Tackling Deforestation in the Palm Oil Industry: Quo Vadis Private and Public Sectors Commitments?

Introduction

The ‘Lungs of the Earth’ and ‘Paradise on Earth’ are descriptions associated with Indonesia’s forests because of their beauty and as home to the largest mega biodiversity on earth, accounting for 15.5% of the world’s flora and 10% of the world’s fauna (MoEF, 2014). Many people also depend directly on these forests, especially indigenous people and local communities.

Indonesia’s legal forest area covers around 133 million ha but only 93.6 million ha is still forested.[1] Unfortunately, Indonesia has continued to loose its forests at an alarming rate. Margono, et.  al  (2014) reported that total primary forests loss between 2000 to 2012 was 6.02 million ha, with increase of average rate of 47,600 ha per year. Between 2009-2011, deforestation in Indonesia reached 1,240,000 ha. 40% of the deforestation took place in Sumatra (Greenpeace, 2013). The natural forest and peat lands in Indonesia have been replaced by other land uses, mostly for industrial plantations, such as oil palm and pulpwood.

The plantation sectors such as oil palm and pulpwood are the largest driver of deforestation in Indonesia. Around 24 million hectares of rainforest were destroyed in Indonesia between 1990 and 2015 based on the official figures released by the Indonesian Government. (Greenpeace, 2018)

According to Ministry of Agriculture (MoAg)[2], the total area of oil palm plantations in Indonesia reached 14.03 million ha in 2018. Since 1990, Indonesia’s palm oil production has increased more than fourteen-fold, and in 2005 Indonesia became the largest producer of palm oil in the world. The significant increase of the lands for oil palm plantation, mostly to satisfy the global demand for affordable vegetable oils, including as an ingredient for 50% products of consumer brands at the supermarkets globally as well as for biofuel.

The forest fire crisis of 2015 was a man made disaster and considered as one of the biggest crisis in Indonesia’s history. The disaster in Sumatera and Kalimantan led to the destruction of around 2.6 million ha of forests and peat lands causing 100,000 premature deaths[3] of people in the Southeast Asia region due to heavy air pollution, as well as increasing the risk of Orangutan extinction.

Companies use fire to clear the land to make way for expansion of agriculture commodities like oil palm, because it is the cheapest way to do. They firstly drain the carbon rich ecosystem of peat lands by making canals, and are then able to plant oil palm. The drainage of the peat lands itself emits between 70-100 tons CO₂ per hectare per year[4] into the atmosphere. At the same time, the drained peat land makes the ecosystem much more fire prone, irrespective of who starts the fires.

Fires and the resulting haze have caused Indonesia and neighboring countries significant economic, social and environmental costs. Early estimates of the total economic costs of the fires in 2015 in Indonesia alone exceed US$16 billion, and the biodiversity loss cost is estimated about US$ 295 million for 2015. Daily emissions from Indonesia’s fires in October 2015 exceeded the emissions from the entire US economy – that is more than 15.95 million tons of CO₂ emissions per day.

The concerns around deforestation, fires, animal extinction, social conflicts and other problems with the palm oil industry, especially in Indonesia, has increased significantly in the past two decades. There have been commitments made by governments and companies to tackle deforestation in Indonesia since then. What are the main commitments from government and companies, what are the progress and the major challenges to deliver them, and what are the recommendations, will be the main focus of this article.

The Commitment

Back to 2010, the Consumer Goods Forums (CGF) in Cancun[5] announced its commitment to eliminate deforestation from the palm oil supply chain and other high-risk commodities by 2020. Four years later in 2014, a multi-stakeholders platform including major consumer companies with government and civil societies called New York Declaration on Forests (NYDF)[6] declared it aimed to halve deforestation by 2020 and to end it by 2030, potentially reducing annual global emission by 4.5 to 8.8 billion tons of CO₂. This commitment also endorsed at the Bonn Challenge in 2011[7], another global effort to restore 150 millions ha of worlds deforested and degraded lands by 2020 and 350 million ha by 2030.

Greenpeace and other Civil Society Organizations (CSOs) have been campaigning against deforestation calling companies to commit and implement No deforestation policies. These individual company commitments are now known as NDPE commitments (No Deforestation, No Peat, No Exploitation)[8].  It is a policy or commitment of companies to protect forests and peat lands as well as human rights, not only in their concessions but also across their supply chain. Some companies are in line with 2020 target, however, most do not have any timeline. According to Forest Trends (2017), by March 2017, there are 447 companies had made 760 public commitments similar to NDPE to end deforestation in their supply chain including palm oil and soy and other high-risk commodities, responding the call from the CSOs around the world.

