DISCLOSURE INSIGHT ACTION

Measuring Progress
Towards a Sustainable
Palm Oil Supply Chain
A company's journey

August 2022
Contents

04 About this report

05 Key findings
07 Setting the context
08 Journey to a sustainable palm oil supply chain
09 Actions towards sustainable palm oil in Indonesia
10 Governance
11 Board-level oversight
12 Policy and commitments
13 Strategy
15 Risk management
18 Measurement and targets
19 Certification
21 Traceability
22 Targets
23 Compliance
24 Legal compliance
25 Value chain engagement
26 Smallholder engagement
28 Direct supplier engagement
29 Beyond first-tier supplier engagement
31 Forest-related external activities or initiatives
32 Ecosystem restoration and protection
34 The way forward
35 Annex: Key performance indicators

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3
 About this report

In 2021, a total of 865 companies reported through CDP's 2021 forests

questionnaire. Of these, 233 companies reported actions they are taking to
decouple deforestation from palm oil supply chains. This report analyzes
the data disclosed through CDP’s forests questionnaire in 2021 by 167
companies who reported producing and/or sourcing palm oil from Indonesia.
It is the fourth installment of the report focused on assessing progress
towards removing deforestation from palm oil value chains in Indonesia.

These companies’ current governance, Two subcategories within metrics and

strategies and implementation targets are separated out, given their
measures are assessed against a specific importance to deforestation, with
series of industry-accepted measures the addition of value chain engagement
to reduce deforestation. They are then and restoration. The individual KPIs are
broken down into 15 Key Performance strongly based on the 12 Core Principles
Indicators (KPIs) across six categories, of the Accountability Framework.
showing the critical aspects of
performance towards eliminating Based on their adoption of the KPIs,
deforestation from supply chains. companies are mapped onto a pathway
The categories are based on the Task towards deforestation-free markets
Force on Climate-Related Financial and a forest-positive future. This allows
Disclosures’ (TCFD) categories of companies to benchmark against peers
governance, strategy, risk management and follow in the footsteps of pioneers
and metrics and targets. leading the market transformation.

865
companies
233
companies
167
companies
reported reported actions reported
through CDP they are taking producing and/or
to decouple sourcing palm oil
deforestation from Indonesia
from palm oil analyzed in this
supply chains report

Note on methodology

For all CDP corporate questionnaires, there are two versions: full and minimum. The full version contains all questions
relevant to a company, including sector-specific questions and data points. The minimum version contains fewer questions,
and no sector-specific questions or data points. To encourage disclosure, companies that are disclosing for the first time
or have an annual revenue of less than EUR/US$250 million have the option to complete the minimum version. CDP’s
forests questionnaire also includes question dependencies meaning certain questions only appear based on previous
answers. Throughout this report, the number of companies reporting on each topic will vary based on these elements and
consequently so will the denominator.
4
Key findings

1
Compared to 2020, the financial impact of
2
In stark contrast, 40% (67) of companies
forest-related risks has increased by 80%. 44% reported the cost for early action to manage
(74) of companies reported a potential impact these risks is estimated at up to US$656.4
of US$18.3 billion1. The lack of companies million — only 0.37% of the total risks' value.
disclosing financial information indicates this
figure may be an underestimation.

3
Overall, companies are adopting a wider range of actions. However, these
actions are not yet robust enough to end commodity-driven deforestation in
the palm oil value chain.

{ 86% of companies have implemented policies, { Compliance has increased, but only 23% of
but only 22% have public and comprehensive no- companies producing or sourcing palm oil from
deforestation policies. Indonesia assess compliance against national
regulatory standards. Most companies (79%)
{ While 75% of companies have commitments, only assess their own or supplier compliance with
28% of these demonstrate good practice. Only 2% forest regulations and/or mandatory standards.
incorporate social elements, such as remediation
of any adverse impacts on Indigenous peoples and { The inclusion of smallholders in supply chains is
local communities. increasing, but engagement must be prioritized
further. 44% of companies work with smallholders
{ Traceability systems have been implemented by to reduce or remove forest degradation, while
87% of companies, but only 25% have the capacity only 30% support good agricultural practices and
to scale these to over 90% of their production/ provide financial or technical assistance to help
consumption back to at least municipality or them achieve this.
equivalent.
{ 83% of traders, manufacturers and retailers work
{ While 90% of companies use certification, only with direct suppliers to support and improve their
2% of organizations that source or produce palm capacity to supply sustainable raw materials. Only
oil are using deforestation-free compliance third- 35% provide financial and technical support.
party verified schemes that cover over 90% of their
production of palm oil and/or consumption volumes. { The lack of progress in setting and meeting no-
deforestation targets is evident in key actions
{ 69% of companies have a system to control, such as traceability and certification. While 28%
monitor, or verify their suppliers’ compliance on no- of companies have traceability targets and 43%
deforestation/no-conversion of natural ecosystem of companies have certification targets, only 16%
policies. Only 32% have implemented such systems and 4% have set and are reporting linear progress
which further cover all relevant direct operations towards achieving related targets.
with over 90% of total volume in compliance
alongside forest-related commitments.

