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A new transparency pathway to decoupling commodity trade from deforestation

By Thomas Sembres



Global supply chains are notoriously complex and opaque, making it very difficult to address sustainability issues in mainstream markets – including deforestation, sustainable livelihoods, child labour and land grabbing.

In recent years, however, there’s been a surge of global supply chain transparency instruments, data and analysis to help company and government efforts to stop deforestation associated with commodity trade. These include:

  • online databases
  • dashboards
  • scorecards
  • traceability platforms
  • interactive maps
  • independent local monitoring initiatives

These advances in supply-chain transparency are transforming capacities to identify more systematically the greatest opportunities for action. For instance, subnational data analysis across major commodity producing countries in the tropics shows that the vast majority of deforestation linked to the production and trade of agricultural commodities occurs in a handful of places where the commodities are produced.

However, this is not where efforts to manage deforestation risks in commodity supply chains are systematically concentrated. 
 

Traditional approaches to tracking forest-risk commodities

Traditional approaches to tracing and verifying forest-risk commodities rarely penetrate a market far enough to be able to separate the bad from the good, at scale. The bad is often kept hidden in complex and opaque supply chains. Good practices like sustainable production don’t get the market visibility they deserve, and thus often fail to receive incentives from commodity markets to sustain their efforts.

The following are illustrations of the proportion of total world production covered by a sustainability certification scheme (green) versus the proportion that concentrates 80% of commodity-driven deforestation within four global supply chains (red). These are estimations made by EFI based on various sources.
 

Initial situation: efforts and risks disconnected

Share of the world production covered by a sustainability certification scheme (green) versus the proportion concentrating 80% of commodity-driven deforestation in four global supply chains (red) extrapolated from patterns of the largest producing tropical countries for each of these supply chains (Brazil, Indonesia, Argentina and Côte d’Ivoire).
 

This is a situation without prioritisation of efforts, with a high disconnect between areas concentrating the highest risks and voluntary certification and verification efforts.

Clearly, the data revolution alone is not enough. Many actors are overwhelmed with information or remain unable to seize the opportunities that it can provide. Increasingly, the most significant challenge is making data useful for specific policy purposes, based on shared understanding of trusted information.
 

A new approach: the Transparency Pathway

A new approach is possible: one that leverages transparency at both ends of major agricultural commodity supply chains, and that can turn policy aspirations into pragmatic measures to decouple deforestation and trade.

Our new Transparency Pathway offers a pragmatic method to shift commodity markets towards sustainability, by harnessing the potential of existing information and transparency instruments.
 

Transparency Pathway: Channelling efforts towards risks

In this situation, efforts are channelled towards risk areas through the Transparency Pathway, after agreeing on a risk-based mechanism with stricter requirements (e.g. mandatory third-party verification) for high-risk areas only. This also enables reducing the burden of proof on producers in low-risk areas.
 

Six steps for harnessing the power of data

The Transparency Pathway is a tested method that builds on our experience in supply chain transparency in various countries. In particular, it draws on our partnership with Trase, the first initiative to unlock subnational supply chain transparency at scale in tropical countries.

The method charts six pragmatic steps designed to make collaboration between public and private supply chain actors more impactful and inclusive, while reducing costs and gaining positive visibility in global commodity markets. Incremental information disclosure is used as a mechanism to reduce information asymmetry among actors, improve governance and support increased accountability.

The six steps are:

  1. Building trust by engaging stakeholders
  2. Measuring subnational commodity deforestation
  3. Assessing jurisdictional sustainability
  4. Tracking supply chains to jurisdictions
  5. Establishing a central point of information
  6. Independent monitoring

These steps are adaptable to the country and supply chain context, and the whole process can be applied to any measurable sustainability issue.
 

A jurisdictional approach

We have chosen to take a jurisdictional approach in the Transparency Pathway for several reasons:

