Leveraging Agricultural Value Chains to Enhance

LEAVES Tropical Tree Cover and Slow Deforestation

B A C K G R O U N D P A P E R

Oil Palm in Indonesia

John D. Watts and Silvia Irawan
Disclaimer:
All omissions and inaccuracies in this document are the responsibility of the authors. The findings,
interpretations, and views expressed in this guide do not necessarily represent those of the institutions involved,
nor do they necessarily reflect the views of PROFOR, The World Bank, its Board of Executive Directors, or the
governments they represent.

The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors,
denominations, and other information shown on any map in this work do not imply any judgment on the part of
The World Bank concerning the legal status of any territory or the endorsement or acceptance of such
boundaries.

Published December 2018

© 2018 International Bank for Reconstruction and Development / The World Bank
1818 H Street NW
Washington DC 20433
Telephone: 202-473-1000
Internet: www.worldbank.org

Rights and Permissions

The material in this work is subject to copyright. Because The World Bank encourages dissemination of its
knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full
attribution to this work is given.

Financing for this study was provided by the Program on Forests (PROFOR).


1. SUMMARY
Tropical deforestation, forest fires, and peatland degradation in Indonesia are a major cause of
greenhouse gas emissions and biodiversity loss. Oil palm (Elaeis guineensis) is one of the more
visible and profitable agricultural commodities driving the expansion of industrial and small-scale
plantations into forest and peatland areas. Although they are not the primary driver of deforestation,
oil palm plantations are the last and most profitable phase of a land governance system that
incentivizes the degradation and eventual conversion of natural forests, beginning with forestry
concessions. Especially in Southeast Asia, oil palm cultivation has become synonymous with tropical
deforestation and subject to numerous environmental campaigns, including calls for boycotts and
other measures to discourage its use. Free from deforestation and social conflicts, sustainably
produced palm oil has become the aspired goal for many consumers, buyers, and governments,
reinforced through zero-deforestation commodity supply chain pledges. The most effective path for
ensuring the sustainability of palm oil, which should trigger a broad-scale reduction in the rates of
deforestation, remains elusive.
This report evaluates six different approaches that have been implemented to transform the production
of palm oil:
1. Private supply chain certification systems;
2. Government supply chain certification systems;
3. Corporate zero-deforestation commitments;
4. Government policies and regulations;
5. Smallholder productivity and intensification; and
6. Jurisdictional approaches to certification.

This report evaluates these initiatives by examining how well they addressed the causes of
deforestation and environmental degradation and their acceptability among different stakeholders. The
Roundtable on Sustainable Palm Oil (RSPO) certification scheme has both the instruments for
reducing deforestation and the legitimacy among nongovernmental organizations, companies, and
consumers globally. The legitimacy of the certification system largely derives from the consultative
processes that led to the development of its principles and criteria. What limits the effectiveness of the
scheme is that it does not address deforestation and environmental degradation in the broader
landscape, the limited uptake of certified sustainable palm oil, and the costs and other requirements of
certification. At present, these limitations prevent RSPO from leading to a broader scale reduction in
deforestation across adjacent landscapes and among independent smallholders. In the case of
Indonesia, the scheme also lacks legitimacy from the perspective of the government, which prefers its
own Indonesia Sustainable Palm Oil (ISPO) system. Although the ISPO system is based on existing
laws and regulations that are more enforceable than the voluntary requirements of RSPO certification,
the system is perceived as a weaker by non-government organizations. These claims have been
reinforced through recent studies that point to RSPO as having more robust environmental and social
safeguards than ISPO.
Apart from the two certification schemes, voluntary efforts have been made by producer companies to
ensure zero-deforestation supply chains. The Indonesian Palm Oil Pledge, which was a short-lived
association of palm oil producing companies, sought to realize its zero-deforestation commitments
through voluntary and collective action. These zero-deforestation pledges were similar to
commitments made by producer and consumer goods companies as well as by importing nations
globally. Similar to the reactions of the Indonesian government to RSPO certification, these zero-
deforestation pledges were met with resistance by the government, which highlighted the
disproportionate impact these pledges would have on smallholders. Under investigation by the
government for cartel-like practices, the association was disbanded. The individual companies
pledged to continue implementing their sustainability commitments through supply chain initiatives,

although in closer collaboration with the government as well as with initiatives that support
smallholder production.
The Indonesian government has also issued laws and regulations to reduce deforestation and
environmental degradation, focusing on peatland degradation and fires. The approach used by the
national government has emphasized strict regulatory approaches rather than positive incentives.
Consequently, the effectiveness of these regulations has been undermined by the government’s
limited capacity for law enforcement in remote, rural areas.
Addressing the yield gap between small-scale and industrial oil palm growers has been identified as a
pathway for encouraging intensification and reducing agricultural expansion into forests and peatland.
National efforts to address the yield gap have focused on providing finance for replanting, while
agribusinesses and nongovernmental organizations have provided local support to farmers. Although
addressing one of the main challenges facing small-scale producers, smallholders, in particular
independent smallholders, generally lack access to high quality agricultural inputs and training and
require a more systematic effort to improve their productivity.
Despite being in their infancy, jurisdictional approaches, in particular jurisdictional certification
initiatives, represent a hybrid approach that has the potential to overcome many of the challenges
faced by other initiatives. Because the pilot certification initiatives were nominated as RSPO pilot
projects, they have the tentative endorsement of the RSPO as well as the leadership of local
governments, supported in many cases by national line-agencies. These initiatives have begun to
address many of the challenges that obstruct the sustainable and inclusive production of palm oil,
through a mixture of local regulations and initiatives supported by the private sector and
nongovernment organizations. While improving productivity, the pilot initiatives have focused on
formalizing the participation of independent smallholders as well as on reducing deforestation and
environmental degradation across the landscape through improved spatial planning processes.
As the demand for sustainably produced palm oil increases, a hybrid approach that supports and
formalizes the participation of independent smallholders while reducing deforestation and
environmental degradation is required. Although not the sole model, jurisdictional certification is one
standard of a hybrid, jurisdictional approach that addresses many of these challenges, particularly
when it eventually applies to all products exported from the jurisdiction. Understanding the benefits
and limitations of these initiatives while building market recognition for this model of sustainably
produced palm oil requires empirical research supported by constructive dialogues among producer
and importing governments, nongovernmental organizations, and the private sector.

2. TABLE OF CONTENTS

1. SUMMARY .............................................................................................................................. 1
2. TABLE OF CONTENTS .......................................................................................................... 4
3. INTRODUCTION ..................................................................................................................... 5
4. BACKGROUND ....................................................................................................................... 6
5. DEFORESTATION AND OIL PALM ..................................................................................... 9
6. SUSTAINABILITY APPROACHES ....................................................................................... 9
6.1 Private Supply Chain Certification Systems ....................................................................... 10
6.2 Government Supply Chain Certification Systems ............................................................... 10
6.3 Corporate Zero-Deforestation Pledges ................................................................................ 11
6.4 Government Policy And Regulations .................................................................................. 12
6.5 Smallholder Productivity and Intensification ...................................................................... 12
6.6 Jurisdictional Approaches to Certification .......................................................................... 13
7. CASE STUDY: JURISDICTIONAL CERTIFICATION IN CENTRAL KALIMANTAN ... 15
8. CONCLUSION ....................................................................................................................... 21
9. FURTHER RESEARCH ......................................................................................................... 21
10. REFERENCE ...................................................................................................................... 23

3. INTRODUCTION
Although native to West Africa, the oil palm (Elaeis guineensis) had become one of the dominant
plantation crops in Indonesia by the end of the twentieth century. Where historically oil palm had
been cultivated as part of small-scale swidden systems, oil palm’s introduction in Southeast Asia was
primarily as an industrial scale plantation crop (Corley and Tinker 2016). The dominant model of
production has defined both the benefits and the negative social and environmental effects of oil palm
cultivation. Despite some significant shifts in oil palm production towards independent small-scale
producers and mills, industrial-scale plantations, scheme smallholders, and mills remain the dominant
mode of production. In 2013, it was officially estimated that there were 10.4 million hectares of oil
palm planted, with private companies controlling 51%, smallholders controlling 42%, and state-
owned companies controlling 7%(Directorate General of Estate Crops 2014; Pacheco et al. 2017a).
Although the expansion of these plantations into the forest frontier and peatlands has been perceived
as the main cause of extensive deforestation, greenhouse gas emissions, and the displacement of local
and indigenous peoples, the reality has often been more nuanced. (See Section 5: Oil Palm and
Deforestation below.)

