The complaint concerns the activities and conduct of Rabobank in relation to loans it provided to Bumitama Agri Group (BGA) and the adverse environmental impacts at the Bumitama managed Golden Youth (GY) palm oil plantation in Kalimantan (Indonesia).
In research published in November 2013, FoEE documents how land for s Bumitama-managed plantation in West Kalimantan was cleared in breach of national laws, without the necessary permits or proper government approval. The research also found that Bumitama has knowingly destroyed forest that is home to endangered orang-utans and is partially uses prohibited deep peat land. Also, the company brought illegally produced palm oil into the supply chain by taking over the management of the GY plantation, which was operating without the right permits. Previously, five complaints against Bumitama had already been filed with the Roundtable on Sustainable Palm Oil (RSPO), but to date none of the complaints have yet been resolved.
This complaint alleges that Rabobank should have known about the severe environmental, social and legal problems with Bumitamas operations and nevertheless provided significant loans to Bumitama, directly linking the bank to the impacts caused by Bumitama. The complaint further alleges that Rabobank has failed to implement its own palm oil policy and that it has failed to conduct due diligence and seek to prevent and mitigate impacts with which it is directly linked, as is stipulated in the OECD Guidelines.
The complainants request that Rabobank publicly disclose the concrete due diligence procedures and steps it has taken to identify, prevent and mitigate the adverse impacts caused by Bumitama. The complaint also asks Rabobank to exercise its leverage to prevent future adverse impacts by publicly committing to withhold financial services from BGA and to divest from the company until it has resolved problems concerning the legality and sustainability of its operations. Finally, the complainants request that the bank implements its own Environmental, Social and Governance (ESG) policy in a transparent and effective way in the Bumitama case and in future cases.
Relevant OECD Guidelines
During the preliminary discussions on the initial assessment Bumitama announced it had terminated its contract with the illegal Golden Youth palm oil plantation in Borneo, from which it is no longer purchasing palm oil.
The Dutch NCPs initial assessment found that the case still warranted further examination. In light of the termination of Bumitamas contract with the GY plantation, the NCP established a dialogue between Friends of the Earth and Rabobank specifically focusing on the Rabobanks palm oil supply chain policy and how its implementation compares to the OECD Guidelines.
During the dialogue it became apparent that the irreconcilable difference of opinion between the parties, made it difficult to reach a joint agreement concerning the feasibility of large-scale sustainable palm oil production. The parties did agree that a critical view on the sustainability of palm oil production is imperative and that Rabobank should maintain its dialogue with external stakeholders on the basis of concrete evidence of non-compliance by Rabobanks clients in the palm oil industry.
It its final statement the NCP stressed that financial institutions have a responsibility of their own to exercise individual leverage to seek to prevent or mitigate the impact of their business conduct, to increase their leverage on their own clients if necessary, and respond identified adverse impacts through engagement or, as last resort, divestment. The NCP further urged companies to develop their own policies towards genuine sustainable production of palm oil. The NCP also recommends that Rabobank devote more attention to transparency in its policy and procedures and encourages financial institutions in general to actively take part in due diligence initiatives in the financial sector and in the industry.
Friends of the Earth welcomes Rabobanks commitment that they will modify their current approach to handling complaints and will publish their complaints procedure. The complainants also welcome the NCP’s recommendation to Rabobank to devote more attention to being transparent with regard to engagement with its clients. However, Friends of the Earth are disappointed about the general findings of the NCP, especially since the NCP fails to acknowledge the many failures of the RSPO, the clarification on disengagement is limited and the NCP has not been able to address the underlying problem of Rabobanks continuous financing of palm oil companies.
At the end of 2017 the NCP will reconvene the parties to evaluate the agreements made between the parties and results of the NCPs recommendations.