  • Possibilities for balancing detail and scale.
    Jurisdictional approaches provide a middle ground between finer approaches that are impossible or too costly to implement at scale, in the absence or incompleteness of property-level data on deforestation, production and supply chain connections; and on the other hand, coarser scale approaches. These may be risk analysis at national level that cannot have the necessary finesse for targeted and proportionate interventions, ending up with much fewer levers for action. 
  • A strategy to include vulnerable actors.
    Traditional farm-level certification approaches tend to exclude the people with the greatest needs, such as small-scale farmers and indigenous communities. This is because they usually place the burden of proof on commodity producers. Small-scale producers rarely have the skills and resources needed to meet this burden of proof and obtain certification. Small-scale producers can also struggle to meet sustainability standards if their land is not zoned for legally planting crops, if administrative procedures are complex, or if official monitoring and law enforcement are not fairly or evenly directed. Only the government and local authorities can address these governance issues.
  • Recognition of government authority to control land use and supply chains.
    The advantage of involving local governments is that they often have the authority and legitimacy to implement sustainability policies – and sometimes, in decentralised systems, to issue regulations – that cover the entire land area under their control. They may also have the authority to monitor and enforce relevant laws and regulations. When their authority is limited, through their institutional connections and the involvement of the national administration, they can leverage regulatory changes at the necessary level. Adopting a jurisdictional approach in monitoring enables building on existing national information systems as much as possible.
  • A strategy to reduce the risk of leakage across supply chains and territories.
    Deforestation, water contamination, and child labour are among many challenges that unfortunately have a great capacity to shift across places and supply chains. These ‘leakage effects’ are a constant concern in efforts to reduce deforestation and forest degradation. Jurisdictional approaches allow for going beyond the inevitable fragmentation of other approaches that would focus on just one supply chain or group of actors in a territory. ‘Free riders’ or ‘poor performers’ don’t go unnoticed and peer pressure from other supply chain actors can help bring them on board. Leakage effects may still occur between jurisdictions, hence the interest in nesting a subnational jurisdictional approach within a national process. This is the approach taken in the Transparency Pathway, inspired by the Terpercaya experience in Indonesia.
     

A guide to decoupling commodity trade from deforestation

Governments, supply chain organisations and anyone convening a multi-stakeholder process to improve the sustainability, governance and reputation of a sector or supply chain will find the Transparency Pathway a practical guide for harnessing the transformative potential of data.

Its principles have been informed by several initiatives supporting the sustainability of commodity supply chains. These initiatives have facilitated constructive engagement among stakeholders, and made the Transparency Pathway a tested way to inform domestic policy making, investment decisions and commodity trade.

We invite you to explore the method further – take a look at the new Transparency Pathway website and don’t hesitate to get in touch for more information.

 


Thomas Sembres

Supply chain transparency and land-use planning

EU REDD Facility

 

Supporting sustainable palm oil: a crucial role for Indonesian districts

By Istu Septania


As consumers globally become more selective about choosing products based on sustainable production processes, suppliers must increasingly provide evidence that their goods are made without damaging the environment or ignoring the rights of local people.

Demand for sustainable palm oil is driven by concerns associated with social and environmental impacts of palm oil production. Consuming countries have frequently been held responsible for driving these impacts and for importing deforestation through commodity supply chains. In response, efforts are being made to reduce oil palm related deforestation, resolve land conflicts, improve smallholders’ livelihoods and agricultural practices, and revamp the sector’s image. Multinational companies sourcing palm oil and palm oil products have improved supply chain accountability and transparency. Indonesia as the world’s leading palm oil producer is also making efforts to address concerns and meet expectations.

An EU-supported webinar hosted by The Jakarta Post on 30 March 2021 explored how The Terpercaya Initiative can support Indonesian sustainable palm oil production and trade. The Initiative, established in 2018 through a multi-stakeholder Advisory Committee, has developed a district sustainability monitoring system that will provide credible information to buyers assessing where to source products in Indonesia. It is part of the Indonesian Government’s efforts to promote sustainability in commodity supply chains and improve the welfare of communities, especially smallholders, by providing accurate information to markets. 

The virtual event confirmed that districts in Indonesia can provide a crucial role in achieving sustainable palm oil; one which must be communicated with buyers and consuming countries as their concerns for sustainability have increased significantly. 

The webinar featured a panel of experts: Jarot Indarto (Policy Analyst at the Ministry of National Development Planning (PPN)/Bappenas); Henriette Faergemann (First Counsellor European Union Delegation to Indonesia and Brunei Darussalam); Asep Asmara, (Director of Export of Agricultural and Forestry Products, Directorate General of Foreign Trade, the Ministry of Trade); Jeremy Broadhead (KAMI Project Manager, European Forest Institute); Nur Maliki Arifiandi, (Policy Engagement Manager, Forests at the Carbon Disclosure Project); and Josi Khatarina (Senior Advisor at Yayasan Inobu).

Indonesia has enjoyed enormous benefits from the high-yielding oil palm and the industry has substantially contributed to socioeconomic development in the country. The palm oil industry has absorbed around 5.3 million workers directly and is an income source for more than 21 million people, including farmers and their families. According to the Trade Ministry, Indonesia supplies 56% of the world’s crude palm oil and in 2020, the export value of the commodity reached US$ 21 billion (Rp 307 trillion), contributing 13.5% of the total value of non-oil and gas exports. 