For the most part, this expansion of oil palm in Indonesia has been legally planned in alignment with
the economic development goals of the government, which in turn has supplied an ever-growing
global demand for palm oil (Byerlee et al. 2016; Corley and Tinker 2016; Henderson and Osborne
2000). Under the right circumstances, smallholders have been able to benefit from the production of
oil palm either as scheme (plasma) farmers or independent smallholders (Belcher et al. 2004;
Feintrenie et al. 2010a; Rist et al. 2010) The multifunctionality of the oil palm and its derivatives,
which are used for cooking oil as well as in the food, cosmetics, and other industries,, means that
demand is stable, despite price fluctuations and independence from a single sector (Henderson and
Osborne 2000; Rival and Levang 2014).

Understanding the complex linkages between the producer companies, the government, and the
demand from global markets is the first step toward decoupling palm oil production from its adverse
social and environmental effects. This paper aims to provide a brief overview of the main challenges
to ensuring sustainable and inclusive palm oil production as well as an overview of the main
approaches that have been attempted. The paper then discusses the linkage between the expansion of
oil palm plantations and deforestation, focusing on the Indonesian laws and regulations that,
intentionally or unintentionally, have led to plantation-driven deforestation. Following this, the paper
presents and assesses six supply-side approaches that have been implemented to ensure the
sustainability of palm oil production in Indonesia, in particular:
1. Private supply chain certification systems;
2. Government supply chain certification systems;
3. Corporate zero-deforestation commitments;
4. Government policies and regulations;
5. Smallholder productivity and intensification; and
6. Jurisdictional approaches to certification.

4. BACKGROUND
The oil palm is a highly productive crop in terms of yields of oil per unit of land. The trees begin
fruiting within 3 years and reach their maximum production at years 9 to 15. Oil palms should be
replaced 25 years after planting. There are two main derivatives fresh fruit bunches (FFB) from oil
palm: crude palm oil (CPO) and palm kernel oil (PKO). The main product of FFB is palm oil, which
makes up 20% to 22% of the fruit, while the palm kernel accounts for 5% of the weight of the FFB.
Palm oil is predominately used for food such as cooking oil and margarine but is also used for non-
food purposes such as consumer goods, industrial inputs, and biofuels. Palm kernel oil, in contrast, is
mainly used for soap and industrial purposes. Palm fruits should be processed at mills within 24 hours
of harvesting, which means that farms and plantations should be located relatively close to mills
(Byerlee et al. 2016). The oils are then transported to refineries for further processing.

The oil palm, originally from Central and West Africa, has now spread across the humid tropics. In its
natural habitat, it thrives in disturbed forests and acts as a pioneer species. The distribution of oil
palms, was linked to human activity, and groves of oil palm emerged in areas that had been cleared
for shifting cultivation (Corley and Tinker 2016; Gerritsma and Wessel 1997). The traditional uses of
palm oil included cooking oil, fuel for lighting, and medicinal purposes (Henderson and Osborne
2000). The first palm oil was imported to England in 1590, and by the early nineteenth century, a
large market had developed for palm oil (Henderson and Osborne 2000). Driving the increasing
demand for palm oil were changing standards in hygiene and the industrial revolution. Palm oil was
used in products as varied as soap to tinplating (Rival and Levang 2014; Sheil et al.,2009). In the
1850s, the palm oil trade took off after the British government directly encouraged the trade of palm
oil (Corley and Tinker 2016). The first oil palm trees were planted in the Bogor Botanical Gardens in
Java in 1848, and a demonstration plantation was later established in Java (Levy 1957; Sheil et al.
2009). In 1875, seedlings were transferred from Java to Sumatra. These seedlings would become the
foundation stock for future plantations in Indonesia and more broadly in Southeast Asia (Corley and
Tinker 2016; Gerritsma and Wessel 1997).
In contrast to West Africa, the early history of oil palm in Indonesia was as a plantation crop under
the Dutch colonial administration. The first large scale plantation in Indonesia was established in
Sumatra in 1911 by a Belgian firm (Henderson and Osborne 2000). By 1925, 31,600 hectares of oil
palm had been planted in Sumatra (Corley and Tinker 2016). By 1936, there was 75,000 hectares of
oil palm plantations in Sumatra (Budidarsono et al. 2013). Aided by scientific research and access to
modern technologies including mills, plantations in Sumatra became significantly more productive
than plantations in Africa (Budidarsono et al. 2013). The benefits of these plantations during the
colonial era were unevenly distributed, with unskilled workers receiving low wages for working on
the plantations (Budidarsono et al. 2013). Despite these limited benefits, Chinese and Javanese still
migrated in large numbers to work on the plantations, spurring broader economic growth across the
East coast of Sumatra (Budidarsono et al. 2013).
Following the Second World War and independence from Dutch colonial rule, the oil palm plantation
sector persisted, although it had been significantly affected by the period of turbulence. Although the
plantation sector was always part of the newly independent Indonesian government’s development
plans, it was not until the 1970s that oil palm plantations began to expand again (Budidarsono et al.
2013). Driving this new phase of agricultural development was the New Order regime, which by the
late 1970s had begun promoting the development of tree plantation crops over food crops
(Budidarsono et al. 2013). During the period from 1967 to 1997, the planted area of oil palm
increased 20-fold, although slowed as a result of the El Niño related drought, declines in global crude
palm oil prices, economic crises, and the resulting social and political unrest in 1997. Following these
events, the industry began to expand again in 1999 as social, economic, and climatic conditions
became more favorable (Casson 2000).

At the core of these policies were large-scale plantations, which were supported by smallholder
farmers who were contractually bound to their plantation companies. The dominant form of
“schemed” farming was the Nucleus Estate-Smallholder Scheme (NES) (Perkebunan Inti Rakyat or
PIR) (Cramb and Curry 2012; Rist et al. 2010; Zen et al. 2016). Within these schemes, there would be
a large concession (inti) surrounded by smallholder plots of around 2 to 3 hectares (plasma). In 1995,
these schemes were replaced with Primary Cooperative Credit Schemes (Kredit Kepada Koperasi
Primer untuk Anggotanya or KKPA) that focused on providing indigenous and local farmers with
productive lands and extending support in exchange for giving large tracks of land to estates. This
model was replaced with the partnership model (kemitraan), which was more advantageous to
companies (Rival and Levang 2014; Zen et al. 2016). Whereas in the past companies would need to
allocate the majority of concessions to smallholders, the new model meant that companies controlled
up to 80% of lands. Smallholders could be compensated through profit dividends rather than just
being allocated plots. A subsequent ministerial regulation in 2013 further eased the requirements for
concessionaires.1 This model has eroded the direct participation of smallholders in oil palm
development in favor of promoting large-scale investments.

By the early 2000s, the model of large scale land acquisitions had begun to decline (Rival and Levang
2014). In its place, independent smallholders have emerged in areas with pre-existing palm oil
processing infrastructure. Located within the required distance of a processing mill, independent
smallholders have several options available to them if they want to cultivate oil palm. At one extreme,
farmers and other local people may simply sell their land to companies or other small-scale investors,
who then cultivate oil palm on the land (Rival and Levang 2014). Other independent smallholders
must enter into various institutional arrangements in order to obtain the planting materials needed to
establish an oil palm farms. Among the challenges faced is a lack of income from the land in the two
to three years before a farm becomes productive. Only after the palms become fully mature do
farmers begin to receive the full benefits of cultivating oil palm (Feintrenie et al. 2010a). Those
farmers unable to survive these early years may find themselves financially worse off than before they
tried to cultivate oil palm. Those who are able to survive these early years are able to earn an income
that far exceeds their returns from other comparable crops such as rubber (Belcher et al. 2004; Rist et
al. 2010). Although by law smallholders should have less than 25 hectares of farmland, more recently,
medium- and large-scale producers have emerged as new categories of independent producers, who
fall in between the more clearly defined categories of smallholders and industrial-scale producers
(Jelsma et al. 2017).

1
Agricultural Ministerial Regulation No. 98/Permentan/OT.140/9/2013

Figure 1: Trend in World Consumption of Vegetable Oils from 1995 to 2015

Source: USDA 2015

The expansion of oil palm plantations in Indonesia has been driven by the significant increase in
demand for oil crops. (Figures 1 and 2) During the period of 1990 to 2010, the world production of
palm oil grew by 300%, while world production of soybean grew by 220%. The demand for palm oil
and palm kernel oil increased from 2 Mt to over 50 Mt in the past 50 years. In the late twentieth
century, the growth of the palm oil industry in Indonesia led it to become the world’s leading
producer of palm oil, followed by Malaysia (Byerlee et al. 2016). The main importing countries for
palm oil and its derivatives are Asian markets that absorb 51%, with India importing 19.4% and China
13.0%, whereas European markets absorb 26% of CPO and its derivatives (Pacheco et al. 2017a).
Generally, Asian markets have been less concerned about the sustainable production of palm oil,
although there has recently been greater uptake of certified palm oil in China (Schleifer and Sun
2018).

