TFT responds to Chain Reaction Research’s Stranded Assets report

Increased collaboration is key to finding the balance between palm oil development and forest conservation

 

A brief history of palm oil transformation

Seven years ago, NGO campaigns targeting the palm oil industry caught the attention of millions of consumers worldwide. These campaigns created strong links between palm oil and deforestation in the minds of consumers.  As a result, the palm oil industry became the public face of deforestation and the public lobbied palm oil buyers and called for product boycotts. A lot of work has been done over the last seven years to address these concerns:

  • The Indonesian government has released landmark moratoriums prohibiting the clearing of forests and peatland, and the licensing of new palm oil concessions.
  • 365 companies globally have joined the “No Deforestation, No Peat, No Exploitation (NDPE)” or “zero-deforestation” movement.
  • Financial institutions have become aware that land-banks can no longer be used for financial valuation, as developing these lands would violate a company’s NDPE commitments and reduce their access to key markets or valuable finance.

Since we began working in palm oil in 2010, many of our members have committed to the protection of forests, peat lands and people through their own policies. The policies created in collaboration with TFT include a commitment to protect High Carbon Stock (HCS) forests and High Conservation Value areas (HCVs), and peatlands, and are the first step to engage suppliers in a dialogue on policy implementation as it relates to good business practice. As such, we have provided socialisation of those policies to over 975 mills – many of which have now adopted their own NDPE policies.

At the same time, we acknowledge that the scale and complexity of the industry means full compliance with those NPDE policies cannot be achieved overnight. To allow for everyone to demonstrate and follow progress, we have co-designed with companies a transparent system of reporting through dashboards, allowing Civil Society Organisations (CSOs) to track progress and submit grievances directly to our members for their attention and intervention.

Pivotal to this positive chain reaction within the industry has been the development of the HCS forest assessment methodology to quantifiably define areas for conservation and development within palm oil concessions, the product of an innovative collaboration that TFT initiated together with Greenpeace and Golden-Agri Resources.

The six million hectare question – what next?

TFT applauds the recent study by Chain Reaction Research, which highlights 6.1 M ha of forest and peatland in Indonesia that cannot be developed without violating palm oil buyers’ No Deforestation, No Peat development and No Exploitation (NPDE) policies.  This land, situated within palm oil concessions, represents 29% of Indonesia’s palm oil concessions[1].

These 6.1 M ha are evidence of a massive market shift by the palm oil industry to no longer countenance expansion of plantations into forests and peatlands. This situation has come about due to the hard work of many companies to engage with their suppliers and quickly respond to grievances and concerns raised by civil society about forest or peat clearing taking place.  TFT members are at the forefront of these engagements, and we have been eyewitness to what is truly a remarkable industry transformation.

However, we cannot assume that all of these forests and peatlands are securely protected.  Challenges remain to be resolved[2] before the long term conservation of High Carbon Stock (HCS) forests and High Conservation Values (HCV) within the 6.1 M ha can be secured. But we believe the study offers a great opportunity for enhanced dialogue and collaboration among all stakeholders: the palm oil industry, NGOs, communities and most importantly the Indonesian government, to find the right balance between development and conservation.

It is important to remember that concessions containing the 6.1 million hectares of forests are not evenly spread across Indonesia. The majority of these concessions are concentrated in High Forest Cover Landscapes such as Papua. In these landscapes, conventional HCV or HCS assessments do not allow for any development and therefore companies that hold on to these assets are left with only a few options:

  1. Don’t develop the concession area and risk losing their development license. The government will then re-issue a license for this land to another company – perhaps one without NDPE commitments that will develop the land, or…
  2. Develop the land, breaking their NDPE commitments and risking negative reports from advocacy NGOs and a loss of business with their buyers.

Given these choices, is it not surprising that divestment of concession assets that contain forests has already begun, as demonstrated by the recent sale of a concession containing HCS and HCV forest in West Kalimantan[3] by Genting Plantations. Genting undertook HCS and HCV assessments to identify areas within the concession that could be developed without breaching NDPE commitments. Following these assessments, Genting determined that it was not economically feasible to develop the remaining plantable areas and sold the concession to an investment company. What will they do with this land?

