Fires and audits overshadow palm oil sustainability claims amid Indonesia-EU “trade war”

Efforts by Indonesia’s government and private sector to counter negative perceptions of palm oil’s environmental and social footprint have been overshadowed this month by the resurgence of rampant forest fires and a damning Supreme Audit Agency report of widespread legal violations.

The developments come amid an increasingly concerted government and private sector campaign to protect and promote the industry in light of a perceived palm oil “trade war” with the European Union (EU) centred on biofuel rules that may reduce EU demand by 60% by 2030.

Indonesia has responded to EU biofuels requirements by threatening WTO challenges and bans on domestic airlines importing Airbus passenger jets. In September the country introduced a ban on sales of products labelled as not containing palm oil.

Complementing these combative approaches to trade diplomacy Indonesia has also been increasingly promoting the expansion of its Indonesia Sustainable Palm Oil (ISPO) certification scheme.

Indonesia hopes to have the ISPO recognised in the EU-Indonesia CEPA free trade agreement currently under negotiation – an outcome opposed by many NGOs.

In March 2019, the ISPO Secretariat’s Azis Hidayat announced that 4.11m hectares – 30% of Indonesia’s plantations – had received ISPO certification.

By August Hidayat updated this to 5.2m hectares, equivalent to around 38% of Indonesia’s palm estates. Indonesian Palm Oil Association (GAPKI) has said 67% of association companies already have ISPO certification with the remainder expected to be certified by 2020.

However, other events in August have called into question what value buyers and investors can place in ISPO.

Contradictory Audits

In a shock announcement, on 23 August Indonesia’s Supreme Audit Agency (BPK) announced that it had concluded that 81% of palm oil concessions in the country violated relevant laws and mandatory management standards.

Violations reportedly included operating illegally in protected, production, or other forest areas, outside of concession boundaries, without relevant permits, and without developing smallholdings for local people as required.

BPK commissioner Rizal Djalil declined to name the companies but said “all the big players” were involved – including many listed on the Jakarta Stock Exchange – and called for the national police and attorney general’s involvement in a clean-up.

Luhut Panjaitan, the powerful Coordinating Minister of Maritime Affairs with a reputation for robustly defending the industry nevertheless acknowledged the BPK findings, saying “these are damages that have been going on for 20 to 25 years”, and “now we have to fix them. We have to find the solutions and we can’t let them be like this.”

The government did not explain the obvious contradiction between the Supreme Audit Agency finding 81% of plantations in violation of laws and management rules and 38% of them having nonetheless been certified legal and sustainable under the ISPO.

Other government and industry actors have responded negatively to the BPK report, casting doubts on the agency’s expertise and suggesting ISPO certifications mean the BPK reports could not be true.

At the Sustainable Strategic Plantation Development Forum (FP2SB) – a palm sector event that took place after the BPK announcement – industry stakeholders reportedly suggested the government should nominate the government-backed ISPO and the Ministry of Agriculture as those allowed to comment on the palm sector. BPK is independent of the government.

FP2SB Chairman Achmad Mangg Stephani said: “The claim of 81% of plantations do not follow [the rules] is somewhat doubtful because it is not in line with other policies implemented by the Government through ISPO.”

During early to mid-September Earthsight repeatedly sought clarification on these matters from the government and industry, writing to the ISPO secretariat, the Ministry of Agriculture, and the Secretariat of GAPKI. None of the three organisations replied. The Ministry of Agriculture’s main contact email address was full.

The positive spin given by the latest ISPO announcements also contrasted with forest and peatland fires raging across the country at levels not seen since 2015.

By 18 September, Indonesia’s National Disaster Management Board reported that more than 328,000 hectares of land have burned and 200 people had been arrested. Global Forest Watch indicated over half of these occurred on peatlands.

Officials admitted that nearly all the fires have been intentionally set, and while many are outside palm or timber concessions, many are likely to have been lit to clear land for palm oil that will ultimately end up in big companies’ supply chains.

Large swathes of the country – and of its neighbours Singapore, Malaysia and the Philippines – were engulfed in toxic billowing haze, resulting in a pattern of school closures, flight cancelations and health alerts that afflicts the region nearly every year.

It was into this toxic mix that on 3 September Indonesia’s Information Ministry launched its #sawitbaik (#goodoilpalm) social media campaign in an apparent ramping up of efforts to protect and promote the industry in the face of “black campaigns” against the crop.

However, the severity of the fires have resulted in the public relations strategy backfiring badly, including not just with environmental and human rights NGOs but among Indonesia’s domestic audience.

The @SawitBaikID has been silent since 16th September.

On 17 September the BPK announced that a report detailing its findings will be published “soon”.