Figure 2: Indonesian Palm Oil Exports in 2014 (Countries with Imports Over 100,000 tons)

Source: Palm oil supply chain, TRASE

5. DEFORESTATION AND OIL PALM

The expansion of agricultural commodities in Indonesia has led to deforestation and the conversion of
degraded rural lands across the country. Between 2000 and 2010, around 4.5 million hectares of
forests were lost in Indonesia (Margono et al. 2014). Others estimate that the total amount could be
over 7 million hectares (Hansen et al. 2013; MoEF 2015). Although the cultivation of agricultural
commodities is not the primary driver of deforestation in Indonesia, it contributes significantly to the
total amount of deforestation and discourages the rehabilitation of degraded forest lands through
forest regeneration (Gaveau et al. 2016; Gunarso et al. 2013; Abood et al., 2015). However, oil palm
is by far the most significant of the main plantation commodities driving deforestation. According to
Busch et al. (2015), 20% of the deforestation that occurred from 2000 to 2010 occurred within oil
palm plantations. In provinces such as Central Kalimantan, this figure is much higher at 41% during
the period from 2000 to 2012, based on Ministry of Environment and Forestry data (MoEF 2015).
Despite these adverse environmental impacts, the relatively lucrative returns from oil palm plantations
continue to drive expansion, especially among smallholder farmers (Belcher et al. 2004; Miettinen et
al. 2012; Rist et al. 2010).
The expansion of oil palm causes deforestation through several mechanisms, both planned and
unplanned. Historically, oil palm plantation concessions were allocated in areas that still retained
forest cover. However, beginning in the 1970s, land use planning processes sought to separate forest
areas from non-forest areas, with the former being used for forestry, conservation, and protection, and
the latter for agriculture including plantations (Brockhaus et al. 2012). Due to limited information
available at the time, in many instances non-forest areas still retained forest cover, which could be
legally cleared for the purpose of economic development. The second mechanism by which oil palm
plantations contribute to deforestation is through the rezoning of forest areas into non-forest areas.
Forest areas, which have been degraded through forestry operations, can be reclassified as conversion
forests, which in turn can be reclassified as non-forest areas. Although degraded, these areas still
retain some forest cover, which could potentially be rehabilitated or restored. In both of these cases,
extensive deforestation by oil palm is not a foregone conclusion. The final mechanism by which oil
palm expansion contributes to deforestation is by independent, non-scheme smallholders. These
smallholders may convert their existing plots, which retain tree cover or are diverse forest gardens,
into oil palm monocultures (Belcher et al. 2004; Feintrenie et al. 2010b; van Noordwijk et al. 2017).
Transforming palm oil production in Indonesia so that it is both socially inclusive and sustainable
requires addressing several main performance issues, including:

• Pervasive land conflict and informality;

• Yield differences between companies and smallholders; and
• A high carbon debt linked to emissions arising from deforestation and peatlands conversion
(Pacheco et al. 2017b).

6. SUSTAINABILITY APPROACHES
In this section, the paper discusses six of the main approaches to promoting sustainable and inclusive
palm oil production and their comparative advantages and disadvantages:
1. Private supply chain certification systems;
2. Government supply chain certification systems;
3. Corporate zero-deforestation commitments;
4. Government policies and regulations;
5. Smallholder productivity and intensification; and
6. Jurisdictional approaches to certification.

6.1 Private Supply Chain Certification Systems

In response to protests and boycotts of palm oil, the Roundtable on Sustainable Palm Oil (RSPO) was
formed in 2004.2 RSPO is a round table organization where each members such as small- or large-
scale producers and processors, consumer goods companies, investors or civil society organizations
have the same membership rights. One of the significant achievements of RSPO has been the
development of a certification scheme for producers and processors, which is based on a set of
principles and criteria. The principles and criteria were designed to minimize environmental and
social harm while improving the efficiency and quality of palm oil production throughout the supply
chain. The emphasis of the certification scheme was mainly on commercial actors in the palm oil
supply chain, in particular on industrial scale plantations and palm oil mills, although smallholders
were also incorporated into the principles and criteria. The cost of certification quickly became an
obstacle to independent, non-scheme smallholders, which eventually led the RSPO to establish a fund
for supporting these farmers to achieve certification. The industry has generally adopted the RSPO
certification scheme, and by the end of March 2018, around 3.58 million hectares of oil palm
plantations across the globe had been certified, including 335 certified palm oil mills, equivalent to
19% of global production. Despite the demands from civil society for certified sustainable palm oil
(CSPO), the absorption of CSPO is less than 60% (Chalil and Barus 2018). RSPO certification,
however, has not been a perfect solution for reducing deforestation and environmental degradation. A
study in 2017 found that RSPO certification reduced deforestation within plantation areas, but did not
reduce fires or peatland clearance (Carlson et al. 2017). The positive effects were further diluted by
the fact it was largely older plantations, with little remaining forests, that were adopting RSPO
certification. In response to many of the criticisms of RSPO, a more stringent standard, RSPO NEXT
was developed, which has stronger environmental and social safeguards. RSPO NEXT does not
replace the existing standard but is voluntary for members who wish to go beyond meeting the
existing principles and criteria.3

6.2 Government Supply Chain Certification Systems

The resistance to RSPO certification was not solely related to the costs, especially for smallholders.
Industry pressure in Indonesia led to the government creating a parallel certification system, the
Indonesian Sustainable Palm Oil System (ISPO) in 2011. In contrast to RSPO, where environmental
and social protection criteria were defined through multi-sector dialogue, ISPO emphasized legal
compliance with existing Indonesian laws and regulations, including those pertaining to
environmental protection. Table 1 presents a comparison of the RSPO and ISPO systems.
International nongovernmental organizations reacted negatively to the new system, arguing that the
new certification system offered inadequate social and environmental protections. Despite the legal
requirement that companies comply with the ISPO system, only 12% of Indonesia’s oil plantations
were ISPO certified in early 2017.4 Aware of the limited coverage of ISPO, the government plans to
issue a Presidential Regulation in 2018, which will create the legal basis for ensuring industry-wide
compliance, including for smallholders. The initial design of the regulation was debated and, as of
April 2018, still under discussion and revision.

2
Another private palm oil certification system is the International Standard for Carbon Certification (ISCC), which was
designed to enable companies to comply with the Renewable Energies Directive implemented by the European Union in
2009. This system will not be discussed in detail as part of this report due to the higher visibility and impact of RSPO in
Indonesia.
3
RSPO NEXT: https://rspo.org/certification/rspo-next
4
http://www.thejakartapost.com/news/2017/04/12/only-12-of-indonesias-oil-palm-plantations-ispo-certified.html

10



Table 1: Comparison of ISPO and RSPO Principles5

ISPO PRINCIPLES RSPO PRINCIPLES

• Principle 1: Legal Plantation Business • Principle 1: Commitment to Transparency

Permits • Principle 2: Compliance with Applicable
• Principle 2: Plantation Management Existing Laws and Regulations
• Principle 3: Protection of Primary Forest • Principle 3: Commitment to Long-Term
and Peatland Economic and Financial Viability
• Principle 4: Environmental Management • Principle 4: Use of Appropriate Best
• and Monitoring Practice by Plantations and Mills
• Principle 5: Responsibility to Workers • Principle 5: Environmental Responsibility
• Principle 6: Social Responsibility and and Conservation of Natural Resources and
Community Economic Empowerment Biodiversity
• Principle 7: Continuous Business • Principle 6: Responsible Consideration of
Improvement Employees, Individuals, and Communities
Affected by Growers and Mills
• Principle 7: Responsible Development of
New Plantings
• Principle 8: Commitment to Continuous
Improvement in Key Areas of Activity

6.3 Corporate Zero-Deforestation Pledges

Despite their adoption of RSPO certification, producers have continued to be pressured by
international and Indonesian nongovernmental organizations to reduce the environmental and social
harm of palm oil production, in particular the clearing of degraded forests. Similar to many consumer
goods and producer companies globally, Indonesian producers began making pledges to remove
deforestation from their supply chains (Pasiecznik and Savenije 2017). In 2014, four large Indonesian
palm oil producing companies (Wilmar, Asian Agri, Cargill Indonesia, and Golden Agri-Resources)
declared their commitment to zero-deforestation palm oil. This commitment was followed by Musim
Mas in early 2015.6 The companies formed an association with a secretariat called IPOP to implement
its zero-deforestation commitment. In early 2016, another major palm oil company, Astra Agro
Lestari, also joined the pledge.7 By September 2016, the association and its secretariat had been
dissolved. Zero-deforestation commitments for palm oil in Indonesia have faced intense resistance
from the government and farmers since the time of the announcement. Whereas smallholders were
worried about being excluded from palm oil supply chains, the Indonesian government reacted
negatively to the unilateral declarations. In particular, the Indonesian government had been
developing the ISPO, and the zero-deforestation pledges were perceived to be undermining the
system. Under pressure from the government, including the threat of being investigated for cartel-like
practices, IPOP was dissolved (Vit 2016). The individual companies have continued to promote
sustainability, but through collaborative approaches with the national government through supporting
ISPO or through direct engagement with regional governments such as jurisdictional certification
initiatives in Central Kalimantan. Other companies, such as Asian Agri, have chosen to focus on
supporting smallholder production instead through their “One to One” commitment, where they plan

