Stunning reversal? Why 'big paper' just went green in Indonesia.

Asia Pulp & Paper Co. has promised to stop using wood from Indonesia's natural forests.  Unprecedented market pressures, driven in part by Barbie and Mickey Mouse, helped.

Focus

It's all around you, all the time. Tidily rolled up next to the toilet when you wake up in the morning, handed to you at the corner cafe with your morning coffee, all over your desk at work, and surrounding much of the food you buy at the grocery store before heading home.

And for years, this product – paper – so ubiquitous you only really notice it when it's not there, has been coming at a horrific cost – the annihilation of the richest, most biologically diverse rain forests on the planet by a sprawling company with over $4 billion in annual revenue that you've probably never heard of: Asia Pulp & Paper Co. Ltd. (The company says it's worth about $10 billion.)

But this month, if the company is to be taken at its word, that is changing. In early February APP promised not to use a single splinter of wood again from natural forest, a stunning reversal that has environmental campaigners overjoyed. Why did it happen?

In the end, it was down to the combined efforts of the corporations behind Ronald McDonald, Mickey Mouse, and Barbie. While what's left of Indonesia's forests hasn't been saved yet, with skepticism abounding about whether the company will deliver on its promises, the unprecedented market pressure that was put on APP ahead of its announcement heralds a sea change in the way the largest corporations in the world do business.

Environmental activists have had APP and its larger parent, the Indonesian conglomerate Sinar Mas, in their sights for two decades. But they struggled to make headway against the company's general indifference to environmental concerns, Indonesian government corruption, and the challenge of connecting seemingly innocuous paper to the disappearance of orangutans and Sumatran tigers in the minds of consumers.

"I think this will stand as one of the biggest market-based campaign successes that we've seen in a long time," says Laurel Sutherlin of the Rainforest Action Network, which, along with Greenpeace and other environmental groups, spent years trying to tie well-known brands to rain forest destruction. Their effort saw dozens of major paper consumers eventually adopt standards for using sustainable products that essentially froze APP out of much of the European and US markets. "We're still a little bit stunned, to be honest," he says.

Mr. Sutherlin describes 18 months of negotiations with The Walt Disney Co. that were kick-started when activists hired actors to dress up as Minnie and Mickey Mouse and lock themselves to the company's Burbank, Calif., headquarters, displaying a banner that read "Disney is destroying Indonesia's rainforests."

By last October the company, which has about $40 billion in annual sales, had passed new standards requiring that all paper used in everything from the packaging of its toys to movie posters be sustainably sourced, effectively cutting off APP, which has aggressive expansion plans, from a potentially huge customer. Not only that, but the company has promised to demand those standards from all its suppliers and licenses. As a sign of how far that can ripple out, Sutherlin says that when Disney adopted its new policy it had to be translated into 35 languages.

It wasn't the only one. Nine of the top 10 US publishers have adopted similar standards, with Harper Collins coming on board just a few weeks before APP's announcement.

In 2011, when Greenpeace discovered that Mattel, the toy company that makes the Barbie doll, was using APP paper for its packaging, it targeted the company with a video campaign in which Ken, the toy's boyfriend, is shocked and enraged to discover that Barbie is responsible for rain forest destruction, and dumps her in response. Mattel soon adopted new standards.

Rolf Skar, a forest campaigner for Greenpeace, says globalization, often viewed as a driver of environmental ills, is in some ways making the group's recent success possible. "You have to find a brand that resonates with people, so you take a Barbie box, the most famous toy in the world, and then you're linking Barbie boxes to environmental destruction all over the world," he says. "As the world has gotten flatter and cultures have homogenized to some degree, it's gotten easier."

Greenpeace has had a lead role in negotiations with APP over the past year, and he explains the reason his group is optimistic that a real corner has been turned. "Our group in Indonesia has no illusions about APP given their track record over the years. In the past there were commitments from behind the podium with no details, no plans, no transparency. So it was very easy to scratch your head and say how are you going to get from Point A to Point B?"

This time, however, he says the company has laid out how it's going to rely on acacia and eucalyptus tree plantations it has developed over the years (on previously clear-cut forestland), and there seems to be support for the shift at the top. He describes the presence of Sinar Mas and APP Chairman Teguh Ganda Wijaya sitting at the podium with Indonesia's forestry minister to announce a commitment to environmental protection as "almost surreal for me … we've never seen that high level support before." (Editor's note: An earlier version of this story erroneously referred to Mr. Wijaya's father and Sinar Mas patriarch Eka Tjipta Widjaja as present.)

