As consumers globally become more selective about choosing products based on sustainable production processes, suppliers must increasingly provide evidence that their goods are made without damaging the environment or ignoring the rights of local people.
Demand for sustainable palm oil is driven by concerns associated with social and environmental impacts of palm oil production. Consuming countries have frequently been held responsible for driving these impacts and for importing deforestation through commodity supply chains. In response, efforts are being made to reduce oil palm related deforestation, resolve land conflicts, improve smallholders’ livelihoods and agricultural practices, and revamp the sector’s image. Multinational companies sourcing palm oil and palm oil products have improved supply chain accountability and transparency. Indonesia as the world’s leading palm oil producer is also making efforts to address concerns and meet expectations.
An EU-supported webinar hosted by The Jakarta Post on 30 March 2021 explored how The Terpercaya Initiative can support Indonesian sustainable palm oil production and trade. The Initiative, established in 2018 through a multi-stakeholder Advisory Committee, has developed a district sustainability monitoring system that will provide credible information to buyers assessing where to source products in Indonesia. It is part of the Indonesian Government’s efforts to promote sustainability in commodity supply chains and improve the welfare of communities, especially smallholders, by providing accurate information to markets.
The virtual event confirmed that districts in Indonesia can provide a crucial role in achieving sustainable palm oil; one which must be communicated with buyers and consuming countries as their concerns for sustainability have increased significantly.
The webinar featured a panel of experts: Jarot Indarto (Policy Analyst at the Ministry of National Development Planning (PPN)/Bappenas); Henriette Faergemann (First Counsellor European Union Delegation to Indonesia and Brunei Darussalam); Asep Asmara, (Director of Export of Agricultural and Forestry Products, Directorate General of Foreign Trade, the Ministry of Trade); Jeremy Broadhead (KAMI Project Manager, European Forest Institute); Nur Maliki Arifiandi, (Policy Engagement Manager, Forests at the Carbon Disclosure Project); and Josi Khatarina (Senior Advisor at Yayasan Inobu).
Indonesia has enjoyed enormous benefits from the high-yielding oil palm and the industry has substantially contributed to socioeconomic development in the country. The palm oil industry has absorbed around 5.3 million workers directly and is an income source for more than 21 million people, including farmers and their families. According to the Trade Ministry, Indonesia supplies 56% of the world’s crude palm oil and in 2020, the export value of the commodity reached US$ 21 billion (Rp 307 trillion), contributing 13.5% of the total value of non-oil and gas exports.
During the webinar, Jarot Indarto highlighted that the Indonesian government has set its policy direction on sustainable food and agriculture in its 2020-2024 National Medium-Term Development Plan, particularly on integrating supply chains to ensure sustainability and improve the agricultural-based processing industry.
The Terpercaya Initiative aims to provide credible and accurate information about district sustainability performance in producing palm oil and has been developed to support similar outcomes. The initiative has been led by Bappenas with financial support from the European Union, and implemented by Yayasan Inobu and the European Forest Institute.
The initiative seeks to bring lasting impact at scale by tracking and creating incentives for sustainability performance of districts across the country. The initiative is also expected to support district governments in transitioning to sustainability and its development has been informed by experience in four pilot districts: Seruyan and West Kotawaringin in Central Kalimantan, Rokan Hulu in Riau, and North Morowali in Central Sulawesi.
Terpercaya indicators share sustainability principles and criteria with existing commodity certification schemes, such as the Indonesian Sustainable Palm Oil and the Roundtable on Sustainable Palm Oil, and align with the Indonesian legal framework. The indicators also align with and support local governments in progressing towards the United Nations’ Sustainable Development Goals and Nationally Determined Contributions under the Paris Agreement on climate change.
During the webinar, Jeremy Broadhead, Manager of the EU funded KAMI Project which is implemented by the European Forest Institute (EFI), explained the development of the Terpercaya Initiative. He said a data platform for collating and disseminating information has been established and is now hosted by Bappenas. In addition, supply chain traceability to connect consumers and buyers to information on district progress towards sustainability has been undertaken. He hopes that these efforts can help reinforce supply chains for sustainable palm oil.
The Terpercaya Initiative has developed a set of 22 sustainability indicators to evaluate district level economic, environmental, social, and governance performance.
Details of the 22 indicators are as follows:
A. Environmental Pillar
- Permanent forest protection
- Forest and critical areas protection
- Fire prevention
- Peatland protection
- Climate change mitigation
- Production forest managed sustainably
- Water and air pollution control
B. Social Pillar
- Free Prior Informed Consent (FPIC)
- Customary rights recognition
- Conflict resolution
- Smallholders share
- Smallholder registration
C. Economic Pillar
- Smallholder productivity
- Smallholder organizations
- Smallholder supports
- Responsible industry (including ISPO)
- Poverty rate
D. Governance Pillar
- Public information access
- Multi-stakeholder participation in district planning
- Complaint mechanism
- Sustainable land-use planning
- Proportion of budget for sustainability
The Terpercaya Initiative adopts the jurisdictional approach, which has several advantages in overcoming the challenges of sustainable agriculture. Compared to the conventional approach where the focus is on individual plantations and supply chains, the jurisdictional approach is more cost effective and covers all forests and producers, including smallholders for whom certification is often either too expensive or unattainable due to land tenure issues. The approach should help district governments to achieve sustainable agricultural production, support smallholders and thus bring holistic impacts.
Among the main goals of the initiative is sharing objective information on district sustainability performance with stakeholders and supply chain actors and providing information on palm oil governance and trade.
Meanwhile, the Terpercaya data platform is expected to be a key tool to inform discussions on the sustainability of palm oil production in the context of Indonesia’s national and international commitments and Indonesia’s trade including with the EU. It is hoped that it will help smallholders to access supply chains for sustainable palm oil and accelerate district level transitions to sustainability.
During the webinar, Josi Khatarina of the Terpercaya Initiative’s secretariat and Senior Advisor at Inobu, explained that the jurisdictional approach is an inclusive one. The Terpercaya Initiative aims to be implemented at the national level, with four districts for detailed piloting. The initiative is set to collaborate with other regions as well in its effort to achieve sustainable palm oil production on a national scale.
Henriette Faergemann, First Counsellor European Union Delegation to Indonesia and Brunei Darussalam, explained that the Terpercaya Initiative builds on the UN Sustainable Development Goals and Indonesian legal frameworks. It also serves as complementing to the Indonesian Sustainable Palm Oil standard by covering entire jurisdictions and all producers and forests so that nothing is left aside and no one is left behind.