PROCTER &

ANTONIUS FELIX
1412412335
MM Professional - 2A21-LEC

CHAPTER 1
Introduction
Indonesia is one of the fastest lost areas of tropical rain forest in the world. The
rate of deforestation in Indonesia is number two in the world after Brazil until
2011 ago. According to research led by Matt Hansen of the University of
Maryland, found that Indonesia lost 15.8 million hectares between 2000 and
2012, ranking fifth behind Russia, Brazil, USA, and Canada in terms of forest loss.
As for the approximately 7 million hectares planted during the period
(Greenpeace, 2014). However, of the five countries in the woods above, based
on a percentage, then Indonesia is in the first rank of the rate of forest loss of 8.4
percent. By comparison, Brazil only lost half of the proportion. Of the 98 percent
of forest loss in Indonesia, deforestation occurred in forest areas of high density
in Sumatra and Kalimantan, the location where the conversion due to industrial
timber plantations and oil palm plantations developing very widespread during
the last 20 years.
Greenpeace investigations found that the palm oil supply manufacturers of
consumer products giant, Procter and Gamble (P & G) is obtained from sources
that are allegedly destroying forests of Indonesia, Malaysia and Africa (Saturi,
2014). Palm Oil needed for this company from 2012-2013, amounting to 432
thousand tons, only 10 percent certified. The rest, 90 percent indicated because
of undetected damage forests. Production of palm oil and its derivatives such as
detergent, shampoo, Handbody, bar soaps and others. One of the famous Head
and Shoulders shampoo. As a global manufacturer, Greenpeace took P & G in
order to use the position for the sake of saving the forest by using the palm from
the responsible sources. Its products, available over 18 countries and serves 4.8
million customers.
Procter & Gamble, founded in 1837 and based in Cincinnati, OH, is recognized as
the world's largest producer and distributor of household and personal products.
PG is organized into three global business units: Beauty; Health and WellBeing;
and Household Care. PG Procter and Gamble operates in over 80 countries and
offers products and services to more than 180 countries worldwide. PG has a
strong global market presence. In 2009, PG generated 61% of its total sales in
international markets.

P&G and Competitors (2009)

Source : Student Investment Fund Stock Report, Washburn School of Business
The company started building factories in other countries besides United States
due to product demand has exceeded the capacity of the Cincinnati facility. The
leaders of the company started to diversify, in 1911, began producing Crisco.
When radio became more popular in the 1920s and 1930s, the company
sponsored a number of radio programs. As a result, these events often become
known as a "soap opera.
Palm Oil is used broadly across the consumer products industry as a high quality,
cost effective, versatile oil that can used in a wide variety of food, personal care,
and cleaning products. According to the World Wildlife Fund, palm oil is used in
about 50% of all packaged food products in supermarkets today. Palm is a highly
productive crop, requiring much less land use than alternatives, and can
contribute to economic development and poverty alleviation in areas where it is
produced. While expansion of palm production to meet increasing global demand
has raised real concerns regarding deforestation, when produced and managed
responsibly,

palm

production

can

have

positive

economic,

social,

and

environmental results.
As giant in this industry, P & G must applying the Corporate Governance. In this
paper, writer will analysis the GCG of P&G di Indonesia : how they facing the
conflict and what they do. The principles of good corporate governance in

Indonesia refers to the principle made by KNKG and some other laws. The
principle according to KNKG are : transparency, accountability, Responsibility,
Independence, Fairness and Equality. While by law, for a public company listed in
bursa efek to the rules issued by Bapepam LK and for the Bank must according
to Peraturan BI dan Basel III.

CHAPTER 2
Ethical Theory

The ethics of ecology

Five arguments from those who advocate corporate social responsibility from an
ecology- based organizational ethic include the following:
1. Organizations responsibilities go beyond the production of goods and
services at a profit.
2. These responsibilities involve helping to solve important social problems,
especially those they have helped create.
3. Corporations have a broader constituency than stockholders alone.
4. Corporations have impacts that go beyond simple marketplace
transactions.
5. Corporations serve a wider range of human values than just economics.
Enforcement of Environmental Law
A number of governmental regulatory agencies have been created to develop
and enforce policies and laws to protect the general and workplace environment.
If United States has the EPA (Environmental Protection Agencies), Indonesian
government has BKSDA (Balai Konservasi Sumber Daya Alam) in order to control
and keeping eye on the conservatory area throughout Indonesia.
Beside that, the BKSDA also responsible in monitoring and supervising the
distribution of plants and animals that are protected in the Indonesia; including
the breeding and maintenance of plants and animals protected by individuals,
companies and institutions related conservation. BKSDA is a government
institution under the Departmen Kehutanan Republik Indonesia. The specific law
regarding environmental protection in Indonesia will be explained later in section
4.3.1.
Causes of Environmental Pollution
Some of the most pervasive factors that have contributed to the depletion of
resources and damage to the environment include:
1. Consumer affluence. Increased wealth as measured by personal per
capita income has led to increased spending, consumption, and waste.

