South East Asia’s first Corporate Sustainability Bond

Third party verification by ESG consultant, Vigeo Eiris

  • A multi-tranche, long-dated sustainability bond arranged by BNP Paribas (BNPP) and issued by TLFF I Pte Ltd for RLU, a JV between Indonesia’s Barito Pacific Group and France’s Michelin Group. ADM Capital acts as facility and ESG manager for TLFF I
  • For climate smart, wildlife friendly, socially inclusive production of natural rubber in Jambi and East Kalimantan provinces in Indonesia
  • Out of a concession area of 88,000 hectares, 1.25 times the size of Singapore, 34,000 will be planted with commercial rubber, while more than half will be set aside for community livelihoods and conservation purposes
  • Includes a 9,700 ha Wildlife Conservation Area
  • At maturity, RLU will employ 16,000 locals and improve the livelihoods of 50,000 community members
  • Commercial plantations in Jambi serve as a buffer zone to protect the 143,000 ha Bukit Tigapuluh National Park, replete with important biodiversity and endangered species such as Sumatran elephants and tigers
  • Project will be monitored annually by a third-party consultant against an Environmental and Social Action Plan (“ESAP”)

The Project

Indonesia’s First Sustainable Natural Rubber Plantation

On Feb 26, 2018 the Tropical Landscapes Finance Facility (“TLFF”) announced its inaugural transaction, a landmark US$ 95MM loan to help finance a sustainable natural rubber plantation in two heavily degraded landscapes. The transaction incorporates clearly defined social and environmental objectives and safeguards.

A long-dated sustainability bond will fund PT Royal Lestari Utama (“RLU”), a joint venture between France’s Michelin Group (49%) and Indonesia’s PT Barito Pacific (51%) and Indonesia’s first sustainable natural rubber plantation.

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Of the total concession size of 88,000 ha, 70,000 sits in the Jambi province and 18,000 sits in the East Kalimantan province of Indonesia. In all, only an estimated 34,000 ha will be planted in rubber, while the rest will be left for conservation, restoration and community programs.

At maturity, the plantation will represent 10% of natural global rubber purchased by Michelin, and is designed to enhance the livelihoods of about 50,000 local people and create 16,000 fair-wage jobs.

RLU, through its plantations and smallholder programs, is targeting a higher annual rubber yield of 1.7 tons per ha, compared to Indonesia’s current 0.8. tons per ha.

Jambi
East Kalimantan

The ​70,000 ha Jambi concession​ forms part of a wider Bukit Tigapuluh (Jambi and Riau provinces) landscape of 400,000 ha, including two PT Alam Bukit Tigapuluh (“ABT”) ecosystem restoration concession blocks. Of the 400,000 ha, only 230,000 ha still contain forest cover.In Jambi, the plantation will function as an important buffer zone to stop further land speculation and encroachment in the adjacent biodiverse 143,000 ha Bukit Tigapuluh National Park (“BTPNP”), which is one of the last places in Indonesia to see Sumatran elephants, tigers and orangutans. The ecologically significant BTPNP Landscape is 400,000 hectares and will benefit from encroachment protection the plantation will provide, coming from “boots on the ground” plantation workers, smallholders and planted areas themselves.

The RLU and ABT concessions ​(~38,000 ha)​ form a contiguous and ​critical buffer to the 143,000 ha BTPNP​ from encroachers, many seeking to illegally plant oil palm and rubber to supply a wide range of mills in the wider landscape.

The ~18,045 ha East Kalimantan concession is situated across two blocks in the Nyapa Mangkalihat Mountains and Plains biogeographical region of central Borneo. The landscape had suffered severe deforestation and degradation, facing threats from illegal harvesting of timber, clearance for slash & burn agriculture, expanding human settlement and illegal development of palm oil.

USAID has provided a credit guarantee on part of the transaction, which has been rated “Aaa” by Moody’s. Vigeo Eiris, the ESG consulting firm, has confirmed that the bonds are “Sustainability Notes” with positive contribution to sustainable development and are aligned with the Sustainability Bond Guidelines.

Hadiputranto, Hadinoto & Partners provided important pro bono support in the initial stages of the Transaction.