To implement NDPE commitments CSOs and the private sector developed the High Carbon Stock Approach (HCSA), a methodology for putting no deforestation into practice on the ground[9]. This is now being implemented widely by the palm oil sector, as well as being referenced by governments for example the French strategy on importing deforestation[10] and the UNEP[11]. After many reports and non-compliance cases having been published by CSOs capturing the problems of the main palm oil certification system, the Roundtable on Sustainable Palm Oil along with its members, it finally lead to the revision and strengthening of its standards to address no deforestation by requiring compliance with the HCSA toolkit[12].

Major global brands such as Unilever, Nestle, and Mondelez have all committed to have clean palm oil supply chains by 2020. Greenpeace and other CSOs are demanding the global brands as well as manufacturing companies and traders to be fully transparent about where they sourcing their palm oil from, and to publish their list of suppliers. If this is disclosed, it will show us how much the companies are linked via their suppliers to forest destruction and then consumers brands, manufacturers and traders can take action against any supplier group linked to deforestation. Another fact is that all those companies cannot currently claim that their supply chain is 100% in line with their policy and not linked to deforestation. This leaves consumers globally with little hope of stopping ‘dirty’ palm oil entering the brands and products they love if the 2020 target the companies promised cannot be achieved.

Still, deforestation is happening as we speak. Last year, Greenpeace has published an investigative report on the massive deforestation and human rights violation by 25 palm oil producer groups who supplied to the Brands, and who have cleared more than 130,000 ha of forests and peat lands since 2015. 56,000 ha or 40% of the destruction happened in Papua, the last frontier forests of Indonesia (Greenpeace, 2018)

Picture below is showing the big threats on Papua forests from the loggings and oil palm concession allocated in Papua based on the Kepo Hutan, an online monitoring mapping platform by Greenpeace. The red lines are the concession boundaries of the loggings concessions and the blue lines describe the oil palm concessions.

Following the Paris Climate Agreement, The Indonesian government has committed to reducing unconditional GHG emissions by 29 percent from the business scenario as usual by 2030, and up to 41 percent with international assistance. Unfortunately, Indonesia’s Nationally Determined Contribution (NDC) is still aiming for an increase of about twice the current emissions, which is highly insufficient to tackle the problem of our climate change.[13]

According to Wijaya et al. (2017), Existing policies in the land-use and energy sectors, even if fully implemented, will cut emissions only by an estimated 547 MtCO₂ against the reference scenario, resulting in an emissions level of approximately 2,311 MtCO₂ for the land-use and energy sectors alone. This is too high to meet the unconditional target of 2,037 Mt CO₂ set in Indonesia’s NDC.

Strengthening policy and the implementation on the forestry sector will be able to reduce total emissions to around 1,733 MtCO₂ (Wijaya et al., 2018), thereby exceeding Indonesia's unconditional target of 29 percent. This finding highlights the importance of government’s role, but the important precondition to reach the target and managing the natural resources which is transparency is still lacking, despite Indonesia as a country that has adopted the concept and vision of the open government since 2011.

CSOs actions to challenge Indonesia Government on the transparency issues

One map policy is the good example to show the discrepancy between the government commitment and the actions in tackling deforestation problem in Indonesia. The policy aims to provide clarity of landholdings in a one single map, it is also can be used as references for Indonesia’s development for different level of governments. This policy intervention is potentially reducing the land conflicts and disputes that very common in Indonesia caused by lack of records and  different maps from one government agency or levels. The One Map progress is very slow and seems to be  only a political commitment (or trade?) since the era of President Susilo Bambang Yudhoyono in 2011 and then extended every 2 years by President  Jokowi. The accomplishment of one map is schedulled in this year but it is still a doubt if that map can be accessed by public due to refusal of the Indonesian Government to open the maps and the bussiness permits like HGU because it wil threat the national interests, and insist that such data is confidential, and to protect palm oil industry in Indonesia[14]

The data, the maps and information of the permits about who owns the lands  that concern our natural resources management in Indonesia has been a long time hidden and can not be accessed by public. At the moment, many cases of complaints are filed at the Public Information Commission against the governments by CSOs, including Greenpeace Indonesia and Forest Watch Indonesia (FWI)[15] to encourage the Indonesian Government to open those data, so that Indonesia citizens can proactively support and monitor the management of the natural resources, including efforts to prevent corruption and national loss caused by untransparency, including the process of handling permits and weak implementation of the law and regulation. According to KPK (2017), the potential national loss in the forestry sectors between 2003-2014 was about IDR 799 trillion.

