A Scandinavian paper company is facing accusations that it illegally acquired rights to thousands of hectares of land in China.
Rights groups say it may be a taste of what's to come as companies increasingly turn to the developing world for the land needed to supply food, biofuels, wood and other natural products for a growing population.
These investments can be a boon to development in poor countries.
But Finland-based Stora Enso discovered it can also be a source of conflict when the rights of those who depend on the land are violated.
Stora Enso is considered the benchmark for sustainability and corporate responsibility in the paper industry. Beginning in 2002, the company began acquiring land for a eucalyptus tree plantation in southern China's Guangxi province. When completed, the 120,000 hectare plantation would supply a paper mill to be built nearby.
"It's a poor region of the country, and the local government is very interested in attracting investment," says Andy White, coordinator of the Rights and Resources Initiative (RRI), a coalition of groups focusing on forest development and human rights. He says when done right, projects like these can help to raise incomes and improve livelihoods in poor areas.
The local government in Guangxi's Beihai municipality set up a business to facilitate land deals between local farmers and Stora Enso. And that's where the trouble started, White says.
"The way in which the local government business acquired land in many cases contradicted the land law," he says.
The Chinese central government has been working to turn over to individual households land collectivized under communist rule. That gives households the right to decide how to use the land or who to rent it to.
But the Beihai-government business often made its deals with the head of the collectives, not the individual households. That's illegal. And RRI found that some farmers who didn't go along were physically threatened.
In 2006, four year after its land acquisitions in Guangxi province began, Stora Enso invited civil society groups including White's to visit the project.
"At that time we notified Stora Enso managers of this issue of the illegality, if you will, of how the land has been acquired," White says. "And they said then that they had not been aware of that, and would look into it."
But apparently, they didn't.
Local farmers who depend on the land for their livelihoods were unhappy that their land was rented to Stora Enso without their consent -- and for far less than they believed it was worth.
Their frustration boiled over into street demonstrations that turned violent in 2009.
Mistakes were made
Stora Enso spokesman Lauri Peltola acknowledges the company's mistakes. He says Stora Enso is reviewing all of its nearly 2,300 individual contracts in Guangxi province. And he agrees Stora Enso should have acted faster on the land rights issues pointed out by White's group and others.
Peltola says it has been a learning experience for the company.
"We are not in China to teach. We are there to learn," he says, "and do things together. And together with our stakeholders, we really need to re-think the traditional ways of doing things and create something new that everyone can be happy and proud about."
Land running out
Experts note that the need to grow food and fiber is increasing, but the amount of land available is not. RRI's Andy White says Stora Enso's experience in China is not an isolated case. Other companies -- even those with good social responsibility records -- will run into problems in the developing world as they pursue the last remaining arable land.
He notes that the government of Madagascar was overthrown a year and a half ago in part because of opposition to a large land acquisition by a Korean company.
"I would say to these governments that the risks of conflict are very high and they're growing," he says.
He adds, that should serve as a warning that violating land rights for poor people can create serious problems for governments in the developing world, as well as to companies seeking to invest there.