Palm Oil Business in Indonesia
PT.BIA, POSCO INTERNATIONAL's local palm plantation business in Indonesia, defines its vision as ' Building a Sustainable Palm Business That Contributes to Society', and has fully assessed its impact on the environment and society from the initial business phase to integrate such impact in its decision-making and take necessary action. Building on such efforts, POSCO INTERNATIONAL announced the NDPE (No Deforestation, No Peat, No Exploitation) policy as the first Korean company to do so in March 2020, and went on to achieve RSPO (Roundtable on Sustainable Palm Oil) certification in September 2021 to faithfully commit to delivering on the promises it made with the international community.
KEY SUSTAINABILITY METRICS
| Planted Areas | 21,166 ha |
| High Conservation Value Area (HCVA) | 6,718 ha |
| Plasma Area | 6,868 ha |
| Peat Area | 0 ha |
| FFB (Fresh Fruit Bunch) supply chain traceability | 100% |
(as of Dec. 2022)
PT.BIA PR VIDEO
PROTECTING FORESTS AND BIODIVERSITY
PT.BIA was granted a Location Permit (lzin Lokasi)1 for the 39,900ha-sized land by Invest Indonesia in January 2007 before starting business, and implemented the environmental impact assessment (AMDAL) process2 on the permitted land pursuant to applicable Indonesian laws. The environmental impact assessment report confirmed that the plantation site was mostly composed of bushes, reeds, and secondary forests. The Location Permit issued by Invest Indonesia also verified that the site fell into the category of Convertible Production Forest3, which makes the site available for a transition into non-forest areas.
Landsat Satellite Imagery 5TM Acquision Date:
January 10, 1988 Path Row 100X65
January 10, 1988 Path Row 100X65
Note. Areas affected by large-scale fires in 1998
The 1997-98 El Nino is among the strongest recorded in the 20th century, and triggered the global record-breaking natural disaster of large-scale fires that spread across tropical rain forests in Indonesia. PT.BIA's plantation site also experienced massive destruction in most of its forest areas due to the fires that occurred in 1998.
1. Izin Lokasi, which means Location Permit in English, is granted by local government authorities through the application process. A company or an organization permitted to invest in Indonesia may apply for Izin Lokasi when the need arises to utilize, lease, or acquire land for business purposes within the boundary of permitted investment activities.
2. Environmental impact assessment consists of environmental impact analysis (ANDAL), environmental management plan (RKL), and environmental monitoring plan (RPL), and comprehensively reviews the concerned areas for their physical, chemical, biological, social, economic, and cultural factors and in terms of community health aspects based on the due diligence process which includes on-site observation and sampling and on the data collected from government and other relevant organizations. Indonesia's law stipulates that pertinent documents be disclosed to the public prior to making decisions on environmental impact assessment so that anyone may provide their feedback on such assessment to the environmental impact assessment committee.
3. The Indonesian government classifies the nation's forest areas into (1) Sanctuary Reserve Area/Nature Conservation Area (Kawasan Suaka Alam/Pelestarian Alam), (2) Protection Forest (Hutan Lindung), (3) Limited Production Forest (Hutan Produksi Terbatas), (4) Production Forest (Hutan Produksi), and (5) Convertible Production Forest (Hutan Produksi Konversi).
High Conservation Value Area Information Board
In August 2009, PT.BIA was granted a plantation business permit (IUP), and received Land Use Change Analysis in September that year to exclude protection forests from the permitted area. In so doing, 36,400ha of land was determined as non-forest land by the Indonesian Ministry of Forestry (SKPKH), excluding 3,500ha of wildlife protection areas. The company went on to further exclude 2,205ha of land including swamps and waterways that require protection out of the land that received SKPKH, and earned land use rights (HGU), which is granted on the condition of development pursuant to Indonesian laws, for the remaining 34,195ha of land, which essentially allowed the company to develop plantations. Rather than developing the entire site permitted by the Indonesian government for development, PT.BIA went the extra mile by internally revisiting the environmental impact of its business operations and identified additional 6,454ha of land, which was made up of forests, swamps, and waterways and was considered to have high conservation value, to voluntarily exclude the land from the scope of development. As a result, PT.BIA proceeded with its development efforts on 27,741ha of land which amounts to approximately 80% of the land initially permitted for development, exceeding the statutory standards set by the Indonesian government in committing to forest conservation and working to minimize environmental impact even from the business development phase.