5
Comparison of the revised Minister of Agriculture Regulation Number 11 of 2015 with the RSPO Principles and Criteria
2013 National Interpretation for Indonesia from (Ministry of Agriculture of the Republic of Indonesia and Roundtable on
Sustainable Palm Oil (RSPO), 2015)
6
http://www.thejakartapost.com/news/2015/08/29/govt-opposes-zero-deforestation-pledge-palm-oil-firms.html
7
http://www.regnskog.no/en/news/astra-agro-lestari-joins-the-indonesian-palm-oil-pledge

11



to match each hectare of their own land with one hectare of smallholder land by the end of 2018
(Asian Agri 2017).
6.4 Government Policy And Regulations
The failure of these initiatives to achieve the desired reductions in deforestation and environmental
degradation have been attributed to shortcomings in the laws and regulations governing land uses in
Indonesia. By analyzing the perceptions of stakeholders towards sustainability initiatives in the palm
oil sector, Pirard and others (2017) highlight two major policy challenges in Indonesia. First, they
highlight the legal ambiguity that surrounds the areas with high conservation values that have been set
aside as part in accordance with certification scheme requirements. The ambiguous status of these set
asides means that these areas can potentially be reallocated for clearing and cultivation by the
government. Second, for law enforcement to be effective, the tenure rights of small and medium scale
producers should be clarified as should be the concession boundaries and legal status of
concessionaires. Consequently, sustainable palm oil production is not simply a technical or market
issue, but one that requires regulatory changes and government support to address the underlying
barriers to sustainability.
In recent years, the Indonesian government has introduced many laws and regulations to reduce
deforestation and environmental degradation such as peatland degradation and fires. As part of its
Nationally Determined Contribution (NDC) for mitigating climate change, the Indonesian government
has committed to reducing greenhouse gas emissions, including from land uses, by 29% by 2030, and
another 12% if they receive external support (Republic of Indonesia 2015). There are several
prominent regulations that have been issued to support this commitment. In May 2011, a two-year
moratorium on new logging and oil palm and timber concessions in peatland and primary forests was
enacted through Presidential Instruction 10/2011 (Alisjahbana and Busch 2017). This moratorium has
been extended to the present, although does not apply to clearing on lands where concessions were
allocated prior to the enactment of the moratorium. After the El Niño fires in 2015, the government
tried to strengthen the moratorium laws through Government Regulation 57/2016. Through this
regulation, many activities were prohibited, including certain types of land clearing where there is
uncertainty over forest area delineation, draining peatlands, and burning on peatland (Alisjahbana and
Busch 2017). The law also has strict requirements for peatland areas within existing concessions.
Through presidential instruction 11/2015, the government also introduced a much stricter regulatory
environment for restricting the use of fire for land clearing. Although under the scenario of a
complete moratorium on oil palm plantation expansion, deforestation is predicted to reduce by 28%
in the period from 2010 to 2030, palm oil production is still expected to increase by 124%–97%,
driven largely by smallholders (Mosnier et al., 2017).

6.5 Smallholder Productivity and Intensification

Smallholders have an increasing role in palm oil production, although their actual contribution to
deforestation and environmental degradation remains uncertain. Historically, the contribution of oil
palm smallholders to deforestation has been comparatively small. During the period from 2000 to
2010, smallholders were only responsible for 10.7% of the deforestation caused by oil palm expansion
(Lee et al. 2013). This contribution is expected to increase as a result of the moratorium and corporate
zero-deforestation commitments. Recent research in Riau, for instance, argues that many forest fires
and land clearings are part of a broader cycle of land claims, in which the land is later sold for oil
palm cultivation (Purnomo et al. 2017). Due to the limited data on smallholder plots, the actual extent
of smallholder-driven deforestation is unclear. Case studies, however, have demonstrated a cycle
where smallholders replace biologically diverse forest gardens with monocultures such as oil palm
(Belcher et al. 2005; Feintrenie et al. 2010b, 2010a; van Noordwijk et al. 2017). Improving the
productivity of oil palm smallholders to support intensification has been highlighted as one of the
main targets for achieving sustainable and inclusive palm oil production (Pacheco et al. 2017b).

12



Discussions on improving the productivity of oil palm smallholders has focused on improving access
to finance, especially for replanting, to support smallholders through the early, unproductive phases of
oil palm cultivation (Kusumaningtyas and van Gelder 2017; Pramudya et al. 2017). The obstacles
facing smallholders, in particular independent smallholders, are far more systemic (Brandi et al. 2015)
and finance alone will not solve these challenges. With the support of nongovernmental organizations,
company-led efforts such as Asian Agri’s “One for One” commitment, are promising, but
geographically restricted approaches for supporting smallholder intensification (Asian Agri, 2017). In
the Seruyan district of Central Kalimantan, an agricultural facility has been established by the district
government, with the support of agribusinesses and an Indonesian nongovernmental organization,
Inovasi Bumi (INOBU), to provide training and agricultural inputs to oil palm smallholders.8
Moreover, although intensification can in many instances reduce expansion and environmental
degradation, it should be supported by the improved governance of natural resources (Byerlee et al.
2014; Cunningham et al. 2013).

6.6 Jurisdictional Approaches to Certification

The approaches to sustainable palm oil described above each offer a part of the solution for
sustainable and inclusive palm oil production. There is a need to both coordinate these initiatives at
the local level as well as to incentivize local governments, with the support of higher levels of
government, to address many of the obstacles to producing palm oil sustainably. Jurisdictional
approaches to sustainability offer a pathway for coordinating supply chain initiatives with landscape-
level efforts to reduce deforestation and environmental degradation (Earth Innovation Institute 2017;
Nepstad et al. 2013). Jurisdictional approaches to sustainability, which are a sub-set of landscape
approaches to sustainability, focus on building on the power and authority of democratically elected
local governments to achieve sustainable development. These initiatives can involve endogenous
efforts driven by civil society and the private sector, exogenous incentives including carbon payments
and preferential sourcing, or initiatives led by nongovernmental and multi-lateral organizations (Earth
Innovation Institute 2017).9 A more recent sub-set of jurisdictional approaches that has been piloted
by the RSPO is the jurisdictional approach to certification, or jurisdictional certification.

RSPO jurisdictional certification emerged as a response to both the challenges of certification and
emergent initiatives from subnational governments, in particular the State of Sabah in Malaysia and
the Province of Central Kalimantan in Indonesia. (See the case study in Section 7 below.) Two of the
central challenges that jurisdictional certification aims to resolve relate to reducing deforestation on a
larger scale and including smallholders, in particular independent smallholders, into sustainable palm
oil supply chains. The initial pilot projects for jurisdictional certification, Sabah in Malaysia, Central
Kalimantan, and South Sumatra in Indonesia, were announced in 2015.10,11,12 Following these
announcements, the Government of Ecuador announced its intention to implement a jurisdictional
approach to certification.13 Although jurisdictional certification initiatives in Indonesia initially

8
Perusahaan Sawit Dukung Agricultural Facility: https://www.seruyannews.com/perusahaan-sawit-dukung-agricultural-
facility/
9
The Global Green Growth Institute (GGGI) and IDH: The Sustainable Trade Initiative both promote landscape approaches
to sustainable commodity production at the jurisdictional level. The terms landscapes and jurisdictions are often used
interchangeably. See for instance, GGGI: http://gggi.org/theme/sustainable-landscapes/ or IDH:
https://www.idhsustainabletrade.com/landscapes/
10
RSPO congratulates the Sabah State Government for its recent milestone decision towards Palm Oil Sustainability:
https://rspo.org/news-and-events/announcements/rspo-congratulates-the-sabah-state-government-for-its-recent-milestone-
decision-towards-palm-oil-sustainability
11
Central Kalimantan Announces Jurisdictional Certification for Sustainable Palm Oil: https://www.rspo.org/news-and-
events/news/central-kalimantan-announces-jurisdictional-certification-for-sustainable-palm-oil
12
Landscapes in Indonesia that IDH supports: Aceh, South Sumatra & West Kalimantan:
https://www.idhsustainabletrade.com/news/3765/
13
Ecuador chooses jurisdictional approach for RSPO certification: https://rspo.org/news-and-events/news/ecuador-chooses-
jurisdictional-approach-for-rspo-certification

