CAO Cases

Arne Hoel, The World Bank

East Asia & the Pacific

Indonesia / Wilmar Group-01/West Kalimantan

Complainant
Various community groups and international NGOs
Date Filed
July 01, 2007
Case Status
Closed
 

Synopsis

Complaint


The Wilmar Group is a large agribusiness conglomerate specializing in the production and trade of palm oil, operating in Asia, Eastern Europe, and Africa. Since 2003, IFC has undertaken four investments in the Wilmar Group. In July 2007, 19 signatories from community groups, and local and international NGOs lodged a complaint with the CAO raising the following concerns about adverse environmental and social impacts of Wilmar Group operations with particular reference to Indonesia:

 

1. Land clearance without appropriate community approvals, legally required permits, or completion of Environmental Impact Analysis (EIA) processes;

2. Violation of national regulations and laws as well as the Principles and Criteria of the Roundtable on Sustainable Palm Oil;

3. Inadequate compliance with IFC operating procedures and due diligence requirements. 

 

CAO Action

 

Dispute Resolution process

During the course of CAO’s assessment of the issues raised in the complaint, Wilmar and community members chose to enter a dialogue process to help resolve the conflict.  A moratorium on further land clearance was announced by Wilmar Group, and the CAO team worked with the communities and Wilmar to build capacity for representation and negotiation.  After several rounds of dialogue, a settlement agreement was announced in late 2008 which contained the following provisions:

 

• Agreement for community access and use of land that had not been converted to plantations;

• Compensation for households for appropriation of land;

• Enhanced community investment funds for collective benefits and access to development opportunities for the broader community.

 

A joint Monitoring and Evaluation (M&E) team has been established to ensure implementation of these agreements.

 

CAO's dispute resolution team remained engaged for several more years to support monitoring and implementation of agreements by the parties.  Once the parties signaled that the final agreement has been substantially implemented during M&E team activities in June and July of 2013, CAO started to conclude its involvement.   CAO planned to close the case in early 2014 utilizing a formal process of engagement with the relevant stakeholders to reflect on the process to date.  With insufficient interest by key stakeholders regarding such a process, CAO determined to go ahead and close the case without such an engagement in June 2014.   

 

Compliance process

Questions relating to IFC’s due diligence were transferred to CAO Compliance for appraisal. In September 2008, based on the findings of the appraisal, the CAO determined that an audit of IFC was merited to examine whether IFC had complied with its standards and procedures. 

 

CAO released its audit report in August 2009, together with IFC's official response. The audit concluded that IFC had failed to apply its own standards, and that its actions were counterproductive to its mission and mandate and to its commitment to sustainable development. With regard to IFC's Wilmar Group investments, the CAO found that IFC applied a de minimis approach toward assessing each project‘s supply chain, and that commercial pressures were allowed to prevail and overly influence the categorization of the project, as well as the scope and scale of IFC’s environmental and social due diligence.

 

IFC acknowledged the shortcomings identified by CAO in its official response, and communicated an action plan to CAO on how to address them. As part of the action plan, IFC committed to develop a comprehensive strategy for oil palm investments, with specific focus on Indonesia. In September and October 2009, the World Bank Group President instructed IFC and the World Bank Group to suspend financing of oil palm projects until such a strategy had been developed. 

 

Subsequently, in March 2010, IFC embarked on a global consultation to inform its strategy and its future involvement in the oil palm sector. IFC also immediately changed its procedure for processing single commodity trade finance, embarked on re-assessing its exposure in Indonesian Oil Palm, and committed to report back to CAO on a quarterly basis on progress toward address the shortcomings identified by the CAO audit.  CAO participated in IFC’s global strategy consultations as an observer until IFC concluded the consultation process in February 2011. 

 

In April 2013, CAO released a final monitoring report based on information provided by IFC as of March 2013. CAO finds that IFC’s commitments and actions constitute a substantial approach to addressing the conclusions reached in the CAO Audit Report. CAO has determined that the audit can therefore be closed. 


Status

CAO closed both the dispute resolution and compliance processes. Relevant process documents are available under "View Documents" below in English and Bahasa.

A CAO compliance investigation in relation to another Wilmar complaint (Wilmar-3) is ongoing - see link below.

 

Updated: July 01, 2014

Project information

Institution
IFC
Project Name & Number
Wilmar Group 25532 & 26271
Department
Agribusiness
Company
Wilmar Trading Pte. Ltd.
Sector
Agriculture and Forestry
Region
East Asia & the Pacific
Country
Indonesia
Environmental Category
C
Commitment
$33.3 million (Guarantee) & $17.5 million (Loan)

Case Tracker

Ombudsman

  • Eligible: Completed
  • Assessment Period: Completed
  • Facilitating Settlement: Completed
  • Monitoring/Close-out: Completed

Compliance

  • Under Appraisal: Completed
  • Under Audit: Completed
  • Monitoring: Closed

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