Khor Reports comment: Indonesia has been moving ahead with various programs to improve sustainability in its palm oil sector. These range from increasing high-key awareness of its efforts in sustainability improvements (e.g. moratorium and REDD+ programs, high-level attendance at international meetings and more) and also more precautions such as a bill to protect farmers' interests. There is a clear impetus for the Ministry of Agriculture to intermediate efforts as there are widespread concerns that unfettered international voluntary programs could be unintentionally disruptive or divisive of the palm oil supply-chain, especially for its small producers and smallholder farmers.

Indonesia's program with the UNDP has been in the works for some time, and the Sustainable Palm Oil Initiative’s (SPOI) national platform was just launched (see news item at bottom). It seeks to help the smallholder sector. Industry talk has been that Indonesian policy makers and bureaucrats had not been so pleased with some private sector programs that asked smallholders to take out significant loans to join sustainability programs which had no promise of premiums to cover the cost thereof. Indeed, key programs often do not highlight the "cost-effective" and "inclusive" principles within their sustainability approach (some other agro-commodities programs are better at doing so). These two features are important for small producers and smallholder farmers; else they be excluded and/or continue to lose bargaining and pricing power to middle-men.

We'll have to find out more about the UNDP program in due course - including its costs and benefits. Smallholders have so far been neglected in the drive for sustainability, so this new program should be a plus. With crucial national and multilateral support, the program can hopefully look beyond narrow commercial interests too. It was already well known in the early days of economic sustainability that "unequal trade deals" would be risky (see blog posting below).

The escalating push for sustainability points toward variable market access or restrictions and hence multi-tier pricing for the commodity. Will a high risk sourcing zone status result in an international price discount? Fortunately, smallholders should retain privileged market access. However, program efforts are needed to effectively secure this and ensure that most of or the majority of any premiums for this category actually reaches smallholders.

Sustainability markets are narrow, shallow and obscure. But the big changes they portend is generating heightened interest and scrutiny.

Related blog posting: /khorreports-palmoil/2014/04/revisiting-brundtland-report-1987.html
Tuesday, April 15, 2014;  Revisiting Brundtland Report 1987
Khor Reports: The risks in unequal trade deals has long been recognized, even in the earliest days of the international push for change for sustainability in its broadest sense (inter-generational equity and more) . The UN’s "Our Common Future" / Brundtland Report of 1987 was still heavy on a government role and the principle of “sharing” and conflict mitigation between unequal institutions in the developed world and the developing world. This thinking seems of lower currency in the 2000s sustainability movement (or not highly practiced), including in the sector of palm oil sustainability, which has been narrowly driven on the basis of eco-certification or labeling. The narrower approach is associated with greater competition among NGOs for control of market share in eco-labels and market access policies, as seen across various agro-commodities. In palm oil, top Indonesia policy makers and industry associations are stepping up on regulatory changes and plans for national spatial landuse mapping. Is this the return of government to mediate the uneven negotiations of the big B2NGO2B deal phase? Also witness Australia state government moves to raise the standard on NGO claims and reduce the problem of market boycotts; /khorreports-palmoil/2014/04/australia-resource-industries-seek-ban.html.

News links:

Palm oil certification gets int’l support by Tama Salim, The Jakarta Post, Jakarta | Business | Sat, October 04 2014, 1:19 PM; "Indonesia, the world’s largest producer of palm oil, has launched an internationally backed nationwide program to improve the livelihoods of small-scale oil palm growers by helping them obtain national certification for sustainable practices....The Agriculture Ministry, in partnership with the United Nations Development Program (UNDP), officially launched the Sustainable Palm Oil Initiative’s (SPOI) national platform to help low-income oil palm farmers increase their productivity and improve environmental management....Agriculture Minister Suswono said the UNDP had donated US$15.5 million for the five-year program, which aims to get smallholders to abide by Indonesian Sustainable Palm Oil (ISPO) standards, a mandatory sustainability certificate introduced by the government in 2010....According to Suswono, the SPOI program is targeting 4.4 million hectares of oil palm smallholdings, or equal to 44 percent of the country’s total oil palm plantation area. As many as 2.2 million farmers tend the smallholdings, most of which are in need of revitalization and better management. He said he hoped the program would help plantations drive up productivity by at least 5 tons per hectare. Currently, small-scale growers produce 2.5 to 3 tons of crude palm oil (CPO) per hectare, lower than the private sector’s production potential of 6 tons per hectare....The international community, however, has been loathe to recognize the ISPO, saying it does not do enough to ensure sustainability, especially since Indonesia has a weak system of law enforcement. The ISPO lacks 11 percent of the indicators found in the RSPO, including high conservation value, while the RSPO will need 25 percent additional indicators to fully comply with the ISPO.... http://www.thejakartapost.com/news/2014/10/04/palm-oil-certification-gets-int-l-support.html