13



focused on the provincial level, efforts were later refocused to the district level, such as to the districts
of Seruyan and Kotawaringin Barat in Central Kalimantan and to Musi Banyuasin in South Sumatra
(MacIsaac 2017).14 Although these initiatives are nascent, all share the general objective to apply the
RSPO certification standard at the jurisdictional level, with the support of government policies and
regulations as required. The mechanisms for preferential sourcing from sustainable jurisdictions as
well as the mechanisms for distributing the benefits of jurisdictional certification are still yet to be
agreed upon by the RSPO. As these initiatives are all relatively recent, there has been little written on
how they are contributing to sustainable and inclusive palm oil production in Indonesia as well as
their overall effectiveness. The following case study on Central Kalimantan province in this report is
intended to fill this gap.
Table 2: Comparison of Different Sustainable Palm Oil Initiatives in Indonesia

SIGNIFICANCE PUBLIC SECTOR SCALABILITY

INVOLVEMENT
RSPO The first major oil Although there is limited As certification is based on a farm,
palm certification explicit public-sector plantation, or mill basis,
scheme and involvement, the theoretically, with enough
remains the government should resources, RSPO certification can
industry standard, implicitly ensure the be expanded to all producers that
accepted globally legality of production, meet its requirements.
by including the provision of
nongovernmental certificates and legal
organizations and documents.
consumers
ISPO The official ISPO is based on In its current form, ISPO
Indonesian compliance with certification is on a farm,
government palm government laws and plantation, and mill basis, and
oil certification regulations, enforced compliance is mandatory. The
system through a Presidential new Presidential Regulation
Regulation. provides scope for jurisdictional
certification which may accelerate
the certification process.
CZDP (IPOP) A major private Initially, limited public IPOP was dissolved in mid-2016,
sector initiative to sector involvement with the companies involved
realize Corporate although collaborated with returning to supply chain
Zero-deforestation government (jurisdictional initiatives and some support for
Pledges in initiatives) jurisdictional initiatives.
Indonesia
GOVERNMENT National laws and Strictly enforced national The strong emphasis on
POLICY AND policies to reduce environmental regulations enforceable regulatory measures
REGULATIONS deforestation and rather than incentives means that
environmental regulations may be difficult to
degradation enforce in under-resourced
regional areas.
SMALLHOLDER Reducing Government replanting Interventions to support
PRODUCTION smallholder program, including smallholders, aside from the
AND expansion into smallholder finance replanting fund, are largely led by
INTENSIFICATION forest frontiers nongovernmental organizations or
through agribusinesses. More systematic,
intensification government interventions are
required to provide inputs, farmer
organizational support, and
training as well as finance to

14
Supporting South Sumatra to become a RSPO certified jurisdiction:
https://www.idhsustainabletrade.com/news/supporting-south-sumatra-become-rspo-certified-jurisdiction/

14



smallholders.
JURISDICTIONAL Pilot initiatives for Jurisdictional approaches Jurisdictional approaches,
APPROACHES / reducing explicitly work with local including certification,
CERTIFICATION deforestation across governments, although in theoretically offer a simplified and
entire landscapes a multi-stakeholder larger-scale process for reducing
approach. deforestation and sustainable
commodity sourcing.

7. CASE STUDY: JURISDICTIONAL CERTIFICATION IN CENTRAL KALIMANTAN

The provincial and district governments of Central Kalimantan have been piloting initiatives to reduce
deforestation, to protect peatland, and to recognize the rights of indigenous people. The province of
Central Kalimantan covers 158,000 square kilometers, extending from the coast to the deep interior of
Indonesian Borneo. Peatland covers up to three million hectares, or 19.4% of Central Kalimantan.15 In
2014, tropical forests covered 50.7% of the province, or 7.8 million hectares in 2014 (See Figures 3
and 4 for land use changes, including current forest cover, in Central Kalimantan.)16 Since 2003, the
economy has grown rapidly driven largely by commercial land uses, in particular oil palm (Elaeis
guineensis), with the number of plantation companies tripling.17 In 2012, agriculture contributed 29%
of the regional gross domestic product of Central Kalimantan, with the plantation sector, mainly oil
palm followed by rubber, contributing 44% of that figure.18 Based on figures from the 2013
agriculture census, 3.18 million hectares of land had been allocated for oil palm concessions, with
only 885,894 hectares operational.19 Agriculture is also the largest sector for employment in Central
Kalimantan, employing 53% of all households, and the plantation sector the largest employer within
the agricultural sector.20 Plantations in Central Kalimantan export crude palm oil to several countries,
including China, India, and Pakistan. (Figure 5) The rapid expansion of commercial land uses
including oil palm, however, has come at the expense of the natural environment. From 2001 to 2014,
the rate of deforestation in Central Kalimantan was 164,309 hectares per year.21 The proportion of
deforestation directly caused by oil palm plantations, however, is only a fraction of the overall
deforestation in the province. (Figure 3)

15
Wetland International 2004 - reference
16
INOBU and Ministry of Forestry
17
BPS Agriculture Census 2013
18
Kalimantan Tengah Dalam Angka, 2013
19
BPS Agriculture Census 2013
20
BPS Agriculture Census 2013
21
Data from Earth Engine Partners and processed by INOBU

15



Figure 3: National Deforestation and the Contribution of Oil Palm Cultivation to Average Rates
of Annual Deforestation in Kalimantan from 2001 to 2016.

Source: Croft-Cusworth, 2017

Note: The spike in deforestation in 2015 and early 2016 was probably caused by escaped fires that were exacerbated by the
severe El Niño event during that period

16



Figure 4: Forest Cover in 2015 and Historical Land Use Change, including Oil Palm, in Central
Kalimantan

Figure 5: Palm Oil Supply Chain from Ports in Kalimantan

Source: Palm oil supply chain, TRASE

The efforts to reduce deforestation in Central Kalimantan gained momentum in 2009. In 2009, the
Indonesian government committed to reduce greenhouse gas emissions by 26% by 2020 using its own
resources. If the government were to receive international assistance, that figure would rise to 41%.
The Norwegian government responded to these commitments by pledging USD$1 billion in
performance-based payments to support the efforts of the Indonesian government. As part of the
efforts for Reducing Emissions from Deforestation and Degradation (REDD+), the province of
Central Kalimantan was selected as a pilot province. To support efforts to reduce deforestation and to
ensure that palm oil was produced sustainably and inclusively, the then governor of Central
Kalimantan, Teras Narang, introduced a provincial regulation on Sustainable Plantations (Perda

17



5/2011). The regulation provides a framework for environmental management, for community
plantations, for recognizing and respecting indigenous rights, and for ensuring that new plantations
are only allocated on degraded lands. This regulation built on previous regulations, such as the
Governor’s Regulation No. 13/2009, which gave local customary institutions, in particular Damang
and Mantir, the authority to recognize customary land claims outside of forest areas.
The first major step to implement a jurisdictional approach in Central Kalimantan was developing
“The Central Kalimantan Roadmap to Low-deforestation Rural Development that Increases
Production and Reduces Poverty” in June, 2013. The roadmap defined several goals to be achieved by
2020:

• Province-wide deforestation reduced to 20% of the 2006 to 2009 level;

• Zero-deforestation, sustainable palm oil sector; and
• Smallholder palm oil production reaches 20% of total.

The impacts of achieving these goals would be 1.2 million hectares of deforestation avoided, 0.6
billion tons of carbon dioxide emissions avoided, and reduced poverty in Dayak communities.
Achieving these goals is contingent upon the implementation of several actions including resolving
the negotiations over the long stalled spatial planning process for Central Kalimantan. Other
immediate actions that were outlined in the roadmap included registering and monitoring plantations,
including smallholder oil palm plantations, conserving primary forests and peatlands in non-forest
areas, and increasing the participation and productivity of smallholder farmers. Actions needed in the
longer term included improving market access for sustainable palm oil, supporting local and
indigenous farmers to farm more sustainably, and exploring ways to provide support for smallholder
farmers.
The Central Kalimantan Roadmap is both an aspirational and coordination document. In accordance
with the distribution of powers and authority among different levels of government in Indonesia,
provincial governments have limited authority over land use management. In terms of spatial
planning, an area where the provincial government has the most direct influence on land uses, the
national government was unable to agree on a revised Provincial Spatial Plan that it had created in
2003 through Provincial Regulation 8/2003. Only in 2015 were the provincial and national
governments able to agree on a revised spatial plan for Central Kalimantan. As a result of Perda No.5
2015, there are 200,318 hectares of forests in areas classified as lands for other uses and 680,952
hectares of forests in conversion forest areas. Although provincial governments lack direct powers
and authority over land uses except forestry, the coordinating function of provincial governments is
helpful in addressing many of the challenges of land governance in Indonesia.
In the case of applying a jurisdictional approach for sustainable palm oil in Central Kalimantan, the
provincial government was able to adopt a leadership role in addressing governance challenges at
different levels of government. In Barcelona, in June 2015 at the Annual Meeting of the Governors’
Climate and Forest Taskforce, the Governor of Central Kalimantan declared his commitment to a
jurisdictional approach for certification.22 To this end, the governor issued two decrees in 2015 to
support sustainable palm oil production across the province. The first of these was Governor’s Decree
No. 188.44/435/2015, which aimed to ensure that Central Kalimantan was free from deforestation by
2020 and that all oil palm plantations were sustainably certified by 2019. The decree also established
a provincial working group to drive the achievement of these objectives. The second decree,
Governor’s Decree 188.44/436/2015, formally established a plantation monitoring system, later
renamed Sistem Informasi dan Pemantauan Kinerja Perkebunan Berkelanjutan (SIPKEBUN). This

