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Indonesia aims for sustainability certification for oil palm smallholders

A worker takes a chainsaw to an oil palm on an illegal plantation in Tenggulun. Image by Junaidi Hanafiah for Mongabay.

  • An update to the Indonesian Sustainable Palm Oil (ISPO) standard will require all smallholder farmers in the country to be certified, alongside large plantation companies that are already obliged to comply.
  • Observers have welcomed the move, noting that 40% of palm oil plantation area in Indonesia — an area larger than Switzerland — is under smallholder management.
  • Studies show that these small farmers often lack support and access to high-yield seedlings; as such, their productivity is low, and to make up for it, they clear more land for planting — often illegally.
  • Enrolling them in ISPO certification is expected to help boost their productivity and prevent them from deforesting, but bureaucratic tangles threaten to undermine the program.

JAKARTA — Environmental and social activists have welcomed a decision by the Indonesian government to require that smallholder palm oil farmers be certified sustainable.

Major plantation companies are already required to be certified under the Indonesian Sustainable Palm Oil (ISPO) scheme, which was introduced in 2011 in an effort to counter longstanding associations between Indonesian palm oil and deforestation, land disputes, and labor rights abuses.

Now, smallholder farmers, defined as those with farms smaller than 25 hectares (62 acres), will also have to seek certification, under a regulation updating the ISPO standard and signed by the president in March. They will have five years in which to comply.

Industry observers have lauded the move, noting that Indonesia’s 2.67 million smallholder farmers manage a combined 40% of the total oil palm plantation area in the country. That amounts to 5.8 million hectares (14 million acres) of land — an area greater than Switzerland.

To date, only 0.21% of that area, or 12,200 hectares (30,150 acres), is certified as sustainable under the ISPO. In contrast, 557 of 1,500 plantation companies have been certified, covering 5.25 million hectares (12.97 million acres).

An oil palm estate in Riau. Image by Rhett A. Butler/Mongabay.

Low yields prompt more deforestation

Failure to ensure sustainability in the palm oil industry in Indonesia, the world’s top producer of the commodity, has prompted several major buyers, including Unilever, Nestlé and Burger King, to stop sourcing palm oil from certain suppliers in the country.

With the ISPO standard, the Indonesian government expects to instill greater confidence in the sustainability of the product, ensuring that it’s free from deforestation, labor rights abuses, and land conflicts.

On the key issue of deforestation, a major factor is that three-quarters of smallholder farmers, managing 3.1 million hectares (7.7 million acres) of land, are not affiliated with any particular company or mill, have limited support from the government, and lack training in good agricultural practices. That’s led to low productivity per hectare, which they make up for by clearing more land for planting, often illegally through slash-and-burn agriculture.

“So far, they’ve received little to no assistance from the government,” Aziz Hidayat, the ISPO secretary, told Mongabay. “They set up their own plantations. They apply for credit from banks themselves.”

By enrolling in the ISPO scheme — which requires that the land is legally owned, that farmers don’t encroach on areas designated as forest, and that they apply good agriculture practices without burning — the problems of productivity and illegal clearing can be addressed, says Teguh Surya, the executive director of the environmental NGO Madani.

“It’ll be great if that could happen because it’ll increase their productivity,” he told Mongabay. “Right now, our productivity is way behind Malaysia. So the government should be focused on small farmers.”

The total area of farms managed by smallholders increased by 35% between 2013 and 2018, yet their per-hectare yield during that period fell by 4%, according to agriculture ministry data. A study by the University of Indonesia found 69% of small farmers in Riau and South Sumatra provinces said they would continue clearing new land for planting even if offered monetary compensation not to do so.

Palm oil plantation abutting natural forest. Image by Rhett A. Butler/Mongabay.

Replanting aging trees

With the global demand for palm oil expected to keep increasing, researchers predict that smallholders will double their production capacity over the next decade, managing a 60% share of Indonesia’s total oil palm plantation area by 2030.

This expansion could lead to more deforestation if left unchecked, experts warn; the rate of expansion by smallholders is increasing faster than that of state-run and private plantation companies.

A 2019 study by the Center for International Forestry (CIFOR) on smallholders in West and Central Kalimantan provinces, in Indonesian Borneo, shows that small farmers are increasingly converting carbon-rich peatlands into oil palm plantations. The CIFOR scientists predicted the majority of smallholder oil palm expansion will occur on peat soils by 2030.

Data from the Starling satellite monitoring system indicate that rainforest loss in Indonesia is now driven mainly by smallholders nibbling at the edges of forests rather than by industrial-scale tree felling.

“The agricultural land that people are prepared to convert to palm oil has already been converted — and a lot of the existing farmland is becoming exhausted, so farmers are venturing further away and going into more marginal areas,” said CIFOR senior scientist George Schoneveld.

The risk of deforestation grows as smallholder farms approach the end of their life cycle, which is typically 25 years. After that point, oil palm trees cease being productive and new ones are planted. Two-fifths of the total smallholder plantation area in Indonesia, 2.4 million hectares (5.9 million acres), has now reached that stage.

In 2017, the government launched an ambitious nationwide program to replant the entire span of those aging farms with higher-yield seedlings by 2025. As of the end of 2019, however, it had planted just 4% of the targeted area, with bureaucracy the main obstacle: the farmers found it difficult to prove they were eligible for government financial assistance for replanting.

