Indonesia Looks Toward Palm Oil Sustainability in Kalimantan

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Palm oil plays an important economic role in Indonesia, but also destroys ancient forests and wildlife habitats via deforestation. The Government hopes to make it more sustainable.   

Palm oil is one of the world’s most produced and consumed oils. The low-cost, efficient, and stable oil is used in food, cosmetics, and hygiene products. It can also be used as a fuel source. Palm oil production is championed by Indonesia and Malaysia. Together, the two nations account for 85 to 90 percent of total global palm oil output. Indonesia is the largest producer and exporter worldwide.

As the resource is quite versatile, Indonesia has shown an increased level of interest in upping its own production. Palm oil already plays an important role for the archipelago’s economy, more so than most of its other export commodities.

Palm oil is sometimes referred to as ‘green gold’, as it can be particularly lucrative. Crude palm oil (CPO) comes from fast-growing plants called oil palm trees. The plants are easy to farm, and CPO is present in more than half of the products typically found in supermarkets. Food products such as noodles, chocolate, and cooking oil almost always have some level of CPO, but so do products like soaps, shampoos, and over-the-counter medicines. Companies around the world that produce biofuel and biodiesel also hunt for bulk deals on palm oil.

After petroleum resources, palm oil serves as a very important pillar for Indonesia. Indonesian CPO exports rose to 1.8 million tonnes in January, up 15 percent from the same time last year, according to the Indonesian Palm Oil Association (GAPKI). This was despite slowing demand from India and China, two of the world’s largest CPO-consuming nations. The deficit was recouped by a large uptick in demand from Pakistan, which imported around 126,000 tonnes in January. Overall CPO exports to the Middle East rose to nearly 190,000 tonnes in the same month.

In recent years, local production has grown by as much as 11.3 percent annually. In 2008, palm oil plantations covered 7.3 million hectares in Indonesia. That number rose to more than 10 million by 2012. According to the Indonesian Ministry of Agriculture, palm oil plantations currently occupy nearly 11 million hectares across the archipelago, with a total production of 32.5 million tonnes of CPO and derivatives annually. Indonesia also aims to increase palm oil production to 40 million tonnes by 2020.

Palm oil in Indonesia is produced by the private sector but also by the Government. Additionally, independent farmers and smallholders account for a sizeable portion of the industry, according to the United Nations Development Programme. In Indonesia, palm oil plantations are the prime movers of agribusiness developments. About 75 percent of palm oil plantations in Indonesia are located on Sumatra and Kalimantan, according to the Centre for International Forestry Research (CIFOR).

An ecological disaster

Scaling up palm oil farming operations will have devastating effects on Indonesia’s environment and ecosystem. NGO studies show that monoculture palm oil plantations are sources of ecological disaster in Indonesia. Krystof Obidzinski, a scientist at CIFOR, says at least half of all plantations have been developed via deforestation. According to him, this is the main problem with the industry.

As a result of deforestation, the level of biodiversity plunges in clear-cut areas, meaning that the variety of living things becomes significantly diminished. The World Wildlife Federation (WWF) says deforestation is considered to be a major contributor to climate change and threatens the extinction of local species. In Indonesia, this namely includes the orangutan, whose natural habitat is often the space needed for palm oil operations. WWF Australia estimates around 300 football fields worth of forests are cleared every hour to make way for palm oil production.

Palm Oil farmers by UNDP GCP

Rising commitment for sustainable palm oil

There is a slew of environmental campaigns from activists and NGOs that encourage consumers to choose environmentally-friendly products over those made with CPO. The main idea is that shoppers should check product labelling first to see if CPO was used in the manufacturing process.

However, there are certifications that indicate consumer products were manufactured sustainably with CPO. The Roundtable of Sustainable Palm Oil (RSPO) is a non-profit organisation that brings together stakeholders from several different sectors of the palm oil industry: producers, traders, consumer goods manufacturers, retailers, banks, investors, and NGOs. The goal of the initiative is to develop and implement global standards for sustainable palm oil production. In recent years, the Swiss organisation has attracted more than 1,000 members from more than 50 different countries, many of whom are Indonesian.

The RSPO lays out a list of principles and criteria that constitute responsible palm oil production. The list includes are variety of boxes that companies must tick in order to get certified. These include but are not limited to the removal of pesticides deemed hazardous by the World Health Organisation, conservation of natural resources and biodiversity, and the responsible cultivation of new plantings.

