In recent years, the palm oil industry in West Sulawesi has become an issue relevant to the Environment, Social, and Governance (ESG) discussion. Behind promising economic growth and investment, there are serious social and environmental problems. ESG principles, which should be a reference for a corporation’s operations, are not very relevant to the activities of the palm oil corporation in West Sulawesi. The practice of massive deforestation to clear land for plantations has led to a reduction in forest area, threatening wildlife habitat, and disrupting the balance of the ecosystem. On the other hand, local communities living around companies often experience marginalization, loss of location, and poor working conditions.
It is important to note that ESG (Environmental, Social, and Governance) is a framework used to assess the sustainable performance of a corporation by considering environmental, social, and governance aspects (Li et al., 2021). In this context, ESG helps various parties such as investors, stakeholders, and the general public to evaluate the corporation’s sustainable performance and its impact on the environment, society, and corporate governance itself. In addition, ESG principles also encourage corporations to integrate environmental, social, and governance considerations into company operations and strategic decision-making.
Palm Oil Industry in West Sulawesi
West Sulawesi is one of the regions in Indonesia that has a large area of oil palm plantations. Data from the Central Statistics Agency of West Sulawesi in 2023 shows that the area of oil palm plantations in West Sulawesi reached 108,443.89 hectares in 2022. Many oil palm corporations are operating in West Sulawesi including, PT Astra Agro Lestari (AAL) which has five subsidiaries namely PT Pasangkayu, PT Mamuang, PT Letawa, PT Lestari Tani Teladan (LTT), PT Surya Raya Lestari I, PT Surya Lestari II, and PT Badra Sukses. In addition, some companies are not part of the Astra group, namely PT Toscano, PT Prima Nusa Global Lestari, PT Trinity Palmas Plantation, PT Wahana Karya Sejahtera Mandiri, PT Manakarra Unggul Lestari (MUL), PT Tunas Fajar Perkasa (TFP), PT Surya Raya Lestari (SRL), and so on. These companies are spread across three districts in West Sulawesi, namely Pasangkayu, Central Mamuju, and Mamuju (Daniel, 2024).
However, palm oil corporations in West Sulawesi also face challenges related to environmental conservation, social responsibility, and corporate governance practices. The reason is that the efforts of oil palm corporations to obtain maximum profits often make them ignore ESG principles, which ultimately sacrifice human rights, environmental preservation, and sustainable development. This can be seen from the increasing cases of environmental damage and human rights violations committed by several oil palm corporations in West Sulawesi in recent years.
Table 1. Planted Area of Oil Palm by Regency in West Sulawesi (ha), 2021 and 2022
| Regency | Oil Palm | |
| 2021 | 2022 | |
| Majene | ||
| Polewali Mandar | 1 951,10 | 1 951,10 |
| Mamasa | ||
| Mamuju | 10 079,68 | 10 400,25 |
| Pasangkayu | 59 933,00 | 59 933,39 |
| Mamuju Tengah | 36 159,15 | 36 159,15 |
| Sulawesi Barat | 108 122,93 | 108 443,89 |
(Sourse: Badan Pusat Statistik)
Putting ESG Dimensions aside for Corporate Interests
To maximize their profits, Palm Oil Corporations in West Sulawesi are always trying to expand their plantation areas. However, the expansion of oil palm plantations by corporations has contributed to the rate of deforestation in West Sulawesi. According to the author’s virtual interview with an academic who is a native of Pasangkayu District (FA), oil palm corporations often sacrifice forest areas to expand their plantations. Some of these plantations are allegedly located in protected forest areas. This accelerates climate change, destroys the habitat of forest-dependent wildlife, and triggers water scarcity.
Another problem is waste from palm oil mills. In Kalola Village in Pasangkayu District, West Sulawesi, palm oil mill effluent from PT Toscano Indah Pratama has polluted the surrounding environment due to the absence of a good wastewater management system at the company. As a result, the palm oil mill effluent caused a decrease in water quality in several areas in Pasangkayu, created unpleasant odors, and caused inconvenience to the local community (Irwan et al., 2021). The mill effluents also polluted the river. Thousands of fish died in the Barakkang River in West Sulawesi because the river was polluted by palm oil mill effluent. In addition, waste from palm oil mills also caused fish deaths in ponds in Kasano Village, Baras Subdistrict, Pasangkayu District in 2022 (Masalembo, 2022).
