By TOM WRIGHT, The Wall Street Journal, 7 February, 2008
Office-supplies giant Staples Inc. has severed all contracts with Singapore-based Asia Pulp & Paper Co. Ltd., one of the world's largest paper companies, in a move that shows concerns over forest destruction and global warming are having an impact on big U.S. paper buyers.
Until recently Staples sourced about 9% of its total paper supply from APP and used the paper for its own Staples-branded stock, mainly photocopy and office paper. Staples had stuck with the company even as other large paper sellers in the U.S., Europe and Asia, including Office Depot Inc., stopped buying from APP in recent years because of alleged environmental misdeeds. Staples had hoped that continuing to buy from the company would prompt APP to improve its environmental record. But the Framingham, Mass., company canceled its contracts in late January, said Mark Buckley, vice president for environmental issues at Staples. Staples is expected to announce the move next week. "We decided engagement was not possible anymore," Mr. Buckley said. "We haven't seen any indication that APP has been making any positive strides" to protect the environment.
Remaining a customer of APP was "at great peril to our brand," he added. Staples didn't disclose how much paper it sells. APP representatives didn't return calls seeking comment. In the past, the company has said it is moving toward relying for all of its wood on plantation trees but needs to cut natural forest in the meantime to maintain production levels. APP runs one of Asia's largest pulp mills on the Indonesian island of Sumatra and has operations in China. The retailers worry that APP is destroying natural rainforest to feed its mills, putting the survival of species like orangutan and Sumatran elephant at risk. Concerns over rainforest destruction have been heightened in recent months because new data show that Indonesia is the world's third-largest emitter of carbon dioxide, the heat-trapping greenhouse gas, behind the U.S. and China despite having a relatively small economy.
Fires set to clear natural forests and forested peat swamps after they have been logged are the major cause of those emissions. Staples' decision is just the latest in a long list of environment-related problem for APP, which is controlled by the Widjaja family of Indonesia. The company, for instance, signed an agreement in 2003 with the WWF, the Geneva-based conservation group, to complete a study of areas in its forest concessions with high biological diversity. But the WWF pulled out a year later, citing APP's failure to produce a valid study and continued destruction of natural forests. In the face of increasing criticism from environmental groups and in a bid to win back big customers, APP last year sought permission to use an environmentally friendly logo issued by the Forest Stewardship Council.
The FSC is a Bonn, Germany, group set up by producers, wood-product buyers and environmental organizations that aims to guide consumers on what wood products are environmentally-friendly. In October, after inquiries from The Wall Street Journal about APP's planned use of the logo, the FSC barred the company from using it. The FSC also ordered independent auditors who assess whether a company can use the FSC's logo to stop working with APP. The Rainforest Alliance, a U.S.-based environmental group that runs one of these auditing concerns, said in December it was terminating a contract to assess APP's China operations. The FSC's decision "did not help the situation," Mr. Buckley said of Staples' deteriorating relationship with APP. APP has made up for lost orders from big Western buyers by selling more in the Middle East, India and Bangladesh, where environmental concerns are not such an issue, says a person familiar with the matter. Environmentalists say APP continues to damage the environment, despite its attempts to portray itself as more environmentally friendly.
The WWF says APP recently built a large road in a forested peat swamp in Sumatra's Riau province, and believes drainage and cutting of trees will soon begin there. Peat swamps store huge amounts of carbon dioxide; draining them emits CO2 into the environment. In a report to be released in late February, the WWF will say that a total of 11% of Riau's natural forest was lost in 2005 and 2006 because of the activities of local companies, including APP. Total emissions of CO2 from forest destruction, peat swamp drainage and fires during that period was equal to 34% of the United Kingdom's emissions and 106% of the Netherlands', the WWF data shows.