Tracking sustainable palm oil and defining jurisdictional sustainability

Seeking scalable solutions in Indonesia

The European Forest Institute’s EU REDD Facility and Inovasi Bumi (INOBU) are leading a study that maps and screens jurisdictional approaches to demonstrating the sustainability of forest and agricultural production. The Terpercaya Study takes its name from the Indonesian word terpercaya, meaning ‘trustworthy’, as it aims to generate credible information and analysis. It should inform and improve understanding and trust for discussions on sustainability, trade and cooperation.

The study is financed by the Partnership Instrument of the European Union, through its Delegation to Indonesia and Brunei Darussalam. The study team invites input from interested stakeholders, who can contact the team at:

Key facts

  • Timeframe: 2018-2019
  • Country: Indonesia
  • Partners: European Forest Institute’s EU REDD Facility and Inovasi Bumi (INOBU).
  • Budget: EUR 150 000
  • Funded by: European Union

The objective

The objective of this study is to help Indonesian districts and provinces explore jurisdictional approaches to demonstrating the sustainability of commodity production. The study will provide the jurisdiction, and the smallholder groups involved, a pathway towards clearer market visibility and related incentives. It aims to design and illustrate a system that could track jurisdictional progress in order to: 

  • Identify and reward front-runner districts
  • Attract a second tier of districts capable of demonstrating improvements well before they reach an ambitious target of jurisdictional sustainability or jurisdictional certification

The study should help clarify definitions of ‘jurisdictional sustainability’ in Indonesia, and identify pragmatic jurisdictional approaches that could be replicated to eventually secure global market acceptance and acknowledgement. 

Workshop on collaborative land use planning in Papua

Workshop on collaborative land use planning in Papua

Source: Mokhamad

Workshop on collaborative land use planning in Papua

Source: Mokhamad

The challenge

Consumers rely on public or private certification/licensing schemes to ensure that the items they buy have been produced according to sustainability standards. However, such schemes usually place the burden of proof on commodity producers, including farmers and other small-scale producers, without necessarily attracting price premiums on the demand side. 

Furthermore, in many producing countries, systemic issues also make it difficult and/or expensive for producers to meet the criteria of sustainability standards. These issues include: land allocation or zoning that determines where farmers can legally plant crops; administrative procedures; and fair and proportionate enforcement or official monitoring. Only the government and local authorities could address these issues. In practice then, sustainability certification schemes therefore risk excluding small-scale farmers who lack the resources or skills to meet their costly standards.

Certification remains an important tool for many companies, as well as a source of inspiration and best practice. Simpler, more affordable and scalable, yet trustworthy, approaches may help, and could complement certification. A trustworthy system requires transparency, as well as simple and objective verification. Measuring sustainability performance at the jurisdiction level, based on a few Key Performance Indicators and a supply-chain tracking system, may be a first step. It could, for example, be a simpler and less costly way to ensure a reduction in deforestation from producing more and better agricultural products while including smallholders and indigenous peoples in global supply chains.

In contrast to farm level and supply chain initiatives, jurisdictional performance is the responsibility of subnational governments working in conjunction with agribusinesses, farmer groups and civil society. The jurisdictional approach relies on new synergies between the authorities and the resources of different actors to achieve common goals. Democratically-elected local governments play a central role, with both the authority and legitimacy to issue regulations and implement policies for sustainability. More importantly, local governments, unlike many other actors, have the authority to monitor and enforce sustainability laws and regulations.

The approach

In decentralised Indonesia, district governments are responsible for providing public services and for coordinating socioeconomic development at the subnational level. A new decentralisation law, issued in 2014, redistributed some of the authority of district governments to provincial governments, especially as related to forest management. However, district governments still have the authority to develop agricultural development plans, issue licences for plantation companies, and to ensure that producers, including companies and small-scale farmers, cultivate the land sustainably.