1. The increase is both from the number of companies reporting to CDP and the average amount of risk reported.

5
 4
Actions beyond the value chain are
5
Collective action is increasing, but it is
increasing. This year, 61% (88) of companies still lacking. 14% (23) of companies are
implemented ecosystem restoration and involved in jurisdictional approaches to
protection projects. Of these, 81% (71) remove deforestation from their operations
reported measuring and monitoring compared to 8% in 2020.
outcomes within two years2.

2. Two years being the acceptable period to do so.

6
Setting the context

Forests play a critical role in every aspect of our lives. They provide key services that are essential for
livelihoods and ecosystems, with around 500 million people depending on them directly3. Their ability to store
carbon and regulate climate means that they have the potential to reduce global emissions by up to 30%4.
From an economic perspective, US$44 trillion of the global economy — equal to over half of global GDP — is
dependent on nature and its services5. Despite this, in 2021, the tropics lost 11.1 million hectares (ha) of tree
cover. 34% of this loss — equivalent to a rate of 10 football pitches a minute — was within tropical primary
rainforest6. Expansion of commercial agriculture is the main driver of deforestation with 65.6 million ha of
forest lost globally between 2001 and 20157.

There is now a global recognition of forests as key and a peatland rehabilitation program14. Under the updated
in tackling climate change. Tighter regulation on Nationally Determined Contribution (NDC), Indonesia
deforestation-linked products has been implemented and has committed to curb 60% of its emissions through
proposed in both Europe and the US. At COP26, over 30 transforming its Forestry and Land Use (FOLU) sector into
major financial institutions with US$8.7 trillion in assets a net-carbon sink by 203015.
committed to address agriculture linked to deforestation in
a collective effort to end forest degradation. From a corporate perspective, No Deforestation, No
Peat, No Exploitation (NDPE) commitments cover 83%
Indonesia is one of the most biologically diverse countries of palm oil refineries in Indonesia and Malaysia16. Under
in the world8, and is home to the earth’s third largest the Consumer Goods Forum, several palm oil buyers and
rainforest9. It is also the world’s largest palm oil producer. manufacturers have transitioned towards a forest-positive
The expansion of palm oil plantations in Indonesia led strategy. This shifts the focus to manage deforestation
to almost one-third of its old-growth forest being lost risk within individual supply chains while aiming to create
from 2001 to 201910. Due to widespread habitat loss, this a positive impact in the broader sourcing landscapes17.
conversion threatens populations of critical species such
as the Tapanuli orangutan and Sumatran tiger11. From As a result of corporate commitments, policy
emission perspective, Indonesia is the eighth largest implementations, and favorable climatic conditions,
emitter of fossil fuels12 with the Agriculture, Forest and Indonesia has seen a decline in primary forest loss over the
Other Land Use (AFOLU) sector accounting for 55% of its last 5 years18. Despite the declining trend in primary forest
total emissions13. loss, 19,000 ha of forest and peatland were cleared for palm
oil plantations in 202119. The rate of action from companies
The Government of Indonesia (GoI) has implemented must accelerate to transform the palm oil sector. While it is
several policies to slow the pace of deforestation. These critical for companies to set ambitious targets, it is equally
include a permanent moratorium on primary forest and as important for these to be implemented effectively and
peatland conversion; “social forestry” (management and for their progress to be tracked.
protection of forests for the benefit of local communities);

