Identifying Small Wins towards ISPO Certification of 1 Million Palm Oil Smallholders in Indonesia in 2025

Last week, Strengthening Palm Oil Sustainability Indonesia (SPOS), IPB University, and ANGIN-Wageningen University hosted an online dialogue session on the possibility of ISPO-certifying one million Indonesian smallholders by 2025. Overall, experts speaking at the dialogue appear cautiously optimistic about the ambitious goal, with several pertinent points:

1. Marieka Leegwater from Solidaridad Palm Oil Program reiterated that transparency is imperative for ISPO standards to be effectively enforced and receive recognition by value chain and government. In response to a question about fostering a fair relationship between mills and smallholders, Marieke opines that it cannot be forced, as the former are typically in a better position contractually than the latter. 

2. Rukaiya Rafik from Forum Petani Kelapa Sawit Berkelanjutan Indonesia (FORTASBI) was optimistic about the possibility of certifying one million smallholders by 2025. Data is already available, as are incentives, although the latter is not yet well integrated throughout the supply chain. Rukaiyah agreed with Marieke’s answer on the question on mill-smallholder relationships, adding that it presents a good opportunity to encourage smallholders to get certified. 

3. Frans Claassen of Margarine, Fats and Oils (MVO) explained that several initiatives and measures introduced, including the ISPO and relevant presidential moratoria, have contributed towards international recognition of sustainable palm oil from Indonesia. Success stories help, such as the declining deforestation rates linked to palm oil plantations for four years in a row in Indonesia. With specific reference to ISPO, increased transparency, continuous improvements, and clear benefits for the smallholders are key to strengthening its credibility.

Source: Heriawan, National Action Plan of Sustainable Palm Oil (2021). There was a discussion on whether intercropping or agroforestry would be more acceptable to big plantation companies, especially considering that these companies would likely be deterred from agroforestry practices as it may lower their oil palm production rate.

SIIA Haze Outlook 2021

It is halfway through 2021, meaning it is time for another risk assessment report on the infamous haze within the Southeast Asia region. Together with the Singapore Institute of International Affairs (SIIA), we concluded that there is a low risk of a severe transboundary haze incident for this year, on account of favourable weather, pandemic-related disruption to land clearance and planting exercises, and proper forest management by various stakeholders, including the Indonesian government.

As usual, Segi Enam Advisors collected and examined qualitative and quantitative data from various sources, including recent academic literature, meteorological departments, and government agencies. We also provided geospatial analysis of key areas in the Riau and Central Kalimantan regions to give a geographical overview on hotspot intensity in relation to other information such has forest and peatland moratorium areas and districts with food estate projects in planning.

Read the full report here: SIIA Haze Outlook 2021

Edit (28.06.2021, 11.40 a.m.): ANTARA News covered the launch of the Haze Outlook 2021 report during SIIA’s virtual webinar on 24 June 2021. The article reported the statements made by guest speaker Herry Purnomo of the Center for International Forestry Research (CIFOR), who commended both the public and private sectors for their roles in reducing fires and deforestation, and SIIA chairman Professor Simon Tay, who opined that the extension of the Peat and Mangrove Restoration Agency’s tenure shows the Indonesian government’s fire prevention commitments.

Covid-19 and the Johorean Property Market

As the pandemic drags on, one obvious victim is real estate. Market outlook in 2020 have been unsurprisingly bleak, although experts have expressed cautious optimism for 2021 as some aspects within the sector gradually improve. Still, it would seem a relatively long way off until a more significant recovery occurs, as owners of property in Johor Bahru would tell you.

Channel News Asia’s Amir Yusof wrote an interesting piece on how the residential property market has been hit by the Covid-19 pandemic. According to a report by property consultancy firm Henry Butcher, Johor contributed 20% of overhang residential properties in Malaysia in 2019, making it the state with the highest proportion of unsold residential property even before the outbreak of the coronavirus. Segi Enam Advisors principal, Khor Yu Leng, contributed her opinion on the matter, explaining that:

“The spending power of the former Johor daily commuters and Singapore residents who visited Johor weekly or otherwise has diminished or disappeared from the Johor economy… A year later, with Johor’s economic umbilical still cut off from Singapore, and Malaysia suffering a big wave of COVID-19, informal social support activities (to help the lower-income households) have been ongoing.” 

Head over here to read the entire article: How Johor’s residential property market has been hit hard by COVID-19

UPM-CIRAD-MPOB: The New Geopolitics of Palm Oil Industry and Deforestation—From Neo-Colonialism to Post Covid-19

Last week, University Putra Malaysia’s Institute of Tropical Forestry and Forest Products (INTROP) collaborated with the French Agriculture Development Centre (CIRAD) and the Malaysian Palm Oil Board (MPOB) to host a webinar on the geopolitical issues surrounding the palm oil industry and deforestation.