To tackle this issue, the HCS Approach Steering Group has initiated the High Forest Cover Landscape Working Group. The group has been working on case studies in Papua New Guinea, Papua province in Indonesia, and Liberia to develop an alternative HCS Decision Tree that takes into account deforestation threats and rates, policy and regulations and, crucially, the development needs and desires of local communities.

However, little progress has been made to date on adapting the HCS Approach to High Forest Cover Landscapes, and the 6.1 million hectares of forest within these concessions remain at risk of future conversion. There is an urgent need for this Working Group to provide solutions and a way forward for these ‘stranded assets’, and TFT will work closely with this group to accelerate their progress. Again, collaboration with government, local communities and advocacy groups will be key to this approach.

Turning a challenge into an opportunity for the palm oil industry

The 6.1 M ha represent an opportunity for industry, the Indonesian government, communities and NGOs, to find the right balance for palm development and conservation, and to restore “brand palm oil” worldwide. The message from global brands and key industry players reflects consumer desire to see responsible growth.

Of course, there remains significant room for development outside the stranded assets. In 2010 WRI estimated that there were seven million ha of degraded land suitable for new oil palm plantations. Developing seven million ha at an average annual yield of four MT/ha would provide an additional 28 MT to Indonesia’s current yield of 35 MT per year. Moreover, with advances in agricultural science, yields have the potential to double, from four to eight MT per ha. Finally, at the smallholder level, which represents approximately 50% of the production, there is an immense opportunity to increase productivity and quality, and to create significant value for all. Clearly, the Indonesian economy can continue to benefit from palm oil market growth while conserving valuable forests and peat areas.

As for the stranded assets themselves, there is an urgent need for mechanisms to give value to standing forest. The role of the palm oil industry may need to evolve to include climate, species and water protection in its remit, through preserving peatlands and forests.

 What is TFT doing in response to these challenges?

Positive dialogues have been created between many different stakeholders, but there is still much to do to protect forests. Our next steps will be to work through several of these ‘stranded’ concessions as case studies in partnership with local communities, local governments, and affected TFT members, with the aim of delivering an outcome that ensures livelihood development for local populations while leaving HCS forest and HCV areas standing.

We will continue to work with the High Forest Cover Working Group in the HCS Approach Steering Group to map out different options and pathways for NDPE companies which have High Forested Landscapes in their landbanks.

In parallel, TFT is researching two key areas:

  • An overview of the legal mechanisms for protecting forests found in and near Indonesian oil palm concessions.
  • Forest-friendly development options for communities to improve their livelihoods while limiting deforestation.

The solutions we are all looking for will not be born out of compliance. The progress the palm oil industry is making is critical but the impact is limited if it takes place in a region where other industries are not playing by the same rules. Solutions will come from collaboration and innovation that creates value for all.

We believe showing the world the industry can strategically plan its development is key for palm oil to be an oil by choice, not by default, ensuring a bright and sustainable future for the industry.

Our palm oil vision is set out in seven key points:

  1. Creating value and trust – between companies, but also with the smallholders producing 50% of the global supply
  2. Helping smallholder farmers develop their own capacity and resilience through strategic use of market links and supply chains and through experts and partners who can help realise the vision of smallholder farmer leaders
  3. Ensure that the rights of the local communities are respected and that communities have a say in issues affecting them
  4. Democratizing and simplifying verification through real time monitoring and verification tools, as accelerators of change. One example of which is Starling, an Airbus Defence and Space, TFT and SarVision initiative. Starling is an inexpensive and private service that enables growers to verify and give evidence of good practices through high-resolution, timely satellite imagery.
  5. Continuing to build supply chain traceability – as a means, but not an end.
  6. Collaborating on landscapes – focusing the push towards sustainability through in specific areas will bring about transformational models that can then be scaled up
  7. Addressing labour issues – creating a respected and productive workforce

To learn more about our vision in more detail read our 2017 palm oil paper. 

[1] Chain Reaction Research “Indonesian Palm Oil’s Stranded Assets: 10 Million Football Fields of Undeveloped Land”, www.chainreactionresearch.com and https://chainreactionresearch.files.wordpress.com/2017/02/palm-oil-stranded-land-size-equals-ten-million-football-fields-crr-170209.pdf

[2] http://www.inpop.id/en/news/read/12-02-2016-key-ministries-to-refine-high-conservation-value-guidelines-for-legal-recognition-in-indonesia

[3] http://www.genting.com/press/2017/GENP_25012017_a.pdf