Statement Summarizing
WWF Concerns over theOrigin of Fiber for the Mills of theAsia Pulp and Paper Company in Sumatra, Indonesia
13 July 2004

Sustainable development is a fundamental prerequisite for a just and prosperous
nation. WWF Indonesia recognizes the potential role of the pulp and paperindustry in supporting economic development in Indonesia, however it isimperative for the industry to apply sustainable development principles in its
operations, including timber sourcing activities.
APP's operations in Sumatra
Asia Pulp & Paper Co Ltd (APP) is Indonesia’s largest pulp and paper producer and operates

two mills in Sumatra, Indonesia. The first is the Lontar Papyrus in Jambi Province. The second isIndah Kiat in Riau Province - one of the world largest mills. APP also has several mills in China,
who receive pulp supplies from it’s Indonesian mills. APP is a member of the Sinar Mas Group(SMG), which also owns forestry companies that supply the mills. APP has debts of US$13.9
billion and has frozen debt repayments. Creditors are currently exploring debt restructuringoptions.
APP's operations threaten the remaining tracts of lowland natural rainforest in Sumatra.
APP’s projected in early 2004 that it will clearcut 180,000 hectares (three times larger thanSingapore) of Sumatran lowland natural forest in 2004-2005. The monthly rate of forest
clearcut is three times larger than the size of Macau. The World Bank in 2001, analyzing therate of forest loss, predicted that the Sumatran lowland forest would disappear in 2005.1
WWF Indonesia and The Indonesian Institute of Sciences (LIPI) surveys reveal that some ofRiau province's forests contain absolutely outstanding conservation values2. In comparative

1World Bank. 2001. Indonesia: Environment and Natural Resource Management in a Time of Transition.
Washington D.C. Report in PDF format (154 pages, approx. 10 MB) is available at World Bank website, under
the Documents & Reports section. http://www-wds.worldbank.org/default.jsp?site=wds.
2
LIPI. 2003. The Summary of Biodiversity Assessment in Tesso Nilo,
http://www.wwf.or.id/attachments/summary_bio_assesment.pdf
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studies, no forests were found to have higher plant richness.3 No forests are likely to have ahigher probability of containing plants with unique pharmaceutical values.
A history of broken promises
In 2001, Friends of the Earth (FoE) United Kingdom published Paper Tiger, Hidden
Dragons4. The report highlighted the negative social and environmental impacts of APP's
operations in Sumatra. FoE called on APP customers in the UK to urge APP to improve its
operations and, until then, to stop doing business with them. Many APP customers responded
to this call and APP lost much of its UK market.
These events prompted many international pulp and paper buyers and the media to contact
WWF offices around the world seeking their assessment of the environmental performance ofAPP and other Indonesian pulp and paper companies. In 2002, WWF called on APP and theSinar Mas Group (SMG) 5 to demonstrate a commitment to operate within the limits of aclearly defined legal and sustainable pulpwood supply and ensure sound forest stewardship inplantations and forests from which they sourced pulpwood. APP/SMG responded with apromise to produce a Sustainability Action Plan.
On 19 August 2003, WWF and APP/SMG signed a joint Letter of Intent that set out steps thecompanies would take over a six-month period to produce their much-delayed plan and put
their operations on a more sustainable footing. The issues addressed included protecting forest
with high conservation values, resolving social conflicts and ensuring the legality and longterm sustainability of the company's wood supply6.
In February 2004, APP released its Sustainability Action Plan (SAP)7. The SAP addresses
some of WWF's concerns and includes some conservation gains such as adding 17,500
hectares to a 58,500 hectare reserve. However the SAP, and the process by which it wasformulated, are deficient on key issues:
1. The targeted sustainable wood supply from plantations in 2007 will be achieved at theexpense of 180,000 hectares of Sumatran natural forest. The company has refused toput these forests under temporary moratorium while credible conservation assessments
are carried out.
2. The companies assessed natural forest areas using their own standard based on priordisturbance, a standard unrecognized anywhere else, and used the results to fashion aforest clearance plan. The companies should have been assessing the crucial role the3