The speakers and panellists approached the subject matter from different perspectives: (1) Jean-Marc Roda spoke about a range of topics, including the regulation of imported deforestation, the ever-evolving issue of food security and consumption, and Europe’s biofuels conundrum; (2) Alain Rival explained palm oil’s vulnerability to climate change and the growing need for more sustainable agricultural systems within Southeast Asia region to address that vulnerability; and (3) Khor Yu Leng discussed social media attention on key commodities as well as recent developments relating to trade and climate governance.

Source: Roda, CIRAD/UPM (2021)

Source: Rival, CIRAD (2021). Experimental palm oil plots of TRAILS, a forest landscape conservation programme tackling the adverse impact of large-scale agricultural expansions on land cover change and biodiversity.

Source: Khor, Segi Enam (2021)

Greenhouse Farming Booming in China Amidst Age of Pandemic

The coronavirus outbreak brought to light another unexpected practice: greenhouse farming. Disruptions to farming caused by the pandemic has spurred several areas in China to turn to more modern farming practices in effort to strengthen its food security whilst ensuring safety and quality. Chongming Island is one such example, where glass greenhouses equipped with high-end technology have been set up by professional greenhouse operators FoodVentures to produce sustainable vegetable crops.

Greenhouses are not new in the Chinese agricultural scene—Shouguang, a city in northern China, are pioneers of greenhouse farming and have seen the use of greenhouses since the late 1980s as a way to guarantee a continuous supply of fresh vegetable throughout winter, while Jiuquan has greenhouses covering 1,666 hectares of land in 2019 to combat its cold desert climate. What the pandemic appears to have done is further accelerate the development in the modern agricultural technology; this, coupled with a growing middle class willing to pay more for better quality produce, has reportedly led to a 28% increase in glass greenhouse use in 2020.

BFM: Ronaldo's Gesture Costs Coca-Cola Billions

The business world was abuzz last week: Cristiano Ronaldo’s actions of moving away two Coke cans from view during European Championship press conference has led to a USD4 billion plummet in Coca-Cola’s market value. While the Portugal captain’s opinion on carbonated drinks is already well known, Ronaldo’s gesture was followed almost immediately by a drop in Coca-Cola’s share price from USD56.10 to USD55.22, showcasing a significant effect big names can have on brands. Segi Enam principal Khor Yu Leng was invited to BFM to discuss the matter: Ronaldo's Gesturer Costs Coca Cola Billions.

On Monday, Christiano Ronaldo removed two Coca Cola bottles at a Euro 2020 press conference, which led to Coca Cola acquiring a loss of 4 billion dollars in company market value. We looked into the impact that big names can have on brands, as well as what it takes to be more health conscious.

Image Source: beIN SPORTS France; produced by: Kelvin Yee; presented by: Lee Chwi Lynn, Sharmilla Ganesan

The High Carbon Stock Map by Barry Callebaut and ETH Zurich

In an effort to closely examine the relationship between selected commodities and areas at risk of deforestation, chocolate manufacturer giant Barry Callebaut has teamed up with ETH Zürich, a Swiss public research university, to come up with a High Carbon Stock (HCS) map targeting forests in Malaysia, Indonesia, and the Philippines. The map—an “industry-first”, according to Barry Callebaut—combines existing methodologies involved in deforestation research and artificial intelligence, and provides an indicative illustration of HCS areas by classification across the aforementioned target countries.

From ETH Zürich and Barry Callebaut: “Note: Our indicative HCS map shows which areas are identified as so-called High Carbon Stock forests. These natural forests store a high amount of carbon in the form of biomass. In addition, the map also shows degraded lands (open land and scrub) that store less carbon. Our first high-resolution indicative HCS forest map for Indonesia, Malaysia, and the Philippines is a land-use planning tool. It allows efficient use of available resources to identify forests that should be protected for conservation and degraded lands that may potentially be developed.”

Source: Barry Callebaut (2021)

It is interesting to see the data presented here. Malaysia appears to have a relatively high concentration of medium to high density forest cover, particularly in Sabah, Sarawak, and along the Titiwangsa mountain range of Peninsular Malaysia. For Indonesia, medium to high density forests can be observed in Papua, Sulawesi, Kalimantan, as well as along the north and western areas of Sumatera.

The release of this HCS map comes amid rising sustainability concern within the coca sector, particularly how the practice of cocoa monoculture has contributed towards global deforestation rates. The Smithsonian Earth Optimism hosted a three-day conference on cocoa agroforestry and production in late May 2021, where the more robust cocoa agroforestry approach was recommended, i.e. the cultivation of cocoa alongside other crops. Similarly, Mongabay recently released a commentary surrounding cocoa production in Côte d’Ivoire, urging the same (in 2017, it was reported that the disappearance of 80% of the nation’s rainforests was largely due to cacao plantations). This movement against monoculture practices is not unique to just the cocoa sector: researchers have found that growing both rubber and illipe nut trees together increases both farmers’ incomes and environmental benefits, including better carbon sequestration.

