Asia Pacific Resources International Holdings Ltd. has long been a pariah to environmental groups for clear-cutting trees in a tropical rainforest here. Friends of the Earth accused it of destroying tracts of "the most biodiverse lowland forest on the planet." Even one of the company's consultants has said it misled environmentalists about its logging practices.
Now, after years of quiet negotiations, the Singapore company is on the verge of signing a landmark agreement with one of its antagonists, WWF, known in the U.S. as World Wildlife Fund. WWF says the deal would preserve one of the last large stands of natural forest on the big Indonesian island of Sumatra, an expanse that has been compared to the Amazon for its richness of species.
The Sumatran rainforest once was a vast canopy of exotic hardwood trees, home to tigers, elephants, tapirs, gibbons and myriad kinds of orchids and tropical flora. Over 20 years, more than half of this vibrant jungle has been cut down, a lot of it illegally by organized gangs, who sell the wood to paper companies and local sawmills.
The accord between WWF and Asia Pacific Resources International, known as April, would greatly expand a recently designated national park within the rainforest and commit April to preserving ecologically sensitive forest in future logging. For the company, it might pave the way for future sales to Western companies, including Procter & Gamble Co., that have been shunning it under pressure from environmentalists. The agreement could be announced within weeks.
April's turnabout shows the growing power of international activist groups and how companies increasingly are dealing with them to protect their access to global customers. In recent years, more multinational corporations have shifted from warring with environmentalist groups to negotiating agreements with them. Coca-Cola Co. began working with Greenpeace in 2000 to stop using certain chemicals in its refrigeration equipment. Unilever PLC has worked with the group on the same issue. Home Depot Inc. in 2003 joined with activists seeking to protect forests in Chile.
Such arrangements let companies protect their reputations, while environmental groups can highlight the agreements in fund raising. Deals like these sometimes are key to global expansion, giving companies entree to customers that also are concerned with how they are regarded by activist environmental groups.
The agreements, however, draw flak from both sides. Many activists see them as sellouts that let companies off the hook in return for minor concessions. "We're very wary of companies using us to 'greenwash' their reputation and getting bogged down in negotiations," says Ed Matthew, corporate accountability campaigner for the British affiliate of Friends of the Earth. Free-market advocates, for their part, often see the deals as cave-ins. "We're basically allowing private, nongovernmental organizations, activist groups, to become private regulators," says Nick Nichols, a former crisis-management consultant who lectures at Johns Hopkins University in Baltimore.
Some April executives initially were aghast at the idea of negotiating with activists. April's president, A.J. Devanesan, says, "My own people told me, 'Transparency is good, but don't be the first naked guy on the beach.' There was skepticism, and there was cynicism." Jonathan Wootliff, a consultant to April and former Greenpeace communications director, says April executives "thought [activists] just all were extortionists."
April is a closely held concern with about $1 billion in annual revenue, serving mostly Asian customers but seeking to expand globally. It sold 20,000 tons of pulp in North America last year. Most of its operations are in Sumatra's Riau Province, where it employs 4,200 people, many living in a remote company town.
The lowest-paid earn about $150 a month, twice what many local villagers earn from farming or fishing. The company town overlooks a giant mill that April opened in 1995, at a cost of nearly $4 billion. The mill runs nonstop, turning out giant rolls of copying paper and millions of tons of wafer-thin white pulp.
April has rights from Indonesia's government to cut trees on 1,274 square miles. Including some other land logged in joint ventures, April so far has replaced nearly 1,000 square miles of mostly hardwood forest with plantations of fast-growing acacia trees that are ready to cut in six years. In the process, native habitat is lost forever. "We don't know what we are losing," says Christian Cossalter, of the Center for International Forestry Research in Jakarta. "It might be these biodiverse systems contain some molecules for miracle" drugs.
The focus of WWF's engagement with April is Sumatra's Tesso Nilo rainforest, a tract that WWF says has the highest density of diverse plant species ever recorded in a tropical forest. It also is home to about 80 endangered Sumatran elephants and 10 tigers. Years of logging have reduced Tesso Nilo to 500 square miles. In 2000, WWF began a campaign that eventually got more than a quarter of what remains declared a national park. That same year the group began talks with April, which had logging rights to large sections of Tesso Nilo.
At a conference in Virginia last year, Mr. Wootliff, the consultant to April, displayed a slide taken several years ago showing a bulldozer in an April tract where only a handful of original trees were left. "I can assure you it was not being done in the right way at all," he said, adding that April had been "lying" to nongovernmental organizations, or NGOs, "for years." A spokeswoman for April denies any lies were told.
A helicopter tour shows how April previously complied with an Indonesian law requiring that 20% of natural forests be preserved in logging. April would clear-cut huge swaths, leaving only long ribbons of original trees, providing insufficient habitat for wildlife. April says it complied with Indonesian law.
WWF had been talking with April managers for only a few months when, in mid-2001, it learned the company was clear-cutting in Tesso Nilo, which April doesn't dispute. "We were very angry," says Nazir Foead, director of policy and corporate engagement for WWF in Indonesia. The initial talks fell apart and Swiss-based WWF and its allies began meeting with overseas customers of April, urging them to pressure it to change. Mr. Wootliff says he later attended meetings in Europe with customers who said, "We can't buy from you."
Mr. Wootliff, an independent consultant who was then at the Edelman public-relations firm, told April its reputation with environmentalist groups was poor and advised it which groups were sufficiently corporate-friendly to engage. He said one was WWF, which doesn't oppose all logging, accepts corporate donations and is active in Indonesia. In December 2001, Mr. Wootliff set up a London meeting between a WWF official and April's Mr. Devanesan, who had recently been named the company's president.