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ESG Impact

Environmental Impact
Social Metrics
Governance
2019 Environment Highlights
628,846 tCO2e
GHG absorbed by protected forest and planted areas
Projected net emissions reduction of over
8.27million tCO2e
during 2014-2030
10,000,000
Rubber trees planted over a total area of 20,970 Ha
1,200
Native trees planted for restoration activities
7,000 +
Seedlings in nursery for restoration
28,000 ha
Protected area delineated
9,700 ha
Wildlife Conservation Area
Jambi
East Kalimantan
JAMBI
The Jambi Concessions
The Jambi concessions include a ​total area of 70,716 ha​ of which only ​28,026 (39%) ​will be used for nucleus planting on degraded land. Conservation area takes up ​26% of total area​, creating an important buffer zone around the Bukit Tigapuluh National Park (BTPNP).

Spotting of vulnerable bearded pigs (Sus barbatus) on RLU concession
BTP Landscape
The BTP landscape is home to 180 species on the IUCN Red List​, including the critically endangered Sumatran elephants, Sumatran tigers, orangutans, and various other ungulates, birds, reptiles and flora.
Patrols
RLU rangers carry out daily patrols in the concession, including the buffer zone of BTPNP to prevent illegal activities such as illegal logging and poaching.
2019
3,902 daysmany-days
166,566 km
Forest Covers
 Land unitBaseline Forest Cover (ha)*Protected Area Delineation (ha)*
Forest Cover YTD 2019 (ha)*
JambiHCV / HCS3,69613,7833,696
- Outside WCA1,2069,1501,206
- Inside WCA2,4894632,489
WCA Total2,4898,1972,489
Riparian Area Outside WCA-885-
Other-103-
Total3,69618,3363696
*rounded to nearest ha
**as per December 10, 2019 in line with the ongoing integrated HCV/HCS assessment, RLU is pursuing an additional moratorium on additional HCV/HCS area in Jambi with a total area of 3,919 ha
Wildlife Spotlight
Managing Elephant-Human Conflict
Effort to Establish Pathways for the Endangered Elephant
INTRODUCING FREDA
Freda, a female Sumatran Elephant (Elephas maxiums sumatranus), is the head of the herd of around 30 elephants. Freda’s herd is one of the five elephants herds that roams the landscape of Bukti Tigapuluh National Park. Its home range intersects with human settlements and plantation areas.
Weight
2-5
tons
Population
1,700
elephants
Home Range
275
km2
Meals & Drink pre Day
10%
of total body weight
Pregnancy Period
18-22
months
EAST KALIMANTAN
The East Kalimantan concessions
The East Kalimantan concessions include a ​total area of 18,045 of which only 5,974 ha (30%)​ will be used for nucleus planting on degraded land. Half of the concession is set aside as conservation areas, with the remainder allocated for the Community Partnership Program and the Indigenous People Program.

Caladi Batu (Meiglyptes tristis) on RLU concession
BTP Landscape

Forested areas and riparian zones within the East Kalimantan concession provide critical habitats for a range of protected and/or threatened flora and fauna.

Around ​40% of intact forest remains within the concession​ and is home to a wide range wildlife such as Bornean orangutan, sambar deer, sun bear and clouded leopard.

Patrols
RLU rangers carry out daily patrols in the concession, including the buffer zone of BTPNP to prevent illegal activities such as illegal logging and poaching.
2019
2,077 daysmany-days
81,767 km
Forest Covers
 Land unitBaseline Forest Cover (ha)*Protected Area Delineation (ha)*
Forest Cover YTD 2019 (ha)*
East KalimantanHCV / HCS7,8229,3757,822
Riparian Area

-1,802

-
Other (KPPN & DPSL)-608-
Forest Cover7,822-7,822
Total7,8229,9837,822
*rounded to nearest ha
**as per December 10, 2019 in line with the ongoing integrated HCV/HCS assessment, RLU is pursuing an additional moratorium on additional HCV/HCS area in Jambi with a total area of 3,919 ha
Wildlife Spotlight
A Journey to Save Borneo’s Orangutans

RLU partnered with Ecology and Conservation Center for Tropical Studies (Ecositrop) to conduct an orangutan and wildlife study in its East Kalimantan concession. The study surveyed ​orangutan distribution and population, assessed habitat quality and resources and recommended orangutan conservation and conflict mitigation strategy for RLU.

