Indonesia and Malaysia jointly produce 84% of the world’s palm oil, at 32.4 and 17.1 million metric tons respectively. 19% of the production is certified by the Roundtable on Sustainable Palm Oil (RSPO), most of which is sold to Europe, the second largest buyer of palm oil (17%). In 2015, the European Sustainable Palm Oil project was initiated, leading to a private-sector palm oil pledge to achieve 100% sustainable palm oil across Europe by 2020. The production-side objectives include transparent land titles, forest and peat protection, and smallholder inclusion. The private-sector initiative is supported by various European countries through the signing of the Amsterdam Declaration. Currently, 69% of the 2016 European palm oil imports for food were certified as sustainable.

Impact Focus

Market transformation

Denmark, France, Germany, the Netherlands, Norway, the United Kingdom, and (since 2017) Italy have already committed to support the uptake of sustainable palm oil in Europe. To achieve the goal of 100% sustainable palm oil in Europe by 2020 (palm oil that is traceable to plantation level, with mill level as an intermediate step), IDH is focusing on the largest European offtake markets that have not yet made this commitment, such as Spain and Poland. Furthermore, we aim to link market demand to regions where farmers and governments are balancing production, protection and inclusion.

We do this by linking the market demand to Verified Sourcing Areas (VSAs), and by strengthening our engagement with other mayor buyers of palm oil, such as India, China and the Indonesian domestic market. To benefit both the forest and the farmers, we will also continue our work with palm oil producers in Indonesia to get more smallholders RSPO and ISPO (Indonesian Sustainable Palm Oil) certified. In order to help farmers apply new agricultural practices and put a stop to deforestation, investments will be needed. Finally, through our landscape work we will create the enabling environment for sustainable palm oil production. Land-use planning, policies and enforcement thereof are crucial to enable transition in the sector.

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KPI progress 2017

  • Change in Business Practices

    Percentage of Palm oil imported 2020 100
    Target 2017 70
    Result 2017 69
    A VSA is a defined area or jurisdiction where production meets relevant sustainability criteria. By verifying at landscape level rather than individual farmers, this system will be cheaper to implement and lift the entire region, not only the frontrunners. This means that sustainability targets related to good agricultural practices, forest and peat protection, and governance itself can be much more ambitious in scale and wider in scope. The IDH-led Sustainable Landscapes Working Group (previously the Traceability Working Group) in the palm oil sector recognizes the need for landscape-level verification and set targets and milestones for action in 2018. We’ve also set up a think-tank on VSAs with large brands and retailers, initially focusing on soy and palm oil. This led to the development of a concept note and clear next steps for 2018. The first ESPO monitoring report was presented at the European Palm Oil Conference in November 2017 providing aggregated, Europe-wide figures showing that Europe imports 69% certified sustainable palm oil (2.5 metric tons) for food.
  • Changes in Sector Governance

    Effective multistakeholder convening target 2017 (not set) 0
    Result 2017 7
    The ESPO project’s supported national initiatives to develop and implement specific, time-bound and cost-effective action plans to achieve 100% sustainable palm oil per country by 2020. For example, the Spanish National Initiative was created in 2017 and is taking its first steps. The French Alliance for Sustainable Palm Oil has been entrusted to oversee the Economic Activities Working Group, which is part of French national plan against imported deforestation. The European Parliament adopted the report on “Palm oil and deforestation of rainforests”. Together with its European partners, ESPO has managed to include statements that support sustainable palm oil in the resolution. EU member states are called upon to ratify the Amsterdam Declaration and to introduce obligatory requirements favoring sustainable palm oil in national public procurement procedures. IDH also concentrated on gaining endorsement for the Amsterdam Palm Oil Declaration from European countries, and facilitating the dialogue on sustainable palm oil in Europe between the various stakeholders, including upstream and downstream partners and relevant NGOs. In 2017, Italy signed the Amsterdam Declaration, which is an important step considering the political sensitivity around palm oil, and the country is starting to move towards sourcing more sustainable palm oil. IDH also contributed to drafting the national action plan on Palm Oil in Indonesia – the aim is for formal adoption in 2018. We have also been asked to support ISPO strengthening through partnership with national government.
  • Field Level Impact

    Number of farmers reached/trained 2020 120
    Target 2017 15
    Result 2017 9
    As a result of the field-level projects, and in collaboration with the private-sector companies, we contributed to the production of 35,000 metric tons of certified/verified sustainable palm oil, the training of 7,352 farmers on good agricultural practices, 2,053 certified (or in the process of certification) farmers, and an area of 2,798 hectares where certified palm oil is produced. At the beginning of 2017, only around 1,500 independent smallholders were certified worldwide (within and outside of our program). By implementing sustainability projects, we managed to increase certified numbers worldwide by 137%. We realized this by innovating at supply-chain level, for example by using local traders (aggregators) to support training and sustainability outreach. We have brought our cost per farmer down by almost ten times between the first and most recent projects. In addition, one of the projects revealed that using a belt press in the production process can reduce greenhouse gas (GHG) emissions from palm oil mills by 25.5%. Part of this project was also the development of the first prototype to enable mill operators to calculate the impacts on GHG savings.

With the support of ESPO initiated by IDH we will continue to facilitate and support actions to improve sustainable production and achieve 100% sustainable palm oil imports in 2020

Frans Claassen, Managing Director MVO (Dutch Oils and Fats Industry Association)

Relevant SDGs

  • 5 Gender Equality
  • 8 Decent Work & Economic Growth
  • 12 Responsible Consumption
  • 15 Life on Land

Gender focus

In our field-level projects in palm oil, at least 728 female farmers have been involved in training. We have no data on explicit gender analysis prior to starting the palm oil field-level projects. From now on, we will require implementing partners to conduct this analysis at the start of new projects, most feasibly under the umbrella of the landscape program in Indonesia.

Lessons Learned

Trust-building is critical. Co-funding can play an important role in building that trust since this demonstrates commitment to execute actions.

Development of a VSA proved to be more complex than anticipated. It is necessary to develop the logistics and operational model of the VSA before the roles for downstream and upstream actors can be defined.

Smallholder inclusion
RSPO certification remains a challenge for smallholders. In particular, the ongoing costs of audits (which are typically US $7,000-15,000 each year) are a significant burden while premiums remain low. To make new models of smallholder inclusion, such as the VSAs, a success, they will need strong links with the market end alongside cost-effective verification methods.

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