During the webinar, Jarot Indarto highlighted that the Indonesian government has set its policy direction on sustainable food and agriculture in its 2020-2024 National Medium-Term Development Plan, particularly on integrating supply chains to ensure sustainability and improve the agricultural-based processing industry.

The Terpercaya Initiative aims to provide credible and accurate information about district sustainability performance in producing palm oil and has been developed to support similar outcomes. The initiative has been led by Bappenas with financial support from the European Union, and implemented by Yayasan Inobu and the European Forest Institute. 

The initiative seeks to bring lasting impact at scale by tracking and creating incentives for sustainability performance of districts across the country. The initiative is also expected to support district governments in transitioning to sustainability and its development has been informed by experience in four pilot districts: Seruyan and West Kotawaringin in Central Kalimantan, Rokan Hulu in Riau, and North Morowali in Central Sulawesi.

Terpercaya indicators share sustainability principles and criteria with existing commodity certification schemes, such as the Indonesian Sustainable Palm Oil and the Roundtable on Sustainable Palm Oil, and align with the Indonesian legal framework. The indicators also align with and support local governments in progressing towards the United Nations’ Sustainable Development Goals and Nationally Determined Contributions under the Paris Agreement on climate change.

During the webinar, Jeremy Broadhead, Manager of the EU funded KAMI Project which is implemented by the European Forest Institute (EFI), explained the development of the Terpercaya Initiative. He said a data platform for collating and disseminating information has been established and is now hosted by Bappenas. In addition, supply chain traceability to connect consumers and buyers to information on district progress towards sustainability has been undertaken. He hopes that these efforts can help reinforce supply chains for sustainable palm oil.

The Terpercaya Initiative has developed a set of 22 sustainability indicators to evaluate district level economic, environmental, social, and governance performance.

Details of the 22 indicators are as follows: 

A. Environmental Pillar

  • Permanent forest protection
  • Forest and critical areas protection
  • Fire prevention
  • Peatland protection
  • Climate change mitigation
  • Production forest managed sustainably
  • Water and air pollution control

B. Social Pillar

  • Free Prior Informed Consent (FPIC)
  • Customary rights recognition
  • Conflict resolution
  • Smallholders share
  • Smallholder registration

C. Economic Pillar

  • Smallholder productivity
  • Smallholder organizations
  • Smallholder supports
  • Responsible industry (including ISPO)
  • Poverty rate

D. Governance Pillar

  • Public information access
  • Multi-stakeholder participation in district planning
  • Complaint mechanism
  • Sustainable land-use planning
  • Proportion of budget for sustainability

The Terpercaya Initiative adopts the jurisdictional approach, which has several advantages in overcoming the challenges of sustainable agriculture. Compared to the conventional approach where the focus is on individual plantations and supply chains, the jurisdictional approach is more cost effective and covers all forests and producers, including smallholders for whom certification is often either too expensive or unattainable due to land tenure issues. The approach should help district governments to achieve sustainable agricultural production, support smallholders and thus bring holistic impacts.

Among the main goals of the initiative is sharing objective information on district sustainability performance with stakeholders and supply chain actors and providing information on palm oil governance and trade.

Meanwhile, the Terpercaya data platform is expected to be a key tool to inform discussions on the sustainability of palm oil production in the context of Indonesia’s national and international commitments and Indonesia’s trade including with the EU. It is hoped that it will help smallholders to access supply chains for sustainable palm oil and accelerate district level transitions to sustainability.

During the webinar, Josi Khatarina of the Terpercaya Initiative’s secretariat and Senior Advisor at Inobu, explained that the jurisdictional approach is an inclusive one. The Terpercaya Initiative aims to be implemented at the national level, with four districts for detailed piloting. The initiative is set to collaborate with other regions as well in its effort to achieve sustainable palm oil production on a national scale.

Henriette Faergemann, First Counsellor European Union Delegation to Indonesia and Brunei Darussalam, explained that the Terpercaya Initiative builds on the UN Sustainable Development Goals and Indonesian legal frameworks. It also serves as complementing to the Indonesian Sustainable Palm Oil standard by covering entire jurisdictions and all producers and forests so that nothing is left aside and no one is left behind.