2. Materialistic

cultural

values.

Values

have

evolved

to

emphasize

consumption over conservation a mentality that believes in bigger is

better, me first, and a throwaway ethic.
3. Urbanization
4. Population explosion. Population growth means more industrialization,
product use, waste, and pollution.
5. New and uncontrolled technologies. Technologies are produced by fi rms
that prioritize profi ts, con ve nience, and consumption over environmental
protection. Although this belief system is changing, the environmental
protection viewpoint is still not mainstream.
6. Industrial activities. Industrial activities that, as stated earlier, have
emphasized depletion of natural resources and destructive uses of the
environment for economic reasons have caused significant environmental
decay

CHAPTER 3
Case Study

Palm oil is an ingredient commonly used in soap, shampoo, cosmetics and goods
of daily needs were produced by consumer companies such as P & G. Palm oil is
not the source of the problem, but the problem is dirty palm oil that comes from
forest destruction. Greenpeace investigation showed P & G purchased from
several companies that palm oil comes from controversial plantations.
Based on the Greenpeace report, palm oil supply chain to P & G identified in
connection with cases of forest destruction, forest fires and damage to wildlife
habitat such as the Sumatran tiger and orangutan, below are some of following
issues.
2013
PT. Adhyaksa Satya Dharma (ADS), located in Kalimantan with an area of 5,466
hectares. The concession is still happening in the forest clearing orangutan
habitats. Almost the entire concession orangutan habitat, and already 4,330 ha
opened, only 200 hectares of remaining forests (saturi 2014).
PT. Wana Catur Jaya Utama, a member of the RSPO, which has a concession in
Central Kalimantan 9490 hectares. Since 2011-2013, covering an area of 1,400
hectares of forest have been cleared for palm oil. Then, 5,900 acres of forested
and threatened into palm oil plantations as well. This Forest is very important for
orangutan but not guaranteed can be protected.
In Riau, July 2013, PT Adei, a subsidiary of KLK, tripping the case of forest fires,
and in December 2013, company officials have become suspect. Still owned KLK,
PT Karya Makmur Abadi Estate II in Central Kalimantan area of 13,127 hectares.
The Company does not have a study of high conservation value (HCV) and about
1,000 hectares of forests are cleared for two years. Now, there is an active
opening around the boundary in orangutan habitat.
2014.

Procter & Gamble has been shown to actively damaging a primary forest in
Papua, Indonesia. The findings are revealed in conjunction with Greenpeace
activists in several cities in the world perform a number of protest on March 26,
2014, demanding the company to guarantee its products, such as Head &
Shoulders, be friendly to the forest (Greenpeace, 2014).
Greenpeace field team and mapping analysis has documented large-scale
permits recently in the concession owned by PT Rimba Matoa Lestari (PT RML),
which is located in Sarmi district and Jayapura, Papua Province. Landsat imagery
also showed activity in the opening of the mapped region as primary forest land
cover data according to the Ministry of Forestry in 2011. PT RML is controlled by
industrial conglomerate RGE Group Indonesia, oil palm division includes Asian
Agri. This group sells palm oil to Cargill, suppliers of P & G.
On March 11 2014, Greenpeace unfurled a large banner right in the midst of the
destruction of orangutan habitat in the concession area of PT. Multi Persada
Gatramegah (MPG) (Transindonesia, 2014). Dozens of Greenpeace activists with
indigenous peoples Karumuan Village, North Barito, South Kalimantan unfurled
banners reading "Head & Shoulders dandruff and eliminate rainforest over forest
clearing for palm oil plantations". Based on the analysis of Landsat, deforestation
in the concession MPG has occurred since 2012, including in the area of High
Conservation Value (HCV), home to a number of endangered species that should
be protected. Their involvement for the extinction of orangutans and Sumatran
tigers
On March, 2014 activists in Indonesia climbs building where P & G offices, and
hung a banner measuring 10x20m reads 'Head & Shoulders, 100% Forest
Destruction'.
The Consequences
Greenpeace found that orang-utan habitat cleared in plantations that are
connected to the P & G supply chain. Land used for the cultivation of oil palm
plantations BW Group, the same company that is connected with the death and
the grave orang-utan adjacent to the Tanjung Puting National Park. In other
cases, Greenpeace documented ongoing forest clearance in the concession of
two producers who are known as two direct supplier of P & G.
According to greenpeace statement, companies without strong policies to
eliminate deforestation relationship with the products they were exposed an