The study found that RLU’s East Kalimantan concession includes:

  • Good quality habitat with a density of 150 trees/ha with a basal area of 27.1m2/ha
  • Sufficient natural food resources for orangutan
  • Orangutan nests are scattered across the forest, indicating a strong presence of orangutan
RLU has the largest, highest quality, and most well-populated orangutan habitat within the High Conservation Area (HCV) of MKC. Working within the conservation area of MKC’s Industrial Forest Plantation feels like working in a National Park.
Testimony of Dr. Yaya Rayadin
(Orangutan Expert and Head of Ecositrop)
2019 Social Highlights

Beyond the direct environmental conservation and restoration efforts, this project is expected to generate positive impact for approximately 50,000 people at maturity, offering direct employment, expanded livelihood opportunities, improved welfare (housing, healthcare and education) and other multiplier effects. At plantation and remilling maturity, it is estimated that approximately 16,000 people will benefit from direct employment. An additional 3,500 smallholders are also slated to benefit from the Community Partnership Program through hands-on trainings and diversified market opportunities.

  • 333 Smallholder rubber farmers engaged in Community Partnership Program
  • 804 Farmers trained
Employee Indicator based on Gender
  • 1Male (70%)
  • 1Female (30%)
Employee Indicator based on Gender
58,000
Estimated Direct Employment at Maturity
16,000
Estimated Direct Employment at Maturity
4,320
(As of December 2019)
JAMBI
  • In 2019, the Community Partnership Program was implemented across two farmer groups in RLU’s Jambi concession.
  • A total of 33 farmers managing 124 ha were trained to sustainably improve rubber production quality and yield.
  • An Integrated Farming Program was initiated as part of the Community Partnership Program. RLU trained members of the community to utilize their own backyard to provide economic benefits through eco-friendly agriculture practices. To date, the Integrated Farming Program has been carried out in nine villages in Jambi and trained over 260 people, educating communities on the concept of food independence and kitchen independence.
  • RLU has provided access to educational services through a digital learning platform in Sungai Karang Village. To date the platform has provided access to 2,500+ digital school books, 1,000+ class videos and 17,000+ exam training modules.
Local Population
50,000
Estimated Direct
Employment at Maturity
13,200
Current Level of Employment
(As of December 2019)
3,256
Employee Indicator based on Gender
  • 1Direct employment total at Maturity(Mills + Plantation)
  • 1Current level of employment (As of December 2019)
EAST KALIMANTAN
  • A total of 300 smallholders have been involved in RLU’s supply chain in East Kalimantan, providing rubber for RLU’s mill in Samarinda.
  • The smallholders are also involved in the Rubberway Program, which aims to enhance supply chain traceability and identify risks in social, labor, safety and environment areas. The smallholders are also provided with technical capacity support on how to improve rubber quality and productivity.
  • RLU’s milling facility has received the Gold Flag/ Satisfactory Category in the Safety and Health Management System by the Ministry of Manpower of the Republic of Indonesia.
Local Population
8,000
Estimated Direct
Employment at Maturity
2,800
Current Level of Employment
(As of December 2019)
1,013
Employee Indicator based on Gender
  • 1Direct employment total at Maturity (Mills + Plantation)
  • 1Current level of employment (As of December 2019)
ENVIRONMENTAL AND SOCIAL ADVISORY BOARD (“ESAB”)

The ESAB was established to implement RLU’s sustainability strategy. The ESAB consists of key stakeholders and independent experts to provide guidance and evaluation of the progress of RLU’s Environmental Social Monitoring System (“ESMS”) ​and Environmental and Social Action Plan.

The ESAB conducts quarterly meetings and reports on ESG related matters and progress. An independently-audited ESG report is also published annually.

RLU SUSTAINABILITY POLICY
RLU’s sustainability policy is guided by both Michelin Group’s and Barito Pacific Group’s values.
RLU’S CODE OF ETHICS
Working with Diversity
Employing a minimum of 30% women and indigenous people
Environmental Stewardship
Bribery and Facilitation Payment
Respecting Safety
Representing the Company
Supplier Ethical Principles and Fair Treatment
Respecting National Laws, Regulations, and Human Rights
Minimum age of employment: 18+
(Check identification cards against school record to ensure employees are not underage)
We believe that every employee should be treated equally, fairly, and respectfully. In practice, we comply to the applicable laws and regulations as well as relevant international standards, which cover issues such as freedom of association, decent wage and working hours, non-discrimination policies, and the elimination of child and forced labor.

