Citigroup Leans on Logging Company to Clean up Its Act

Citigroup Leans on Logging Company to Clean up Its Act

Citigroup, the U.S.-based financial institution, now requires Southeast Asian timber client Rimbunan Hijau to obtain independent, third-party certification. The company has won praise from forest protection advocates, human rights activists, and socially responsible investors for its proactive, constructive engagement to help end endangered forest destruction, rampant illegal logging, and related human rights abuses in Southeast Asia.

During briefing at Citigroup's New York headquarters this week, CEO Chuck Prince told stakeholders that client Rimbunan Hijau, a Malaysian logging giant with a well-documented history of human rights abuses and illegal logging activities, must comply with a set of progressive new environmental policies adopted by the bank last year. Prince affirmed that Citigroup will require Rimbunan Hijau to obtain credible, independent, third-party certification for its Papua New Guinea operations and specified the Forest Stewardship Council program by name during his comments.

"Over the past five years, a coalition of socially responsible investors has talked with Citigroup about reducing business risks by considering impacts to ecosystems and local communities affected by its financing decisions," said Steve Lippman, senior social research analyst at Trillium Asset Management. "Citigroup CEO Chuck Prince's announcement this week that the bank is persuading Rimbunan Hijau to improve its logging practices in Southeast Asia is a tangible demonstration that these policies can make a real difference and can help protect endangered regions and long-term shareholder value at the same time. We expect this kind of proactive engagement to become the norm over time in the banking industry and challenge other financial institutions to follow Citigroup's positive lead."

In January 2004, Citigroup adopted a comprehensive environmental policy including initiatives on endangered ecosystems, illegal logging, ecologically sustainable development and climate change. During the implementation process, Rainforest Action Network alerted Citigroup to investigations into Rimbunan Hijau by London-based Environmental Investigations Agency, Greenpeace Australia Pacific and Dateline, Australia's longest-running international current affairs television program.

A recently released report on Rimbunan Hijau prepared by the Papua New Guinea Department of Labor and Employment found widespread corruption, bribery, and human rights abuses. The investigation revealed that Rimbunan Hijau employees were treated like slaves by the company's privately paid police squad and forced to live in appalling conditions in company-controlled logging camps.

A January 2004 Greenpeace report, "The Untouchables: Rimbunan Hijau's world of forest crime and political patronage," also documented allegations that the Malaysian cartel was trafficking unlawfully harvested rainforest timber for export to the global marketplace, destructively logging vast areas of ancient forest in defiance of national laws, local customs, and the rights of resource owners, and using the protection of political elites to impoverish local people.

The environmental and SRI communities are awaiting formal targets and timelines from Citigroup for Rimbunan Hijau's certification process.