PT.BIA Fire Response Training
PT.BIA applied legally appropriate methods in clearing the land by using its equipment and personnel. While there were allegations raised over illegal slash-and-burn clearing, this is strictly banned pursuant to Indonesia's domestic laws and may lead to the cancellation of the plantation business permit granted. Any company given a plantation business permit in Indonesia is obligated not to slash-and-burn for land clearing, and PT.BIA also secured and operated sufficient equipment (bulldozer/excavator) and workforce required to clear the land from the business initiation phase. In fact, such equipment was more efficient than slash-and-burn, and PT.BIA's working capacity as of 2012 when clearing started was over 2.5 times the capacity generally required to clear the given size of land.
Papua in Indonesia where our palm plantation operates is located in the Southern Hemisphere near the equator, and is exposed to the constant flow of southeast trade winds. Land clearing started from the northwestern direction where the port is based and progressed towards the southeastern direction, which is just the opposite of the flow of southeast trade winds (southeast -northwest). If PT.BIA relied on slash-and-burn for land clearing, this would have spread the fire to already-cleared areas as well as PT.BIA's assets and infrastructure, causing massive damages as a result. PT.BIA has established an independent fire response system to protect community members as well as its plantations and employees from the slash-and-burn practices traditionally implemented by indigenous peoples in the vicinity of its plantations and from fires that naturally occur during the dry season. PT.BIA is equipped with a suite of fire suppression equipment, including fire monitor towers, fire hydrants, fire extinguishers, and fireproof suits on the basis of its fire response manuals. The company also conducts regular fire prevention and response drills for community members as well as its own employees.
Papua in Indonesia where our palm plantation operates is located in the Southern Hemisphere near the equator, and is exposed to the constant flow of southeast trade winds. Land clearing started from the northwestern direction where the port is based and progressed towards the southeastern direction, which is just the opposite of the flow of southeast trade winds (southeast -northwest). If PT.BIA relied on slash-and-burn for land clearing, this would have spread the fire to already-cleared areas as well as PT.BIA's assets and infrastructure, causing massive damages as a result. PT.BIA has established an independent fire response system to protect community members as well as its plantations and employees from the slash-and-burn practices traditionally implemented by indigenous peoples in the vicinity of its plantations and from fires that naturally occur during the dry season. PT.BIA is equipped with a suite of fire suppression equipment, including fire monitor towers, fire hydrants, fire extinguishers, and fireproof suits on the basis of its fire response manuals. The company also conducts regular fire prevention and response drills for community members as well as its own employees.
PROTECTING THE QUALITY OF WATER
Location of Palm Farm Business Site and Non-ing River (including the expanded area adjacent to the river)
Official Letter from the Environment Agency of Merauke Regency, Indonesia
In selecting and operating its plantation site, PT.BIA always commits to minimizing its environmental impact on nearby rivers and underground water. While some allegedly claimed that PT.BIA's plantation operation degraded the water quality of the Bian River, the River flows along the periphery of the plantation site, rather than running through it. The plantation site is distanced more than 100m away from any river and more than 5m away from any tributaries pursuant to applicable Indonesian laws. In conformity with the ISPO standards, PT.BIA does not use fertilizers nor agricultural chemicals near the River, and installs signboards in areas close from the River to protect the water quality of the Bian River and other nearby rivers.
PT.BIA uses the water withdrawn from the reservoir for its CPO mills where FFBs (Fresh Fruit Bunch) are steamed. Three CPO mills currently owned by PT.BIA do not have any pipelines nor drains that discharge into the Bian River and other rivers The water used at CPO mills (wastewater) is treated through the seven artificial ponds created by PT.BIA as a microorganism-assisted natural purification system, and the organic substances contained are reused for plantation operations (Land Application) in a closed-loop system. As such, PT.BIA does not discharge any of its wastewater into the Bian River.
