Calls for FSC to drop Canada’s Paper Excellence over ties to deforester

Calls for FSC to drop Canada’s Paper Excellence over ties to deforester

  • Green groups have gathered mounting evidence that Canada’s biggest pulp and paper company, Paper Excellence, is effectively controlled by notorious Indonesian deforester the Sinar Mas Group, via its subsidiary, Asia Pulp & Paper.
  • They are now calling on the Forest Stewardship Council, which certifies millions of hectares of Paper Excellence-managed forests as well as 42 of the company’s mills, to cut ties with it.
  • APP was in 2007 “disassociated” from the FSC and remains barred from membership due to “destructive forestry practices”; its control of Paper Excellence should lead to the same outcome for the Canadian company, activists say.
  • Both companies have denied allegations of controlling ties — despite the fact that Paper Excellence’s sole shareholder is the son of the APP chair and previously directed APP’s China business, among other revelations.

JAKARTA — Activists have urged the Forest Stewardship Council to cut ties with a leading Canadian pulp and paper producer that they allege is effectively under the control of an Indonesian conglomerate notorious for millions of hectares of deforestation.

Paper Excellence, based in British Columbia, controls 22 million hectares (54 million acres) of forest in Canada and the United States, of which 7.3 million hectares (18 million acres) is FSC-certified. It also has 42 mills across North America and France with FSC certification, the leading stamp for certified sustainable timber production.

But Greenpeace Canada and Indonesian environmental NGO Auriga Nusantara say the FSC should disassociate from Paper Excellence, given what they say is abundant evidence that the company is controlled by Indonesian conglomerate the Sinar Mas Group, via its subsidiary, Asia Pulp & Paper (APP).

“For too long Sinar Mas has been expanding its operations in North America without any consequences from the FSC,” Auriga Nusantara director Timer Manurung said. “To maintain its credibility, we expect the FSC to implement its own policies and disassociate with Paper Excellence.”

The groups have filed a formal complaint with the FSC on the heels of a series of major acquisitions by Paper Excellence that makes it the biggest pulp and paper producer in Canada.

“The FSC might be the last to acknowledge that Paper Excellence and APP are two sides of the same coin,” said Shane Moffatt, head of the food and nature campaign at Greenpeace Canada. “It now has a clear decision to make — to enable a shady forest takeover by a multinational logging giant or be honest with the public about what’s really happening here. Over 10,000 Canadians have already called on Paper Excellence to be more transparent and their calls will only get louder.”
Paper Excellence’s mill in Howe Sound, British Columbia, Canada. Image courtesy of Paper Excellence.

Links to a known deforester

The groups have justified their call for disassociation, as the FSC’s process of cutting ties with a company is known, on the fact that the FSC disassociated from APP in 2007. APP is barred from regaining FSC membership due to “destructive forestry practices,” which environmental watchdogs say includes more than 2 million hectares (5 million acres) of deforestation in Sumatra between 1984 and 2010.

The public needs to be aware of the connections between Sinar Mas and Paper Excellence because there are concerns the latter will operate its forestry concessions in North America similarly to how Sinar Mas and APP operate in Indonesia, said Hilman Afif, a campaigner at Auriga Nusantara.

Besides its long history of deforestation, APP also has record of burning in its concessions, Hilman said. According to data from the Transparency for Sustainable Economies (Trase) platform, APP was linked to 350,000 hectares (865,000 acres) of burned areas from 2015 to 2022, more than half of them in carbon-rich peatlands.

“We know that multiple civil organization reports have shown how large swaths of forests have been destroyed by APP,” Hilman told Mongabay. “We don’t want the same thing to happen in Canada, when a company there is controlled by a conglomerate that has a bad corporate track record in Indonesia. That’s why this connection has to be revealed.”

The FSC has repeatedly denied the allegation that Sinar Mas secretly controls Paper Excellence via APP, saying it has examined the shareholder ties between the companies multiple times and has concluded each time that there’s no majority ownership relationship between APP and Paper Excellence.

The FSC said it had conducted a robust review of the APP corporate group in 2023, and at the time of the submission of the NGOs’ complaint, it was in discussion with Paper Excellence on conducting a corporate group review of its governance.

“To date, FSC has not found the requisite connection of 51 per cent shareholding or voting interest to consider Paper Excellence as part of APP,” the FSC told Mongabay in an email.
A Domtar pulp and paper mill in British Columbia, Canada. Paper Excellence purchased the Quebec-American company Domtar in 2021 for US$3 billion. Image courtesy of Domtar.

A family affair

In their complaint, however, Greenpeace Canada and Auriga Nusantara criticize the FSC’s criteria that Sinar Mas/APP must be shown to have a majority stake in Paper Excellence for the latter to be considered under the influence of the Indonesian conglomerate.

“The FSC’s use of ownership as the sole criteria for determining ‘indirect involvement’ is at odds with FSC’s own policy and international accounting standards that say control — with or without formal ownership of a majority of the equity shares — is the basis for determining parent/subsidiary corporate relationships,” the groups said in their complaint.