To explore these issues further, see the webinar recording and watch the video on Terpercaya

 

Istu Septania

Public Communications Coordinator

Inobu

 

This blog post was originally published by Inobu on 20 May 2021. Read the original English blog post and the Bahasa Indonesia blog post

Climate finance tracking: From data to ambition to action

By Adeline Dontenville and Angela Falconer


Climate change is a whole-economy problem. Tackling it will require looking at every financial decision through a climate lens. Does the decision result in greenhouse gas emissions or will it reduce them? Will it improve resilience to climatic shocks or worsen vulnerability?

As countries move to implement the Paris Agreement on climate change, they need to know the answers to such questions. They need to be able to track and understand domestic flows of finance so they can better align them with their climate goals, identify gaps and unlock the private investment needed for green, resilient development.

Earlier this year, the EU REDD Facility, Climate Policy Initiative (CPI) and the United Nations Development Programme (UNDP) gathered experts from governments, donor agencies, and organisations tracking climate finance to take stock of progress, in an online workshop.

Setting the scene, Chavi Meattle from CPI gave an overview of the various ways dozens of countries are tracking climate finance and mainstreaming climate change into national and sectoral budgets. Padraig Oliver of the UN Framework Convention on Climate Change (UNFCCC) Secretariat explained how climate finance tracking can feed into countries’ national reporting under the Paris Agreement on climate change, as well as the Convention’s periodic global stocktake showing, “where we are, where we are going and what needs to be done”.

There has been considerable growth in climate finance tracking in recent years. While all of this data is great, how can we ensure it leads to policy action? As noted in the workshop, we need greater transparency, we need to ensure tracking approaches are tailored to each country’s context, and we need to better explain the benefits and opportunities for all stakeholders.


 

Impacts of finance tracking

To get an idea of how national climate finance tracking is helping to increase policy ambition, improve reporting and mobilise new resources, we heard from government representatives in Ecuador, Indonesia, Kenya and South Africa.

For example, Noor Syaifudin of Indonesia’s Fiscal Policy Agency said the country has used climate budget tagging for mitigation action since 2016, and recently included tagging for adaptation actions too. Indonesia used this data for the issuance of green bonds (called Green Sukuk) that have generated more than USD 2 billion for financing climate action.

Sarah McPhail from the National Treasury of South Africa said her country was “late to the party” but was taking a “big bang” approach. Having recently mapped out the landscape of climate finance with GreenCape and The Bertha Centre for Social Innovation and Entrepreneurship, in partnership with CPI, South Africa is now piloting climate budget tagging, which it aims to roll out at national, provincial and local government levels. South Africa is also targeting its whole finance sector to improve climate-related financial disclosure.

In Ecuador, climate finance tracking is evolving to also consider the social justice aspects of spending. As Diego Teca of the Ministry of Environment and Water explained, the country is developing a gender-relevant climate index as part of an ongoing Climate Public Expenditure and Institutional Review.

In terms of building ambition, the speakers said it was necessary to provide the evidence base to inform ambition and implementation, build awareness and capacity at all levels of government, and strengthen climate finance institutional arrangements to increase private sector participation. They also highlighted the need to incorporate equity and ‘just transition’ considerations, extend tracking to adaptation and other sectors, and to strengthen budget effectiveness.
 

Aligning with Paris

The Paris Agreement calls for all financial flows to be consistent with low-carbon, climate-resilient development. The second half of the workshop focused on how to ensure that countries, institutions and companies are aligning their financial decisions with that goal, and whether climate finance tracking can accelerate progress by public and private actors.

Clifford Polycarp of the Green Climate Fund spoke about how the fund is driving systemic change through both its investments and by helping countries to put in place strategies and frameworks and investment plans and capacities. Francisco Dall’Orso from Chile’s Ministry of Energy explained how the country is using UNDP’s Investment and Financial Flows assessments to identify ways to achieve carbon neutrality by 2050 cost-effectively.

Chris Dodwell of Impax Asset Management said that in many cases, national policy responses to climate change had not focused enough on financing requirements and so lacked baseline information from which to track progress. Citing the UK Committee on Climate Change’s 6th Carbon Budget report as a positive example, he also pointed to a need for credible sectoral roadmaps that clarify where private capital is needed and are supported by ‘investment-grade’ policies to attract that capital.

Dodwell highlighted strong growth in the amount of private capital coming into the climate solutions sector. There is a huge interest in investing in this sector, he said. What is lacking is knowledge about where that capital needs to be deployed.