Moratorium Policy

Indonesia's forest moratorium policy might be the greatest climate mitigation potential to combat deforestation. It is about temporary delay of granting any permits to operate in the primary forests and peatlands enacted in 2011. Strengthening the forest moratorium alone and to include secondary forest areas and forest areas within the concession can actually lower down emissions by 437 Mt CO₂ by 2030 (WRI, 2017). The new moratorium on granting oil palm permit in 2016 is also considering a step forward, but potentially failed if there is no novelty on the approach like the previous moratorium of granting permits on the primary forests and peatlands that has driven further clearance of 2.6 million ha of Indonesia’s forests based on the CSO’s coalition report on the moratorium evaluation[16].

To be able to end the deforestation, the moratorium should be permanent and should be applied for the existing concessions since there are still good forest inside the concessions that have already granted, therefore there is a need to review those permits accordingly. Some weakness of such moratorium in Indonesia are firstly, it does not apply on the millions of hectares of natural forest that located in the lands that not described as forest areas such as in the plantation area usually controlled by local governments. It almost has no teeth to stop the on going deforestation and peatlands destruction by companies who operate on tho forests and peatlands areas. The nature on its legal scheme under Presidential Instruction is considered as not legally binding and contain no sanction for non compliances for the relevant governments nor companies.

Meanwhile, there is number of contradictions on the Indonesian Government's policy and regulations as a hindrance of the willingness and the implementation of the moratorium to protect the remaining forests and peatlands in Indonesia, for example the ‘planned deforestation’ stated in the 2018 Indonesian Forestry Status Report[17] through so called ‘agrarian reform’ (TORA) program and land swap, the governments continues to allocate about million hectares for the plantation and agricultural development in Papua, the last frontier of Indonesia’s pristine forests. 

Biodiesel policy: A contradiction of commitments  

Another contradiction of the Indonesian Government's commitments to protect forests is its policy on biofuel, where it goes against its objective to reduce GHG emissions. the Indonesian Government argued that the implementation of B20 (20 percent blended biodiesel) target program in 2017 can reduce GHG emissions worth 3.84 million tons of CO2 (Ministry of Energy and Mineral Resources, 2018)[18], and also go some way to addressing fossil fuel imports dependency.

In fact, the emission value of the carbon footprint generated from planting first generation oil palm in Indonesia to biodiesel is greater than fossil fuels, especially when talking about direct land use change and indirect land use change, where deforestation produces high emissions. In order to fulfill the B20 blended target, it is projected that by 2025, the Indonesian Government will require 11.75 million kilo liters and 10.58 million tons of CPO, requiring 3.78 ha of additional lands to plant oil palm for the biodiesel (Co-Action, 2018).  This can be a very serious threat to Indonesia's forests as there wil be a significant increase in demand from the domestic energy market, even if the European Union demands are phasing out biodiesel from palm oil and any vegetable oils by 2030[19]. Given the favourable economics and environmental benefits of renewable energy sources, especially solar[20], and electric vehicles[21] rather than liquid fuel vehicles, Indonesia is heading in the wrong direction.

This year is a critical election year and in the recent public debate of Presidential candidates it seems that both candidates were willing and planning to speed up and increase the B20 target, additionally threatening Indonesia’s forests, peatlands and food security. Therefore, whoever the President is, the forests conversion in Indonesia might still be continued.

The Real Battle Ground

With all the current commitments and efforts by companies and the government, why the deforestation in Indonesia is still happening? Why those dirty palm oil are still produced, traded and consumed? Even worse, the oil palm expansion is starting massively in the Papua forests, which are the last frontier of Indonesia’s forests. So what are the keys challenges we face and the opportunities we have to save Indonesia’s remaining forests and the peat lands?