They offered several pieces of evidence to make their case, including pointing out the obvious fact that Paper Excellence’s founder and sole shareholder, Jackson Widjaja (also spelled Wijaya), is a member of the billionaire Widjaja family behind Sinar Mas. Jackson’s father, Teguh Widjaja, is the chair of APP, and Jackson was previously a director of APP’s China business.

The complaint also cites a recent investigation led by the International Consortium of Investigative Journalists (ICIJ), based on internal company records and insider accounts, that shows Paper Excellence coordinated its business and strategy decisions with APP closely and secretly until at least the late 2010s. For instance, both companies were shown to communicate when deciding when and to whom to sell Paper Excellence’s products, and worked together on representations made to a national regulator.

A source cited in the investigation also said Paper Excellence’s entire back office at the time was run by APP and that the two companies essentially shares the same staff.

“APP staff is PE staff. There is no difference there,” the source said.

APP has denied it ever collaborated behind the scenes with Paper Excellence or shared confidential information with it.

A former executive at Paper Excellence’s French subsidiary, meanwhile, was quoted in the investigation as saying he had a direct relationship with the owners of APP, with monthly videoconference meetings held with Teguh Widjaja.
Jackson Widjaja (also spelled Wijaya), right,  with Brazilian politician Eduardo Bolsonaro in this image sent out via Twitter on July 30, 2019. Image courtesy of BolsonaroSP/Twitter.

‘Ultimately controlled by APP’

Despite the family ties between APP chair Teguh and Paper Excellence owner Jackson, Paper Excellence has said that it operates completely independently; Jackson has said he no longer has connections to APP.

However, in a response to a letter sent by Auriga Nusantara in October 2019, the FSC acknowledged that Jackson was involved with APP China through Ever Dragon Investments Group, which owns APP’s factories in China. Jackson reportedly ran Ever Dragon Investments Group from 2005 until at least 2017.

This “would qualify Paper Excellence as being indirectly involved with an indirectly involved organization,” with Jackson positioned “one degree removed” from APP, the FSC said in its response letter dated July 15, 2020.

But once again citing its majority shareholder criteria, the FSC said Jackson’s involvement in APP China wasn’t a close enough relationship to violate FSC policy, and therefore there was no ground for disassociating from Paper Excellence.

Even if there was justifiable ground to the contrary, the FSC might not immediately cut ties with Paper Excellence, FSC Canada said, because companies that commit to “immediately work with the FSC” to correct any wrongs might be able to retain their membership.

Besides the media investigation, the complaint also cited various Canadian government communications acknowledging the ties between Sinar Mas/APP and Paper Excellence.

In 2021, the country’s minister for international trade, Mary Ng, referred to Paper Excellence as “Sinar Mas from Indonesia” in testimony to a House of Commons committee.

In its 2021 database, Statistics Canada identifies the Sinar Mas Group as an owner of both Paper Excellence and APP.

And in a 2019 briefing note from the Nova Scotia Department of Finance and Treasury Board to the province’s premier, Paper Excellence was described as “ultimately controlled by Asia Pulp and Paper.”

This isn’t the first time civil society groups have highlighted alleged ties between Paper Excellence and Sinar Mas. In a 2022 report, Greenpeace Canada and three other environmental watchdogs revealed that Sinar Mas has hidden ties with Paper Excellence, indicating that the former secretly controls the latter.

The ties are hidden through a multilayered corporate structure with holding companies in numerous offshore jurisdictions that are characterized by high levels of corporate secrecy, such as the Netherlands, Labuan in Malaysia, the British Virgin Islands, and Hong Kong, the report showed.

It uncovered these hidden ties after analyzing corporate filings, lobbyist registration, and official government documentation.
Rainforest beside cleared and drained peatland in the PT Bina Duta Laksana concession. The Sinar Mas group affiliated concession, a supplier of pulpwood to Asia Pulp & Paper (APP), is located within the Kerumutan Peat Swamp Forest in Riau, Sumatra. Image courtesy of © Kemal Jufri / Greenpeace.

Political scrutiny

The FSC has acknowledged receipt of the latest complaint filed by Greenpeace Canada and Auriga Nusantara, and says it will process the complaint, including deciding whether there are grounds to launch a disassociation process.

The recent media investigation has prompted the Canadian Parliament to launch a probe into Sinar Mas’s alleged ties with Paper Excellence. Lawmakers have repeatedly summoned Jackson Widjaja to answer questions about who is behind Paper Excellence and its complicated network of holding companies.

“What kind of message is he sending to Canadians if he’s at a headquarters in Shanghai or in Jakarta and he refuses to respond,” Parliament member Charlie Angus said this past May. “These are our forests, these are our workers, these are our communities. If this individual is in control of all of this, he should be able to come and give us pretty straightforward answers.”

However, Jackson has twice declined invitations to appear before the parliamentary standing committee on natural resources. Angus called this “an absolute disrespect to Parliament and a slap in the face, particularly to people who are dependent on natural resource communities.”

Banner image: Forest in British Columbia. Image by Rhett A. Butler/Mongabay.

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