“It is a commitment form for the palm oil companies to comply with the sustainability aspects,” says Fadhil Hasan, executive director of the Indonesian Palm Oil Producers Association. Additionally, the Indonesian Government also has its own label of sustainability that it places on consumer goods called the Indonesian Sustainable Palm Oil (ISPO) certification. In 2014, it became mandatory for all local palm oil producers to get an ISPO certification.

However, according to Hasan, only 90 companies actually applied for an ISPO certification last year, and there are more than 680 more palm oil mills to go. “Maybe it will be too late. It takes time and resources,” says Hasan. For companies that don’t meet the ISPO requirements or fail to get certified in time, the Government claims it will impose sanctions. “Sanctions can include revocation of business licenses,” says Hasan, adding that it’s also left up to the Government’s discretion on how best to deal with palm oil companies, case by case.

The Indonesian Government has also renewed a moratorium on logging permits necessary for clearing prime forests and peatlands. This means the space for palm oil plantations will get smaller despite the nation’s plan to double its current CPO output to 40 million tonnes annually while reducing emissions by 26 percent come 2020.

“To change the system of an industry, it’s not just the private sector but also all of the related stakeholders,” says Juliarta Brahmansa Ottay, Central Kalimantan project manager for the Climate Policy Initiative (CPI). “We need to provide a model that is comprehensive enough to enable all stakeholders to know what it would look like and its impact [sic].”

A few examples of possible changes in the palm oil sector include ensuring plantations are situated on appropriate lands, employing best business practices and modern agricultural methods, better integrating smallholders into supply chains, and making sure nearby communities also benefit from the business activities.

For smallholder farmers with limited resources, these big changes are easier said than done. Because of this, the CPI says that an integration model for large companies and smallholder farmers to work together is necessary in Central Kalimantan to achieve sustainable palm oil.

In the private sector, large multinational firms like Unilever claim that their palm oil supply chain is now free of deforestation. In terms of policy, the CPI is also working with the Ministry of Finance to see what fiscal incentives they can swing to make a large-scale shift to sustainable palm oil feasible.

While it’s difficult to quantify for sure if the palm oil industry in Indonesia can actually reach a true level of sustainability, the Government and stakeholders seem to recognise that it’s at least an issue worth addressing.

Palm oil is one of the world’s most produced and consumed oils. The low-cost, efficient, and stable oil is used in food, cosmetics, and hygiene products. It can also be used as a fuel source. Palm oil production is championed by Indonesia and Malaysia. Together, the two nations account for 85 to 90 percent of total global palm oil output. Indonesia is the largest producer and exporter worldwide.

As the resource is quite versatile, Indonesia has shown an increased level of interest in upping its own production. Palm oil already plays an important role for the archipelago’s economy, more so than most of its other export commodities.

Palm oil is sometimes referred to as ‘green gold’, as it can be particularly lucrative. Crude palm oil (CPO) comes from fast-growing plants called oil palm trees. The plants are easy to farm, and CPO is present in more than half of the products typically found in supermarkets. Food productssuch as noodles, chocolate, and cooking oil almost always have some level of CPO, but so do products like soaps, shampoos, and over-the-counter medicines. Companies around the world that produce biofuel and biodiesel also hunt for bulk deals on palm oil.

After petroleum resources, palm oil serves as a very important pillar for Indonesia. Indonesian CPO exports rose to 1.8 million tonnes in January, up 15 percent from the same time last year, according to the Indonesian Palm Oil Association (GAPKI). This was despite slowing demand from India and China, two of the world’s largest CPO-consuming nations. The deficit was recouped by a large uptick in demand from Pakistan, which imported around 126,000 tonnes in January. Overall CPO exports to the Middle East rose to nearly 190,000 tonnes in the same month.

In recent years, local production has grown by as much as 11.3 percent annually. In 2008, palm oil plantations covered 7.3 million hectares in Indonesia. That number rose to more than 10 million by 2012. According to the Indonesian Ministry of Agriculture, palm oil plantations currently occupy nearly 11 million hectares across the archipelago, with a total production of 32.5 million tonnes of CPO and derivatives annually. Indonesia also aims to increase palm oil production to 40 million tonnes by 2020.

Palm oil in Indonesia is produced by the private sector but also by the Government. Additionally, independent farmers and smallholders account for a sizeable portion of the industry, according to the United Nations Development Programme. In Indonesia, palm oil plantations are the prime movers of agribusiness developments. About 75 percent of palm oil plantations in Indonesia are located on Sumatra and Kalimantan, according to the Centre for International Forestry Research (CIFOR).

