Prepared By:

Amar Bikash Sahani

James Biplab Salim
Kalpit Kaya Mohanty
Raunak Roy

UR14005
UR14016
UR14017
UR14029

Class: MBA-RM(II)
Section: A

TERM PAPER ON ORANGUTAN HABITAT LOSS DUE TO NESTLES PALM

OIL EXTRACTION IN INDONESIAN RAINFORESTS

Submitted To:
Prof. Satyendra Nath Mishra
Xavier School of Rural Management
Xavier University Bhubaneswar

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TABLE OF CONTENTS

1.) BACKGROUND DESCRIPTION

1.1) PALM OIL PLANTATIONS IN INDONESIA
1.2) GRADUAL LOSS OF ORANGUTAN HABITAT OVER THE YEARS
1.3) NESTLES ACTS
2.) EXAMINING NESTLE AND ITS PALM OIL SUPPLIERS
3.) ISSUE OF CONSERVATION:TIME RUNNING OUT FOR
SUMATRAS RAINFOREST
4.) MAPPING KEY ACTORS
5.) ROLE OF GREENPEACE AND IMPACT OF ITS EXTENSIVE
ACTIVITIES
6.) DAMAGE CONTROL
7.)

HOPE FOR A LONGER

CONCLUSION

LIFE:

CURRENT

SCENARIO

AND

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1.) BACKGROUND DESCRIPTION

1.1) PALM OIL PLANTATIONS IN INDONESIA
Palm oil today is a ubiquitous forest commodity holding immense commercial value. It is
incidentally the cheapest oil in the world with India, U.K and E.U being the top
consumers. It flourishes where heat and regular rainfall combine and hence southeast
Asia. Each decade since 19801, palm oil productions has doubled specially in Indonesia
In the forests of Borneo and Sumatra are the Indonesian rainforests that give shelter to the
now critically endangered orangutans. Keen to cash in on naturally available opportunity,
plantation owners have been chopping off or setting fire to the existing vegetation.
As forests get cleared, it leads to orangutans desperately seeking food and are starved.
They are considered to be an agricultural pest. United Nations Environment
Program(UNEP)2 held that the palm oil spread across 30000 sq kms was one of the
greatest threat to the Indonesian and Malaysian forests.
The demand for Palm Oil are pushing the companies to do leveling of rainforests to make
ways for Palm oil plantations. Deforestation being actually responsible for 1/5 th of the
total carbon emissions, it has put Indonesia in a much critical position due to drastic
deforestations.
Orangutans, which is a keystone species 3 played a vital role in the regeneration of forest.
Sumatran Orangutans which had been classified as Critically Endangered by IUCN,
the conversation of the species became a major concern and the major threat to the
species was the loss of their habitat which resulted due to the devastation of rainforests in
Indonesia and Malaysia. This led to the drastic decline in wild Orangutan population
from almost 12000 in 1994 to 6500 in 2008. The construction of road networks had
immensely fragmented the rest existing population of Orangutans and this conflict
between humans and Orangutan forced them to leave the devastated forests in search of
shelter and food and experts claimed they could soon be extinct.

1. Nestle Drops Indonesias Sinar Mas as Palm Oil Supplier, www. Palmoilhq.com,
March 18, 2010.
2. UNEP coordinates environmental activities and promotion of environementally
sound policies and practices in developing countries.
3. A keystone species is one that a has a disproportionate effect on its environment
relative to its biomass.

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1.2) GRADUAL LOSS OF HABITAT OVER THE YEARS:

As the above figure indicates the orangutans have lost close to 80% of their habitat in the
last 20 years or so4. At this rate many experts estimate and that to a conservative one that
the species could be extinct in less than 25 years. A decade ago their number was about
60000 and now they are only 40000 of them in the forests of Borneo and Sumatra.
4. Jennifer Macey, Nestle Defends its Use of Palm Oil at AGM www. abc.net.au,
April 16, 2010.
Prime reasons for their steep disappearance are the following:
Deforestation
Illegal hunting
Illegal pet trade
Palm oil plantations
Each palm plantation that destroys thousands of hectares takes with it the lives of
innumerable orangutans at the cost of massive profits to Nestle and other leading
companies like Unilever, Cargill and the like.
Orangutans survive only in the tropical rainforests of Sumatra and northern Borneo,
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being dependent on forest for food and nesting sites.