The Bian River is categorized as Class 2 agricultural water according to Indonesian government's river classification system in accordance with the regulations and technical guidelines of the Indonesian Ministry of Environment and Forestry, PT.BIA regularly analyzes and monitors the water quality of rivers, and regularly reports analysis results to the Environmental Department of Merauke. To improve the reliability of water quality inspections, the company has engaged indigenous peoples since 2019 in collecting samples for water quality analyses, and held public hearings in areas occupied by indigenous peoples to fully disclose water quality analysis results. The public hearing held in the village of Selil was directly attended by officials from the Environmental Department to explain the results indicating the water quality of the Bian River and other nearby rivers satisfied the applicable statutory standards. PT.BIA resumed water quality inspections engaging indigenous peoples which were suspended amid the spread of COVID-19, and held a public hearing in August 2022 along with officials from the Environmental Department of Merauke to communicate to all community members that the water quality was within the set threshold.
PT.BIA uses the water withdrawn from the reservoir for its CPO mills where FFBs (Fresh Fruit Bunch) are steamed. Three CPO mills currently owned by PT.BIA do not have any pipelines nor drains that discharge into the Bian River and other rivers The water used at CPO mills (wastewater) is treated through the seven artificial ponds created by PT.BIA as a microorganism-assisted natural purification system, and the organic substances contained are reused for plantation operations (Land Application) in a closed-loop system. As such, PT.BIA does not discharge any of its wastewater into the Bian River.
The Bian River is categorized as Class 2 agricultural water according to Indonesian government's river classification system in accordance with the regulations and technical guidelines of the Indonesian Ministry of Environment and Forestry, PT.BIA regularly analyzes and monitors the water quality of rivers, and regularly reports analysis results to the Environmental Department of Merauke. To improve the reliability of water quality inspections, the company has engaged indigenous peoples since 2019 in collecting samples for water quality analyses, and held public hearings in areas occupied by indigenous peoples to fully disclose water quality analysis results. The public hearing held in the village of Selil was directly attended by officials from the Environmental Department to explain the results indicating the water quality of the Bian River and other nearby rivers satisfied the applicable statutory standards. PT.BIA resumed water quality inspections engaging indigenous peoples which were suspended amid the spread of COVID-19, and held a public hearing in August 2022 along with officials from the Environmental Department of Merauke to communicate to all community members that the water quality was within the set threshold.
PROTECTING THE HUMAN RIGHTS OF INDIGENOUS PEOPLES
PT.BIA Business Site (Black Border) and Impact Zone (Purple Border)
In operating its palm oil business, PT.BIA has sincerely communicated with indigenous peoples for extended periods of time, and provided sufficient information on its plantation business prior to starting operations, along with compensation, employment, and education, in full compliance with the principle of FPIC (Free Prior and Informed Consent). Before developing the palm plantation, the company first identified indigenous peoples who had interest in its palm oil business by way of residing in the plantation site or within the sphere of business influence, or using the site for hunting and collecting food with ◦ the help of the indigenous peoples institution (LMA) and the Regency Government of Merauke.
Furthermore, PT.BIA included indigenous peoples living outside the sphere of influence in addition to those living within its sphere of business influence in gaining FPIC. This demonstrates the company's voluntary effort to extend the protection of rights to more indigenous peoples.
PT.BIA has remained steady in its endeavors to help community members understand its business operations and their impacts The first public hearing was held in January 2007 for indigenous peoples who had interest in the plantation site. This was followed by a series of public hearings and business presentations before progressing to site development in 2012 to continue with communication with indigenous peoples. All such hearings and presentations were provided in Indonesian, and were open to any stakeholders wishing to attend including local NGOs, media, and local government departments to freely interact with one another.
Furthermore, PT.BIA included indigenous peoples living outside the sphere of influence in addition to those living within its sphere of business influence in gaining FPIC. This demonstrates the company's voluntary effort to extend the protection of rights to more indigenous peoples.
