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Chairperson of Yayasan IDH
This interview was originally posted on Roundtable on Sustainable Palm Oil (RSPO).
Can you tell us more about IDH the Sustainable Trade Initiative and how the organisation plays a role in driving forward a more sustainable palm oil industry?
Established ten years ago, IDH works to ensure that there is transformation of sector and markets of globally traded commodities, delivering impact on the Sustainable Development Goals.
We focus on creating positive impact across agriculture and forestry including the palm, cocoa, coffee and cotton sectors. We have also invested in apparel and electronics. Our view is that since most companies face similar social and environmental issues it is worth trying to solve them together.
Our approach is to work with private sector partners and other organizations and platforms such as RSPO, WWF and Grow Asia. These partners contribute up to 60% of investments into projects, with 40% coming from IDH. Our aim is to achieve improvements in the following areas: smallholder livelihoods, mitigating deforestation, living wage, responsible agrochemical management and gender equality.
We are also creating impact through innovative financing by engaging with development banks and impact investors to develop ways to support this style of farmer financing. By creating sustainable banking environments in origin regions for productivity input and rehabilitation services, investors may see agricultural investment as less risky.
Do you have experience of being involved in partnerships or collaborations that have played a role in mitigating risk and strengthening long-term sustainability?
We work in three different tiers within the palm oil sector to mitigate risk and strengthen long-term sustainability.
The first tier is focused on developing prototypes, aimed at seeking solutions towards sustainable palm oil. There are currently 8 or 9 prototypes being implemented across Indonesia and Malaysia with private sector partners including Unilever, Asian Agri and IndoAgri Lonsum to name a few.
Through co-investment, IDH provides support by addressing risks linked to independent smallholders – which can include mapping, traceability, land legality and strengthening farmer organisations. More and more this also includes linking to sustainable certification at the national level (ISPO) or global level (RSPO).
The second tier is the Jurisdictional Landscape. A verified sourcing area could include several other commodities tackling shared set of issues: water management, HCV area, land legality, fires, access to finance and collaboration between mills and processing. We collaborate with provincial governments to develop frameworks, programs and investment that address these issues.
The third tier, is focused on linking to the market in Europe – achieving sustainable palm oil with support from IDH. This includes through supporting the Amsterdam Declaration. We want to link what’s happening on the ground to debate and discussion in Europe.
What is one of the key ways we can advance integrated solutions that bring about benefits for all stakeholders involved?
Through a combination of interventions on the ground – to increase smallholder productivity and forest/peat/biodiversity protection systems – and linking this to the supply chains of big companies. This then needs to be linked to the investment required from financial institutions.
To advance integrated systems we need to look at what we are doing on the ground with farmer organisations and mills, then linking this activity to supply chains companies. It needs to be demonstrated that purchasing of 100% certified or verified sustainable palm oil is possible. However, to be able to address issues you need to have capital – which is why financial institutions play such as key role.
How can RSPO work alongside initiatives such as IDH to drive sustainable supply chains?
We have been working with RSPO on a prototype with a company in North Sumatra, where 63 smallholders have now been certified under RSPO.
A good lesson for us has been learning that the mapping of smallholders and strengthening of farmer organizations does not only have to be part of a cooperative. Instead we could work with local traders – who famers trust. Traders link farmers to the mills, where there are incentives to supply certified sustainable palm oil e.g. jumping the queue when delivering goods.
We are also gaining support in the context of jurisdictions. In Indonesia, where they are willing to have verified sourcing areas, we work together with leaders and the Heads of District.
What does a sustainable palm oil future look like to you? What must still be done to get there?
There is demand from Europe for 100% certified sustainable palm oil. Nevertheless, this can’t be achieved with intervention in one or two supply chains. A Landscape Approach or Verified Sourcing Area – taking into consideration the impact of other commodities at the downstream – will also be required. In the future, I believe sustainable palm oil will require thinking outside the box to determine if there is linkage with other commodities also being produced in the local area.
There’s also much capacity building to be done on the ground with farmers. By training farmers on good agricultural practices we can address fires, and increasing yields without expanding into forests or peatlands. This will also require the involvement of local governments, to enforce good policy. Finally, finance is also required to get there.