Awards and Recognitions

TLFF Key Performance Indicators (KPIs)

(As of Dec, 2019)

TLFF has committed to track and disclose clear environmental and social (E&S) KPIs with external consultants reviewing the ongoing implementation, compliance and the progress of the E&S aspects of the project.

Core ObjectivesOutput and Impact IndicatorsValue (as provided by RLU or source)
Forest RetentionHectares of actively managed HCV/HCS forestJambi - 2,879 ha
East Kalimantan - 8,858 ha
Improved Rural LivelihoodsNumber of smallholder rubber farmers engaged as part of the Community Partnership ProgramJambi - 33
East Kalimantan - 300
Number of smallholder households impacted by RLU’s Community Partnership Program1,655 persons
Number of farmers receiving training from RLU
804 persons
Number of farmers selling into the RLU supply chain333 persons
Number of direct jobs created
RLU permanent employees - 1,042
Daily Labour - 3,278
Total - 4,320
Salary range of direct RLU employeesAbove provincial minimum wage standard
IDR 2,423,889 - 2,893,833
Reduced Emissions
Number of trees planted
Rubber tree planted - 10,000,000
Restoration - 1,234 trees planted in conservation areas
Nursery - 7,108 seedlings
Number of fires registeredJambi - 92
East Kalimantan - 16
Number of hectares burnt (if any)Jambi - 101 ha
East Kalimantan - 42 ha
Carbon footprint
(in tCO2e)
Jambi - (860,189)
East Kalimantan - 231,343
Greenhouse gas emissions absorbed by protected forest and planted trees
(in tCO2e)
Total: 628,846
Biodiversity ProtectionNumber of conservation programmes implementedFour:
1 – Protection forest
2 – Wildlife Conservation Area
3 – Human-wildlife Conflict
4 – Wildlife Monitoring
Number of species protected in the concessions5 Critically Endangered Species:
Elephant (Elephas Maximus Sumatranus)
Tiger (Panthera Tigris Sumatrae)
Orangutan (Pongo Pygmaeus Morio)
Helmeted hornbill (Rhinoplax Vigill)
Yellow Meranti (Shorea Peltata)

4 Endangered Species:
Mitred monkey (Presbytis Melalophos)
Wild dog (Cuon Alpinus)
Otter civet (Cynogale Bennettii)
Malayan tapir (Tapirus Indicus)
Hectares of wildlife conservation areas9,700 ha
Hectares of conservation habitats protected within the concessionsJambi - 18,370 ha
East Kalimantan - 9,983 ha
Patrol coverage and reporting on illegal activity findings overtimeJambi - 107,305 km
WCA - 59,261 km
East Kalimantan - 81,767 km
(4 reports on illegal activities in Jambi to government authorities, and 5 reports in East Kalimantan)

RLU Environmental and Social Action Plan (ESAP)

RLU has established an ESAP to further address the company’s E&S commitments

The ESAP is based on the International Finance Corporation (IFC) 2012 Performance Standards (PS) on Environmental and Social Sustainability and associated Environmental Health and Safety (EHS) sector specific guidelines.

Key ESAP Items Completed to Date
  • Stakeholder Engagement Framework and Plan
  • Community Partnership Program (Smallholders In-Situ) documents
  • Water and Waste Management Plan
  • Community Development Program report of the Land Return Framework
  • WCA Management Plan
  • Indigenous Peoples Framework and Plan
  • Updated HCV/HCS integrated study (final report anticipated in 2020)
  • Participatory Social Mapping
  • Finalised version of external Grievance Mechanisms
  • Land Return Procedure
  • Employee Medical Check-up Procedure
  • Concession and WCA demarcation
  • Increased ranger patrol capacity
  • Establish and implement Grievance Mechanism policy, procedures and tools
Current Key ESAP Progress
  • Independent third party assessment on adherence of key documents with IFC Performance Standards
  • Streamline documentation process
  • Completing over 20 SOP (Standard Operating Procedures) and SOP-related training plans
  • Transport Safety and Traffic Management Plan
  • Storage plan for chemicals and class II pesticides
  • Implement annual medical check-ups for all employees
  • Community Health, Safety, and Security Program
  • Social Impact Assessment and Report
  • Field verification for boundary demarcation
  • Provide employee PPE based on Hazard Identification Risk Assessment and in accordance to job functions
  • Improve details regarding wildlife management and human-wildlife conflict management