Their population gets seriously affected when their homes are logged off not in the least
because they are rampantly killed for meat and new crops. For instance, in Sebangau
swamp forests, many orangutans fled from illegal logging operations by leading
consumer giants and other purposes and moved to less ideal habitat. This resulting
overcrowding lead to a marginal increase in their death rates and fewer births. They
returned only after the forests started to regenerate. When forests are converted, the
results pose to be more serious because many orangutans go on starving.This comes
against the backdrop of the Sumatran orangutan being classified as Critically Endangered
bi IUCN which indicates that it has an extremely high risk of extinction in the near
future. Hence, there is indeed an urgent need for conservation action on both islands
because even with certain protected areas they are under pressure.
The aim hence is to reduce corporate intervention and retain viable populations of both
Major orangutan species and
Three Borneo sub species
in their natural habitats where they exist and by that conserving their genetic, cultural and
ecological diversity.
1.3) NESTLES ACTS:

NESTLE

Suppliers
( Sinar Mas
group)

Expand into
virgin rain forests
in Sumatra and
Borneo and
carbon rich
peatlands

a.)A recent report suggests Nestle is firstly sourcing palm oil from suppliers for
confectionery products like Coffeemate, Kitkat, Crunch and Powerbar and secondly as a
result pushing the already endangered orangutans to the brink of extinction and
accelerating climate change.
b.)Nestle, a leading consumer of palm oil, has doubled its palm oil usage over the last
three years with close to 320,000 tons of palm oil going into some of its most popular
brands.
c.)Greenpeace and other social and environmental activists efforts to bring down
Nestles deforestation has been futile. It was accused of not complying to its
commitments as a member of the Round Table on Sustainable Palm Oil(RTSPO), an
industry body that attempts to make the use of palm oil more sustainable.
d.)All this has stopped other leading companies like Kraft Foods, Unilever to cancel their
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contracts with suppliers but not Nestle as its suppliers continued with rainforest and peat
land destruction.
2.) EXAMINING NESTLE AND ITS SUPPLIERS UNABATED ACTION:
Wildlife campaigners blame Nestles extensive and irresponsible clearing acts for the
habitat loss. Regulatory acts are not helping much either. By law, manufacturers and
suppliers are to mention the amount of peanut, sesame oils and soya bean under food
allergy regulations.
Adding to that, todays consumers are largely uninformed regarding what is in their food
products and the environmental impact created by that activity of extraction, processing
and subsequent manufacturing.
High Utility Product: High in saturated fats, palm oil has a long shelf life and is used in
most super market products including detergent, shampoo, lipstick and paint. Its usage is
also prominent in commercial frying owing to its crisping and non taint producing
qualities. Hence it is quite untempting for Nestle to let go of this product and the
rainforests of Indonesia and Malaysia being the chief repositories are mindlessly
exploited.
FACTOR

IMPACT

No stringent regulatory act for palm oil Manufacturers not mandated to report palm
extraction
oil use, excess depletion causing forest
destruction

Unaware consumers and in some cases Fueling the activity of the Nestles
suppliers
suppliers without restraint when other
companies boycotted palm oil usage to
save orangutans, restricts their ability to
affect the marketplace in a positive way
through purchasing power

High commercial value

Longer shelf life makes it indispensable to

Nestles top brands

The bottom line is the producers, manufacturers and suppliers are not being held
accountable and hence they are able to get away with their unabated acts.

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According to a Greenpeace report in published in 2008, Sinar Mas is the largest producer
of palm oil in Indonesia and it supplies to many companies worldwide. By doing this
Sinar Mas is breaking Indonesian law by clearing the protected forests for the purpose of
palm oil plantations.
3.)ISSUE OF CONSERVATION:
RAINFORESTS

TIME

RUNNING

OUT FOR

THE

Wildlife experts perspective:

The view of the zoologists is interesting because they believe that cleaning up forests is
not anything new but the rate at which palm is becoming a choice is the real threat.
Sumatran orangutans are considered to be the first great ape to go extinct due to the loss
of their natural habitat. Already 80% of the forests are gone and what is left is disappearin
at an alarming rate. According to zoologists these are severe crisis signals.
DO BIG MNCS REALISE THE GRAVITY OF THE SITUATION??
Since this is a highly escalated matter, a lot of consumer companies dependent on palm
oil do acknowledge the habitat loss and subsequent extinction. It has been brought to
attention by:

Wildlife enthusists
Zoologists
Native tribes
Wildlife and animal organisations like Greenpeace, WWF and the like
Social Media

