Liberia: Report says Sime Darby's operations at crossroads and needing a new approach
Chain Reaction Research has produced a sustainability risk analysis report for Sime Darby's Liberian operations and has made the following observations and recommendations:
Sime Darby’s Liberian operations are at crossroads: The company needs to develop a new strategy for the coming years, reflecting both market and environmental and social risk trends. In light of these trends, three expansion scenarios exist:
- In Scenario A, Sime Darby could be in non-compliance with its Free, Prior and Informed Consent (FPIC) commitments. In this scenario, it would aggressively develop its concession area in accordance with the investment plans that formed the basis of the 2009 concession agreement. Risks however include forceful removal of a large number of communities.
- Scenario B assumes Sime Darby respects the 2km buffer zones, obtains FPIC from the required 55 communities. This may lead to a three-year project delay beyond the baseline scenario. This scenario will require direct negotiations, financial compensation, and reparations to local communities, increasing the project cost. As a result, production costs might rise from the current 83 percent of revenue to 87 percent of revenue.
- In Scenario C, Sime Darby abandons the idea of expansion of its own plantations, and relies on an outgrower model for development of its concession. This requires a paradigm shift away from its initial business model to a participatory approach that balances all interests. It would be the scenario with the lowest chance for local conflicts to develop, less strenuous and time-consuming FPIC processes, and is most in line with the emerging agendas for economic development and environmental conservation.
The report and media items related to this story are below:
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Author: Chain Reaction Research (USA)
Shortly after commencing palm oil development in 2011, Sime Darby was subject to a Roundtable on Sustainable Palm Oil (RSPO) complaint by communities at the Matambo estate, for violations of customary land rights and failure to respect FPIC. Sime Darby received negative media and NGO attention stemming from alleged land right disputes, forced resettlement, outbreaks of violence, food insecurity resulting from land clearance, land compensation issues and insufficient wages for workers...Sime Darby has taken steps to improve its sustainability performance. It has committed itself to Zero Deforestation and an improved and thorough Free, Prior and Informed Consent (FPIC) process. The company stated publicly that it would not proceed with the development of areas where communities have not given their express approval.
Report proposes Sime Darby should consider adopting a model that respects rights of host communities
Author: Gabriel Thoumi, Value Walk (USA)
Sime Darby: Liberian Crossroads, 1 Nov 2016
As published by Chain Reaction Research, Sime Darby (SIME:MK), a Malaysian conglomerate, signed a 63-year concession agreement in 2009 for 220,000 ha of land to be developed into oil palm and rubber plantations in Liberia...Analysis suggests that Sime Darby would benefit from pursuing a Scenario C – shift to a 100 percent outgrower model – while maintaining its 20,000 ha plantation to supply its CPO mill...