Andrew N. Gillison. 2001. Vegetation Survey and Habitat Assessment of the Tesso Nilo Forest Complex.
http://www.wwf.or.id/attachments/TN_final.pdf
4Friends of the Earth UK. 2002. http://www.foe.co.uk/resource/reports/paper_tiger_hidden_dragons.pdf
5Sinar Mas is the owner of APP. SMG Forestry Companies supply pulp wood to APP
6The Letter of Intent, APP-WWF. http://www.wwf.or.id/attachments/LoI-Final.pdf
7APP.2004. Sustainability Action Plan. http://www.wwf.or.id/attachments/SAP_Final.pdf
WWF Concerns Over APP Fiber Supply2

forests play in watershed protection, climate regulation and as habitats for key
endangered species. WWF maintains that the conservation value of most ofIndonesia's forests would be underestimated if the only criterion used was priordisturbance or degradation.
3. The companies failed to appoint an independent mediator to resolve land disputes withlocal communities.
Because of these deficiencies, WWF decided not to renew its joint letter of intent with APP.
Unsustainable practices continue
Past and present field observations by WWF and others reveal that APP/SMG operations
contravene the principles of sustainability. Flawed practices include:
1. APP/SMG continues to clear peat swamp forests with a peat depth of more than 3metres. This violates Indonesian law.
2. APP/SMG continues to clear forests with more than 20m3 per hectare of commerciallyvaluable wood. This violates Indonesian law.
3. During an audit in November 2003, LEI (Lembaga Ekolabel Indonesia) auditors found
APP/SMG sourced wood from illegal logging operations at three of five sample sites.
One of those was operating inside a protected area. The legality of at least 30% ofAPP’s fiber supply is questionable.8 LEI was hired by APP to evaluate whether thecompany purchased wood of illegal origin and whether it had a system in place toprevent such deliveries.
4. Since establishing its Forest Crime Unit in 2001, WWF has repeatedly found evidenceof APP/SMG buying wood illegally harvested in the proposed Tesso Nilo National
Park and elsewhere in the Province of Riau. WWF staff tracked the trucks from thelogging and loading sites directly to the APP mill. Large areas in the proposed nationalpark have been cleared this way. Each time WWF requested that APP/SMG stop thispractice, APP/SMG responded that it would check its suppliers and would suspend its
delivery contracts with them. Despite these statements, the WWF Forest Crime Unit
keeps finding illegal wood deliveries to APP.95. Aerial surveys, satellite images and ground surveys by WWF and consultants hired byAPP/SMG have repeatedly revealed that few if any of APP's acacia plantations in8WWF Indonesia. 2004. Legality of APP Timber. http://www.wwf.or.id/attachments/Legality_of_timber.pdf
WWF Indonesia. 2004. Deliveries of Illegally Cut Wood from the Proposed Tesso Nilo National Park to APP’s
Mill. http://www.wwf.or.id/attachments/APP_buys_illegal_wood.pdf
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previously cleared peat swamp forests are healthy. They are not producing the volumeof pulpwood assumed by APP/SMG in their SAP. Indeed, many of the plantations
have collapsed after 3-4 years. Even acacia plantations on dry soils have not brought
the productivity results promised by APP/SMG, with most of the plantations
containing considerable patches without any trees.
6. APP/SMG's SAP identifies more than 110,000 hectares of “wasteland” in their own
concession lands and another 110,000 hectares in Joint Venture concession areas inRiau that have not been planted. It would seem that APP/SMG has ample land forplantation creation and does not need to continue clearing natural forest to make landavailable for plantations.
7. APP/SMG have used unrealistic assumptions in calculating the supply they will
receive from their pulp wood plantations over the next few years and have applied
overly ambitious “tree to pulp” conversion factors. APP/SMG admitted as much when
it published its SAP. The plan contains tables that enable comparison of APP 's own(inflated) assumptions with the more conservative estimates by AMEC, aninternational forestry consulting company. AMEC is currently evaluating APP's SAP.
WWF's conclusions
1. APP/SMG is directly contributing to the demise of some of the last suitable habitat forendangered Sumatran elephants and tigers, and is playing a large part in destroying
one of the world's most biodiverse forests.
2. APP/SMG continues to clear natural forests, some of which have very highconservation values.
3. APP/SMG continues to violate Indonesian forestry laws.
4. APP/SMG’s legal wood supply is not sufficient to feed their mills at current
production levels. Yet, the mills continue to run at full capacity. There are strong
indications of reliance on illegally harvested wood.
5. Given APP/SMG's poor track-record in creating plantations in peat swamps that thecompanies have cleared, it is unlikely they will establish a sufficient renewable wood
supply for many years to come (many in the pulp wood plantation industry question
whether it is possible at all to develop successful acacia plantations on deep peatswamp areas).
6. APP/SMG has or can acquire the human resources, technical know-how and financing
to become a sustainable, yet viable enterprise, but lacks the will to do so.