Questions & Answers

A multi-tranche Sustainability Bond was issued in 2018 by TLFF I for PT Royal Lestari Utama (RLU), an Indonesian joint venture between France’s Michelin and Indonesia’s Barito Pacific Group to develop sustainable natural rubber plantation on heavily degraded land in two provinces in Indonesia. The project incorporates extensive social and environmental objectives and safeguards. Planted areas will serve as a buffer zone to protect a threatened national park from encroachment. The transaction represented the first corporate sustainability bond in Asia and the first sustainability bond in ASEAN. VigeoEiris, the Environmental, Social Governance (ESG) research agency, has confirmed that the Notes are “sustainability Notes” with positive contribution to sustainable development, aligned with the ICMA Sustainability Bond Guidelines. The RLU JV was established in 2015.

Michelin has made public its NDPE commitment to deliver sustainable natural rubber under a Natural Rubber Procurement Policy, established in 2016. Barito, meanwhile, Put forth its NDPE commitments under a Responsible Plantation and Forest Policy in March 2015.

Following RLU’s Landscape Protection Plan (2019) and the current land uses, a total of 18,370 ha in Jambi, including the remaining natural forest and non-forested area, has been set aside for protection. The non-forested area will be restored through enrichment planting with communities starting in 2020. For East Kalimantan, 9,983 Ha of land (comprising of mainly natural forests) will be conserved as planned.

Is it legal to plant rubber on RLU concession?
The RLU concession is an HTI concession issued by the Ministry of Environment and Forestry under Indonesian forestry law (41/199), this provides the concessionaire with a permit to use the land accordingly and in this case industrial forestry for planting rubber.

  • Establish 34,000 ha for rubber plantations and 54,000 ha for sustainable livelihood and protected areas.
  • Build a buffer zone in Jambi alongside the Bukit Tigapuluh National Park (BTPNP), including a 9,700 ha Wildlife Conservation Area adjacent to the Park to protect habitats and endangered species
  • Protect high conservation value (HCV)/high carbon stock (HCS) forest as “No-Go” zones, which covers the majority of remaining natural forest in Jambio and East Kalimantan, among other benefits
  • Support regeneration of protected areas “no-go” zones in the concessions
  • Direct over US$350 million of investment towards sustainable rubber plantation, re-milling operations and value chain
  • Improve the livelihoods of ~50,000 people living in and around the concessions through increased income and employment from the sustainable rubber industry, natural forest protection and restoration activities. This includes improved access to health, education and ecosystem services
  • Provide >2 times higher yield for rubber plantation activities over current yields and set a precedent for the financial, environmental and social benefits from sustainable natural resource management, conservation and sustainable livelihood initiatives

RLU is aiming to develop a best-in-class project for sustainable land use in its Jambi and East Kalimantan rubber concessions, which are largely degraded and encroached. This has involved identifying set-aside and conservation areas; engagement of communities under a Community Partnership Program; restoration and protection of critical habitat; and shared responsibility with other parties in the landscape, which includes the critically endangered 143,000 ha Bukit Tigapuluh National Park (BTPNP). The vision for the project was to take a troubled and degraded landscape and produce, using safeguards, programs and partnerships, a sustainable rubber supply chain of better quality and yield that integrates people and conservation.

The vision of a protected landscape is for the lifetime of the concessions, which are around 60 years but renewable. This is expected also to occur in conjunction with the extended rubber development period of around 25 years. It is only by swiftly developing the commercial rubber plantations and engaging communities, however, that the encroachment will be stalled and the HCV/HCS areas in the landscape, including the National Park, protected.

RLU recognizes that it operates in a tropical forest landscape which in its natural state provides high levels of biodiversity. The RLU Jambi concessions, however, were highly degraded before the company was established. A main feature for project partners is that the commercial plantations provide protection via a buffer zone to help safeguard the BTPNP, which risked degradation from encroachment from the southern border without the boots-on-the ground protection afforded by the plantations. Surveys have shown that the park and adjacent concessions are home to at least 51 IUCN Red List species.