The expansion of palm oil plantations across Borneo and northern Sumatra involved
logging of millions of hectares of forests even under protected areas. The building of road
and other infrastructural networks had fragmented the habitat of the remaining orangutan
population.
Orangutans- a keystone species: A keystone species is one that has a disproportionate
effect on its environment relative to its biomass. They play an important role in forest
regeneration. Historically, they were protected by legislation that prohibited their being
owned, killed or captured in any way. This is the Indonesian law in this regard that should
ideally be stopping suppliers like Sinar Mas from illegally felling trees, but it does not
and this is what is evoking response from activist organisations like Greenpeace to isolate
its services.
From a third partys point of view the entire debate may central around the idea that
decisions about buying palm oil are purely a matter of cost i.e a comparison of the price
of oil from a sustainable source with that of buying the material from somewhere else.
This forms the basic crux of business, to procure at optimal rates from strategic locations
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and push it into your supply chain. Nestle, forcibly, made it a part of its supply chain and
faced its consequences when it did not fit with the external environment, in this case loss
of habitat for an endangered species. And then there is the added dimension of political
pressure rising and the financial calculus changing accordingly.
The problem however at the core of it is that there is no second chance. To what extent
the multiple actors play a role and how how strong or weak their measures in the final
impact are shall be examined later in the paper with the help of a key actors map.
4.) MAPPING KEY ACTORS :
ACTOR
1.)Multinational
company(Nestle)

2.)Subsidiary companies
and suppliers(Sinar Mas,
Wilmar)
3.) RSPO( Round Table on
Sustainable palm oil)

4.)Malaysian law
enforcement bodies

5.) Politicians and

bureaucrats
6) Consumers

7)Environmental
organizations (Greenpeace
in this case)

ROLE

DEGREE
OF
INFLUENCE IN THE
CASE
Exploit natural resources to Very
High-Prime
their own good by making antagonist
use
of
temporary
subsidiaries and multiple
networks
Make use of local contacts High- as they form the
and security firms in operations arm of the
Indonesia to maximise their company
profits
Certifying body consisting ModerateWrong
of trade body of producers certification in this case
and buyers with its prime lead to relentless logging of
role to certify if any logging orangutan habitats
act poses a threat to high
conservation value forests
To make laws relating to the Moderate-High
indefinite felling of trees
but government bodies get
involved in bribery and
exclusive
contracts
supporting parties in which
they have a vested interest
Use corruption and local Low
officials to bend laws
Be aware of ingredients in Low-Moderate
food confectionaries and
avoid using products that
endanger certain species
Active protests on streets Very High-Protagonist
and social media to make
consumers and other actors
involved in order to escalate
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the
case
to
prime
importance
The forestry sector in Indonesia consists of a number of actors ranging from mill
operators to wood manufacturers. Most of these logging companies that operate in
Borneo and Sumatra are subsidiaries or contractors of giant multinational companies like
HUL, Nestle etc. While these contractors and suppliers might be home owned, foreign
investors play a substantial role in the industry.
The timber or processed wood might be smuggled as if produced under legal sanction
with local politicians and bureaucrats acting as the catalyst. They change ownership
multiple times during transit.
Worse still, there exists no certification mechanism to identify sustainably produced palm
oil.The RSPO set up in 2006 was a step to link the
commercial sector together with conservationists, civil society groups, government and
other stakeholders. It has devised several criteria for sustainable palm oil and a broad
code of conduct for the members but the legal and illegal reach of palm oil plantations
and development of refineries and biofuels continue.
RSPO: Struggled to create effective action?
Quite clearly, when it came to setting standards for greenhouse gas emissions that are
associated with palm oil plantations, it failed on a big scale. With critics in and around the
world rechristening it Really Slow Progress Overall, it has earned much disrepute .Its
purpose of creation was to prod industry workers into usingsustainable palm oil that is
not having involved any kind of destruction of areas of high conservation value according
to the Indonesian law. But the supply of certified oil has grown albeit slowly. This can be
because producers have to push themselves into certifying a certain portion of their yield
or crop as sustainable.
Greenpeace activists initially took to streets on April 21 st, 2008 singling out Sinar Mas as
the worst offender accusing it of illegally producing palm oil through unscrupulous
channels of both government and local networks in network by exclusive contracts. This
move was called one sided by close industry observers who felt that the environmental
organisation had turned palm oil into a commercial liability for various
companies(Nestle, HUL). Therefore, two agencies were appointed namely Control Union
Certification and BSI Group to review the allegations. The agencies surprisingly cleared
Sinar Mas of the charges of destroying primary forests and killing orangutan habitat.
This leads to Greenpeace launching another investigation by Aidenvironment that found
Sinar Mas to be worse off by destroying primary rainforests and peatlands. On the back
of this success, Greenpeace launched the tremendously successful social media campaign
to totally decimate Nestles acts and bring its activities to a halt. We shall examine its
campaign in detail at a later phase in the report.