In a follow-up meeting in Jakarta, Mr. Devanesan found WWF officials "quite angry." They challenged the legality of April's clear-cutting at Tesso Nilo and asked it to stop. Mr. Foead says WWF contacted CNN and suggested the news network do a piece on April and Tesso Nilo. Soon after, a CNN crew arrived.
The same month, February 2002, the British affiliate of Friends of the Earth released a report highly critical of April and called for a European boycott of its products. April says the boycott didn't hurt its market share but acknowledges it had to sell some pulp at a discount and defend itself to customers. "We needed to do a lot of work to sort of counter the NGO perceptions in the global market," says an April executive, Jouko Virta.
Mr. Foead says that three days after CNN's news crew left Indonesia, and with its report still weeks from airing, April invited him to a meeting with a team of executives. To his surprise, they promised to stop logging at all inside Tesso Nilo and stop building a second road through it. At a later meeting, April agreed to stop buying wood from other suppliers, to discourage illegal logging.
Ibrahim Hasan, an April director who took part in the discussions, says that while CNN's visit didn't prompt the company to change its position, that visit and all the criticism had "an impact." Mr. Wootliff says Mr. Devanesan suggested the new policy and saw it as an opportunity to send a friendly signal to the NGO community.
April also decided to bar other loggers from using its private ferry on a river near the forest. That didn't go over well with locals, many of whom see illegal logging as an economic necessity. Sukidi, a 41-year-old former illegal logger who uses a single name, says he used to earn $10 a day, triple what he can make fishing. He says he knew cutting the rainforest had an environmental impact, "but this was for my stomach. I have children." He says he quit for a variety of reasons, including fear of arrest.
On Sept. 29, 2002, a mob attacked April's security guards at the ferry-crossing post and set it afire. The guards tried to flee, but the mob caught two and clubbed them to death, dumping their bodies in the river. Even so, the company didn't back off. WWF's Mr. Foead says, "I have to give April credit. Even after the riot, they enforced that policy."
April submitted to audits of its timber purchases, which showed the wood was mainly from authorized sources. The company agreed with WWF and local officials to set up checkpoints and conduct joint April-WWF patrols to combat illegal logging in Tesso Nilo. Mr. Foead says until recently the effort had had only limited success, and his group is partly to blame. "We failed to push the government hard enough to send their rangers" to make arrests, he says.
In mid-2003, WWF signed an agreement with a larger rival of April, Asia Pulp & Paper Co., in which APP agreed not to log the most ecologically sensitive areas and to verify the legality of timber purchases. That deal fell apart at the end of its initial six-month term, when the parties couldn't agree on how much terrain it covered and who would decide which areas were sensitive. WWF then called on customers of APP to pressure it to stop clear-cutting. One, Office Depot Inc., later said it would stop buying from APP because the cutting of "Sumatra's rare and vulnerable natural forests and the resulting negative effects on endangered species."
An APP official declines to discuss the breakup with WWF. The company has since agreed to set aside more than 460 square miles of forest under an agreement with another environmental group, the Rainforest Alliance, of New York, says Aida A.P. Greenbury, APP general manager for sustainability and stakeholder engagement. She says APP will consider preserving similar tracts "when it's relevant."
April went further, promising last year that it would preserve "high-conservation-value land" in all its future Indonesian logging. "They delivered," Mr. Foead says.
April and WWF also began negotiating the agreement they say is now close to final. It would more than double the size of Tesso Nilo national park, to 386 square miles. April would give up its logging rights in the area and pledge to persuade some other permit holders to do so as well.
As an incentive, the other holders would be offered a share of profits from logging a ring of trees around the park, which would be replanted with acacia. WWF believes the ring of acacia will block illegal logging routes and tend to keep elephants inside Tesso Nilo.
April and WWF say the Indonesian government supports the deal. Efforts to reach forestry officials involved in the discussions were unsuccessful.
Both April and WWF held talks with Procter & Gamble, the producer of Charmin toilet paper and Bounty paper towels, which is considering buying pulp from April for a new line. Mr. Foead says P&G "needed WWF to ensure that they're not attacked by NGOs." A P&G executive confirms his account. To make sure it isn't buying illegally harvested pulp, "we decided that before we would even consider going into an area like that...we would want the support of NGOs behind us," says Celeste Kuta, an executive of P&G's family-care business. She adds that the company hasn't made a commitment to buy from April.
The April-WWF deal still faces hurdles, such as the side agreements to be worked out with smaller holders of rainforest logging permits. And not all the other activist groups here like the deal. It means April can keep turning natural forest into plantations elsewhere in the island, complains Elfian Effendi, executive director of Greenomics, an Indonesian group: "If they want to change their attitude, why don't they end their use of natural forest 100%?" He vows to campaign against the pact if it is signed.
The company says it plans to continue seeking Indonesian permission to convert more forest to tree plantations. But it says its giant mill will run solely on plantation-grown wood by 2009 and it won't cut trees in any sensitive areas.
Two WWF staffers met last month with about 50 villagers who were angry about the blocking of a road used by illegal loggers in Tesso Nilo, a closure resulting from April's talks with WWF. According to WWF officials, the meeting turned violent, with villagers throwing a chair and pursuing WWF staffers back to their base camp, where they threatened to burn the outpost and kill the staffers. The police had to be called in.The Wall Street Journal