In 2016, the palm oil production in Indonesia has reached 26.6 million tons[22], with the export value in that year of USD 18.6 billions. Nobody would argue that for Indonesia (and Malaysia), the palm oil industry has made a contribution to the economy of the country and provide jobs and livelihoods for smallholders. In fact, that there is a discrepancy between statistics and reality on the ground reported by NGOs, and weather that industry profits is able to compensate the economic loss and national loss due to the environmental and social impacts from the bad practices of the industry.  Forest fire crisis in 2015 is the best example for this. The economic loss from that crisis was around 16 billions USD, while as a comparison, Indonesia’s export value of Indonesian in 2017 was about 14.7 billions. This has not been calculated with the other loss like health impacts and destruction on our natural resources and biodiversity, that impacted 275 millions of Indonesian and have to bear that costs.

Based on the data from the Indonesian Corruption Eradication Commission, KPK (2016), from 15.7 million hectares of oil palm plantations, 68.83% are owned by corporations, 28.03% are owned by independent smallholders, 3.14% belong to state owned companies. There is an increase in palm oil production and exports, but it is not equivalent to the increase in tax revenues. The level of corporate taxpayer compliance from 2011-2015 fell from 70.6% to 46.3%.

This shows the injustice and the loss of potential income from the industry that should be benefiting this country to finance the public services. The benefit doesn’t go to the most of the people and smallholders who contribute to production (about 42%) of Indonesia’s palm oil and goes to the conglomerates who control thousands of oil palm plantation in Indonesia, as well as the corrupted actors in the government and the companies.

To end the deforestation in Indonesia, people globally might easily think to ban palm oil for solution, unfortunately it is not the case, and even it could go wrongly, it could also result an unintended negative impacts on the biodiversity.

There are at least two reasons. First reason is it is because the producers will look for other customers or lower the price. When the price is lower, the demand from markets, which have less interests of sustainability like India, Pakistan, China will be increasing, thus reduce incentives for environmentally sustainable palm oil. The second reason is the companies will buy alternatives oils, while other vegetable oils require more than nine times as much land as palm oil needed, then this will increase the pressure on the natural habitat loss, species loss, including social impacts. However, the current palm oil industry failure to address deforestation and other dirty business practices will allow hopeless public opinion to have deforestation free products from palm oil and start to against and ban palm oil use, which is happening now in major markets, especially in the European Union.

Recommendation

So what is the win-win solution for these problems? Can palm oil really be produced in a responsible way, getting the most benefit for Indonesia economy and the people without further destruction of our forests and environment?

Forests and the mega biodiversity within, including the people who depends on them is the national identity of Indonesia.  It is very crucial that all the remaining forests, peat lands and other valuable natural ecosystem to be protected, no matter where they are located, inside or outside permit or concessions, in the existing or future allocation. Both of governments and companies have the responsibility for that. They need to halt (moratorium should be properly implemented) any development until they identify or assess the healthy forests and come up with an integrated plan to protect the identified areas, while palm oil can be developed outside of those areas. One of the examples is by using High Carbon Stock Approach that it is more than assessment to identify healthy forests, other natural ecosystem and community uses, beyond that is the plan and implementation to protect and restore to support the carrying capacity of the area as well as livelihoods of the local community. 

There are many ways to gain economic growth on the palm oil industry without expansion. the Indonesian Government needs to focus on the increasing productivity with ecological farming approach and to build capacity to support smallholders to survive in the industry, given the existing significant productivity gap between smallholders and big companies. Palm oil funds that collect by the the Indonesian Government should be allocated on this area, not like in the current situation that it is used to support big companies for biodiesel, which is actually a false solution for our climate.

About more than 70% of palm oil production in Indonesia is for export. The resource curse: National economic that has highly reliance on the natural resources and export is vulnerable in a long (even short) run, due to uncertainty of the external global political, currency and market situation. Indonesia needs also to focus the downstream side of the industry and potential national market and balancing the number of export for the sake of national economic security.

The most critical key for both government and company is the transparency. Bear in mind that it is more than publishing the maps. It is more than traceability, more than public reporting and beyond the Corporate Social Responsibility (CSR) program. It is about taking actions together. In one hand, it should be industrial approach to ensure there is no incentive for forest destroyers, there is no market leakage to sell the ‘dirty’ palm oil to other countries like India, Pakistan and China as well leakage in the domestic market. In the other hand, transparency will give benefit to the country in ensuring the active involvement of the wide public to safeguard and monitor the use of our natural resources in a sustainable way.