WWF Concerns Over APP Fiber Supply

4WWF recommendations to APP/SMG
APP/SMG should initiate immediate reforms to demonstrate a genuine commitment toprinciples of sustainability, including:
1. Declaring a moratorium on clearing of any natural forest where ecological and culturalconservation values have not been determined.
2. Commissioning independent assessments of the conservation values of these forests ina publicly transparent manner.
3. Committing to the protection of all high conservation values identified through suchassessments.
4. Ceasing all forms of logging and clearing that are in breach of Indonesian laws andregulations.
5. Ceasing all purchases of pulpwood that cannot be verified as having been harvested
legally.
6. Installing a wood tracking system for the companies' supply chains to ensure that theirown harvesting operations are compliant with all laws.
7. Establishing productive plantations on suitable soils that do not currently have any
natural forest cover.
8. Revising projected yields of existing and future plantations to levels deemed
acceptable by independent experts.
9. Reducing mill capacity to reflect the level of legally and sustainably available woodsupplies.
WWF Indonesia recommendations to the Government of Indonesia
WWF Indonesia calls on the relevant agencies of Government in Indonesia to:
1. Conduct field audits of the legality of all of APP/SMG's operations in the company ofindependent observers.
2. Audit the condition of all existing and recently harvested natural forests underconcession to APP/SMG or its partners to determine whether their conversion would
be or was in accordance with Indonesian laws and regulations (WWF is willing tosupply current and historical high resolution images to aid such audits).

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3. Follow up the audit results accordingly.
4. Support adaptation of land-use plans, concessions and other authorizations as neededto enable APP/SMG plantation development on “wasteland” areas rather than innatural forest with high conservation values.
WWF recommendations to APP customers
WWF encourages environmentally responsible companies to:
1. Immediately review their business relationships with APP/SMG in light of the strong
evidence that APP's products continue to be contaminated with illegal timber and fiber
sourced by clearing natural forests likely to contain high conservation values.
2. Assess the environmental performance of each Indonesian forest products company
individually, and not make the assumption that all companies are alike in the terms of
their practices and the impacts of their operations.
3. Optimize commitments to environmentally and socially responsible sourcing of pulpand paper products.

As an Indonesian conservation NGO that is part of world's largest conservation
network, WWF Indonesia is committed to assist the Government of Indonesia andthe private sector to develop sustainable forest management by providing datafrom the field, drafting policies, facilitating discussions with international markets
and the financial community to support sustainable forest management.
WWF Indonesia believes that with political will and proper law enforcement, theIndonesian pulp and paper industry will be able to operate sustainably and as aresult capture a large share of the ever increasing international demand forsustainable products.

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