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The tactic was simple basically intended to draw the attention of the actors at the
international level. It was also effective largely.
COMPANIES CHANGING BUYING POLICIES IN RESPONSE?
These attacks by environmental organisations are proving to be potent. Such matters are
seemingly difficult on the part of palm oil buyers to ignore even though it comprises 4%
of the global total. Unilever being the biggest buyer and Nestle coming in a close second.
But these are not all as a hoard of companies like Kraft, General Mills, Cargill have also
come under scanner.
Companies are now changing their buying policies and paying heed to more distant
reaches of their supply chain web. As said, companies environmental policies and
responsibilities have never been more public. The orangutans meanwhile can heave a
sigh of relief.
NESTLE VS UNILEVER: UNILEVER CHOOSING THE ENVIRONMENTALLY
CORRECT STRATEGY
UNILEVER Major palm oil user committed to
using only palm oil certified as
being from sustainable sources
By December 2009, Greenpeace
had pushed Unilever into further
action making fresh allegations
that SMART, a palm oil producer
along with Sinar Mas were
involved in illegal clearance of
peat land
Unilever, in response, suspended
any further purchases from
SMART
Did not engage in any verbal social
media spat despite being attacked
RESULT: IMAGE DID NOT
TAKE A BEATING

NESTLE Smallish buyer as well as a

member of RSPO
Weak spots were that it was unsure
of its extraction policy regarding
palm oil and insufficient
knowledge of its supply chain
whereas in other areas it took pride
in its relationship with raw
materials growers
Did not suspend relationship with
suppliers involved in illegal
logging of rainforests and
orangutan habitat despite wake up
calls and protests.
Engaged in online verbal duel with
activist organisations under
pressure
RESULT: IMAGE TARNISHED
TEMPORAILY

5.) ROLE OF GREENPEACE AND IMPACT OF ITS EXTENSIVE ACTIVITIES:

