‘Devil in the Details’ for Palm Oil Sustainability

Jul 02, 2014

The Jakarta Globe. Ukui, Riau. When Wartono arrived in Ukui, a village in Sumatra’s Riau province, 26 years ago, there was little else beyond a dusty, rutted road that carved through the jungle.

Like many Indonesian families from densely populated Java, Wartono and his parents moved to Riau as part of then-president Suharto’s transmigration policy of the late-1980s. Promised two hectares of land to cultivate under the “plasma scheme,” the family were offered a new start. No one told them, however, that there was nothing waiting for them.

“When I first came here, our area was all jungle,” Wartono said, sitting on a rug in the front room of his tidy, two-story home. “It scared me. There was no decent infrastructure.”

Now the road from Riau’s capital, Pekanbaru, is paved. There is electricity and employment. And the jungle has been cleared and replaced with hundreds of thousands of hectares of oil palms.

Like much of Riau, Ukui has been transformed by the rapid development of oil palm plantations. The province is now the largest producer of palm oil in Indonesia and the industry is a major driver of economic development.

For a farmer like Wartono, 41, palm oil provides an average monthly income of about Rp 3.5 million ($295), a house and the chance to send his two children to university.

But the industry, environmentalists say, is also the biggest single driver of deforestation and wildlife habitat destruction in Indonesia.

Wartono is one of 15,000 smallholders in Riau contracted to supply Inti Indosawit Subur (IIS), a subsidiary of Indonesian palm oil giant Asian Agri. He is also the type of fruit supplier the company likes to present to the media — successful and certified by the Round Table on Sustainable Palm Oil (RSPO), a multi-stakeholder initiative committed to sustainable palm oil production.

In an industry that has become synonymous with the destruction of rainforests and wildlife habitats, corruption, and fueling haze from forest fires, a story like Wartono’s is a stamp of credibility.

In 2012, Asian Agri, which is part of the Royal Golden Eagle conglomerate, was found guilty of one of Indonesia’s largest cases of tax evasion and, in a report released last year, the company was implicated in sourcing fruit from illegal plantations in Tesso Nilo National Park by the World Wide Fund for Nature.

Faced with a consumer backlash in Western markets, pressure from NGOs and the government, the company has scrambled to clean up its image in the past two years. Committing its agreement with Riau’s plasma smallholders to sustainability is one of its flagship projects.

Pengarapen Gurusinga, head of the smallholders’ association at Asian Agri, said there were 29,000 smallholders throughout Sumatra contracted to supply IIS, and more than 80 percent of them were RSPO certified.

“The most important act in this is to educate the farmers to practice sustainable farming,” he said.

Certified farmers, whose smallholdings, or plasma farms, are worked on primarily by family members, are taught sustainable plantation management, such as protecting the environment and wildlife, and to stop slash and burn farming, Pengarapen said.

Standards are ensured through regular training and monitoring, all of which is paid for and conducted by Asian Agri.

“Changing the mind-set of farmers is not easy,” Pengarapen said. “But now with the recommendations and standards of the RSPO they need to be responsible.”

But responsibility is not yet a hallmark of the palm oil companies themselves.

An opaque supply chain has made it all but impossible to verify if fruit grown on illegal plantations — often on cleared peatland or in forests not designated for palm oil production — was being mixed with fruit grown legally.

“At the moment the transparency is almost none in the supply chain,” said Irwan Gunawan, market transformation strategy leader for agriculture and fisheries at WWF. “Even the RSPO traceability system only tracks down to the mills.”

In addition to receiving fruit from its own smallholders, Asian Agri also takes fruit from independent smallholders, who are self-managed, self-financed and not contractually bound to any one mill.

Only a fraction of those, such as the Amanah Palm Oil Independent Smallholders Association, are RSPO certified.

Asian Agri has said it receives the bulk of its palm fruit from its own plantations or smallholders. But data on how much fruit is purchased from suppliers not owned by the company or contracted to the company is lacking, RSPO documents show.

IIS, the only subsidiary of Asian Agri that is a member of the RSPO, did not declare how many tons it purchased from independent smallholders or third-party suppliers in its 2012-13 progress report, or how much was from certified sources.

Furthermore, IIS does not anticipate achieving 100 percent certification of independently sourced palm fruit until 2053, according to the report.

In May, the company announced efforts to “fortify” its policy of responsible fruit buying. The policy requires Asian Agri’s independent smallholders and third-party palm oil suppliers to provide legal documentation to show the source of their fresh fruit bunches.

Suppliers who present illegal fruit have their agreements suspended. All reports of illegally supplied fruit will be investigated, the company said.

Asian Agri general manager Freddy Widjaya said his company was committed to ensuring the legality of its fruit supply.

“We want to make sure that the fruits from our farmers come from sustainable farming practices,” he said.

But there are still doubts from some quarters. Irwan said because the supply chain between smallholder plantations and mills was complex, oversight was still an issue.

“The critical point is that from the plantation to the mills Asian Agri hasn’t been able to develop a system to prove that this part of the supply chain is clean and without contamination,” he said.

He said that although it was important to support the commitment from companies on sustainability, the “devil is in the detail.”

“That’s why as an organization we’re cautiously welcoming any sustainability commitments from companies, because that is easy on paper, but not in implementation,” Irwan said.

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