OFIC 2021 Virtual Conference: Day Two

Day Two of the OFIC 2021 virtual conferenced concluded yesterday, this time involving speakers with technology and consumer expertise. Again, there were several intriguing takeaways throughout the day:

1. Dr Jason Schatz of Descartes Labs Inc explained that although recent sustainability monitoring-based technology advances have been promising—e.g. there are now satellites that can see through clouds and tree canopies, as well as measure carbon footprint—mapping out supply chains in detail still remains a challenge. While there is no specific technology that can help solve the problem, Dr Schatz suspects that existing tools, such as a consumer packaged goods (CPG)-traders coalitions, blockchain, and trackers, could go a long way in addressing it.

2. According to Mr Dario Altera, the Oleochemical Head of Department of the Desmet Ballestra Group, the market is shying away from petrochemicals in favour of oleochemicals, particularly in the personal care, pharmaceutical, food, and feed sectors. Consequently, there is a need to find a balance between oil for food and oil for oleo as the market share of oleochemicals and biofuels continues to grow.

3. Dr Gary Theseira observed that Covid-19 has revealed the world’s vulnerability to climate change and other associated risks (interestingly, he mentioned that the demand for plastics has increased during the pandemic). Greater transparency from companies—in this context, palm oil companies—is increasingly demanded by the public and required for more concrete steps to materialise and address this vulnerability.

4. Ms Luanne Sie, the Head Group Sustainability and Corporate Responsibility of CIMB Group, revealed that investors are increasingly asking banks pertinent questions about deforestation and Task Force on Climate-related Financial Disclosures (TCFD). She also gave an interesting update on the regulatory front: the Climate Change and Principle-based Taxonomy, an initiative by Bank Negara which aims to assist financial institutions in determining whether their economic activities will “contribute towards climate change mitigation and adaptation.”

OFIC 2021 Virtual Conference: Day One

The Oil and Fats Congress 2021 (OFIC 2021) is having its annual conference, this time going virtual. The first day yesterday proved highly informative, and many interesting points made throughout:

1. The presentation by Professor Loh Teck Peng of Nanyang Technological University explored whether it was possible to create a fully green, biocompatible synthetic material. Research by Professor Loh’s team has shown that it is entirely possible to create an “aqueous media” using “practical and green chemical process” which generates less waste.

2. During the Sustainability and Climate Change Modules:

   1. Dr Gary Theseira, a senior research officer with the Forest Research Institute Malaysia (FRIM), recommended that sustainability policies should be approached from a more resource-based perspective. To that end, he emphasised the importance of a comprehensive census of resources to dispel the narrative that the palm oil industry is a land and labour hungry sector frequently associated with indirect land use change (ILUC).

   2. Dr Alain Rival of the French Agricultural Research Centre for International Development (CIRAD) pointed out that while oil palm plantations have the advantage of high oil yields and wide agronomic plasticity, it has poor climatic resilience; this is due to factors including large-scale monoculture and risky geographic concentration, i.e. 90% of global palm oil is concentrated around the Malacca Straits. It is thus prudent if research were to pay more attention to the climatic resilience of palm oil.

   3. Sime Darby Oils (SDO) Managing Director Mr Mohd Haris Mohd Arshad believes that evolving global opinions on sustainability points to several indications: (1) sustainability sourcing will be mainstream; (2) ultra transparent supply chains; (3) higher climate change urgency; (4) clearer expectations on human rights protection and remedies, including labour rights; (5) a shift from voluntary to regulatory-based compliance; and (6) increasing investor pressure on sustainability sourcing, e.g. BlackRock CEO’s annual letter to CEOs.

   4. Dr Denis Murphy of University of South Wales presented an interesting observation: the Covid-19 pandemic has increased demand in the personal care sector. This provides an opportunity for companies to address environmental concerns associated with palm oil consumption. There is also rising negative attention directed at the palm oil industry in general, this time most likely fuelled by more recent labour allegations against several palm oil companies.

China Dialogue: Sustainable Palm Oil and Affordability

China Dialogue has recently published an article exploring whether sustainable palm oil is only affordable to western buyers. Our 2019 report written in collaboration with Proforest and WWF Indonesia was cited in the article, specifically the fact that the premium paid for crude palm oil (CPO) is the lowest when Roundtable on Sustainable Palm Oil’s (RSPO) book and claim supply chain method is used. The article also cited that only in general, bigger companies will find it easier to obtain RSPO’s highest levels of supply chain certification compared to smaller ones, thus allowing the former to reap more benefits from the price premium.

China Dialogue also reached out to Segi Enam principal Khor Yu Leng for additional comments, who explained that many growers have opted for both RSPO and the International Sustainability & Carbon Certification (ISCC) certifications in order to better cater to market demands. She also expects that demand for palm oil from the EU would remain stable despite commitments to end biofuel use by 2030, stating that:

“The premium of certified sustainable palm oil will likely rise if new players, such as fast-moving consumer goods companies from Japan or China, start to buy certified palm oil and its derivatives. That will cause a shortage of certified palm oil rather than an oversupply, and the premium will go higher. That, in turn, could stimulate new supply.”

To read more (and you should! The article is pretty interesting and informative), head over to the following link: "Can only western buyers afford sustainable palm oil?"