Nathan Fabian of Principles for Responsible Investment added that private investors want to know their financial flows are, in fact, being invested in ways that make a substantial difference. He said a lack of alignment with climate goals is raising concerns in private markets about greenwashing. This highlighted the importance of harmonised approaches, common metrics and terms that can give private investors confidence that investments will align with stated climate goals.

Panellists also spoke a need to focus not only on decarbonisation of private investment portfolios but on increasing investment in climate solutions, including adaptation and resilience. They highlighted a need to measure both flows of finance and the effectiveness of those flows.


 

What’s next?

As CPI’s global managing director Barbara Buchner said in her closing remarks, it will not be possible to assess progress under the Paris Agreement without enhanced approaches to benchmark and measure the impact of commitments and finance on climate mitigation and adaptation goals. Enhanced approaches will also be needed to assess the contribution of public and private actors to sector transitions in the real economy across different geographies.

What’s more, the levels of finance currently available are trillions short of the sums needed to mitigate and adapt to climate change.

The workshop also highlighted the need for clear roadmaps for climate action and investment, greater transparency of financial data, harmonised approaches, and standardised criteria and benchmarks. 

Fortunately, the number of organisations engaged in climate finance tracking is increasing every year, and they are digging ever deeper into this vital area. As this community of practice continues to grow, we look forward to more opportunities to develop and share methodologies, tools and best practices.
 

More information

The workshop on domestic finance tracking and planning took place online on 21 January 2021. It was the latest in a series that began with a workshop that took place in 2019 at COP25 in Madrid.

Watch the recording of the workshop, read the summary report or view the presentation slides. For more on tracking the life cycle of climate finance flows, take a look at the Land-use Finance Tool, an open source tool that CPI and the EU REDD Facility have developed.

 


Adeline Dontenville

Land-use finance expert

EU REDD Facility

 


Angela Falconer

Director, Climate Finance Division

Climate Policy Initiative

 

2020 in review: Risks and opportunities for forests

By Christophe van Orshoven


COVID-19 has brought some of the most pressing global challenges in recent history, including for the world’s forests and the people depending on them. In EU REDD Facility partner countries, the pandemic has had severe social, economic and environmental consequences.

Forest-risk commodity exports have decreased dramatically, jeopardising financial security in agricultural sectors. At the same time, environmental standards have become less of a priority for operators and producers, as sustainability goals give way to tactics for economic survival.

Yet despite these difficult times, our partners remain committed to the sustainability agenda and are working to integrate sustainability as part of economic recovery.
 

Latin America and West Africa: growing interest in supply chain transparency approaches

Supply-chain transparency is key for constructive dialogue on delinking deforestation from the production and trade of commodities such as palm oil and soy. Building on our partnership with the Trase Initiative and the progress we’ve made in tracking jurisdictional sustainability in Indonesia, we worked this year with public and private sector stakeholders to assess the feasibility of transparency approaches for the cocoa sector in Côte d’Ivoire and Ghana.

We also worked with supply chain actors and other stakeholders to pragmatically address deforestation risks in the soy sector, which is where the EU has greatest opportunities for reducing its commodity trade-driven deforestation. Our work also helps inform targeted interventions in soy-related deforestation hotspots in producing countries such as Brazil.


Palm oil plantations. East Kalimantan, Indonesia by European Space Agency

 

Colombia and Ecuador recently started building domestic information systems to monitor forest-risk commodity trade, in response to evolving market requirements for agricultural commodities around the globe. With the Colombian Ministry of Environment and its technical institute IDEAM, we kick-started reflections on how to enhance transparency in the cocoa sector. The study will inform Colombia’s National Roundtable in charge of monitoring zero-deforestation commitments
 

Côte d’Ivoire: designing and testing incentives for zero-deforestation cocoa production

We launched a stock-take of payment for environmental services (PES) experiences in Côte d’Ivoire, in cooperation with Ivorian Forest and Environment ministries. Our findings confirmed the importance of financial incentives to cover initial investment costs. Nevertheless, we concluded that PES should be viewed as a means to an end, not an end in itself. In some cases, the same results can be achieved or greatly facilitated by other types of direct incentives or measures, like securing market access for agroforestry products or protecting tree ownership. Ultimately, establishing a national PES programme is a political decision. It requires sustainable financing, conducive legal, governance and institutional frameworks, and land tenure security.
 

Africa, Asia and Latin America: benefitting from our Land-use Planner

We saw interest this year in our Land-use Planner from Colombia, the Republic of the Congo and Vietnam. The Planner is an interactive tool, designed to help develop land-use scenarios, compare social, economic and environmental impacts, and estimate the costs and benefits of policy decisions.