22
Central Kalimantan Announces Jurisdictional Certification for Sustainable Palm Oil: https://www.rspo.org/news-and-
events/news/central-kalimantan-announces-jurisdictional-certification-for-sustainable-palm-oil

18



system was later adopted by the Ministry of Agriculture and three district governments in Central
Kalimantan in October 2016. The plantation monitoring system includes smallholder spatial and
socio-economic data, which is collected through pilot activities in three districts in Central
Kalimantan along with similar data regarding plantations and scheme smallholder oil palm farmers.
Due to the distribution of power and authority among different levels of government in Indonesia,
provincial governments do not have direct authority over land use management in non-forest areas.
Consequently, the role of district governments is essential for sustainable palm oil production, which
can only legally occur in non-forest areas. Two of the largest palm oil producing districts in Central
Kalimantan, Seruyan and Kotawaringin Barat, subsequently declared their commitment to
jurisdictional certification of palm oil according to RSPO standards in 2015. These declarations were
formalized through decrees issued by the respective district heads in 2016, establishing working
groups for the jurisdictional certification of palm oil.23 These working groups were given the mandate
to develop detailed plans for achieving jurisdictional certification as well finding:
“quick and appropriate ways of reducing frequent risks facing palm oil smallholders and
companies, including deforestation, social conflict, greenhouse gas emissions and destruction
of areas of high conservation value and high carbon value.”24
In the two pilot districts, one of the main motivating factors for jurisdictional certification was the
empowerment of independent smallholder farmers and their inclusion into sustainable palm oil supply
chains. Consequently, the pilot districts have taken a stepwise approach to jurisdictional certification
that emphasizes the importance of independent, smallholder farmers. In the Seruyan district, the more
advanced of the two pilot districts, the following activities to address the challenges of achieving
sustainable and inclusive palm oil development have been undertaken, or are ongoing: (Table 3)

• Establishing a district, multi-stakeholder working group for jurisdictional certification;

• Mapping and registering independent smallholders;
• Supporting all producers to comply with legality requirements;
• Establishing a district agricultural facility to systematically provide training and inputs to oil
palm smallholders;25
• Revising the district spatial plan to protect forest and peatland areas and restore critical areas
as necessary;
• Developing a district protocol and mechanism to prevent and mediate social conflict arising
from plantation development;
• Developing a district protocol and mechanism to trace transactions between independent
smallholders, traders, and mills; and
• Engaging buyer companies to commit to sourcing sustainably produced palm oil from the
district.

Although these initiatives share some of the features of many other nongovernmental organization or
private sector supply chain initiatives, what differentiates jurisdictional certification is the scale and

23
In the Seruyan district, the working group was established through “Decree of The Seruyan District Head Number
188.45/92/2016 on the Establishment of a Working Group on Jurisdictional Certification of Palm Oil in Seruyan District”
while in Kotawaringin Barat district, the working group was established through “Decree of the Kotawaringin Barat District
Head Number 525/500/198/Ut/2016 on the Establishment of a Working Group on Jurisdictional Certification of Palm Oil in
Kotawaringin Barat District”
24
Decree of The Seruyan District Head Number 188.45/92/2016 on the Establishment of a Working Group on Jurisdictional
Certification of Palm Oil in Seruyan District
25
Perusahaan Sawit Dukung Agricultural Facility: https://www.seruyannews.com/perusahaan-sawit-dukung-agricultural-
facility/

19



the importance of government regulations, policies, and instruments. A jurisdictional approach means
that sustainability, including deforestation, peatland degradation, and the improvements of
smallholder productivity, can be achieved systematically across the entire jurisdiction. The initiation
of jurisdictional certification has also encouraged the local government to address outstanding issues
regarding palm oil production, such as ensuring plantation companies in the district meet the
requirement of allocating 20% of their production to smallholders. The mapping and registration of
smallholders has also initiated a process with the Ministry of Environment and Forestry to regularize
the land tenure status of farmers with lands located in forest areas.
Jurisdictional certification at the district level has incentivized district governments and companies to
address the complex challenges obstructing sustainable and inclusive palm oil production. These
efforts have been supported by donors and nongovernmental organizations. As a result, many of the
costs have not been directly borne by the jurisdiction. As an official framework for recognizing
jurisdictional certification is still under discussion at RSPO, including the appropriate supply chain
model, these initiatives have yet to translate into actual incentives for producers in the district.26 The
longevity and scalability of jurisdictional certification in Indonesia depends on jurisdictional
certification providing producers and local governments with adequate upfront financing and
incentives to undertake and maintain sustainable and inclusive palm oil production. A further
advantage of jurisdictional certification is that creates a regulatory and enabling environment to
ensure that all commodities within the jurisdiction are produced sustainability with institutional
mechanisms to guarantee the inclusion of smallholders.
Table 1: How Jurisdictional Certification in the Seruyan District Addresses the Main
Challenges for Sustainable and Inclusive Palm Oil Production27

Challenge Jurisdictional Approach to Relevant Laws, Policies, and

Certification Interventions
Limiting the expansion of palm oil Revising the spatial plan to protect • Carrying capacity assessments
into high-carbon forests and and restore forests and other (Daya dukung, daya tampung)
peatlands critical areas • Plan to protect and manage the
environment (Rencana
Perlindungan dan Pengelolaan
Lingkungan Hidup)
• Strategic environmental
assessment (Kajian
Lingkungan Hidup Strategis)
• District Spatial Plan (Rencana
Tata Ruang Wilayah
Kabupaten)
Adopting mechanisms to enhance Monitoring and transparency • Plantation monitoring system
transparency and accountabilities systems at the district or (SIPKEBUN)
provincial level and the piloting of • District traceability system
protocols and mechanisms for supported by regulation (under
preventing and mediating social development)
conflicts arising from plantations • District social conflict system
supported by regulation (under
development)

26
Calling for Participation and Nomination of Jurisdictional Approach Working Group Members: https://rspo.org/news-and-
events/announcements/calling-for-participation-and-nomination-of-jurisdictional-approach-working-group-members
27
Challenges adapted from Pacheco et al. (2017b) and compared with ongoing initiatives and regulations in the Seruyan
district, Central Kalimantan as part of jurisdictional certification efforts through personal observations and citations
presented earlier in the report.

20



Creating conditional incentives to Preferential sourcing from • Agricultural facility (Fasilitas

intensify palm oil supply, mainly sustainable jurisdictions and the Pertanian Pelita Seruyan)
of smallholder farmers creation of an agricultural facility
to support smallholders
Adopting new approaches to Creation of an agricultural facility • Agricultural facility (Fasilitas
facilitate the upgrade of to support smallholders Pertanian Pelita Seruyan)
smallholder production systems
Legalizing tenure claims under Mapping and registering • Various instruments from the
different types of rights smallholders followed by Ministry of Agriculture, the
recognition schemes formalizing land and cultivation Ministry of Environment and
rights Forestry, and the National
Land Agency

8. CONCLUSION
Although global demand for palm oil and the expansion of plantations in the tropics continue to
increase, the demand for verified, sustainably produced palm oil is also increasing. Campaigns by
nongovernmental organizations have inspired new national and regional policies in importing regions
that are either encouraging outright bans, disincentivizing the use of palm oil for biodiesels, or
demanding sustainable sourcing arrangements. Among nongovernmental organizations and
consumers, the accepted pathway for improving the sustainability of palm oil production is through
RSPO supply chain certification. Recent research has indicated that although RSPO certification does
improve the sustainability of oil palm plantations, it does not reduce rates of deforestation, fire, and
peatland degradation across the landscape. Zero-deforestation commitments have met with resistance
from local nongovernmental organizations and communities. Government certification systems such
as ISPO are perceived as diluting the principles and criteria of private certification systems. National
policies for reducing deforestation and environmental degradation have focused on strict regulations
with limited incentives for encouraging positive performance. Finally, initiatives for encouraging
improvements in the productivity of smallholders to promote intensification are currently
geographically limited in scope.
To significantly reduce the deforestation, fires, and peatland degradation from oil palm expansion, a
compromise among producers, buyers, nongovernmental organizations, and governments in tropical
producer countries is needed. Driving these processes forward requires government coordination and
initiatives at the local or district level. District governments do not have any direct incentives to drive
these initiatives. Environmental policies at the national level have a strongly emphasize legally
enforceable bans and moratoriums, in contrast to providing positive incentives based on performance.
Despite early promise, REDD+ payments to subnational governments have not yet been implemented.
Globally, district governments receive few direct benefits from sustainability initiatives through
commodity chain certification efforts, which instead flow to certified plantations and mills. To move
beyond this impasse, there needs to be an alignment of the incentives for sustainably produced
commodities and the actors, including local governments responsible for reducing deforestation and
improving the legality of farmers. These incentives should be linked to a performance system, tailored
to reflect the laws, regulations, and policies of Indonesia, as well as the jurisdictional authority of
district governments. Jurisdictional certification, among other jurisdictional approaches to
sustainability, offers the promise of addressing many of these challenges, with single commodity
certification creating the enabling environment for wall-to-wall commodity certification.

