Researchers say Canadian logging giant has hidden ties to Indonesian logger accused of destroying habitat

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A new report alleges hidden business ties between a Canadian forest products company and an Indonesian pulp and paper producer accused of causing serious environmental damage, illustrating how even companies with serious reputational issues can use weak financial transparency laws to grow their business.

Researchers from four environmental watchdogs said they found evidence of formal links between Paper Excellence, a Canadian forestry giant that is expanding globally, and Asia Pulp & Paper, a subsidiary of Sinar Mas Group. , an Indonesian company accused of deforestation, conflicts with local communities and catastrophic causes. fires. The two companies are both controlled by members of Indonesia’s powerful Widjaja family, but have long denied any formal connection and maintain they are separately owned and operated.

Environmentalists, including the Environmental Paper Network and Greenpeace, reviewed company records from 10 countries and foreign records obtained by the International Consortium of Investigative Journalists and published in the Offshore Leaks Database.

In the report entitled “Hide Business Control“, they say that a “link of factors such as family ties, overlapping management and financial ties indicate that the Sinar Mas Group controls Paper Excellence”.

Joshua Martin, spokesman for the Environmental Paper Network, said the “number and nature of ties” between the two companies were concerning.

“Many cases have shown how financial and corporate secrecy can shield companies from liability for deforestation and other environmental issues,” Martin said.

The 70-page report also cites Canadian lobbying records, loan agreements, financial statements and company press releases from the mid-2000s to 2021, which it says appear to show the two companies are affiliated. and even share some administrators.

Both Paper Excellence and APP are controlled by individual members of the Widjaja family, Indonesian business magnates whose total net worth is estimated at around $10 billion, according to Forbes magazine.

The report says the Widjajas effectively run the conglomerate’s businesses as a “family council”.

But the companies deny any business ties. Paper Excellence spokesman Graham Kissack told researchers that the Canadian company “is entirely independent” of the Indonesian paper producer, even though its leader, Teguh Widjaja, is the father of the Canadian company’s owner.

“Of course,” Kissack said, “it is well known that Jackson Widjaja, the ultimate owner of PE, is the son of the current leader of APP,” the subsidiary of Sinar Mas Group, a conglomerate with business interests in agriculture, finance and real estate.

A diagram showing the links between Asia Pulp & Paper and Paper Excellence. Image: via Papering Over Corporate Control report

Martin said the researchers “felt responsible” to shed light on the links between Paper Excellence and APP.

“Oopacity makes accountability more elusive, if one arm of a conglomerate causes massive emissions and conflicts with communities, and another arm meets higher standards in order to access markets, investments and to the accolades, but nobody knows they’re connected,” he said.

In 2007, an international environmental compliance agency has withdrawn its certification from APP, the Widjaja-controlled Indonesian paper producer, claiming it was “associated with destructive forestry practices”. That same year, Jackson Widjaja, one of the family heirs, began expanding Paper Excellence’s footprint in Canada and later achieved green certification for the company’s pulp and paper mills, according to the report. .

Paper Excellence has since purchased several factories in North America and expanded its operations to Brazil and France. The company recently announced the acquisition of US forestry giant Resolute Forest Products, which, if approved, could turn the Canadian company into an $11 billion multinational, according to the report.

The report also says that at the center of the company’s complex structure are front companies incorporated in Malaysia’s Labuan Territory and the British Virgin Islands, two jurisdictions whose strict secrecy laws prevent public courts and strangers to access information about the real owner. companies.

The researchers’ examination of Dutch business registers and records leaked on ICIJ broadcasts that a BVI-based company controlled by Teguh Widjaja, the Indonesian APP chief and Jackson Widjaja’s father, was the owner of Paper Excellence’s Dutch parent company.

“Paper Excellence’s corporate shareholders span multiple offshore jurisdictions, which has the effect of obscuring ultimate beneficial owners,” the report said.

The Kissack company spokesperson denied the allegations and said the use of multiple jurisdictions is common for multinational operators. “There is not, and never was, an intention to create a corporate structure at Paper Excellence that is meant to hide anything,” Kissack told researchers.

It is not the first time that the Indonesian conglomerate has been accused of concealing links with related companies. In 2017, a Associated Press investigation uncovered links between APP and almost all of the 27 plantation companies that he had previously told the outside world were independent. “The company’s apparent goal: to ‘varnish’ its image for the global marketplace,” the survey said.

“Difficult to hold companies accountable”

The use of subsidiaries in secrecy jurisdictions is not uncommon for companies trading commodities potentially exposed to deforestation risks.

In 2017, The ICIJ’s Paradise Papers investigation documented how Asia Pacific Resources International Holdings Ltd., known as APRIL, moved billions of dollars through a network of offshore companies and used subsidiaries to secure bank loans. Some of those loans, the ICIJ found, funded APRIL subsidiaries that local communities have accused of destroying their livelihoods and cutting down trees in fire-prone areas, contributing to climate change.

More recently, tax justice advocates have accused APRIL of misrepresentation of its wood pulp exports and use of subsidiaries in the Chinese territory of Macau, a tax haven, to avoid tax. APRIL has denied any wrongdoing in either case.

Analysts from Profundo and Chain Reaction Research, two independent research firms, have also documented the use of shell companies by palm oil companies operating in some of the forest-rich regions of Southeast Asia.

Analysts have called these legal entities used by palm oil traders and producers to conceal ownership of suppliers responsible for environmental and habitat destruction ‘shadow companies’.

Who owns, controls and benefits from the company’s operations? Without a simple and straightforward answer to this question, it can be difficult to hold companies accountable. — Joshua Martin, Environmental Paper Network

In a 2018 reportthe analysts concluded that “legal persons and opaque ownership structures contribute to the ‘leakage’ of unsustainable palm oil to global markets”.

According to Martin of the Environmental Paper Network, the opacity of related parties and corporate ownership structure could undermine the efforts of investors and financial institutions to demand disclosure of climate risks.

“The importance of transparency boils down to one fundamental question: who owns, controls and benefits from company operations,” Martin said. “If there is no simple and straightforward answer to this question, it can be difficult to hold companies accountable.”

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