The government has since scaled back its replanting target to 500,000 hectares (1.2 million acres) a year over the next three years, but acknowledges that it might take more than 12 years to replant the originally stated target. Farmers facing that kind of wait will tend to opt for the easier alternative of clearing more land, observers say.

“In the context of replanting, the government hasn’t taken it seriously,” Teguh said. “The realization of the replanting program so far has been dismal. How can you say that palm oil is beneficial [to farmers] when the government can’t even reach its replanting target?”

A Lubuk Beringin villager, Rahimah, 70, harvests palm nuts for palm oil on her agroforestry farm at Lubuk Beringin village in Jambi province, Indonesia. Photo by: Tri Saputro/CIFOR/Flickr

What to do about illegal plantations?

The main bureaucratic snag stopping smallholder farmers from being certified is the lack of title to their land.

Small farmers are required to apply for a plantation registration certificate, known as an STD-B. But in practice, these are rarely issued, even as the farmers manage plantations in areas designated for agriculture. Only 1% of farmers surveyed for a 2018 study in the provinces of Jambi, Riau and Central Kalimantan had STD-B certificates. In Riau, many farmers were found to be farming inside forest areas — illegal under Indonesian law, and an automatic disqualifier from any sustainability certification.

Another problem is the farmers’ lack of access to ISPO-compliant seeds and fertilizers. The study found 89% of small farmers used lower-cost seedlings that provided smaller yields.

That hasn’t stopped many of these farmers’ crops from ending up in the supply chains of large oil palm companies as well as the global brands that source from them and often tout zero-deforestation commitments.

Amid a lack of monitoring and enforcement, as well as fuzzy zoning plans, illegal plantations have proliferated. An analysis by the NGO Kehati based on satellite images shows there are at least 3.4 million hectares (8.4 million acres) of illegal plantations — an area greater than Belgium — of which 1.2 million hectares (3 million acres) are managed by local farmers.

Aziz of the ISPO said dealing with small farmers operating in forest areas would be the biggest challenge in getting all smallholders certified and eligible for the replanting program. He said the government had launched an initiative last year to address some of the problems in the palm oil industry, including illegal plantations.

The initiative, cemented in a presidential order, contains a provision that specifically calls on the environment ministry to “finalize the land status of palm oil plantations indicated to be within forest areas and in peat ecosystems.” But it remains unclear how the ministry will “finalize” the land status of plantations inside forest areas; activists say the term “finalize” is sufficiently ambiguous that it could be read to mean granting legal status to such illegal plantations.

The other option is to shut down illegal plantations, which would mean prosecuting the thousands of small farmers who manage them. A third option would be to allow small farmers to continue farming inside forest areas under the government’s social forestry program. However, this would require them to switch from oil palms to agroforestry crops.

Madani’s Teguh said addressing the issue of illegal plantations should be a key focus of the ISPO, given that deforestation caused by palm plantations is one of the main objections to palm oil.

“The ISPO has to contribute to solving the problem of illegal plantations inside forest areas,” he said. “Our main hurdle in selling [our palm oil] overseas is deforestation.”

If the problem of illegal plantations isn’t solved by the 2025 deadline, then the new ISPO will be a curse for small farmers, instead of a blessing, according to Gulat Manurung, the chairman of the Indonesian Oil Palm Farmers Association (Apkasindo).

He said that small farmers might not be able to sell their harvest to palm oil mills if they’re still not certified by 2025 and millions of tons of fresh fruit bunches produced by them will go to waste.

In that case, Gulat said the new ISPO will become “a boomerang for Indonesian oil palm farmers”.

An oil palm plantation adjacent to tropical forest in Borneo. Image by Rhett A. Butler/Mongabay.

Clear language needed to prohibit deforestation

A shortcoming of the previous version of the ISPO was that it didn’t explicitly prohibit clearing natural forests for plantations. Oil palm concessions across Indonesia hold a combined 3.4 million hectares of natural forest, all of which can legally be cleared.

The newly updated ISPO standard presents an opportunity to address that shortcoming, Teguh said. The presidential regulation issued in March identifies among the principles of the ISPO the “management of the environment, natural resources and biodiversity.” Technical guidelines on how to achieve these principles were due to be issued in mid-April, but have been put on the backburner, along with many other government policies, as the country deals with the COVID-19 pandemic.

Those guidelines, when they do come out, should state clearly that no palm oil plantations may be developed from clearing natural forests,  and that all standing natural forests inside existing oil palm concessions must be conserved and the concession holder given degraded or unforested land to cultivate in exchange, Teguh said.

Aziz said the new ISPO is stronger in terms of forest protection. He said the previous standard only stipulated protection of primary forests and peatlands, while the new one expands that protection to the environment, natural resources and biodiversity.

But Teguh said that without clear language prohibiting the clearance of all natural forests, the risk of deforestation remains high. He said ensuring such a prohibition would also be in the government’s interest, since it has touted the ISPO as part of its toolkit to tackle greenhouse gas emissions.

“If the government says it wants to lower greenhouse gas emissions [with the new ISPO], then it’s relevant” to protect natural forests, Teguh said. “There needs to be a regulation in the new ISPO’s principles that says palm oil can’t be produced from the conversion of natural forests and that natural forests have to be protected and removed from concessions.”


Banner image: A worker takes a chainsaw to an oil palm on an illegal plantation in Tenggulun. Image by Junaidi Hanafiah for Mongabay. 


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