9. FURTHER RESEARCH
In Table 4 below, this paper proposes areas for further research. The table emphasizes the areas where
targeted and robust research could overcome many of the obstacles to sustainable palm oil production
in Indonesia.

21



22



Table 2: Proposed Areas for Further Research

Topic Focal Area Policy Outcome

Small-scale Finding incentives and financially viable Policy reform to incentivize investment in,
production models of small-scale, sustainable palm and sourcing from small-scale production
models oil production, including mills, as well as systems
identifying the obstacles to a broad-scale
adoption of these models
Land and Investigating appropriate mechanisms for An appropriately designed land tax for
supply chain taxing plantations, other estate land, and plantations and concessions
taxation the palm oil supply chain that adequately
reflect their value and environmental and
social effects
Environmental Finding an acceptable compromise Legally enforceable and globally accepted
safeguards between government methodologies and environmental safeguards for commodity
HCV/HCS production at jurisdictional (landscape) scale
Social Finding an acceptable design for Legally enforceable and globally accepted
safeguards jurisdictional social safeguards that meet social safeguards for commodity production
the requirements of FPIC at jurisdictional (landscape) scale
Legality of Investigating the legal barriers to Legal options/models for jurisdictional
jurisdictional jurisdictional certification and sourcing certification and sourcing, including models
certification both in terms of national laws and bi- for transactions between buyers and
and sourcing lateral and multi-lateral trade agreements producers, including those in bi-lateral trade
agreements
Mechanisms Finding the most effective ways to Models for jurisdictional sourcing that are
for source traceable produce crude palm oil tailored to different types of producers and
preferentially from sustainable jurisdictions buyers globally
sourcing from considering the complexities of the palm
sustainable oil supply chain and the needs of
jurisdictions producers and buyers
Mechanisms Finding the simplest and most effective Models for green, preferential investments for
and criteria for ways for investors to invest in sustainable jurisdictions tailored to different
green sustainable jurisdictions while reducing types of investors, with an initial, although
investments in the risk to those investors not exclusive, focus on the palm oil supply
sustainable chain
jurisdictions
Mechanisms Finding the simplest and most Models for different mechanisms to finance
for financing transparent ways to channel financial low emission development in Indonesia and
low emission resources to local governments globally, with an initial focus on the palm oil
development (jurisdictions) to enable them to develop supply chain.
the governance infrastructure for
jurisdictional sustainability.

10. REFERENCE
Abood, S.A., Lee, J.S.H., Burivalova, Z., Garcia-Ulloa, J., Koh, L.P., 2015. Relative Contributions of
the Logging, Fiber, Oil Palm, and Mining Industries to Forest Loss in Indonesia. Conserv.
Lett. 8, 58–67. https://doi.org/10.1111/conl.12103
Alisjahbana, A.S., Busch, J.M., 2017. Forestry, Forest Fires, and Climate Change in Indonesia. Bull.
Indones. Econ. Stud. 53, 111–136. https://doi.org/10.1080/00074918.2017.1365404
Asian Agri, 2017. Asian Agri’s One to One Smallholder Commitment.
Belcher, B., Imang, N., Achdiawan, R., others, 2004. Rattan, rubber, or oil palm: cultural and
financial considerations for farmers in Kalimantan. Econ. Bot. 58, S77–S87.
Belcher, B., Michon, G., Angelsen, A., Pérez, M.R., Asbjornsen, H., 2005. The socioeconomic
conditions determining the development, persistence, and decline of forest garden systems.
Econ. Bot. 59, 245–253.

23



Brandi, C., Cabani, T., Hosang, C., Schirmbeck, S., Westermann, L., Wiese, H., 2015. Sustainability
Standards for Palm Oil Challenges for Smallholder Certification Under the RSPO. J. Environ.
Dev. 24, 292–314. https://doi.org/10.1177/1070496515593775
Brockhaus, M., Obidzinski, K., Dermawan, A., Laumonier, Y., Luttrell, C., 2012. An overview of
forest and land allocation policies in Indonesia: Is the current framework sufficient to meet
the needs of REDD+? For. Policy Econ., Emerging Economic Mechanisms for Global Forest
Governance 18, 30–37. https://doi.org/10.1016/j.forpol.2011.09.004
Budidarsono, S., Susanti, A., Zoomers, A., 2013. Oil Palm Plantations in Indonesia: The Implications
for Migration, Settlement/Resettlement and Local Economic Development, in: Fang, Z. (Ed.),
Biofuels - Economy, Environment and Sustainability. InTech.
Busch, J., Ferretti-Gallon, K., Engelmann, J., Wright, M., Austin, K.G., Stolle, F., Turubanova, S.,
Potapov, P.V., Margono, B., Hansen, M.C., Baccini, A., 2015. Reductions in emissions from
deforestation from Indonesia’s moratorium on new oil palm, timber, and logging concessions.
Proc. Natl. Acad. Sci. 112, 1328–1333. https://doi.org/10.1073/pnas.1412514112
Byerlee, D., Falcon, W.P., Naylor, R.L., 2016. The Tropical Oil Crop Revolution: Food, Feed, Fuel,
and Forests. Oxford University Press, Oxford, New York.
Byerlee, D., Stevenson, J., Villoria, N., 2014. Does intensification slow crop land expansion or
encourage deforestation? Glob. Food Secur. 3, 92–98.
https://doi.org/10.1016/j.gfs.2014.04.001
Carlson, K.M., Heilmayr, R., Gibbs, H.K., Noojipady, P., Burns, D.N., Morton, D.C., Walker, N.F.,
Paoli, G.D., Kremen, C., 2017. Effect of oil palm sustainability certification on deforestation
and fire in Indonesia. Proc. Natl. Acad. Sci. 201704728.
https://doi.org/10.1073/pnas.1704728114
Casson, A., 2000. The Hesitant boom: Indonesia’s oil palm sub-sector in an era of economic crisis
and political change. Cent. Int. For. Res. https://doi.org/10.17528/cifor/000625
Chalil, D., Barus, R., 2018. Questioning the sustainable palm oil demand: case study from French-
Indonesia supply chain. IOP Conf. Ser. Earth Environ. Sci. 122, 012003.
https://doi.org/10.1088/1755-1315/122/1/012003
Corley, R.H.V., Tinker, P.B., 2016. The Oil Palm, Fifth edition. ed. John Wiley & Sons, Hoboken,
NJ.
Cramb, R., Curry, G.N., 2012. Oil palm and rural livelihoods in the Asia–Pacific region: An
overview. Asia Pac. Viewp. 53, 223–239. https://doi.org/10.1111/j.1467-8373.2012.01495.x
Croft-Cusworth, C., 2017. Are “No deforestation” commitments working? For. News.
Cunningham, S.A., Attwood, S.J., Bawa, K.S., Benton, T.G., Broadhurst, L.M., Didham, R.K.,
McIntyre, S., Perfecto, I., Samways, M.J., Tscharntke, T., Vandermeer, J., Villard, M.-A.,
Young, A.G., Lindenmayer, D.B., 2013. To close the yield-gap while saving biodiversity will
require multiple locally relevant strategies. Agric. Ecosyst. Environ. 173, 20–27.
https://doi.org/10.1016/j.agee.2013.04.007
Directorate General of Estate Crops, 2014. Tree Crop Estate Statistics of Indonesia: 2013-2015 Palm
Oil. Directorate General of Estate Crops, Jakarta.
Earth Innovation Institute, 2017. Jurisdictional Sustainability: A Primer for Practitioners. Earth
Innovation Institute, San Francisco.
Feintrenie, L., Chong, W.K., Levang, P., 2010a. Why do Farmers Prefer Oil Palm? Lessons Learnt
from Bungo District, Indonesia. Small-Scale For. 9, 379–396. https://doi.org/10.1007/s11842-
010-9122-2
Feintrenie, L., Schwarze, S., Levang, P., 2010b. Are local people conservationists? Analysis of
transition dynamics from agroforests to monoculture plantations in Indonesia. Ecol. Soc. 15,
37.
Gaveau, D.L.A., Sheil, D., Husnayaen, Salim, M.A., Arjasakusuma, S., Ancrenaz, M., Pacheco, P.,
Meijaard, E., 2016. Rapid conversions and avoided deforestation: examining four decades of
industrial plantation expansion in Borneo. Sci. Rep. 6. https://doi.org/10.1038/srep32017
Gerritsma, W., Wessel, M., 1997. Oil palm: domestication achieved? NJAS Wagening. J. Life Sci. 45,
463–475.
Gunarso, P., Hartoyo, M.E., Fahmuddin, A., Killeen, T.J., 2013. Oil palm and land use change in
Indonesia, Malaysia and Papua New Guinea (Reports from the Technical Panels of the 2nd