Unleashing the power of social media: Greenpeace began its campaign linking Nestle to
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widespread rainforest destruction because of including Sinar Mas in its supply chain on
March 17, 2010. Kit Kat chocolate bars as known by everyone have the tagline Have a
break, have aKit Kat. Greenpeace made a spoof of the original commercial in trying to
garner attention towards palm oil usage, an ingredient used in the chocolate bar. This
parody video was placed on Youtube, a video sharing website, and its own website.
The video tried to mock Nestles rampant cutting activities evident from the buzz of
chainsaws in the background in the advertisement. It ended with the message Have a
break? Give the orangutan a break and thus asks Nestle to give the critically endangered
species a much needed break. It heightened the need to stop the purchase of palm oil
from companies, in particular Nestle, to stop destroying the rainforests.
Nestles response: The then Vice President of Nestle, Mr.Jose Lopez, felt that the
mockery of their top selling product was an exaggeration since it used a miniscule portion
of palm oil in the snack and that one would require a microscope to detect its presence. It
hence demanded the video to be removed and also cited a breach of copyright.
According to social media experts, this was a lousy attempt by Nestle to bring things on
track by pulling the video off. This action only increased the shrillness of the protest. The
video had not gathered much views initially but it snowballed and eventually the banned
video also got back on Youtube , this time gathering hit views and likes.
Face off on Facebook: This is where Nestle actually lost it. It went on to suffer a negative
onslaught on the social media platform. The initial video did not do much damage but the
censorship resulted in mobilizing both the social media users and the general public .
Negative attention on Nestle began to pour in with influx of more and more visitors.
In one instance, in response to one of the hundreds of messages about the extinction of
orangutans, the facebook moderator for Nestle reacted by replying Get it off your chestwe will pass it on(ref-Mar 18, 2011 facebook update on Mediaspot). The tone of these
replies was not corporate in nature and looked really juvenile. What it needed to do was
tailor its responses more to the environment humanely. But what it did was adopted a
dangerously aggressive strategy by deleting critical comments on its page and removing
pictures of its image with altered logos.
After a while, Nestle was in damage control mode by consciously not replying to
facebook posts or tweets. A span of three weeks did tremendous damage to its reputation.
The entire episode got escalated after it made to the mainstream headline news. The only
thing Greenpeace had to do after generating so much momentum was give it a right
direction to yield the desired result.
DIRECT ACTION BY GREENPEACE:
Greenpeace followed up its social media onslaught with direct face off and protests at
Nestles headquarters in Amsterdam, Frankfurt and London. Dressed as orangutans, they
urged employees of Nestle to urge their employers in return to stop using palm oil. The
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timing of the protest was immaculate as it was Nestles Annual General Meeting and the
shareholders were greeted by Greenpeace activists in orangutan suits. They unfurled a
giant banner depicting orangutan deforestation, used a parallel wifi network that
redirected shareholders to Greenpeace website and such activities to rest their case.
Ultimately, it ended with Nestle pledging that by the end of 2013, it would reduce its
extraction of palm oil by 50% and by the end of 2015 by 100%. It also apologized for its
heavy handed approach in tackling the situation.
6.) DAMAGE CONTROL:
The widespread activism helped create awareness on a larger platform and thereby
barring exports of palm oil products from the Indonesian rain forests. Wildlife activists
get rather emotional about the fate of Asias only Great Ape citing its value prime value
Crucial role in stabilizing forests
Effective seed dispersers
Open forest canopy to let sunlight get into soil.
Saving orangutans would no doubt mean a myriad of other species living in rain forests
to be saved. The international community has acknowledged the role forests in mitigating
and tackling climate change due to its innate ability to absorb greenhouse emissions.
Efforts are on to push and motivate corporates to attend Wildlife Conservation
conferences that stress the relevance and need for orangutan conservation. A number of
palm oil plantation companies, paper and pulp industries already take part in these
conferences enthusiastically.
The Indonesian government plans to coordinate action plans with private companies to
set up new orangutan protected areas in cultivated areas in the form of local reserves and
rehabilitation habitats and also out of conservation areas.
The International Union for Conservation on Nature put the orangutan on Red List
classified as critically endangered to promote pro activism.
The entire ecosystem of the forests is in a way restructured to make the rainforests an
ideal habitat for the Great Ape. Much of the expansion in crop land is in response to
growing demand and escalating prices that are currently occurring in the tropics. The
place has an abundance of arable land and an ideal growing climate for bio-fuel crops that
include sugarcane soyabean and palm oil. Moreover, agricultural subsidies in the United
States of America and Indonesia are acting as incentives to promote the cultivation of
these crops.
7.) HOPE FOR A LONGER LIFE: CURRENT SCENARIO AND CONCLUSION:
What happens from now will greatly be driven by pressure from all parts of the industry.
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Clearly, the movement would not have moved forward at this fast a rate without the
pressure from the green activists.
As the episode drew to a close, several companies and Nestle in particular realized that
they are vulnerable, politically and therefore commercially at times when they do not
control the distant ends of their supply chains. That applies not only to South-East Asian
palm oil plantations but in other places of the globe as well.
Most of the environmental and social issues are to an extent embedded deep within
products at extraction, at the source or rather resource level and it is no longer to ignore
that end.
Currently logging companies not only use bribes, they are also better armed than rangers
frequently employing security firms to manhandle cases in their favor. A very minor
percentage of these cases reach the judicial system failing to evoke judiciary action.
Better coordination between government departments would help the resolve the
issue.Illegal logging and of palm oil plantations in protected areas are basically the result
of
Poor law enforcement
Lack of requisite resources to allow effective monitoring and control
Illegal practice begins with nexus to obtain licenses to harvest timber from the
government and concessionaires easily get away with over harvesting or harvesting
outside areas allocated for exploitation. On the other hand lie the case of green activists.
Protests of the sort Greenpeace engaged in bear ramifications that would go far beyond
Nestle and companies at this stage would like to double check the reputation of supply
firms. Moreover, there would be an improved market for palm oil that has passed the
stages of the sustainable process and certification bodies , which was relatively expensive
and did not find a market prior to this.
Deforestation has arrived firmly on the agenda of international bodies like the World
Bank, International Monetary Fund, the European Union and the
United Nations. The EU might have to re-frame its biofuel norms in lights of reports that
palm oil fails to meet the standards of reducing emissions. What is important to observe
is that there are other forces at work besides green activists and governments and they are
attitudes within companies. A significant reason why Nestle changed its policy is
primarily attributed to the opinion of its staff. For years companies have been going on
stating that a commitment to Corporate Social Responsibility can help improve quality of
staff that are recruited. It follows naturally that these new recruits do care about the
behavior of their employer
It is hence highly beneficial to view the case as not simply a highly successful anti
corporate campaign but a desire and conscious effort on the part of the corporate world
and government bodies to realign their strategies conducive to sustain an endangered
species, the man of the forest, the orangutan
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