Forest losses the size of Oregon

It's sometimes hard to grasp the full scale of Indonesia's forests, or the destruction that's been visited on them in recent decades. Most of the country's remaining rain forest is on New Guinea, Borneo, and Sumatra, respectively the second-, third-, and sixth-largest islands in the world (Indonesia controls half of New Guinea, two-thirds of Borneo, and all of Sumatra).

In the past 20 years, Sumatra has lost natural forest equivalent in size to the state of South Carolina. In Borneo, forest loss in the same period has been greater: more like the size of Oregon.

And these aren't just any forests. It's a rule of the natural world that islands have a greater chance of hosting unusual species of plants and animals than mainlands. The larger the island is, the greater the number of unique species. Near the equator? More still.

So in the forests of Sumatra and Borneo, you have a staggering array of plants and animals found nowhere else. Borneo alone is home to 15,000 flowering plants – about the same as the entire continent of Africa.

While the fruit-eating orangutan stars in most of the activists' posters, the dominant family of rain forest trees in Borneo are the tallest on the planet, and Borneo's forest is filled with gliding animals that take advantage of it. Frogs, lizards, lemurs, and even snakes have evolved to soar between the trees – about 30 species of animal in all. How many gliding animal species does the famed Amazon jungle hold? None.

Aside from valuing diversity as an end in itself, there are direct global considerations. Logging and conversion of peat lands to plantations has made Indonesia a top emitter of carbon dioxide, which most climate scientists believe is responsible for a rapidly warming global climate. Wildfires on Borneo and Sumatra during recent drought years have been devastating. In 2007, the World Bank ranked Indonesia as the third-largest producer of greenhouse gases, behind the US and China.

APP has been far from alone in laying the forests to waste. Its slightly smaller competitor Asia Pacific Resources International Ltd. is now in environmentalists' sights. On top of pulping trees, Indonesia has historically had major plywood operations and has been a provider of high-end lumber.

One of the reasons that APP's promises are being taken seriously is that, surprisingly, its primary owners have a recent positive track record in cleaning up their act.

The Sinar Mas group has emerged as a major palm oil producer in recent decades, and clear-cutting of forests to establish palm oil monoculture. The group's subsidiary, Golden Agri-Resources, is the second-largest palm oil producer in the world, with an area under cultivation today roughly equal to the size of Rhode Island and with a market value of about $6 billion.

In 2011, environmental campaigners who had targeted Golden Agri got the company to adopt similar standards to those now promised by APP. Mr. Skar of Greenpeace says that while implementation hasn't been perfect, the company has largely kept its promises not to clear more natural forest. The company, which had lost contracts with heavyweights like Unilever and Nestlé that use the oil to make everything from candy bars to soap, has been reaping rewards.

Both Nestlé and Unilever (valued by investors as worth $200 billion and $100 billion respectively) have since resumed purchases from Golden Agri, which has demonstrated that there are more than social rewards for improving environmental practices. In both cases, the company has also promised to better manage conflicts with local communities, who are often displaced when forests are cleared.

Of course, part of the reason better practices became possible at Golden Agri and are theoretically possible at APP is that extensive damage has been done. Over the years, the companies have mowed down natural forests and established monocultures on land licensed to them by the government. On the buy side, big corporate customers are happy to pay premiums for sustainably sourced products particularly from companies like APP that can supply in volume, bringing the prospect of higher margins to the Widjaja family and fellow investors.

Doing well by doing good

Aida Greenbury, the director of sustainability at APP, says doing well by doing good is on the company's mind.

"In 2011 APP as a group made a decision that we need to set a very clear road map going forward that would focus on not just the business side but environment and social sides as well," says Ms. Greenbury. "We realized that the targets were not very complete, they didn't address many issues that … were important to various groups like customers and NGOs."

Group-wide, she says, the company's current annual pulp production capacity is 5 million tons, at factories split between Indonesia and China. In 2012, she says about 8 percent of the raw materials feeding the mills came from natural forests. She says for 2013, that number will be 3 percent, and that after June, no more natural forest wood will be going into their mills.

"We made a calculation about what's good for us as a business … we don't view this as a competitive disadvantage," she says.

Greenbury says the company remains ambitious, and that it intends to become "the global player" in pulp and paper. She says APP is currently negotiating to build a new pulp mill on Sumatra with an annual capacity of 2 million tons, which would make it the largest in the world. She says the company is committed to finding a way to feed that mill from sustainable sources before it goes in and is working closely with The Forest Trust of Britain to monitor it.

Will the company succeed and deliver on its ambitious promises? Only time will tell.

But now not just Greenpeace and other activists are watching. Mickey Mouse is looking over its shoulders, too.