Another ESG aspect that is often overlooked by palm oil corporations in West Sulawesi is the social aspect, particularly about human rights. In pursuit of huge profits from the palm oil industry, palm oil corporations in West Sulawesi often unilaterally claim land belonging to local communities. For example, PT Mamuang, a subsidiary of PT Astra Agro Lestari, claimed land owned by the Kaili tribe in Pasangkayu. The land had been managed by the Kaili tribe long before oil palm plantations entered their area. PT Mamuang also used security forces to arrest residents who were fighting for their rights (Rusdianto, 2019).
In Ako Village, West Sulawesi, around 748 hectares of forest and customary land owned by the local community have been claimed and controlled by an oil palm corporation, PT Pasangkayu. As a result, the local community lost the forest that was their source of livelihood. Worse, PT Pasangkayu not only took over the community’s land but also displaced their ancestral graves and damaged or destroyed the community’s church building. This is not the first claim made by PT Pasangkayu. Previously, the company had also claimed 400 hectares of community rice fields in Karya Bersama village (Daniel, 2024).
Another example is the land grabbing by PT Letawa in Lariang village of some land owned by residents that has been managed for 10 years. Around 200 hectares of land were claimed by PT Letawa as part of their ownership. These cases are just some of the many cases of land grabbing by palm oil corporations in West Sulawesi. Instead of ensuring that their operations do not violate human rights, the presence of a palm oil corporation in West Sulawesi has caused unrest in the community.
West Sulawesi also ranks top in terms of the number of child labor in Indonesia (BPS, 2024). One factor contributing to this is the palm oil industry. The involvement of children in work in this industry raises various social and ethical issues. These children often work in high-risk conditions, with inadequate safety and low wages for the benefit of the palm oil corporation. While many of these children are not under direct contract with the corporation and are simply assisting their parents on the corporation’s palm oil plantations, the corporation must still take responsibility to ensure there is no child labor in their operations.
In terms of governance, decision-making by palm oil corporations in West Sulawesi often does not take into account the interests of all stakeholders, especially local communities. Decisions are sometimes not in line with the principles of business ethics and do not comply with applicable regulations and governance standards. For example, four palm oil corporations in Central Mamuju, West Sulawesi, namely PT Prima Nusa Global Lestari, PT Trinity Palmas Plantation, PT Wahana Karya Sejahtera Mandiri, and PT Astra Agro Lestari 2, unilaterally lowered the price of farmers’ oil palm Fresh Fruit Bunches (TBS) to around IDR 1,700-1,940 per kg. In fact, the West Sulawesi provincial government has set the TBS price at around Rp 3,000-3,100 per kg.
In addition, palm oil corporations in West Sulawesi also lack transparent policies and practices. It is rare for corporations to conduct regular monitoring and reporting on the environmental and social impacts of industry activities. They also lack stakeholder engagement to ensure their concerns are heard and addressed. One Pasangkayu resident (FA) said that palm oil corporations in West Sulawesi, especially in Pasangkayu, have never conducted socialization or reporting on environmental and social impacts. The lack of transparency in the governance of palm oil corporations in West Sulawesi may hinder efforts to track other issues related to palm oil industry activities, and it will be difficult to hold companies accountable for their actions. Without clear visibility, it will be difficult to ensure that palm oil is sourced sustainably and ethically.
“There is no socialization in the community! because the system they built is only limited to the relationship between workers and superiors. socialization is only carried out to the company’s partner farmers. the company here is profit-oriented, so all activities are always directed towards profit only”
(Virtual interview with FA, Pasangkayu resident, 2024)
The reality of the dynamics of palm oil corporations in West Sulawesi shows that the application of ESG dimensions as a framework that should guide companies is not optimally implemented in the operations of palm oil corporations. The corporation’s efforts to achieve interests quickly and maximally, ultimately make them ignore environmental issues, social aspects, and sustainable corporate governance. Local communities become the most disadvantaged party. Because environmental problems and poor governance will ultimately have an impact on the community, and potentially lead to other social problems.
The importance of a new, more comprehensive, and integrated approach
Palm oil ccorporation in West Sulawesi should implement a more comprehensive and integrated corporate operational strategy. They can engage local communities and stakeholders more transparently, including consulting with indigenous groups and local farmers to ensure their voices are heard and their rights respected. In addition, corporations should invest in sustainable agricultural practices and biodiversity conservation to reduce environmental impacts. By collaborating with stakeholders and implementing responsible practices, corporation can help realize a more sustainable and ethical palm oil industry in West Sulawesi.
This not only benefits the environment and local communities but also improves the reputation and credibility of corporation operating in the area. By prioritizing transparency and responsibility in their activities, corporation can gain the trust of stakeholders and demonstrate their commitment to social and environmental responsibility. Finally, a cooperative approach between corporation and local communities is essential for the long-term success and sustainability of the palm oil industry in West Sulawesi based on ESG principles.
