Evaluating the Environmental, Social and Corporate Governance Performance of Sinar Mas Group (SMG) and Royal Golden Eagle (RGE) Companies

WWF-Indonesia together with Auriga, Forest Peoples Programme, Hutan Kita Institute, Jikalahari, KKI Warsi, Rainforest Action Network, Titian, Walhi Riau, Walhi Jambi, Wetlands International, and Woods & Wayside International have published Evaluating the Environmental, Social and Corporate Governance Performance of Sinar Mas Group (SMG) and Royal Golden Eagle (RGE) Companies.

As background, FSC is considered by many NGOs and companies as the best certification system to verify environmentally and socially responsible management of forests. However, currently, FSC standards cannot be used as a tool to measure or verify the performance of Sinar Mas Group (SMG) and Royal Golden Eagle (RGE) companies, affiliates  and global wood supply chain partners in their pulp and paper production because:

• SMG’s Asia Pulp & Paper (APP) was disassociated by FSC “because of substantial, publicly available information that APP was involved in destructive forestry practices, which brought it into conflict with the FSC mission in 2007”.
• RGE’s APRIL was disassociated by FSC for “large-scale deforestation activities in Indonesia and bringing negative social and environmental impacts to areas with high conservation values” in 2013.

In July 2017, FSC established a Stakeholder Working Group (SWG) to help develop the roadmap for APP. Many of the authors of this document are part of the SWG. Many of these groups have been monitoring SMG and RGE for almost two decades. They have developed this outcome based Performance Verification Framework because these companies are currently excluded from the FSC system, as the answered for buyers and other to assess and verify APP and APRIL independently, because we do realize re-association process of the two companies will take some years to be completed.

In developing the Framework, the authors have consulted with other NGOs and key private sector actors. The Performance Verification Framework is based on a set of three Performance Categories – environmental responsibility, social responsibility and corporate governance – each with their respective Performance Criteria and Verification Indicators (C & I). The framework was developed:

• As a tool for corporate buyers of pulp and paper products as well as investors in the sector, NGOs, community groups and others to set specific measurable performance requirements for and independently verify on-the-ground performance of SMG and RGE companies.
• So its Criteria & Indicators (C&I) can be used in the development of the detailed roadmaps for ending the FSC’s disassociation with APP and APRIL.
• So its C & I can be used in the FSC’s national standard development process and improvement of the FSC’s Forest Management and Controlled Wood standards.

There are four parts to the document.

• Part I presents the C & I in each of the three Performance Categories and, for reference, provides a “cross-walk” comparison with the FSC requirements for full forest management (FM) certification and for Controlled Wood (CW) that will help in integrating the C&I into the roadmap process. The C & I establish the basis upon which buyers and investors can assess and verify whether these producers of pulp and paper products meet their expectations for environmental, social and corporate governance responsibility in the absence of FSC certification or where there are gaps in the FSC standards.
• Part II recommends that the C & I be used to inform the FSC roadmap and national standards development processes and suggests that buyers and investors also use the C & I to develop and communicate their performance expectations for SMG and RGE independently.
• Part III provides minimum standards for the conduct of audits that can be considered professional, rigorous, and independent, and that have sufficient scope and depth of analysis to be considered reliable and credible evaluations.
• Part IV includes a glossary of terms.