According to a Daemeter and consortium E&S due diligence document undertaken in the concessions and completed in July 2017, over the last three decades, “RLU’s Jambi (LAJ, WMW) and East Kalimantan (MKC) concessions have followed the typical development pathway… Originating as natural forest selective logging estates, they have since experienced an extended phase of uncontrolled ‘open access’ and encroachment, only recently being returned under forest plantation license. While from both an ecological and social perspective the concessions are undoubtedly complex, they represent an important opportunity to practice and promote sustainable landscape development.”

The Concession conducted its activities based on the Environmental and Social Impact Assessment (ANDAL) from the Indonesian Government dated August 2009 in compliance with the prevailing Indonesian Law and Regulations.

These challenges in the landscape highlight the critical need for RLU to apply new business practices that support sustainable use of the land across all three key pillars: Social, environmental and commercial.

  • Before RLU was established, the Jambi concessions suffered severe deforestation and degradation, largely from illegal encroachment from migrants, their slash & burn practices as well as illegal development of oil palm plantations and logging.
  • When RLU took over the concessions in Jambi it took on the customary land claims staked by local communities as well as those by encroachers from outside the area, which accelerated with the building of the APP corridor road linking their plantations with mills.
  • There are acute problems in maintaining critical wildlife habitat within the Wildlife Conservation Area for elephants and other endangered species due to continued expansion by land speculators.

RLU understands the complexity of the landscape in which it is operating and has, over the last four years, been investing to establish capacity and to develop procedures to appropriately manage the environmental and social components according to IFC Performance Standards (IFC PS). Annual sustainability audits highlight the challenging historical context of encroachment and illegal logging in the landscape that RLU has been working to address, and document the pathways to building an integrated rubber project that delivers “win-win” outcomes for the company, communities and biodiversity.

The landscape within the Concession area is challenging, with severe deforestation and degradation from illegal encroachment, slash & burn practices & illegal development of oil palm plantation and illegal logging over many years prior to the creation of RLU. That meant when LAJ (now an RLU subsidiary in Jambi) received a concession in 2010, it did so with significant historical challenges. 

On May 15, 2018, RLU and BTPNP signed a Cooperation Agreement before the Directorate General of Natural Resources and Ecosystem Conservation (Dirjen KSDAE) at the Indonesian Ministry of Environment and Forestry Office. The 3-year agreement is expected to improve existing protection efforts through more intensive joint patrols and team capacity building through experience and expertise sharing between BTPNP rangers and LAJ officers. The scope of partnerships includes protection of the buffer zone between BTPNP
and LAJ concession, biodiversity conservation, ecosystem restoration and community empowerment.

RLU has started on-concession satellite monitoring in 2020 to systematically track any forest cover changes.

RLU manages a specific conservation team including rangers who are responsible for protecting and monitoring the High Conservation Value (HCV) and High Carbon Stock (HCS) areas in its concession. In its Jambi concession, up to 25% of its total area is designated HCV and HCS. Meanwhile, in its East Kalimantan concession, the number exceeds 50%. The well-trained rangers carry out daily patrols in the concession, including the buffer zone of Bukit Tigapuluh National Park (BTPNP) to prevent illegal activities such as illegal logging and poaching. As of end of 2019, a total of 248,333km were patrolled over 5,979 man-days.

RLU is committed to proactively mitigating forest and land fires by establishing an Emergency Preparedness and Response Team (TPKD) in its concessions and providing them with proper fire prevention equipment. The team regularly monitors ground condition and conducts early fire detection. Hotspot monitoring is also regularly carried out. Capacity building and training programs have been conducted in partnership with Manggala Agni Task Force and the Ministry of Environment and Forestry of the Republic of Indonesia.

The Biodiversity Management Plan was drafted to provide the overall context of topography and habitat on the RLU concessions; identify habitat goals for endangered target species and guide the conservation and management of ecological communities; outline actions and measures necessary for the effective biodiversity management in the protected areas of RLU’s concessions; address management limitations such as capacity challenges and knowledge gaps; and establish a foundation for evaluating the effectiveness of habitat management. It is currently under review by an independent third-party for alignment with international standards and, once approved, a progress report based on the plan will be produced every 2 years.

The WCA is a ±9,700ha set aside zone adjacent to the BTP National Park established to allow for the transit of animals from the protected areas through the concessions. It includes previously identified HCV- HCS areas and written off rubber planted area for natural regeneration as well as ±1,200 rubber production area that had been previously planted. It is also the area where the majority of Indigenous Peoples in the concessions are residing.