The Terpercaya Study focuses on sustainability in agricultural commodity production at the district and higher levels (provincial and national). It gives particular attention to the palm oil sector and market demands for improved sustainability information. The initiative also seeks to inform major national policies related to climate change and sustainability. These include Indonesia’s Nationally Determined Contribution under the Paris Agreement on climate change, and efforts to accelerate palm oil certification, in particular through the Indonesian Sustainable Palm Oil (ISPO) initiative.

The study benefits from innovative methods for processing and visualising supply chain data that are making it possible to track complex supply chains more quickly and cheaply than before. The study collaborates, for example, with the Transparency for Sustainable Economies (Trase) initiative, which is developing a comprehensive tracking system for Indonesia’s palm oil sector based on diverse publicly accessible data sources. The study assesses the extent to which the newly-available information can help screening for market opportunities and for more cost-effective monitoring of the implementation of government policies and regulations, while providing higher market visibility for local supply chain actors.

This study ran from February 2018 until July 2019. It was officially launched at a seminar in Jakarta on 23 April 2018. A multistakeholder Advisory Committee was established at this seminar, to ensure regular inputs from stakeholders. This Committee was chaired by the Delegation of the European Union to Indonesia and Brunei Darussalam and the Coordinating Ministry of Economic Affairs of the Republic of Indonesia. It had 15 members representing the central government, district governments, non-state actors and the private sector. The Advisory Committee held its first meeting in July 2018 and its fourth and final meeting under the EU-funded project in June 2019. 

The study asked the following questions:

  1. Within the next two years, would it be possible to track sustainable palm oil and jurisdictional sustainability performance across Indonesia? How reliable would a system for this be?
  2. Can we build a consensus among stakeholders about the best indicators for measuring jurisdictional performance? Are these indicators acceptable and appropriate for tracking the sustainability of palm oil?
Palm oil nursery in Indonesia

Palm oil nursery in Indonesia

Source: Aul Rah

Palm oil nursery in Indonesia

Source: Aul Rah

Results and impact

The most important achievements of the Terpercaya study so far have been:

  • Establishing a multistakeholder Advisory Committee involving five Indonesian ministries and building trust for continued inter-sectoral dialogue on sustainable commodity production and improved forest and land-use governance.
  • Supporting development of a shared understanding on indicators of jurisdictional sustainability as the basis for an evolving definition contributing to EU-Indonesia dialogues on sustainability and trade.
  • Increasing government interest in jurisdictional approaches as a means to increase smallholder engagement and facilitate jurisdiction-wide monitoring not offered by existing producer-based sustainability schemes.
  • Supporting sustained engagement between the EU Delegation and the Indonesian Government on sustainability and trade.
  • Building understanding of potential links between the timber legality assurance system under the EU-Indonesia Voluntary Partnership Agreement on Forest Law Enforcement, Governance and Trade and the Terpercaya jurisdictional sustainability monitoring system.
  • Creating an entry point for the Government of Indonesia to demonstrate progress towards jurisdictional sustainability and zero deforestation, in anticipation of increased palm oil supply chain transparency and rising policy and market incentives for sustainable production.
  • Building understanding of Trase among Indonesian stakeholders and improved understanding among Trase consortium members of potential risks in Indonesia associated with different engagement modalities and strategies for using information.
  • Developing a set of 22 Terpercaya indicators grouped into environmental, social, economic and governance categories, together with information on related Indonesian regulations and Sustainable Development Goals, and an initial scoping of data availability and collection strategies.

Terpercaya’s progress has been underpinned by cross-sectoral engagement, a strong basis in the Indonesian legal framework, jurisdiction-wide coverage, as well as the EU’s backing and emphasis on incentivising progress of districts in transitioning to legality and sustainability rather than focusing on shortcomings.

Next steps

The Terpercaya project will continue into 2021 with a second phase funded by the EU REDD Facility. The next phase of the project will test the 22 indicators to ensure that they are relevant and that data are available for objective verification. After the testing process, the indicators can be revised or changed as required. Guidance will then be produced to support districts in understanding and verifying indicators.

A fifth Terpercaya meeting is planned for September 2019. Options for institutional hosting are being explored.

Project resources