illegal practice in the area of high risk, such as Riau Province in Sumatra. The
main example is the concession PT. Rokan Adi Raya, which includes the area of
tiger habitat and peat forests, and includes areas of forest were destroyed and
exposed to uncontrolled forest fires.
Biodiversity is threatened, protected habitat of endangered species, such as
tigers, and Sumatran orangutan. The tiger and orangutan is symbolic, that no
wildlife disturbed due to forest clearing. Value of forest ecosystems have been
invaluable.

CHAPTER 4
Ethical review
According to an article released by www.theguardian.com, In the wake of severe
criticism by a Greenpeace report, P&G commit the end of 2015 it would ensure
that the palm oil and palm kernel oil it sources is traceable to the supplier mills.
It also pledged to ensure no deforestation is involved anywhere along the supply
chain by 2020. The policy appears to go further than the assurances made at the
time of Greenpeaces report, that it would have 100% sustainably purchased
palm and palm kernel oil by 2015, and 100% recycled or third-party certified
paper products by 2020.
P&G stated in their sustainability 2014 report, The will buy palm oil from
companies that do not do the destruction of tropical rain forests. Commitment no
deforestation P & G in the palm oil supply chain is not negotiable. Their goal is to
build long-term effective solution to the issue of sustainability in oil palm. They
are committed to positive change through the entire supply chain, not only for
company, but also for the industry as well as small-scale farmers who depend on
this commodity. They will do following works :

Partnering with the Malaysia Institute for Supply Chain Innovation (MISI),
part of the Massachusetts Institute of Technology
MISI is conducting two six-month in-field studies to understand the highly
segmented supply chain and the challenges facing farmers so we can help
them continue working while also protecting the environment.

Communicate new goals and the expectation that our supply chain will not
contribute to deforestation with all our palm
Continue to work with their industry peers and NGOs to develop consistent
industry standards and practices that will ensure sustainable palm oil
sourcing for the long term.

Sustainable Foresty (based on their report)

Although they do not own or manage forests, many of their products and
packages are dependent on raw materials from the forest based supply chain.
Therefore, they recognize the key role they can play, through their procurement
practices, to ensure the sustainability of the worlds forest resources. For

example, P&G and other members of the Consumer Goods Forum have
committed to help achieve zero net deforestation in their supply chains by 2020.
At P&G they have identified three strategic commodities where their sourcing
practices can have the greatest impact on ensuring responsible use of the
worlds forest resources: wood pulp for tissue and absorbent hygiene products,
wood pulp used in paper packaging and palm oil for their laundry and beauty
products. The supply chains for these materials are significantly different.
Ultimately, however, all of these programs are tied to our commitment to
ensuring the sustainability of the worlds forests.
WWF commends Procter & Gamble for exceeding its FSC goal for tissue and
towel products, said Linda Walker of WWF, who is director of GFTN-NA. Action
by companies to increase the volumes of FSC-certified and recycled material in
their supply chains plays an integral role in ensuring the worlds forests are
managed sustainably. By meeting and exceeding its goal a year ahead of its
commitment, Procter & Gamble is demonstrating its ongoing dedication to the
advancement of sustainable forestry. The Forest Stewardship Council applauds
Procter & Gambles remarkable progress in FSC-certified fiber procurement for
its tissue and towel products, said Corey Brinkema, President of Forest
Stewardship Council - US. P&G is proof positive that setting robust sustainability
goals and a commitment to implementation can bring great results.
Responsible Forest Management in Their Wood Pulp Supply Chains
There are a number of third-party forestry certification systems that are now
available around the world. P&G relies on the use of these systems within their
supply chain wherever possible:

Forest Stewardship Council (FSC global)

Sustainable Forestry Initiative (SFI North America)
Programme for the Endorsement of Forest Certification (PEFC global)
Brazilian National Forestry Certification Scheme (CERFLOR)
Canadas National Standard for Sustainable Forest Management (CSA-SFM)

They give preference to pulp from Forest Stewardship Council (FSC)-certified

forests when it is available and meets product performance requirements and
competitive market conditions. FSC has the worlds most widely recognized
forest certification scheme and is supported by internationally recognized
environmental nongovernmental organizations (NGOs). P&G is committed to the
following core principles:

Ensuring the safety of forestry and manufacturing operations for

employees and the environment.