A decision to create the WCA area was made following WWF’s recommendation on efforts to support conservation of Sumatran elephants in Bukit Tigapuluh Landscape. The establishment of the WCA also aims to align with the government program Ecosystem Essential Area (KEE), initiated by Natural Resources Agency (BKSDA) of Jambi Province, for an elephant corridor in Bukit Tigapuluh National Park.

In the WCA, RLU focuses on the following outputs:

  • Protecting the remaining forest through SMART-based patrols and stakeholder partnerships.
  • Regaining control through Community-based Framework Agreement.
  • Operating the WCA Management Unit to mitigate human-elephant conflict.
  • In order to achieve the long-term objectives, RLU, along with a number of stakeholders and communities, agreed to build a home range for the endangered elephant species while also providing alternative livelihood for members of the community.

RLU has committed to manage its rubber plantations in Jambi and East Kalimantan towards compliance with IFC Performance Standards. These are covered by the company’s Environmental and Social Monitoring System (ESMS), which includes an Environmental and Social Action Plan (ESAP) created in collaboration with TLFF and then with active participation from notes purchaser, &Green Fund. Performance against the ESAP and a Landscape Protection Plan are audited and reported upon annually and as part of the company’s transparency to its stakeholders. The results are made available on RLU, TLFF and &Green Fund websites.

Besides working with national, international and local stakeholders, experts and consultants have been appointed to support the company through work with indigenous people groups in the concessions, to build the Community Partnership Program, to provide carbon assessments and environmental studies of the concessions. Project partners are fully committed to helping RLU towards compliance with its obligations under IFC PS.

In 2019, a comprehensive study was conducted by independent experts from Rimba Bungaron Indonesia (RBI), which found three indigenous Orang Rimba (Suku Anak Dalam) groups residing within the WCA. An Indigenous Peoples Engagement Framework and Community-based Framework Action Plan is currently under review by an independent third-party for alignment with IFC PS.

227 community and stakeholder dialogues have been facilitated as part of an ongoing discussion forum between RLU and the 23 communities in and around the concessions.

A comprehensive grievance procedure has been established as part of the company’s commitment to transparency and improving social inclusion. A grievance management facilitator is hired to be in charge of grievance submission and verification while the grievance committee, led by the publics affair general manager and consisting of legal general managers, sustainability general managers, government relations general managers and communication specialists, is in charge of coming up with action plans and developing resolution recommendations.

This procedure has been socialized internally with the employees and is currently under review by an independent third-party reviewer. It has also been socialized externally to 227 community members through 11 formal forums and 61 informal forums. So far, resolution rate is 100% with 11 grievances received and all verified and processed with documented agreements.

As part of RLU’s commitment towards providing safe and decent working environment to its employees, RLU has developed an infrastructure improvement master plan as one of its major programs in 2019 and 2020. The master plan includes improvement in employees’ residential area and supporting facilities such as roads, Water Sanitation and Hygiene (WASH), waste management, and other employee facilities. To date, 146 units of housing and supporting facilities, 2 clinic units and 1 medical room have been built.

As of end of 2019, 4,320 people are employed across the concessions and in the East Kalimantan re-milling facility, of which 30.28% are women.

IFC’s Performance Standard 5 Land Acquisition and Involuntary Resettlement (PS5) requires that people affected by involuntary land acquisition should: 1. Receive replacement value for their assets. 2. Be presented with alternatives. 3. Have their livelihood restored or improved. 4. Have access to a grievance mechanism. A DEG guidance document on Legacy Land issues recognizes that, “Given the nature of Legacy Land issues, meeting the first requirement would be a very rare circumstance. PS 5 would not actually have required compensation for land where the users did not hold legal title or a customary title recognised under national law. What this guidance seeks to achieve is meeting the second to fourth requirements, with the modification that livelihood should be improved, not just restored. Achieving improvement is both the risk mitigation measure for the company and the desired outcome for the community. The second principle should be met through the stakeholder engagement process that could result in a multi-year community development programme. Finally, in putting in place an effective grievance mechanism, the project may also meet the UN Guiding Principles on Business and Human Rights.”