PT.BIA has remained steady in its endeavors to help community members understand its business operations and their impacts The first public hearing was held in January 2007 for indigenous peoples who had interest in the plantation site. This was followed by a series of public hearings and business presentations before progressing to site development in 2012 to continue with communication with indigenous peoples. All such hearings and presentations were provided in Indonesian, and were open to any stakeholders wishing to attend including local NGOs, media, and local government departments to freely interact with one another.
| NO. | Date | Topic of Consultation |
| 1 | Jan. 17, 2007 | Held a public hearing on land compensation |
| 2 | Jul. 19, 2007 | Held a public hearing to reach agreement on land compensation for Estate B and made advance payments |
| 3 | Jun. 7, 2008 | Held a presentation for indigenous peoples concerning environmental impact assessment |
| 4 | Jul. 7, 2008 | Held the 1st public hearing concerning environmental impact assessment |
| 5 | Mar. 10, 2009 | Held the 2nd public hearing concerning environmental impact assessment |
| 6 | Dec. 21, 2010 | Held a public hearing to reach agreement on land compensation for Estate A |
| 7 | Dec. 28, 2010 | Held an event to thank community members for reaching agreement on land compensation for Estate A |
| 8 | May 30, 2011 | Held a presentation on land compensation for port areas |
| 9 | Jul. 16, 2011 | Held consultations to address the objections raised in relation to land compensation for Estate A |
| 10 | Nov. 14, 2011 | Made consultations on land compensation for areas encompassing alternative access roads |
Indigenous Consultation Details
The land compensation process was implemented along with the heads of tribes that have customary land ownership in the plantation site pursuant to the customary laws of indigenous peoples, and these heads directly signed the consent indicating their understanding of and agreement to land compensation. Other tribes who did not have customary ownership but still participated in the consultation process also signed the consent as witnesses.
The Indonesian government confirmed that PT.BIA abided by all applicable laws and regulations in reaching agreement with indigenous peoples prior to business execution, and that no issues occurred in the local community.
In selecting areas to be developed for business purposes, PT.BIA classified areas held sacred by indigenous peoples for customary and religious reasons as HCV (High Conservation. Value) areas and excluded such areas from the scope of development while putting up signboards to manage and safeguard these HCV areas from any harm. The principle of FPIC was also honored in the CPO mill construction process. Prior to initiating the construction, PT.BIA provided indigenous peoples with multiple presentations on its construction plan and potential impact, and gained FPIC from the representative of indigenous peoples pursuant to customary laws. Furthermore, PT.BIA received confirmation from the representative of indigenous peoples that the requirements of indigenous peoples were sufficiently reflected in relation to its business execution as well as a letter of support for its business operations, faithfully implementing the FPIC process for the construction of CPO mills.
The Indonesian government confirmed that PT.BIA abided by all applicable laws and regulations in reaching agreement with indigenous peoples prior to business execution, and that no issues occurred in the local community.
In selecting areas to be developed for business purposes, PT.BIA classified areas held sacred by indigenous peoples for customary and religious reasons as HCV (High Conservation. Value) areas and excluded such areas from the scope of development while putting up signboards to manage and safeguard these HCV areas from any harm. The principle of FPIC was also honored in the CPO mill construction process. Prior to initiating the construction, PT.BIA provided indigenous peoples with multiple presentations on its construction plan and potential impact, and gained FPIC from the representative of indigenous peoples pursuant to customary laws. Furthermore, PT.BIA received confirmation from the representative of indigenous peoples that the requirements of indigenous peoples were sufficiently reflected in relation to its business execution as well as a letter of support for its business operations, faithfully implementing the FPIC process for the construction of CPO mills.
OBJECTIONS RAISED IN LINE WITH OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
On December 19, 2019, civic organizations in Korea and Indonesia raised issues to the Korean NCP, alleging that POSCO INTERNATIONAL's palm plantation business in Indonesia ran counter to the OECD Guidelines for Multinational Enterprises to result in human rights violation and environmental destruction. We proactively participated in the mediation process arranged by the KNCP to sincerely explain that we did not violate the Guidelines in conducting palm oil business and that we were fully implementing our environmental and social policies including the NDPE policy. Following three rounds of mediation meetings, the KNCP published its final statement on January 18, 2022. In its statement, the KNCP expressed its opinion to the effect that POSCO INTERNATIONAL compiled best practices of the Guidelines through stipulating the Standard Operating Procedures (SOPs), implementing the Free, Prior and Informed Consent (FPIC) process, and adopting the NDPE policy. Even after the announcement of this final statement, POSCO INTERNATIONAL additionally submitted performance reports on our overall ESG operations including the implementation of the NDPE policy to do our utmost to elevate understanding among concerned parties. Not only will we continue with such efforts, but we will also proactively implement our environmental and social policies and reach out ever closer to stakeholders.