”

He adds that Bumitama is committed to sustainability and has taken many measures to dispel the negative news surrounding the industry. In 2016, it established the Bumitama Biodiversity and Community Project, working with IDH — The Sustainable Trade Initiative to create a wildlife corridor that willspan the area straddling two of its plantations in the Ketapang district in West Kalimantan.

“The primary objective of the project is to secure the rehabilitation and management of a wildlife corridor for orangutans and other species,” Gunawan Hariyanto Lim says. The company has numerous policies and initiatives in place that address emissions from oil palm, reforestation, reduction in the use of chemical pest control and fi re monitoring.

Ensuring that Bumitama is run as a responsible business is a priority for Gunawan Hariyanto Lim. He explains the origin of the name Harita Group and the values derived from the name: “The word Harita is coined from its founders’ names — that is, my father’s and mother’s names: Hariyanto and Rita. This name also stands for the values adopted by our group: Humility, Achievement, Respect, Integrity, Teamwork and Accountability. This is why our employees and stakeholders have to adhere to these values, as do we.”

Looking ahead, Bumitama expects that oil palm prices will bounce back, and it will continue to aim for growth in a sustainable and responsible way. Ultimately, many stakeholders, including smallholders, consumers and Bumitama’s shareholders, will benefi t together.

“We cannot drive major industry change alone, but we are willing to take the lead where we can make a positive difference,” he says. “We are transparent in the way we do things, and we are here for the long term.”

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