Workshop on collaborative land use planning in Papua by Mokhamad Edliadi/CIFOR
 

Colombia’s technical institute under the Ministry of Agriculture used the Land-use Planner to evaluate the best scenario for stabilising the agricultural frontier and reducing deforestation. In Lac Duong District, Vietnam, where local forest ecosystems are under threat from further expansion of coffee production and other agribusiness, authorities used the tool for planning processes across the entire district. In the Republic of the Congo the tool helped stakeholders in the Tropical Forest Alliance (TFA) Africa Palm Oil Initiative (APOI) building scenarios for sustainable palm oil development. 

Cameroon continued to use the tool to inform participatory land-use planning decision-making at local level.
 

Colombia and Indonesia: community forestry as a bridge between livelihoods and sustainability

There are many ways that communities protect, manage, and use their forests. Some rely on logging and the timber trade to support their livelihoods. In Colombia, promoting community forestry is a key priority under the National REDD+ Strategy. Working with the Ministry of Environment and FAO, we developed a support package with technical and financial analysis on ways to ensure community forestry contributes to national REDD+ related objectives and commitments. 


Cutting of Capitancillo (Pentaclethra macroloba) boards in a traditional forest exploitation in the Vigía del Fuerte Municipality, Urabá, Antioquia, Colombia by ONF Andina
 

In Indonesia, we are working with our partners to understand how legal timber production from customary forests would advance equity by opening livelihood opportunities for customary groups, while also reducing illegality, deforestation, and forest degradation.
 

Towards 2021

Looking to 2021, we remain hopeful though expect enduring COVID-19 impacts. We look forward to increasing collaboration with local partners, and experts who can take work forward independently, but with strong and continued backing by the EU REDD Facility. We will expand the reach and impact of our work on transparency in deforestation-free commodity production and supply chains, and ways to attract investments supporting inclusive and sustainable land-use planning.

 


Christophe van Orshoven

Team leader

EU REDD Facility

 

Terpercaya: Building a supply chain of understanding and trust

By Jeremy Broadhead


I’m frequently asked why tropical countries shouldn’t clear forests when many industrialised countries cleared theirs years ago. It’s an interesting question and one that I’ve been grappling with since I first went to Indonesia over 25 years ago.

I lived in Central Kalimantan in 1994-1995 working on the research component of the Indonesia-UK Tropical Forest Management Programme. From Palangkaraya, the provincial capital, it was around eight hours drive to the project’s hut where I lived – the pondok – in a pristine forested valley in the Kayu Mas timber concession in Kotawaringin Timur. All along the route, the forest had been logged and heavily loaded logging trucks were a frequent sight and a considerable danger in travelling along the steep slippery roads.


Wheel loader and logging truck in Central Kalimantan, 1994 by Jeremy Broadhead


I spent a lot of time counting and measuring trees across the project’s permanent sample plots, each of which contained over 200 tree species - far more than my home country, the UK, which has only around 50 native species in total. Most of the plots were ultimately logged as part of a growth and yield experiment. At that time, forest cover in Indonesia was still over 60% compared to 11% at home.

In recent years, as the rewilding and reforestation movements have gained strength in the UK, I’ve thought more about this discrepancy. In the UK the situation was the result of an ice age which sharply reduced species diversity, and thousands of years of human activity and forest clearance. In England, forest cover has been estimated to have been only 15% in 1086 when Britain’s earliest public record the Domesday Book was written. Having reached a low point of 5% at the turn of the last century, significant efforts were made to increase UK forest cover to a present-day 13%.

That Indonesia had much more forest and with much higher species diversity did not mitigate the loss of forest. But it was also clear that the demand for land and forest products was increasing as it has done all over the world for many centuries. In the years since, oil palm plantations have been established on 40% of the land area in Kotawaringin Timur. Just over half the district is natural forest but only 1.9% of that is intact. Since 2000 the district has lost 43% of its tree cover and many actors, economies and consumers around the world have played a part in this transition.

Click to enlarge
Global Forest Watch information on Kotawaringin Timur by Global Forest Watch


In 2015, just over 1 million tonnes of palm oil were produced in Kotawaringin Timur, the fourth highest-producing district in Indonesia, with 3.5% of national production. Half was consumed domestically, about 9% in the EU and a minor quantity in the UK. India and China consumed around 10% each. Kotawaringin Timur has, however, experienced significant economic growth since the 90s and between 2003 and 2017 poverty rates more than halved while GDP almost doubled between 2010 and 2019.

