It was first announced in December 2022 by the European Union (EU) bodies that they agreed on the new proposal to address the deforestation caused by their consumption
When it was first announced in December 2022 by the European Union (EU) bodies that they agreed on the new proposal to address the placement of products related to deforestation and forest degradation, the very first group that reacted negatively to the news was the Indonesian palm oil sector. The response itself is not something unpredictable considering the country’s position in the global palm oil industry as one of its largest producers countries.
According to Statistica, from 2012 to 2022 Indonesia has consistently topped the list with more than 60% shares of the market each respective year. However, it is important to highlight that the fierce response to the EU-free deforestation regulation is mainly reflecting the concerns of the private sector actors of the industry.
The EU-free deforestation regulation itself is the latest effort by European countries to fulfil their commitment to preventing the use of products associated with deforestation. Prior to this, in 2019 the European Commission adopted the EU Communication on Stepping up EU Action to Protect and Restore the World’s Forests, which aims to reduce the EU’s consumption footprint and promote the consumption of products from deforestation-free supply chains as a priority. It followed with the European Green Deal (EGD) in December 2019, where they signed up for a transition to a modern, resource-efficient, and competitive economy with no net emissions of greenhouse gases (GHG) by 2050 and economic growth decoupled from resource use.
These are actually a domino chain of EU commitments after signing several international agreements related to climate change such as the New York Declaration on Forests, and the 2021 Glasgow Leaders’ Declaration on Forests and Land Use. The European countries recognized the importance of further transformative action in interrelated areas of sustainable production and consumption such as infrastructure development; trade, finance, and investment; and support for smallholders, Indigenous Peoples, and local communities (IPLCs).
On the other side, palm oil in Indonesia is also widely known as the main driver of tenurial and land conflicts. Annual reports by Konsorsium Pembaruan Agraria (KPA) — an Indonesian NGO focusing on peasant rights and land conflicts — show from 2011 to 2022, a total of 3.700 reported agrarian conflicts, 1.676 took place in the plantation sector and 1.057 of it caused by the palm oil companies. In addition to this, there are also concerns about forced labour, cheap labour, mistreatment of women workers and their rights, and the use of child labour.
Palm oil also has been the main driver of the country’s deforestation and land conversion, causing Indonesia to lose over 27.5 million hectares (68 million acres) of forest over the last 35 years. So, despite recent decreases in the country’s annual deforestation rate, in 2018 the country still ranked fourth in the world for deforestation, and forest loss continues to be the major factor contributing to its GHG emissions.
The facts above show that the real reason behind the worries of the Indonesian palm oil actors over the newly agreed European Union (EU) free deforestation regulation is the reluctance to address the problems within the sector itself.
They’re comfortable with the fact that the current national mandatory certification scheme known as ISPO is still considered weak and in need of strengthening. In their 2022 report, Kaoem Telapak — a forest monitoring organisation — shows that despite its mandatory status, the certification system is not effectively enforced, and companies receive ISPO certification despite not meeting the necessary standards. ISPO transparency is another highlight in the report where public participation has been limited and monitoring of the implementation is now in limbo.
As a result, the EU-free deforestation regulation may lead to increased scrutiny of the Indonesian palm oil industry, and many companies are unable to prove that their products are free from deforestation. These companies are worried that the regulation may exacerbate the problems, as they will be under increased pressure to prove that their products are not associated with deforestation, land conversion and the violations of the IPLCs rights.
If they fail, will make the palm oil companies unable to meet the necessary standards and may lose access to this market. This for sure would have a significant impact on the industry’s revenue. Another real concern for the Indonesian palm oil industry is the cost of complying with the new regulation. To prove that their products are free from deforestation, palm oil companies will require a significant investment in monitoring and verification systems within their own supply chain.
The newly agreed European Union (EU) free deforestation regulation may have caused concern for many in the Indonesian palm oil industry, but it is also a golden ticket to push for significant reform. The Indonesian government should realise that the negative reaction to the EU-free deforestation regulation is an attempt to overshadow the fact that Indonesian law enforcement still struggles to impose its authority over the sector.
Instead, the Indonesian government should use the EU regulation as an opportunity and leverage to devise more careful and detailed definitions of criteria for sustainable palm oil, covering all relevant environmental, social, labour and human rights issues. There should be a review of the criteria by a multistakeholder process, including representatives of oil palm farmers, Indigenous Peoples, local communities, and civil society organisations, alongside government and industry.
The EU’s efforts to address products linked to deforestation should be seen as an offer of support from the consumer’s side to improve the criteria, implementation and monitoring of the ISPO scheme to enable it to meet ambitious sustainability criteria. By pushing for significant reform, the Indonesian government can reduce the environmental impact of palm oil production, protect its valuable natural resources, and enhance its reputation as a responsible producer of palm oil. By addressing the widespread use of forced labour, child labour and the violation of women’s labour, Indonesia will improve the welfare of workers in the industry, and demonstrate its commitment to responsible and ethical production practices.
The fact that Indonesia is the biggest palm oil producer, means we shoulder a greater responsibility to ensure that the Indigenous Peoples and local communities are not being put at risk by the exploitation of the palm oil industry. Only by addressing the challenges facing the industry, Indonesia can improve the sustainability, reputation, and ethical standards of its palm oil production, and will easily meet the requirements set by the EU. By doing so, Indonesia can secure its place as a leading producer of sustainable and responsible palm oil.
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