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EU response to palm oil is opportunity, not threat (commentary)

A truck with Oilpalm fruits is entering Fajar Harapan Palm Oil Mill.
  • Policy moves by the EU to more closely scrutinize palm oil over its links to deforestation have been portrayed as a smear campaign in Indonesia and Malaysia, the top two producers of the commodity.
  • But for Indonesia, this presents an opportunity to devise more careful and detailed definitions of criteria for sustainable palm oil, covering all relevant environmental, social, labor and human rights issues, argues Andre Barahamin, a forest campaigner at the NGO Kaoem Telapak.
  • This post is a commentary. The views expressed are those of the author, not necessarily of Mongabay.

Indonesia is the biggest palm oil producer in the world. Alongside Malaysia, both countries dominate 85% of the global market.

Palm oil is considered one of the strategic commodities in Indonesia that has a significant role in the country’s economic development. According to the Indonesian Coordinating Ministry of Economy, the palm oil industry has provided employment to 16 million workers, both directly and indirectly. In 2018, Indonesia’s palm oil and palm kernel production was recorded at 48.68 million metric tons, consisting of 40.57 million metric tons of crude palm oil and 8.11 million metric tons of palm kernel oil.

In addition, palm oil also has been headlining land conflicts in Indonesia in the past decade. From 2012 to 2021, the Consortium for Agrarian Reform (KPA) recorded 3,537 agrarian conflicts. Within these past 10 years, the plantation sector always sits on top every single year, with a total of 1,380 cases, where palm oil dominates the source of conflicts.

Therefore, the ongoing discussion in the European Union regarding setting up new due diligence against products that are linked to deforestation is going to affect Indonesia and its palm oil producers.

Forest and oil palm in Kalimantan, Indonesia. Image by Rhett A. Butler / Mongabay.

The EU moves

On Jan. 17, 2018, the European Parliament voted to phase out palm oil from its renewable energy program by 2021. It also wants to cap crop-based biofuels at the member states’ 2017 consumption levels and no more than 7% of all transport fuels until 2030.

The vote did not receive a warm response from the palm oil sector. The European Palm Oil Alliance (EPOA) believes that the move was based on the belief that palm oil production was closely linked to rapid deforestation in countries producing the crop. The EPOA argues that 70% of Indonesian palm oil products that enter Europe were already certified sustainable palm oil (CSPO). EPOA chairman Frans Claassen said the initiative amounted to “discrimination” against palm oil.

Regardless, the votes later followed by the adoption of the European Green Deal (EGD) in December 2019, where the EU signed up for a transition to a modern, resource-efficient, and competitive economy with no net emissions of greenhouse gases (GHG) by 2050 and economic growth decoupled from resource use. As a medium-term target toward this “net zero” long-term goal, the EU committed to an increased climate ambition of at least 55% in GHG emission reductions by 2030, as endorsed by the European Council in December 2020 and reconfirmed by the recent agreement reached by Parliament and Council on the European Climate Law.

These actions are actually a follow-up to several international agreements related to climate change. By signing the New York Declaration on Forests, and the 2021 Glasgow Leaders’ Declaration on Forests and Land Use, the European countries recognized the importance of further transformative action in interrelated areas of sustainable production and consumption such as infrastructure development; trade, finance, and investment; and support for smallholders, Indigenous peoples, and local communities.

The EGD was not the only move made in 2019. A few months prior, the European Commission also adopted another initiative to address the global environmental crisis, specifically aimed at reducing the rate of deforestation. The EU Communication on Stepping up EU Action to Protect and Restore the World’s Forests aims to reduce the EU’s consumption footprint and promote the consumption of products from deforestation-free supply chains as a priority.

Indonesia and Malaysia said they would team up to fight what they called a smear campaign targeted at palm oil. In a joint press release, the two nations said they “will continue to fight against palm oil discrimination.” The statement implies that the EU’s moves were simply an act to try to protect European vegetable oil producers who compete with the palm oil industry. In particular, it singles out the exclusion of palm oil from the biofuel market.

Indirect land-use change induced by increased biofuels production
Indirect land-use change induced by increased biofuels production. This figure indicates land requirements for biofuels production in response to current biofuels mandates. Image by Riccardo Pravettoni / UNEP/GRID-Arendal via Flickr (CC BY-NC-SA 2.0).

The fact that Indonesia, as the world’s largest palm oil producer, has lost 27.5 million hectares (68 million acres) of forest over the last 35 years, with 7.5 million hectares (18.5 million acres) of that for agriculture, and 2.9 million hectares (7.2 million acres) of that due to palm oil expansion, is hard to ignore. Despite recent decreases in the country’s annual deforestation rate, in 2018 the country still ranked fourth in the world for deforestation, and forest loss continues to be the major factor contributing to its greenhouse gas emissions.

Indonesia itself has been continuously trying to reform the palm oil sector, including initiating the Indonesian Sustainable Palm Oil (ISPO) program in 2009.