Ensuring that wood is legally harvested and that all legal requirements are
met. P&G will not knowingly use illegally sourced materials in our

products.
Ensuring that our supply chain is incorporating the principles of
sustainable forest management and continuous improvement in their own
operations and that these are verified by independent forest and chain-

ofcustody certification.
Ensuring that trees are not harvested from high-conservation value
forests. P&G supports multi-stakeholder efforts to develop information
sources and tools that will help suppliers identify these areas on their own
forestlands and in their procurement of wood raw materials from third

parties (e.g., www. hcvnetwork.org).

Ensuring that there is no sourcing from genetically modified trees.
Ensuring that supplier practices reflect our social values and support of
universal human rights through work with local governments and
communities to improve the educational, cultural, economic and social

well-being of those communities.

Ensuring that our supply chain does not contain fiber from conflict timber
(timber that was traded in a way that drives violent armed conflict or
threatens national or regional stability).

Commitments & Actions (sustainability report, 2014):

Commitment :
Their Commitments:
1. Develop a traceable supply chain
2. Ensure our suppliers meet RSPO criteria and have policies and procedures
in place to ensure:
o No development of high conservation value (HCV) areas and high
o
o
o

carbon stock (HCS) forests.

No new development of peat lands regardless of depth.
No burning to clear land for new development or replanting.
Compliance with P&Gs existing Sustainability Guidelines

for

External Business Partners.

o Respect for human and labor rights.
a. Respect for land tenure rights, including rights of indigenous and
local communities to give or withhold their free, prior and informed
consent for development of land they own legally, communally or
by custom.

2. Work with suppliers, industry peers, NGOs, academic experts and other
stakeholders to promote consistent industry standards and practices in
palm oil sourcing with the aim of achieving full traceability and eliminating
deforestation.

Their Actions:
1. Palm Oil and Palm Oil Fractions The following actions will apply to our
purchases of palm oil and palm oil fractions:
o Establish traceability to palm oil mills by December 31, 2015.
o Require suppliers to submit plans by December 31, 2015, to
demonstrate how they will ensure no deforestation in their supply
o

chain by 2020.
As we advance progress against the goals above, we also will

continue to purchase 100% RSPO certified palm oil.

2. Palm Kernel Oil The following actions will apply to our purchase of palm
kernel oil:
o Establish traceability to palm kernel oil mills by December 31, 2015.
o Invest in and work with palm kernel oil suppliers, and the
smallholders who supply them, with the aim of improving both
practices and livelihoods to establish zero deforestation in our
supply chain by 2020.
3. Palm Oil Derivatives and Palm Kernel Oil Derivatives
o Require suppliers to put forward time-bound plans by end of 2016 to
demonstrate how they will ensure no deforestation in their supply
chains.
Now, actually P & G already bought RSPO certified palm oil (Roundtable on
Sustainable Palm Oil). P & G is a member of RSPO and make purchases according
to standards set by the organization criteria. However, through this new target,
commitment P & G determined to do more than the standard set by the RSPO,
degan goal to build sustainability practices reliable, effective and durable
throughout their suppliers.

CHAPTER 5
Conclusions
Although not P & G doing deforesting, but their demand for the palm oil is very
massive, at the end public beliefs that P & G caused environmental damaging.
The sustainability report of P & G showed us, how they take concern to these
environmental issues. In the future we believe there is growth of CSR from others
companies to forests in Indonesia.
P & G already gave good response about the deforestation issues, they are take
responsible and formulate the strategy. The goals, commitment, and actions they
do are proven P&G conducting Good Corporate Governance

Sources :
http://trecnews4u.blogspot.com/2014/02/investigasi-greenpeace-p-pakaisawit.html
http://www.mongabay.co.id/2014/02/27/investigasi-greenpeace-pg-pakai-sawitdari-babat-hutan/
http://transindonesia.co/2014/03/greenpeace-pg-ikut-lenyapkan-hutan-hujan-diindonesia/
http://www.pg.com/en_US/downloads/sustainability/reports/PG_2014_Sustainabilit
y_Report.pdf
http://nrmnews.com/2014/02/26/pg-tersangkut-kasus-pengrusakan-hutanindonesia/
http://www.washburn.edu/sobu/apm/Reports/PG.pdf
http://www.euromonitor.com/medialibrary/PDF/ProcterAndGamble-CompanyProfile-SWOT-Analysis.pdf