An ecological disaster

Oil palm nursery by Lian Pin Koh

Scaling up palm oil farming operations will have devastating effects on Indonesia’s environment and ecosystem. NGO studies show that monoculture palm oil plantations are sources of ecological disaster in Indonesia. Krystof Obidzinski, a scientist at CIFOR, says at least half of all plantations have been developed via deforestation. According to him, this is the main problem with the industry.

As a result of deforestation, the level of biodiversity plunges in clear-cut areas, meaning that the variety of living things becomes significantly diminished. The World Wildlife Federation (WWF) says deforestation is considered to be a major contributor to climate change and threatens the extinction of local species. In Indonesia, this namely includes the orangutan, whose natural habitat is often the space needed for palm oil operations. WWF Australia estimates around 300 football fields worth of forests are cleared every hour to make way for palm oil production.

Rising commitment for sustainable palm oil

There is a slew of environmental campaigns from activists and NGOs that encourage consumers to choose environmentally-friendly products over those made with CPO. The main idea is that shoppers should check product labelling first to see if CPO was used in the manufacturing process.

However, there are certifications that indicate consumer products were manufactured sustainably with CPO. The Roundtable of Sustainable Palm Oil (RSPO) is a non-profit organisation that brings together stakeholders from several different sectors of the palm oil industry: producers, traders, consumer goods manufacturers, retailers, banks, investors, and NGOs. The goal of the initiative is to develop and implement global standards for sustainable palm oil production. In recent years, the Swiss organisation has attracted more than 1,000 members from more than 50 different countries, many of whom are Indonesian.

The RSPO lays out a list of principles and criteria that constitute responsible palm oil production. The list includes are variety of boxes that companies must tick in order to get certified. These include but are not limited to the removal of pesticides deemed hazardous by the World Health Organisation, conservation of natural resources and biodiversity, and the responsible cultivation of new plantings.

“It is a commitment form for the palm oil companies to comply with the sustainability aspects,” says Fadhil Hasan, executive director of the Indonesian Palm Oil Producers Association. Additionally, the Indonesian Government also has its own label of sustainability that it places on consumer goods called the Indonesian Sustainable Palm Oil (ISPO) certification. In 2014, it became mandatory for all local palm oil producers to get an ISPO certification.

However, according to Hasan, only 90 companies actually applied for an ISPO certification last year, and there are more than 680 more palm oil mills to go. “Maybe it will be too late. It takes time and resources,” says Hasan. For companies that don’t meet the ISPO requirements or fail to get certified in time, the Government claims it will impose sanctions. “Sanctions can include revocation of business licenses,” says Hasan, adding that it’s also left up to the Government’s discretion on how best to deal with palm oil companies, case by case.

The Indonesian Government has also renewed a moratorium on logging permits necessary for clearing prime forests and peatlands.

This means the space for palm oil plantations will get smaller despite the nation’s plan to double its current CPO output to 40 million tonnes annually while reducing emissions by 26 percent come 2020.

“To change the system of an industry, it’s not just the private sector but also all of the related stakeholders,” says Juliarta Brahmansa Ottay, Central Kalimantan project manager for the Climate Policy Initiative (CPI). “We need to provide a model that is comprehensive enough to enable all stakeholders to know what it would look like and its impact [sic].”

A few examples of possible changes in the palm oil sector include ensuring plantations are situated on appropriate lands, employing best business practices and modern agricultural methods, better integrating smallholders into supply chains, and making sure nearby communities also benefit from the business activities.

For smallholder farmers with limited resources, these big changes are easier said than done. Because of this, the CPI says that an integration model for large companies and smallholder farmers to work together is necessary in Central Kalimantan to achieve sustainable palm oil.

In the private sector, large multinational firms like Unilever claim that their palm oil supply chain is now free of deforestation. In terms of policy, the CPI is also working with the Ministry of Finance to see what fiscal incentives they can swing to make a large-scale shift to sustainable palm oil feasible.

While it’s difficult to quantify for sure if the palm oil industry in Indonesia can actually reach a true level of sustainability, the Government and stakeholders seem to recognise that it’s at least an issue worth addressing.

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Senja Dibali is a freelance writer and traveller currently based in Jakarta, covering a variety of issues. For more information, visit www.copycollision.com.