Through the ISPO, the Indonesian government wants to encourage oil palm plantation businesses to fulfill their obligations under laws and regulations, protect and promote sustainable oil palm plantations in accordance with market demands, as well as to support commitments to reduce greenhouse gas emissions.

However, the effectiveness of the certification seems to have fallen short to protect human rights or the environment, as well as ignoring the needs to accommodate input from Indigenous peoples and local communities.

According to an analysis by the U.K.-based Environmental Investigation Agency (EIA) and Indonesia-based Kaoem Telapak, the ISPO fails to address various issues, such as social safeguards, in particular related with Indigenous peoples’ rights, including the right to consent to development projects on their lands. Secondary forests, too, continue to be overlooked as a landscape that warrants protection.

This, in turn, contributes to the low credibility of ISPO certification in the international market. A 2017 report by the Forest Peoples Programme placed the ISPO at the very bottom of a ranking of various certification schemes for biofuels and edible oils. It said the ISPO had the weakest set of requirements of the schemes evaluated.

The ISPO also has failed to reduce land disputes. KPA reports show that 423 cases out of 1,137 agrarian disputes between 2018 and 2021 involved a palm oil company. New updates to the ISPO through Presidential Regulation No. 44 Year 2020 may boost some hope of instilling greater confidence in the sustainability of the product, ensuring that it’s free from deforestation, labor abuses, and land conflicts. The new standard will require all smallholder farmers in the country to be certified, alongside large plantation companies that are already obliged to comply, noting that 40% of oil palm plantation area in Indonesia is under smallholder management. These small farmers often lack support and access to high-yield seedlings. Enrolling them in ISPO certification is expected to help boost their productivity and prevent them from deforesting.

However, the rollout of ISPO certification itself has been slow: only about 38% of palm oil companies are now certified, falling short of the target of certifying 100% by 2014. Not to mention that a fifth of oil palm plantations in Indonesia are operating illegally in protected forests. In addition, bureaucratic tangles and the lack of an effective mechanism in Indonesia to resolve the never-ending land conflicts threaten to further undermine the program. Past experience shows that the failure to ensure sustainability in the palm oil industry will prompt major buyers to stop sourcing palm oil from certain suppliers in the country, as previously done by firms such as Unilever, Nestlé, and Burger King.

Another problem in the palm oil sector is the difficulty of tracing the supply chain from upstream to downstream industries and the affiliation of the plantations with companies that own processing facilities or refineries. A collaborative study between Trase, Auriga, and the University of California, Santa Barbara, found that ownership of more than 50% of Indonesia’s oil palm plantation area is unclear. Therefore, the EU proposal to promote the consumption of “deforestation-free” products, which will heavily affect Indonesian palm oil, should be seen as an opportunity.

Oil palm plantation next to rainforest in Borneo, Indonesia.
Oil palm plantation next to rainforest in Borneo, Indonesia. Image by Rhett A. Butler / Mongabay.

Opportunity in adversity

Apart from the environmental impacts, the expansion of oil palm estates in Indonesia also has led to the loss of Indigenous peoples’ and local communities’ rights to forest areas, often without their consent. In addition, the employment generated by the palm oil industry may be substandard, with allegations of forced and child labor, raising serious concerns about human rights violations.

The negative reaction to the proposal for a regulation on deforestation-free products has overshadowed the fact that Indonesian law enforcement still struggles to impose its authority over the sector. Brave initiatives to revoke permits for illegal palm oil estates are still rare and have met strong pushback from companies.

Instead, Indonesia should use the ongoing due diligence in the EU as an opportunity and leverage to devise more careful and detailed definitions of criteria for sustainable palm oil, covering all relevant environmental, social, labor and human rights issues. There should be a review of the criteria by a multistakeholder process, including representatives of oil palm farmers, Indigenous peoples, local communities, and civil society organizations, alongside government and industry.

The EU proposal to address products linked to deforestation should be seen as an offer of support from the consumer’s side to improve the criteria, implementation and monitoring of the ISPO scheme to enable it to meet ambitious sustainability criteria.

Speeding up the long-delayed Indigenous Rights Bill, which has languished in parliament for years, would also be a good move. The bill would provide recognition of the customary laws and land rights of Indigenous communities across Indonesia, if only parliament would pass it.

Passing the drafts that have been locked in parliament limbo for years into law is more important now than ever. This is because Indigenous communities across Indonesia are facing increasing threats of violence, prosecution, and land grabbing in the wake of the passage of a massive deregulation bill in 2020. Without the Indigenous Rights Bill, land conflicts will keep rising and they will not echo positively in the international market.

Banner image: Oil palm fruits in being transported in Sabah, Malaysia. Image by CEphoto, Uwe Aranas via Wikimedia Commons.

Andre Barahamin is a senior forest campaigner at Kaoem Telapak, Indonesia.

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