November 20, 2019
Indonesia was plagued by a particularly bad fire season this year, which destroyed over 800,000 hectares of forest and caused widespread air pollution as well as respiratory problems throughout Southeast Asia. Most of the fires were set to clear land for planting, particularly for oil palm plantations. According to a recent Greenpeace report, at least 10,000 fire hotspots were detected in concessions that produce palm oil purchased by major consumer goods manufacturers such as Procter & Gamble, Unilever, and Nestle as well as traders including Wilmar, Musim Mas, and Cargill.
Consequently, public facing companies, and their suppliers have been working to improve transparency within their supply chains to help spot deforestation risks. In 2019, the number of companies reporting on their use of Indonesian palm oil grew by 20%, according to a recent report by CDP. Additionally a coalition of producers and buyers operating in Indonesia announced plans last month to fund and develop a radar-based forest monitoring system called RADD in order to increase transparency and reporting in palm oil supply chains. The system will allow stakeholders to observe forest loss with greater accuracy by detecting deforestation through real-time monitoring.
In light of growing concerns over sustainable palm oil production, the Roundtable on Sustainable Palm Oil (RSPO) has increased its efforts to address the discrepancies in companies’ performance and reporting. Last year RSPO members unanimously agreed to adopt more stringent environmental criteria for producers, and new requirements for smallholders, including new protections for secondary forests, peatlands, and the incorporation of the High Carbon Stock approach. Although their methods of monitoring deforestation were recently criticized by Greenpeace, they aim to more effectively address deforestation in RSPO-certified oil palm concessions. Last month, Musim Mas’s subsidiary PT Multipersada Gatramegah became the first mill to be successfully audited against the new standards, but most companies still have a long way to go to meet even basic certification requirements.
Because strong demand for certified palm oil from downstream companies is essential to encourage sustainable production, the RSPO is preparing to release new guidelines this month for buyers of RSPO-certified palm oil. Under the new guidelines, palm oil buyers must increase their purchases of certified palm oil by 15% every year or face fines and possible suspension from the RSPO. Although this could help the ongoing issues around insufficient demand for certified palm oil, the RSPO has not yet finalized these new rules. Some of these same palm oil buyers will likely come under further scrutiny from assessments of their performance in the World Wildlife Fund’s upcoming 2019 Palm oil buyers scorecard. Assessments and scorecards by environmental groups like WWF and Greenpeace can be important motivators for companies to address deforestation. In recent reporting, Supply Change found that companies assessed for deforestation in their palm oil supply chains were more likely to have commitments to address deforestation in their palm oil supply chains (88%) than those that were not (38%).
The Indonesian government is also taking steps to incentivize sustainable palm oil production. Indonesia’s environment ministry recently introduced a new green fund totaling USD $141 million, which aims to mitigate climate change through increasing forest protection, and restoration projects. It will also establish a carbon trading program, rewarding communities which are making efforts to reduce emissions and preserve biodiversity around their land holdings. Norway’s ambassador to Indonesia and other foreign officials expressed optimism about the fund’s potential to strengthen coordination between local government agencies, international donors, and the private sector, as well as its potential to boost green investment.
These initiatives will be increasingly important as the global demand for palm oil continues to grow. In China, for example palm oil consumption has risen more than 20% in the last year. The demand has led to many concerns around sustainable production, because few companies operating in China have made commitments to source sustainable palm oil, and Chinese consumers are often unable or unwilling to pay the higher premiums for sustainable palm oil. However, though the demand for sustainable palm oil in China is small, momentum is growing. In 2018, a coalition of nonprofits and companies like Cargill, L’Oréal, and Mars came together in 2018 to form the China Sustainable Palm Oil Alliance. In the months to come, these initiatives will be increasingly important to ensure sustainable production in Indonesia, especially as fires sparked by the cultivation of palm oil plantations continue to spread across the country.
More stories about changing supply chains are summarized below, so keep reading!
- The Supply Change team
Upcoming Events and Updates
Sustainable Landscapes and Commodities Forum
London, U.K. | November 20-21, 2019
Innovation Forum will be holding a two-day conference exploring the latest solutions to how companies can deliver on their sustainability commitments. Supply Change will be participating alongside senior professionals from where we will explore barriers in removing deforestation from supply chains, and examine how to implement successful policies beyond 2020. Discussions will cover a wide array of topics including leadership in sustainable agricultural practices, barriers to removing deforestation from company supply chains, resiliency among smallholder farmers, and agri-tech’s role in building sustainable landscapes.
Already confirmed to participate are senior professionals from L'Oreal, Mondelez, Nestle, WWF, Unilever, Golden Agri Resources, WRI and many more. To find out more please visit here.
As Supply Change is a Supporting Partner, we are able to offer a 15% discount when registering by using the SC15 code.
UNEP FI Regional Roundtable on Sustainable Finance - Europe
Luxembourg City, Luxembourg | November 28-30, 2019
UNEP FI will hold its 2nd Regional Roundtable for Europe, will discuss developments such as innovation in sustainable insurance, and scaling up financing for landscape protection and restoration across agribusiness supply chains. Visit here for more information.
UN Climate Change Conference - ICROA COP25 Workshop
Madrid, Spain | December 1-13, 2019
Through engaging market stakeholders, civil society and national governments, ICROA (International Carbon Reduction & Offset Alliance) has embarked on a series of workshops to identify the challenges and solutions among voluntary market stakeholders. Forest Trends’ Ecosystem Marketplace will kick off the event with the launch of their latest publication on the voluntary carbon market, giving insights on current trends and sharing the latest aggregated market data. Moving forward this group will have a critical role to play in exploring voluntary action under the Paris Agreement. Register here.