Explore how the EU REDD Facility is pioneering a jurisdictional PPP approach to promote sustainable and legal oil palm production in South Sumatra. Learn about the challenges, strategies, and expected impact on deforestation reduction and climate change targets.
With the ambition of developing a sustainable palm oil sector, Congo committed in 2016 to the African Palm Oil Initiative (APOI), this flagship initiative of Tropical Forest Alliance (TFA) 2020. The TFA involves 10 countries in West and Central Africa, as well as key palm oil consumers, businesses, traders and producers, civil society, and groups representing local communities and indigenous peoples.
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
B. Social Pillar
C. Economic Pillar
D. Governance Pillar
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.
To explore these issues further, see the webinar recording and watch the video on Terpercaya.
This blog post was originally published by Inobu on 20 May 2021. Read the original English blog post and the Bahasa Indonesia blog post.
The Terpercaya Initiative aims to provide trusted information on sustainability at the subnational level in Indonesia, by developing an application that will provide credible information to buyers assessing where to source products. This virtual event is being held to raise awareness of progress regarding sustainable production and trade of Indonesian palm oil, in the context of global and EU market developments and increased consumer awareness.
I’m frequently asked why tropical countries shouldn’t clear forests when many industrialised countries cleared theirs years ago. It’s an interesting question and one that I’ve been grappling with since I first went to Indonesia over 25 years ago.
I lived in Central Kalimantan in 1994-1995 working on the research component of the Indonesia-UK Tropical Forest Management Programme. From Palangkaraya, the provincial capital, it was around eight hours drive to the project’s hut where I lived – the pondok – in a pristine forested valley in the Kayu Mas timber concession in Kotawaringin Timur. All along the route, the forest had been logged and heavily loaded logging trucks were a frequent sight and a considerable danger in travelling along the steep slippery roads.
I spent a lot of time counting and measuring trees across the project’s permanent sample plots, each of which contained over 200 tree species – far more than my home country, the UK, which has only around 50 native species in total. Most of the plots were ultimately logged as part of a growth and yield experiment. At that time, forest cover in Indonesia was still over 60% compared to 11% at home.
In recent years, as the rewilding and reforestation movements have gained strength in the UK, I’ve thought more about this discrepancy. In the UK the situation was the result of an ice age which sharply reduced species diversity, and thousands of years of human activity and forest clearance. In England, forest cover has been estimated to have been only 15% in 1086 when Britain’s earliest public record the Domesday Book was written. Having reached a low point of 5% at the turn of the last century, significant efforts were made to increase UK forest cover to a present-day 13%.
That Indonesia had much more forest and with much higher species diversity did not mitigate the loss of forest. But it was also clear that the demand for land and forest products was increasing as it has done all over the world for many centuries. In the years since, oil palm plantations have been established on 40% of the land area in Kotawaringin Timur. Just over half the district is natural forest but only 1.9% of that is intact. Since 2000 the district has lost 43% of its tree cover and many actors, economies and consumers around the world have played a part in this transition.
In 2015, just over 1 million tonnes of palm oil were produced in Kotawaringin Timur, the fourth highest-producing district in Indonesia, with 3.5% of national production. Half was consumed domestically, about 9% in the EU and a minor quantity in the UK. India and China consumed around 10% each. Kotawaringin Timur has, however, experienced significant economic growth since the 90s and between 2003 and 2017 poverty rates more than halved while GDP almost doubled between 2010 and 2019.
Extensive areas of forest have been lost to agricultural development in Kotawaringin Timur and I often wonder about the Dayak communities and forest technicians with whom I used to work. Sangai, the village where the Camp 48 concession headquarters stood along with the project’s guesthouse and laboratory, must have been a quiet place before the loggers arrived. Along the road between Camp 48 and the project’s pondok were small houses, constructed by Dayak workers to honour the forest spirits.
