- Significant changes in Liberian context since 2009. Customary land rights are entrenched in Liberian legislation and efforts to halt deforestation have increased, heightening risks for Sime Darby’s original aggressive expansion plans.
- Sime Darby’s undeveloped land bank in Liberia contains high-density forest; thus 45% cannot be developed responsibly. This figure is conservative as it is not adjusted for medium-density forest (an additional 34%) or biodiversity hotspots.
- Unresolved issues remain six years after community negotiations started. These long processes create the risk of ‘moving targets’ as previously made agreements can be voided by new developments.
- Full concession development would require negotiations with an additional 55 communities. This could entail decades of negotiations with uncertain outcomes, and could result in significant delays to project development.
- Respecting a 2km buffer zone around towns reduces the available area by 20%.
- Sime Darby’s share price could devaluate due to restrictions on the concession area. Mainstream investors continue to value Sime Darby’s Liberian project
assuming full concession development.
Sime Darby’s Liberian business model is at a crossroads. As shown in Figure 1 below, Sime Darby has three possible scenarios for future development.
- Scenario A: Backtrack on social and environmental commitments
- Scenario B: Full concession development implementing proper Free, Prior, and
Informed Consent (FPIC), High Carbon Stock (HCS), and High Conservation Value
- Scenario C: A shift to 100 percent out-grower model
Sime Darby’s Liberian Operations Are At A Crossroads: The company needs to develop a new strategy for the coming years, reflecting both market and environmental and social risk trends. In light of these trends, three expansion scenarios exist.
Analysis suggests that Sime Darby would benefit from pursuing a Scenario C – shift to a 100 percent outgrower model – while maintaining its 20,000 ha plantation to supply its CPO mill.
Scenario A: Backtrack on social and environmental commitments
In Scenario A, Sime Darby could be in non-compliance with its FPIC and NDPE commitments. In this scenario, it would aggressively develop its concession area in accordance with the investment plans that formed the basis of the 2009 concession agreement. Risks include:
- Forceful removal of a large number of communities, the deforestation of large tracks of land, and no respect for buffer zones. As customary land rights are today entrenched in Liberian legislation, such violations could lead to fines, sanctions and/or legal costs. Communities might challenge violations of their rights leading to stop-work orders, administrative fees, or criminal punishment and other
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