3. https://www.forestpeoples.org/sites/fpp/files/publication/2012/05/forest-peoples-numbers-across-world-final.pdf
4. Intergovernmental Panel for Climate Change (2021). Working Group III Contribution to the IPCC Sixth Assessment Report (AR6). https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_FinalDraft_Technical-
Summary.pdf
5. World Economic Forum (2020). Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy. https://www3.weforum.org/docs/WEF_New_Nature_Economy_Report_2020.
pdf
6. WRI (2021). Forest Loss Remained Stubbornly High in 2021. https://www.globalforestwatch.org/blog/data-and-research/global-tree-cover-loss-data-2021/
7. WRI (n.d). Deforestation Linked to Agriculture. https://research.wri.org/gfr/forest-extent-indicators/deforestation-agriculture?utm_medium=blog&utm_source=insights&utm_campaign=globalforestreview
8. Convention on Biological Diversity. (n.d.). Indonesia Country Profile. Convention on Biological Diversity. https://www.cbd.int/countries/profile/?country=id
9. FAO. (2020). The State of the World’s Forests. Food and Agriculture Organization of the United Nations. https://www.fao.org/state-of-forests/en/
10. Gaveau D, et.al (2021). Slowing deforestation in Indonesia follows declining oil palm expansion and lower oil prices. https://www.researchsquare.com/article/rs-143515/v1%27
11. Meijaard, E., Garcia-Ulloa, J., Sheil, D., Wich, S.A., Carlson, K.M., Juffe-Bignoli, D., and Brooks, T.M. (eds.) (2018). Oil palm and biodiversity. IUCN Oil Palm Task Force.
12. Friedrich, J. F., Ge, M. G., & Pickens, A. P. (2020). This interactive chart shows changes in the world’s top 10 emitters. World Resources Institute. https://www.wri.org/insights/interactive-chart-shows-chang-
es-worlds-top-10-emitters
13. Austin, K. G. A., Schwantes, A. S., Gu, Y. G., & Kasibhatla, P. S. K. (2019). What causes deforestation in Indonesia? IOPscience. https://iopscience.iop.org/article/10.1088/1748-9326/aaf6db
14. Mongabay (2022). 2021 tropical forest loss figures put zero-deforestation goal by 2030 out of reach. https://news.mongabay.com/2022/04/2021-tropical-forest-loss-figures-put-zero-deforestation-goal-
by-2030-out-of-reach/
15. Ministry of Environment and Forestry (2022). Operational Plan Indonesia’s FOLU Net Sink 2030. https://www.menlhk.go.id/uploads/site/post/1647334063.pdf
16. Chain Reaction Research. (2020). NDPE Policies Cover 83% of Palm Oil Refining Market. https://chainreactionresearch.com/wp-content/uploads/2020/04/NDPE-Policies-Cover-83-of-Palm-Oil-Refining-
Market.pdf
17. The Consumer Goods Forum Positive Coalition of Action. (2022). Palm Oil Roadmap. Consumer Goods Forum. https://www.theconsumergoodsforum.com/wp-content/uploads/CGF-FPC-Palm-Oil-Road-
map.pdf
18. Weisse, M. K., & Goldman, E. G. (2021). Primary rainforest destruction increased 12% from 2019 to 2020. World Resources Institute. https://wri-indonesia.org/en/blog/primary-rainforest-destruction-in-
creased-12-2019-2020
19. Chain Reaction Research. (2022). The Chain: Deforestation Driven by Oil Palm Falls to a Four-Year Low. https://chainreactionresearch.com/the-chain-deforestation-driven-by-oil-palm-falls-to-a-four-year-
low/

7
 Journey to a sustainable palm oil supply chain

Risk
Governance Strategy management Value chain engagement

1 2 3 4 5 11 12
Board-level Policy Commitments Strategy Forest-related Smallholders Direct suppliers
oversight has a general or commodity- has robust public
business plans risk assessment works with smallholders to supports and improves supplier
specific no-deforestation no-deforestation support good agricultural capacity to comply with
has one of five has fully integrated has comprehensive
policy that is company-wide commitments, covering practices and reduce forest-related policies,
key board forest-related issues into forest-risk assessments.
and publicly available. This 100% of production/ deforestation/conversion of commitments and other
positions with all parts of its long-term These cover all relevant
incorporates social consumption, includes natural ecosystems through requirements through financial
oversight of strategic business plans operations with risks beyond
elements including a cutoff date before providing financial or technical and technical assistance.
forest-related including in financial six years and consider the
remediation, restoration, 2020 and set to be assistance.
issues. planning, strategy and future availability, quality
compensation of past completed by 2030
objectives. and impact of forest-risk
harms, and/or commitment with social elements
commodities on
to protect rights and eg. remediation and
ecosystems, habitats and
livelihoods of local restoration.
local communities.
communities.
13 14

Beyond first-tier Forest-related external

suppliers activities or initiatives
works beyond first-tier participates in jurisdictional
suppliers to manage and approaches to promote the
mitigate deforestation implementation of forest-related
Measuring & targets risks through supply chain policies and commitments.
mapping or capacity building.

