Compliance Advisor Ombudsman

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, various community groups 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 approval 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. The cultivation and production of palm oil has caused considerable social tensions between private sector operators and communities in Indonesia. Some community members see palm oil plantations as a threat to their forests and land in a climate where regulations for land appropriation lack clarity and do not always recognize traditional communal property.

CAO Action

CAO Ombudsman was successful in encouraging Wilmar and community members to agree to a dialogue process to resolve this conflict. A moratorium on further land clearance was announced by Wilmar and the CAO worked with the communities and Wilmar to build capacity for representation and negotiation. 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 team has been established to ensure implementation of these agreements and CAO Ombudsman remains engaged with the parties to address concerns as they arise. Questions relating to IFC’s due diligence have been identified and are the subject of an independent audit by CAO Compliance.

Status

In September 2008, CAO Compliance released an Appraisal Report related to the first transfer of issues from CAO Ombudsman. A second Appraisal Report related to IFC’s fourth investment in Wilmar was released in March 2009, as was a third Appraisal Report which dealt with the second transfer of issues from CAO Ombudsman. For this reason, the scope of the audit was defined in two separate Terms of Reference, released in December 2008 and March 2009, respectively.

In August 2009, CAO released its Audit Report addressing issues identified in both Terms of Reference, together with IFC's response to the audit findings.

In April 2010, CAO released its first monitoring and update of IFC's response to the audit. CAO will keep the audit open until actions taken by IFC assure CAO that IFC will move back in to compliance. CAO will report on the status of the case to the President and public on a quarterly basis.