24



Greenhouse Gas. Working Group of the Roundtable on Sustainable Palm Oil (RSPO). 29.).
Roundtable on Sustainable Palm Oil, Kuala Lumpur.
Hansen, M.C., Potapov, P.V., Moore, R., Hancher, M., Turubanova, S.A., Tyukavina, A., Thau, D.,
Stehman, S.V., Goetz, S.J., Loveland, T.R., Kommareddy, A., Egorov, A., Chini, L., Justice,
C.O., Townshend, J.R.G., 2013. High-Resolution Global Maps of 21st-Century Forest Cover
Change. Science 342, 850–853. https://doi.org/10.1126/science.1244693
Henderson, J., Osborne, D.J., 2000. The oil palm in all our lives: how this came about. Endeavour 24,
63–68. https://doi.org/10.1016/S0160-9327(00)01293-X
Jelsma, I., Schoneveld, G.C., Zoomers, A., van Westen, A.C.M., 2017. Unpacking Indonesia’s
independent oil palm smallholders: An actor-disaggregated approach to identifying
environmental and social performance challenges. Land Use Policy 69, 281–297.
https://doi.org/10.1016/j.landusepol.2017.08.012
Kusumaningtyas, R., van Gelder, J.W., 2017. Towards responsible and inclusive financing of the
palm oil sector. Cent. Int. For. Res. https://doi.org/10.17528/cifor/006601
Lee, J.S.H., Abood, S., Ghazoul, J., Barus, B., Obidzinski, K., Koh, L.P., 2013. Environmental
Impacts of Large-Scale Oil Palm Enterprises Exceed that of Smallholdings in Indonesia.
Conserv. Lett. 7, 25–33. https://doi.org/10.1111/conl.12039
Levy, S., 1957. Agriculture and Economic Development in Indonesia. Econ. Bot. 11, 3–39.
MacIsaac, T., 2017. Jurisdictional certification approach aims to strengthen protections against
deforestation. Mongabay.
Margono, B.A., Potapov, P.V., Turubanova, S., Stolle, F., Hansen, M.C., 2014. Primary forest cover
loss in Indonesia over 2000–2012. Nat. Clim. Change 4, 730–735.
https://doi.org/10.1038/nclimate2277
Miettinen, J., Hooijer, A., Shi, C., Tollenaar, D., Vernimmen, R., Liew, S.C., Malins, C., Page, S.E.,
2012. Extent of Industrial Plantations on Southeast Asian Peatlands in 2010 with Analysis of
Historical Expansion and Future Projections. GCB Bioenergy 4, 908–918.
https://doi.org/10.1111/j.1757-1707.2012.01172.x
Ministry of Agriculture of the Republic of Indonesia, Roundtable on Sustainable Palm Oil (RSPO),
2015. Joint Study on the Similarities and Differences of the ISPO and the RSPO Certification
Systems. Ministry of Agriculture of the Republic of Indonesia and the Roundtable on
Sustainable Palm Oil (RSPO), Jakarta.
MoEF, 2015. National Forest Reference Emission Level for REDD+ In the Context of Decision
1/CP.16 Paragraph 70, Directorate General of Climate Change. DG-PPI MoEF Indonesia.
Mosnier, A., Boere, E., Reumann, A., Yowargana, P., Pirker, J., Havlik, P., Pacheco, P., 2017. Palm
oil and likely futures: Assessing the potential impacts of zero deforestation commitments and
a moratorium on large-scale oil palm plantations in Indonesia. Cent. Int. For. Res.
https://doi.org/10.17528/cifor/006468
Nepstad, D., Irawan, S., Bezerra, T., Boyd, W., Stickler, C., Shimada, J., Carvalho, O., MacIntyre, K.,
Dohong, A., Alencar, A., Azevedo, A., Tepper, D., Lowery, S., 2013. More food, more
forests, fewer emissions, better livelihoods: linking REDD+, sustainable supply chains and
domestic policy in Brazil, Indonesia and Colombia. Carbon Manag. 4, 639–658.
https://doi.org/10.4155/cmt.13.65
Pacheco, P., Gnych, S., Dermawan, A., Komarudin, H., Okarda, B., 2017a. The palm oil global value
chain: Implications for economic growth and social and environmental sustainability. Cent.
Int. For. Res. https://doi.org/10.17528/cifor/006405
Pacheco, P., Schoneveld, G.C., Dermawan, A., Komarudin, H., Djama, M., 2017b. The public and
private regime complex for governing palm oil supply: What scope for building connections
and enhancing complementarities? Cent. Int. For. Res. https://doi.org/10.17528/cifor/006464
Pasiecznik, N., Savenije, H. (Eds.), 2017. Zero deforestation: A commitment to change. Tropenbos
International, Wageningen, the Netherlands.
Pirard, R., Rivoalen, C., Lawry, S., Pacheco, P., Zrust, M., 2017. A policy network analysis of the
palm oil sector in Indonesia: What sustainability to expect? Cent. Int. For. Res.
https://doi.org/10.17528/cifor/006528

25



Pramudya, E.P., Hospes, O., Termeer, C.J.A.M., 2017. Governing the Palm-Oil Sector through
Finance: The Changing Roles of the Indonesian State. Bull. Indones. Econ. Stud. 53, 57–82.
https://doi.org/10.1080/00074918.2016.1228829
Purnomo, H., Shantiko, B., Sitorus, S., Gunawan, H., Achdiawan, R., Kartodihardjo, H., Dewayani,
A.A., 2017. Fire economy and actor network of forest and land fires in Indonesia. For. Policy
Econ. 78, 21–31. https://doi.org/10.1016/j.forpol.2017.01.001
Republic of Indonesia, 2015. Intended Nationally Determined Contribution. The United Nations
Framework Convention on Climate Change, Bonn.
Rist, L., Feintrenie, L., Levang, P., 2010. The livelihood impacts of oil palm: smallholders in
Indonesia. Biodivers. Conserv. 19, 1009–1024. https://doi.org/10.1007/s10531-010-9815-z
Rival, A., Levang, P., 2014. Palms of controversies: Oil palm and development challenges. Center for
International Forestry Research (CIFOR), Bogor, Indonesia.
Schleifer, P., Sun, Y., 2018. Emerging markets and private governance: the political economy of
sustainable palm oil in China and India. Rev. Int. Polit. Econ. 25, 190–214.
https://doi.org/10.1080/09692290.2017.1418759
Sheil, D., Casson, A., Meijaard, E., van Noordwjik, M., Gaskell, J., Sunderland-Groves, J., Wertz, K.,
Kanninen, M., 2009. The impacts and opportunities of oil palm in Southeast Asia: What do
we know and what do we need to know? Center for International Forestry Research (CIFOR),
Bogor, Indonesia.
van Noordwijk, M., Pacheco, P., Slingerland, M., Dewi, S., Khasanah, N., 2017. Palm oil expansion
in tropical forest margins or sustainability of production? Focal issues of regulations and
private standards. World Agroforestry Centre. https://doi.org/10.5716/WP17366.PDF
Vit, J., 2016. Under gov’t pressure, palm oil giants disband green pledge. Mongabay.
Zen, Z., Barlow, C., Gondowarsito, R., McCarthy, J.F., 2016. Interventions to promote smallholder oil
palm and socio-economic improvement in Indonesia, in: Cramb, R.A., McCarthy, J.F. (Eds.),
The Oil Palm Complex: Smallholders, Agribusiness and Thestate in Indonesia and Malaysia.
NUS Press, Singapore, pp. 78–108.

26

The Program on Forests (PROFOR) multi-donor partnership generates innovative, cutting-edge knowledge and tools to
advance sustainable management of forests for poverty reduction, economic growth, climate mitigation and adaptation,
and conservation benefits. Through its programs, PROFOR is advancing forest-smart development, which recognizes
forests’ significance for sustaining growth across many sectors, including agriculture, energy, infrastructure, and water.

Interested in learning more? Contact: Dora N. Cudjoe: [email protected] | Erick C.M. Fernandes: [email protected]