Living a transitory life between the pondok and Camp 48 with occasional visits to Palangkaraya and Jakarta, I didn’t get many insights into traditional life but I was fortunate enough to visit Tumbang Gagu, a village in Upper Mentaya District in Kotawaringin Timur where a famous longhouse stands. We spent the night with the inhabitant Dayaks, slaughtering and roasting a pig to eat with rice and plants from the forest. They couldn’t tell us how old the longhouse was, only that it was there when Krakatau erupted, which was in 1883. As well as using timber for construction, villagers were reliant on the surrounding forests for food, medicine and other products used in daily life such as rattan and dyes.
Inequalities in land acquisition have plagued human development the world over and desire for agricultural land and economic development has played a huge part. However, if deforestation and dispossession are accepted as a part of economic development, then where does that leave the environment and forest-dependent people? To suggest that all countries let their forest cover fall to the levels seen in the UK could also constitute a race to the bottom which would do untold damage to the global environment and the legacy left to future generations. And in this age of increased awareness of human rights, capabilities also exist to uphold local rights and labour rights and to separate economic growth from negative social and environmental impacts.
In the context Kotawaringin Timur, although customary groups have been able to claim forest since the milestone ruling of the Indonesian Constitutional Court in 2013, there are still no registered customary forests. This may be a result of a lack of information, organisation or leadership, or the choice of a different ownership and/or management model by local people. Unfortunately, information is not readily available but by tracking customary forests as they are claimed and registered, information from organisations like the Customary Territory Registration Agency (BRWA) can allow supply chain actors to determine whether local rights are being respected. This, in turn, can help to protect forests, as has been found in many parts of the world.
Through past centuries production of agricultural and forest commodities has supported livelihoods, driven economic growth and underpinned welfare improvements, but it has also been a major cause of forest loss. Demand for many products considered to be drivers of tropical deforestation and forest degradation continues to increase, but in recent decades, climate change and biodiversity loss have driven countervailing efforts to protect and restore forests.
The palm oil industry is a major contributor to the economy of Indonesia and in 2018, 36.6 million tonnes of palm oil were produced, equal to roughly half of the world’s supply. More than 80% of the palm oil was exported, valued at USD 18.2 billion. The expansion of oil palm plantations has helped lift more than 10 million Indonesians out of poverty since 2000 and the palm oil industry supported the livelihoods of 23 million people in 2018, 4.6 million of them involved in independent smallholdings. Palm oil is also used in an astonishing array of products used around the world, its productivity and versatile characteristics making it highly valued.
Despite all the positives, the palm oil industry is often seen in a negative light. Along with other agricultural commodities, such as rubber, soya, coffee, and cocoa, palm oil has been blamed for destroying the environment and violating the rights of communities and workers in areas where it is produced.
While various initiatives have responded by making efforts to reduce deforestation in commodity supply chains, political rifts have opened with different lobbies making opposing claims regarding the impetus for, and fairness of advocacy and regulation. The differences in opinion have highlighted the need for improved supply chains of information on land and forest management. Better information exchange could help bridge gaps in understanding along the commodity supply chain and better differentiate factors underpinning the contradictory huge EU demand for palm oil and its negative reputation.
EU economies undoubtedly want palm oil, but the call to stop exporting deforestation and the emissions it produces are growing ever louder. For supply chains of sustainably produced commodities to be successfully established, however, the greatest need is not only for a supply chain of objective information but a supply chain of understanding and trust working in both directions.
Production of agricultural and forest commodities has supported livelihoods and driven economic growth, but it has also been a major cause of forest loss by Jeremy Broadhead
In spite of arguments over palm oil sustainability, reducing deforestation and forest degradation is fortunately a goal agreed by many countries, and related aspirations have been formalised in the Sustainable Development Goals (SDGs) and Nationally Determined Contributions (NDCs) under the Paris Agreement. However, land and forest governance is complex, and the distribution of rights and responsibilities for forest protection, economic welfare and social protection need to be understood and broadly agreed upon for effective, equitable and sustainable progress to be achieved.