Traders and consumer brands companies in the palm oil industry need to required the producer groups in their supply chain to publish concession maps and reveal the scale of their operations; they need to proactively monitor the non-compliance producers who still involved in the deforestation and exclude groups of producers who do not meet deadlines or refuse to reform.  

It seems that the companies at different level of management, either do not understand namely what deforestation-free palm oil means, deforestation free supply chain looks like and how they are able to prove it.  They also might act or implement differently on their commitment, as there is no standards nor definition on the issues of implementation agreed among NGOs and the companies globally, to make the companies (or even government) to hold into account against their commitments.

This industry move will not work without political buy in, especially in the producer countries. It will need a strong role from government aiming for the low carbon development vision to support the willingness and the move of the industry to protect our forests, people and planet by creating and enforcing the law and set of regulations, and be able to punish for non compliance in order to protect citizen’s basic rights for an healthy environment.

Last but very critical, at the end of last year, we have been warned by leading climate scientists under UN Intergovernmental Panel on Climate Change (IPCC), that there is only 12 years remaining for us to keep global warming at the temperature of maximum 1.5 Celsius, which any half a degree will tremendously worsen the risks of extreme heat, drought on the hundreds of millions people in this planet. While, another key pathways identified to stay at 1.5 C is that we need various combination of significant change of approach on the land use and technology. One third of the actions to limit the climate change rely on action on the forest issues particularly stopping deforestation and speeding up restoration works as soon as possible.

There is no planet B, and our battle against the climate change will be more and more difficult if the governments and corporations who are the powerful actors do not act seriously on their commitments. We need them to be accountable to deliver their promises, and we all need to work together in a parallel way to save our planet. Time is clicking, and the climate change is real.

References

Co-action, 2018, “Dinamika Industri Biodiesel Indoensia, Memahami dinamika hulu-hilir industri biodiesel Indonesia”, presentation material, Bogor.

Forest Trends, 2017, Collaboration Toward Zero Deforestation Aligning Corporate and National Commitments in Brazil and Indonesia, Environmental Defense Fund Forest Trends

Greenpeace, 2013, Licence to Kill: How deforestation for palm oil is driving Sumatran tigers toward extinction, Greenpeace International, 13-15.

Greenpeace, 2018, The Final Countdown, Now or Never to reform the palm oil industry. Greenpeace International.

KPK, 2016, Kajian sistem Tata kelola kelapa sawit, Direktorat Penelitian Pengembangan Kedeputian Pencegahan KPK: http://www.mongabay.co.id/wp-content/uploads/2018/05/Kajian-KPK-soal-Tata-Kelola-Sawit-2016.pdf retrived on 3rd March 2019

MoEF, 2014, The Fifth National Report of Indonesia to the Convention on Biological Diversity, Ministry of Environment and Forestry of Indonesia, 2-6.

Margono, BA., Potapov, Peter., Turubanova, Svetlana., Stolle, Fred, Hansen, CM., 2014. Primary Forests Cover loss in Indonesia over 2000–2012, Nature Climate Change, 2-3, Online Version: http://www.nature.or.id/en/publication/forestry-reports-and-guidelines/jagd-2014-primary-forest-cover-loss-in-indonesia-eng.pdf. retrieved on 21/08/2016.

Wijaya, Arief et al., 2017, How can Indonesia achieve its climate change mitigation goal? An analysis of potential emissions reductions from energy and land use policies, Working Paper, World Resource Institute, Online version:

http://wri-indonesia.org/sites/default/files/WRI%20Layout%20Paper%20OCN%20v7.pdf retrieved on 28th February 2019

World Bank, 2016, The Cost of Fire An Economic Analysis of Indonesia’s 2015 Fire Crisis, Indonesia Sustainable Landscapes Knowledge Note: 1, World Bank Group, February 2016. Online version http://pubdocs.worldbank.org/en/643781465442350600/Indonesia-forest-fire-notes.pdf retrieved on 5th March 2019

RSPO, 2008, Fact Sheet, Roundtable on Sustainable Palm Oil Promoting The Growth And Use Of Sustainable Palm Oil: https://www.rspo.org/files/resource_centre/RSPO_Fact_sheets_Extended.pdf Retrieved on February 25^th, 2019