Click to enlarge
Trase palm oil supply chain data for Kotawaringin Timur by Trase


Extensive areas of forest have been lost to agricultural development in Kotawaringin Timur and I often wonder about the Dayak communities and forest technicians with whom I used to work. Sangai, the village where the Camp 48 concession headquarters stood along with the project’s guesthouse and laboratory, must have been a quiet place before the loggers arrived. Along the road between Camp 48 and the project’s pondok were small houses, constructed by Dayak workers to honour the forest spirits. 

Living a transitory life between the pondok and Camp 48 with occasional visits to Palangkaraya and Jakarta, I didn’t get many insights into traditional life but I was fortunate enough to visit Tumbang Gagu, a village in Upper Mentaya District in Kotawaringin Timur where a famous longhouse stands. We spent the night with the inhabitant Dayaks, slaughtering and roasting a pig to eat with rice and plants from the forest. They couldn’t tell us how old the longhouse was, only that it was there when Krakatau erupted, which was in 1883. As well as using timber for construction, villagers were reliant on the surrounding forests for food, medicine and other products used in daily life such as rattan and dyes.


Tumbang Gagu longhouse by Jeremy Broadhead

 

Forest protection and restoration – whose responsibility?

Inequalities in land acquisition have plagued human development the world over and desire for agricultural land and economic development has played a huge part. However, if deforestation and dispossession are accepted as a part of economic development, then where does that leave the environment and forest-dependent people? To suggest that all countries let their forest cover fall to the levels seen in the UK could also constitute a race to the bottom which would do untold damage to the global environment and the legacy left to future generations. And in this age of increased awareness of human rights, capabilities also exist to uphold local rights and labour rights and to separate economic growth from negative social and environmental impacts.

In the context Kotawaringin Timur, although customary groups have been able to claim forest since the milestone ruling of the Indonesian Constitutional Court in 2013, there are still no registered customary forests. This may be a result of a lack of information, organisation or leadership, or the choice of a different ownership and/or management model by local people. Unfortunately, information is not readily available but by tracking customary forests as they are claimed and registered, information from organisations like the Customary Territory Registration Agency (BRWA) can allow supply chain actors to determine whether local rights are being respected. This, in turn, can help to protect forests, as has been found in many parts of the world.

 

Development, agriculture and forests – time for a new story

Through past centuries production of agricultural and forest commodities has supported livelihoods, driven economic growth and underpinned welfare improvements, but it has also been a major cause of forest loss. Demand for many products considered to be drivers of tropical deforestation and forest degradation continues to increase, but in recent decades, climate change and biodiversity loss have driven countervailing efforts to protect and restore forests.

The palm oil industry is a major contributor to the economy of Indonesia and in 2018, 36.6 million tonnes of palm oil were produced, equal to roughly half of the world’s supply. More than 80% of the palm oil was exported, valued at USD 18.2 billion. The expansion of oil palm plantations has helped lift more than 10 million Indonesians out of poverty since 2000 and the palm oil industry supported the livelihoods of 23 million people in 2018, 4.6 million of them involved in independent smallholdings. Palm oil is also used in an astonishing array of products used around the world, its productivity and versatile characteristics making it highly valued.

Despite all the positives, the palm oil industry is often seen in a negative light. Along with other agricultural commodities, such as rubber, soya, coffee, and cocoa, palm oil has been blamed for destroying the environment and violating the rights of communities and workers in areas where it is produced.

While various initiatives have responded by making efforts to reduce deforestation in commodity supply chains, political rifts have opened with different lobbies making opposing claims regarding the impetus for, and fairness of advocacy and regulation. The differences in opinion have highlighted the need for improved supply chains of information on land and forest management. Better information exchange could help bridge gaps in understanding along the commodity supply chain and better differentiate factors underpinning the contradictory huge EU demand for palm oil and its negative reputation.

EU economies undoubtedly want palm oil, but the call to stop exporting deforestation and the emissions it produces are growing ever louder. For supply chains of sustainably produced commodities to be successfully established, however, the greatest need is not only for a supply chain of objective information but a supply chain of understanding and trust working in both directions.


Production of agricultural and forest commodities has supported livelihoods and driven economic growth, but it has also been a major cause of forest loss by Jeremy Broadhead

 

Working together

In spite of arguments over palm oil sustainability, reducing deforestation and forest degradation is fortunately a goal agreed by many countries, and related aspirations have been formalised in the Sustainable Development Goals (SDGs) and Nationally Determined Contributions (NDCs) under the Paris Agreement. However, land and forest governance is complex, and the distribution of rights and responsibilities for forest protection, economic welfare and social protection need to be understood and broadly agreed upon for effective, equitable and sustainable progress to be achieved.