RLU and YBB, in collaboration with Reach Out Foundation (ROF), conducted an Early Childhood Teacher Workshop in September 2019. The workshop was attended by 60 participants, 25% of whom have a Bachelor’s degree while 75% were high school graduates who work in rubber plantations. The workshop aimed to enhance the competency of participants to become professional Early Childhood Education (PAUD) teachers.

Tunas Lestari is part of Royal Lestari Utama’s commitment to provide better quality early childhood education in its operational areas. Currently, RLU, through Berdaya Lestari Utama Foundation (YBLU), YBB, and ROF has constructed 3 Daycares (TPA) and 3 Early Childhood Education (PAUD) facilities in its operational areas. PAUD establishment in RLU’s operational areas is expected to provide children with proper education for a more competitive future generation.

In Sungai Karang Village, 500+ digital schoolbooks, 1,000+ class videos, 17,000+ exam training modules and 150+ educational literatures are provided for local children.

  • Land dispute identification.
  • Design of appropriate strategy to solve land disputes.
  • Prevent new encroachment or illegal activities within the territory of RLU.
  • Negotiate land disputes through win-win solutions.
  • Resolve recorded complaints and conflicts through a transparent and consultative process following Program Guidelines on FPIC.
  • Resolve large lands claims through the courts, letting the legal process determine the outcome.

There is a clear no-conflict policy by RLU as guidelines in handling the stakeholder engagement process for land return, with any grievances being elevated through a clear grievance process and where necessary, be managed through the courts for larger plots of land that are disputed. As outlined in RLU’s CSR Report 2015-2017, beyond the approaches regarding social conflicts are:

  • To document a clear identification of those involved in potential conflicts linked to land claims and land disputes within RLU’s territory.
  • To encourage complaint solving through an informative and acknowledged process.
  • To identify and implement effective mitigation or response measures.

In East Kalimantan, a total of 300 smallholders have been involved in RLU’s supply chain. They provide rubber for RLU’s mill managed by PT Multi Kusuma Cemerlang (MKC), the first and only rubber mill in Samarinda. The smallholders via agents are also involved in the Rubberway Program which aims to identify risks in social, labor, safety and environment. An initiative sponsored by Michelin, the Rubberway Program started in 2019 and plays an important role in MKC’s supply chain. The smallholders are also provided with technical capacity support on how to improve rubber quality and productivity.

In Jambi, the CPP Smallholders In-situ is a long-term program that was developed as one of the social inclusion efforts to empower communities in and around the forest by providing access to manage land in forest areas that have been burdened with permits. It is also one of the conflict resolution approaches to forest resources that occurs between permit holders and communities that have used the forest area. As of end of 2019, the smallholder in-situ program occupied 124 ha in Jambi. In 2020, RLU began to conduct a baseline socio-economic study, with plans to expand the program to 4 villages, 150 farmers, and 400 ha by 2021. The goal is that the CPP should eventually cover over 7,000 ha.

RLU’s vision for a CPP is a social-economic inclusion program that generates benefits to both employees and surrounding communities while addressing environmental issues.

RLU’s policy on community partnership is guided by four objectives:
A. Generate a “social licence to operate” and community consensus on RLU activities.
B. Create positive impact from RLU activities in the area and build a mutually beneficial relationship between RLU and the neighbouring communities.
C. Resolve land claim issues.
D. Provide alternative economic opportunities to reduce illegal logging, encroachment and hunting.

RLU has worked with the local government in Tebo to establish a multi-stakeholder, independent task force comprised of provincial and district government representatives, NGOs, and research institutions. The purpose is to help settle any disputes relative to the concessions or land claims. The CRTF has also facilitated the distribution of Personal Identification Card (e-KTP) for the Orang Rimba indigenous group.

Also in Jambi, the Integrated Farming Program (IFP) is part of the CPP in-situ program, with 256 beneficiaries as of end of 2019. The IFP was established in partnership with Bakti Barito Foundation (YBB) and Joglo Tani, a Yogyakarta-based agricultural learning center and Indonesia’s leading integrated farming organization. Initiated in 2018, the Integrated Farming Program applies the concept of Sustainable Food House Area (KRPL) to provide alternative livelihood opportunities and strengthen the food security of the community. By optimizing the unproductive area, the community can save on expenses often spent on vegetables and fruits. The community can also sell the fruits and vegetables from their own backyard in the market.

Annual sustainability audits, progress towards ESAP and TLFF KPIs, as well as the latest environmental and social updates can be found on our website here.