Indonesia's palm oil gambit

In recent weeks Greenpeace registered significant success when campaign pressure succeeded in convincing Nestle to review its palm oil supply chain in the world's biggest producer, Indonesia. A few weeks ago Indonesian president Yudhoyono declared plans for a two-year moratorium on deforestation. Have enough gains been made to protect Southeast Asia's rainforests? In this month's Regional Matters article, Vaughan Yarwood documents the progress made so far and asks whether it will be enough to safeguard unique habitats and wildlife while still providing the locals with a living.

On 17 May 2010, the Swiss-based food giant Nestlé announced that it had joined a coalition calling for a moratorium on the destruction of tropical rainforest for palm oil production in Indonesia and had become an ‘active member’ of the Roundtable on Sustainable Palm Oil (RSPO). The company also said that it was to partner with the international non-profit Forest Trust to identify and exclude from its supply chain ‘companies owning or managing high-risk plantations or farms linked to deforestation’. Nestlé stated that it had already suspended all palm oil purchases from Indonesian conglomerate Sinar Mas, ‘which has admitted to mistakes in the area of deforestation’.

According to the Jakarta Globe, in 2008 Sinar Mas — which accounts for about 10 percent of Indonesia’s palm oil production —  had rebutted a report by environmental watchdog Greenpeace linking the company to deforestation, calling the report ‘one-sided, inaccurate, exaggerated and misleading’.

However, Greenpeace’s claims pressured Unilever, the world’s largest buyer of palm oil, to commission an independent investigation in 2009 which confirmed that Sinar Mas had destroyed forests and peatlands, despite being committed to sustainable practices as a member of RSPO.

Contrary to the claims of Sinar Mas, Unilever’s auditor, Aidenvironment, found ‘the situation on the ground to be worse than depicted by Greenpeace’, and included the draining of peatland and deforestation of orangutan habitat. As a result, Unilever, which processes 1.3 million tonnes of palm oil each year for products ranging from ice cream to soap, suspended its US$32.6 m contract with Sinar Mas in December 2009. In also set itself the target of sourcing only sustainably produced palm oil by 2015.

Nestlé’s recent pronouncements on palm oil followed a two-month campaign by environmental activists, which gained traction when the company removed a Greenpeace video from YouTube, ostensibly because of copyright violations. The move was widely seen as blatant censorship, however, and the video went viral. Nestle´s subsequent comments were considered arrogant by many and the company’s Facebook page became a focus of growing public discontent. In announcing its new policies, which include the pledge to adopt Unilever’s sustainability target, Nestlé did much to repair the damage to its image.

However, both Unilever and Nestlé look likely to struggle in efforts to clean up what are very opaque supply chains. In 2008 Unilever admitted that it had no idea where about 20 percent of its Indonesian palm oil came from and knew the suppliers, but not necessarily the concession areas of origin, for the remaining 80 percent. At the time, Greenpeace criticised Unilever for its failure to exert a leadership role in the RSPO — a criticism that seems to have been borne out by the later ‘mistakes’ of RSPO member Sinar Mas.

The Indonesian government itself has had mixed results in pursuing palm oil as an environmentally viable solution to the country’s poverty trap. On 27 May, on the eve of the Oslo climate and forest conference, Indonesian president Susilo Bambang Yudhoyono announced a two-year moratorium on deforestation as part of a deal under which Norway would contribute US$1 bn to help preserve the country’s forests. But the deal was criticised for allowing existing activities by plantation companies to continue unchecked.

Under the deal, Indonesia will no longer issue permits for forest clearance and peatland drainage, but existing permits will remain valid. Sinar Mas alone holds a landbank of about one million hectares designated for development and campaigners fear the announced moratorium will trigger a rush for new concessions before it comes into force in 2011.

President Yudhoyono said that Indonesia remained committed to the global initiative to cut emissions from deforestation and forest degradation — the REDD Plus scheme, while at the same time ‘helping local populations become more prosperous’.

During a post-conference cabinet meeting, Yudhoyono qualified his comments by adding that the expansion of palm oil plantations would not destroy the environment. ‘The area categorised as forest (will be sustained) as forest, the land classified as agriculture area will be used for agriculture. The unutilised lands will be used for agriculture without destroying our forest’, he said.

With half of the country’s palm oil plantation land in the hands of smallholders, there is evidence that the crop is indeed helping to lift some villagers out of poverty. John McCarthy, of the Australian National University, surveyed several villages in Sumatra and discovered what he called ‘the emergence of a rural middle class’.

McCarthy found that villagers who owned as little as 2 ha were able to provide financial security for their families, while those without palm oil remained impoverished. Nevertheless, corruption is rife, local communities continue to be marginalised and the system favours large companies, according to the executive director of Indonesian NGO Sawit Watch, Achmad Surambo.

There is also evidence that much forest is logged in the name of palm oil, for which the land is unsuited. A survey in 1998 by Japan International Cooperation Agency (JICA) and the National Development Planning Board (BAPENAS) found that only 15 per cent of the land earmarked for the crop in West Kalimantan was appropriate.

The answer may lie in increasing productivity of existing plantations for smallholders. Steaven Halim of plantation company Lyman Agro, suggests a target of 3.5 tonnes/ha of oil per year — at present it is about 2.0 tonnes/ha.

Malaysia, the world’s second largest palm oil producer after Indonesia, offers an encouraging example. At present its plantations are achieving 3.85 tonnes/ha. In May 2010 the country’s Plantation Industries and Commodities minister, Tan Sri Bernard Dompok, claimed that ‘new technology and good agricultural practices’ could push that figure much closer to the theoretical yield of 18 tonnes/ha.

What is at stake

• Some 80 per cent of the world’s palm oil is grown in Malaysia and Indonesia, and an area the size of Greece is cleared every year.

• Deforestation accounts for about 20 percent of all greenhouse gases, making Indonesia the third-highest emitter, behind the United States and China. It has pledged to cut carbon emissions by at least 26 percent by 2020.

• Between 1990 and 2005, Indonesia lost 28 million ha of forest, including 21.7 million ha of virgin forest. Its forest cover has shrunk from 82 percent of the country in the 1960s to less than 50 per cent in 2010. Much of the clearance on the islands of Borneo, New Guinea and Sumatra is for palm oil.

• Indonesia plans to increase palm oil production to 24 million tonnes by 2014, according to the Agriculture Ministry. In 2009, production reached 19 million tonnes.

• Currently valued at US$7.7 bn a year, the palm industry is Indonesia’s third largest export earner.

• According to Sawit Watch, by 2008 the country had 514 ‘known continuing conflicts’ related to the development of palm plantation developments.

• Indonesia and Malaysia are among the world’s most biodiverse countries, with some 30,000 species recorded in Indonesia alone, and with fresh discoveries being made every year. Indonesia contains 10 per cent of the world’s remaining  tropical forests, hosting 10 per cent of the world’s plant species, 12 per cent of its mammal, 16 per cent of its reptile and 17 per cent of its bird species. Among species threatened by deforestation in the region are the orangutan, the Asian elephant, Sumatran and Javan rhinos, the sun bear and the Sumatran tiger.

- by Vaughan Yarwood

Images sourced from Wikimedia commons:

1) Deforestation at Bukit Tiga Puluh national park, Sumatra

2) Orangutans are now only found in rain forests on Borneo and Sumatra.