Industrialised countries are increasingly taking responsibility for negative impacts overseas but to ensure that positive impacts of trade are not extinguished in the process, support is needed such that SDGs and NDC targets can be met. Most countries have committed to reducing deforestation and forest degradation along with many companies, while in industrialised countries forest area is generally on the increase and forest conditions are improving.

Questions over rights and responsibilities remain. But with domestic legal frameworks supportive of elements encapsulated in the SDGs and NDC, a foundation for equitable progress exists. Through accompanying dialogue and data collection, domestic laws can serve to facilitate sustainable production of commodities, and market-related benefits of sustainable production can be more widely communicated. The EU-Indonesia Voluntary Partnership Agreement which has now been licensing timber exports from Indonesia since 2016 pioneered this approach.

By discussing complex land and forest governance issues with stakeholders along the supply chain and sharing objective information, mutual understanding of European and Indonesian perspectives can help create a chain of trust parallel to the commodity supply chains. This can inform choices to drive progress towards common goals and distribute responsibilities to ensure that principles are upheld, benefits accrue to those making progress and costs are not born by the vulnerable.

 

The Terpercaya Initiative

The aim of the Terpercaya initiative is to support dialogue and cooperation on sustainability and trade and to accelerate district transitions to sustainability in Indonesia. Terpercaya means ‘trustworthy’ in Bahasa Indonesia. The rationale behind the initiative is that by collectively defining sustainability at scale and disseminating information on related indicators, trust can be built amongst supply chain actors and policy and market incentives can be established to encourage positive progress. This approach supports attainment of SDGs and NDC targets in producer countries, while reducing the environmental footprint of consuming countries.

The Terpercaya Advisory Committee is chaired by the Indonesian National Development Planning Agency (Bappenas) and includes members from a wide range of key stakeholder groups. Terpercaya effectively allocates accountability to producers and supply chain actors associated with individual districts, as a means of promoting progress towards sustainability while adhering to principles of legality and legitimacy. Legality is upheld by alignment with domestic legal frameworks, and legitimacy strengthened through the leadership of the multi-stakeholder Advisory Committee. 

The system is designed to work at scale so that all actors are included, and to draw on available, objective, independently verifiable data for regular tracking of progress against indicators reflecting the environmental, economic, social and governance dimensions of sustainability. By building on laws relevant for sustainable palm oil production, they also support widespread adoption of the Indonesian Sustainable Palm Oil (ISPO) standard. Indicators allow questions to be answered such as:

  • Are smallholders being supported and are they benefiting?
  • Are forests and peatlands being protected?
  • Are indigenous and local people’s rights being upheld?
  • Are equitable systems of governance operating?



 

The district approach hinges on the role local governments can play given their authority and legitimacy to promulgate regulations and policies for sustainability. Districts, for example, have the authority to issue certain permits as well as monitor and enforce laws and regulations, and resolve tenure legality issues. In this way, district approaches underpin the transition of the entire jurisdiction towards sustainability. 

A data collection and dissemination platform currently being developed with support from Inobu should provide visibility for sustainable districts and enable sourcing decisions and assessment of due diligence by responsible buyers. Bappenas has expressed interest in using indicator data to help programme support for districts in reaching goals set out in the national mid-term development plan. Work is also underway to determine ways that the platform could be used to support transactions between buyers and companies trading palm oil from sustainable districts. Through the Terpercaya approach it is hoped that forest protection can be a part of socio-economic development in moving towards a greener future.

 

Towards a greener future

Much positive progress has been seen in recent years in Indonesia through Government adoption of a moratorium on oil palm expansion, ISPO revamp, peatland restoration efforts. The country’s timber legality assurance system (SVLK) has been successfully implemented, the Indonesia-EU Voluntary Partnership Agreement in place, and there is falling poverty and steady, measurable reductions in deforestation rates.

What we’re seeing is a change from conflict between nature and industrialisation to complementarity. A healthy environment is an economic necessity, and the dichotomy between environment and economy no longer holds. By building a supply chain of understanding and trust, supply chains of sustainable commodities can hopefully flourish.

 


Jeremy Broadhead

Asia coordinator

EU REDD Facility

 

 

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The views and opinions expressed in this blog are solely those of the original authors and other contributors. These views and opinions do not necessarily represent those of the EU REDD Facility, or other contributors to this site.