Industrialised countries are increasingly taking responsibility for negative impacts overseas but to ensure that positive impacts of trade are not extinguished in the process, support is needed such that SDGs and NDC targets can be met. Most countries have committed to reducing deforestation and forest degradation along with many companies, while in industrialised countries forest area is generally on the increase and forest conditions are improving.
Questions over rights and responsibilities remain. But with domestic legal frameworks supportive of elements encapsulated in the SDGs and NDC, a foundation for equitable progress exists. Through accompanying dialogue and data collection, domestic laws can serve to facilitate sustainable production of commodities, and market-related benefits of sustainable production can be more widely communicated. The EU-Indonesia Voluntary Partnership Agreement which has now been licensing timber exports from Indonesia since 2016 pioneered this approach.
By discussing complex land and forest governance issues with stakeholders along the supply chain and sharing objective information, mutual understanding of European and Indonesian perspectives can help create a chain of trust parallel to the commodity supply chains. This can inform choices to drive progress towards common goals and distribute responsibilities to ensure that principles are upheld, benefits accrue to those making progress and costs are not born by the vulnerable.
The aim of the Terpercaya initiative is to support dialogue and cooperation on sustainability and trade and to accelerate district transitions to sustainability in Indonesia. Terpercaya means ‘trustworthy’ in Bahasa Indonesia. The rationale behind the initiative is that by collectively defining sustainability at scale and disseminating information on related indicators, trust can be built amongst supply chain actors and policy and market incentives can be established to encourage positive progress. This approach supports attainment of SDGs and NDC targets in producer countries, while reducing the environmental footprint of consuming countries.
The Terpercaya Advisory Committee is chaired by the Indonesian National Development Planning Agency (Bappenas) and includes members from a wide range of key stakeholder groups. Terpercaya effectively allocates accountability to producers and supply chain actors associated with individual districts, as a means of promoting progress towards sustainability while adhering to principles of legality and legitimacy. Legality is upheld by alignment with domestic legal frameworks, and legitimacy strengthened through the leadership of the multi-stakeholder Advisory Committee.
The system is designed to work at scale so that all actors are included, and to draw on available, objective, independently verifiable data for regular tracking of progress against indicators reflecting the environmental, economic, social and governance dimensions of sustainability. By building on laws relevant for sustainable palm oil production, they also support widespread adoption of the Indonesian Sustainable Palm Oil (ISPO) standard. Indicators allow questions to be answered such as:
The district approach hinges on the role local governments can play given their authority and legitimacy to promulgate regulations and policies for sustainability. Districts, for example, have the authority to issue certain permits as well as monitor and enforce laws and regulations, and resolve tenure legality issues. In this way, district approaches underpin the transition of the entire jurisdiction towards sustainability.
A data collection and dissemination platform currently being developed with support from Inobu should provide visibility for sustainable districts and enable sourcing decisions and assessment of due diligence by responsible buyers. Bappenas has expressed interest in using indicator data to help programme support for districts in reaching goals set out in the national mid-term development plan. Work is also underway to determine ways that the platform could be used to support transactions between buyers and companies trading palm oil from sustainable districts. Through the Terpercaya approach it is hoped that forest protection can be a part of socio-economic development in moving towards a greener future.
Much positive progress has been seen in recent years in Indonesia through Government adoption of a moratorium on oil palm expansion, ISPO revamp, peatland restoration efforts. The country’s timber legality assurance system (SVLK) has been successfully implemented, the Indonesia-EU Voluntary Partnership Agreement in place, and there is falling poverty and steady, measurable reductions in deforestation rates.
What we’re seeing is a change from conflict between nature and industrialisation to complementarity. A healthy environment is an economic necessity, and the dichotomy between environment and economy no longer holds. By building a supply chain of understanding and trust, supply chains of sustainable commodities can hopefully flourish.