6 7 8 9 10
Certification Traceability Targets Compliance Legal compliance
Ecosystem restoration
can trace over 90% of
their production/
has achieved or is making
linear progress towards
has at least 90% of
its total production/
has a system to control,
monitor and verify
assesses their own company or
supplier to ensure they comply
& protection
consumption volume of targets to source 100% consumption volume compliance with with forest regulations and/or
a commodity back to at no-deforestation certified of a commodity no-deforestation policies/ mandatory standards if sourcing
least municipality level commodities or trace certified in a commitments. This covers commodities from regions with
15
or equivalent. 100% of supply back to at no-deforestation all relevant operations with high forest-related risk.
least municipality or compliant over 90% of total volume in Beyond no deforestation
equivalent level. certification. compliance.
supports or implements ecosystem
restoration and protection projects
with timely monitoring and measured
outcomes.

8
Actions towards sustainable palm oil in Indonesia
Overall progress since last year

Over the last year, transparency has increased. More companies are building sustainable palm oil supply
chains and disclosing through CDP. In 2020, 13% of companies reporting through CDP met no KPIs. In 2021,
28% more companies disclosed through CDP and all companies are now meeting at least one KPI.

Despite this increase, these actions are insufficient to halt deforestation. Most companies (84%) remain at the
developing stage of the CDP roadmap to deforestation-free markets, incorporating between only one and eight KPIs.
No companies achieve best practice level, highlighting the need for more robust action. A full breakdown of the KPIs
and year on year progress is available in the Annex — p. 35.

Table 1. Levels for Maturity Stages

Company classification Number of KPIs adopted 2020 2021

Stage 1 (Early) No KPIs met 17 (13%) 0

Stage 2 (Developing) Between 1 – 8 KPIs met 101 (78%) 140 (84%)

Stage 3 (Mature) Between 9 – 12 KPIs met 12 (9%) 27 (16%)

All relevant KPIs have

Stage 4 (Best practice) 0 0
been met

Total disclosure 130 167

The analysis further found that 92% of companies Figure 2. Progress of companies’ performance in 2020
reporting in 2020 continued to disclose through CDP vs 2021 based on the CDP market segmentation (based
in 2021. Of these, 82% made no progress in maturity on subset of 119 companies who responded through
CDP forests questionnaire in 2020 and 2021)
level to meet the KPIs. Only 8% of companies reported
progress from Early to Developing while 9% reported
Developing to Mature. 10%
19%

Increased transparency is yet to cascade to upstream

suppliers. Despite a 28% increase in the total number
of disclosures, only 12% of requested Indonesian palm
oil producers reported their actions through CDP. This
82% 81%
lack of visibility upstream can hinder the assessment of Mature

actions and progress working towards sustainable palm Developing

oil commitments and targets. Early

8%

2020 2021

9
 Governance

10
1
 Board-level oversight

95%
of companies that
Strong corporate governance is essential to remove deforestation from
supply chains. Companies must incorporate forest-related issues into their
governance procedures to ensure that deforestation is given strategic value
produce and/or source at the senior level.
palm oil from Indonesia
had board-level CDP found that most companies (95%) producing and/or sourcing palm oil from
oversight on forest- Indonesia had board-level oversight on forest-related issues. Only 55% reported having
related issues one of five key board members with oversight of forest-related issues (KPI #1)20.
Such oversight is essential as it ensures there is a highly qualified individual within
Only
the organization with the capacity and understanding to govern forest-related issues

55%
of companies have
effectively, supporting the integration of forest issues into company-wide practices21.
This enables a comprehensive response to forest-risk, often turning to expertise from
other essential departments such as finance and legal.
oversight under
one of 5 key board In 2022, CDP’s forest questionnaire asked companies to disclose the competency of
positions and the relevant board on forest-related issues. This additional level of detail was added
therefore meet KPI #1
to drive further action, deliver deeper commitments and elevate responses to risks,
opportunities, and impacts.

20. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.
21. The five key board positions are Chief Executive Officer (CEO), Board Chair, Chief Risk Officer (CRO), Chief Financial Officer (CFO), Director on Board.

11
 Policy and commitments

86%
Most companies (86%) producing and/or sourcing palm oil from Indonesia
report setting a forest-related policy. However, only 22% report policies
that follow best practice (KPI #2)22. The low number of companies with
of companies produce robust policies aligned with best practice suggests a concerning absence of
and/or source palm oil
intention to eradicate forest loss from corporate value chains.
from Indonesia reported
setting a forest-related
policy CDP’s data indicates that companies’ no-deforestation commitments are not
sufficiently robust. While 75% of reporting companies have a no-deforestation or no-
Despite this only
conversion commitment, only 28% reported a comprehensive commitment that meets

22%
of companies report
the key elements of KPI #323.

When integrating social, remedial, and restorative elements into the criteria, only 2%
policies that follow of companies fulfilled KPI #3. Given that deforestation is linked with many social
best practice (KPI #2) issues such as inequality, poverty, and exploitation of Indigenous communities24, it is
imperative for social aspects to be integrated into commitments as specified in KPI #3.

75%
of companies have a
Setting and implementing comprehensive time-bound no-deforestation commitments is
the first step in building ethical palm oil supply chains. Such commitments demonstrate
a company’s appreciation of forest-related issues and their drive to take action. Policies
no-deforestation or no- with social, remedial, and restorative elements clarify corporate expectations while
conversion commitment showing accountability and constructive stakeholder engagement.
But only

28%
reported a
Unilever Plc
United Kingdom
comprehensive
commitment (KPI#3) Unilever’s 2020 People & Nature policy covers 100% of purchased
volumes of palm oil to achieve its deforestation-free target by 2023. Its
Responsible Sourcing Policy applies to all suppliers. Unilever reviews
policies on a quarterly basis to ensure continued relevance to the issues
in commodity sourcing. For palm oil, the People & Nature Policy is aligned
with the Accountability Framework and goes beyond the palm oil industry
standard NDPE policies and regulatory requirements. It has implemented
a strategy throughout 2020 that relies on traceability and risk assessment
at the sourcing origin, leading to the selection of global palm oil mills falling
from 1,600 to 500, mainly in Indonesia and Malaysia. Unilever embeds
policy requirements in supplier contracts, resulting in approximately 70%
of its palm oil being sourced with additional controls on deforestation and
ecosystem conversation by Q4 2020. In line with public Sustainable Sourcing
Commitments, in 2020 Unilever sourced 99.6% RSPO-certified palm oil from
suppliers who maintain compliance with the RSPO standard.

22. ‘Best practice’ is defined here as developing public time-bound targets, showing a company’s progress in removing deforestation from operations and meeting policy objectives.
23. No-deforestation forests-related public commitment that is timebound, set to be completed by 2030, includes a cutoff date before 2020, with Free, Prior, Informed Consent (FPIC), covers 100%
of production/consumption and applies to all relevant operations.
24. Chao, S., Anderson, P., Colchester, M., (2014). Assault on the commons: Deforestation and the denial of rights in Indonesia. Forest Peoples Programme (FPP). https://www.forestpeoples.org/
en/topics/climate-forests/publication/2014/assault-commons-deforestation-and-denial-rights-indonesia

12
Strategy

2 13
 74%
To decouple commodities from deforestation, a company’s policies and
commitments should be reflected in their business strategy (KPI #4).
Integrating forest-related issues into all parts of a long-term strategic plan
of companies are demonstrates responsiveness to forest-risks, market opportunities, and the
fulfilling KPI #4 by evolving policy landscape.
integrating forest-related
issues into their long-
term business plans Transparency of such strategies helps stakeholders to assess how companies adapt
including financial planning,
and respond to the changing market and regulatory conditions over the short, medium,
strategy, and corporate and long-term.
objectives
Based on CDP data, 74% of companies are fulfilling KPI #4 by integrating forest-related

57%
have integrated forest-
issues into all parts of their long-term strategic business plans including in financial
planning, strategy, and corporate objectives. 57% of companies have integrated forest-
related issues into at least one of those long-term business plan aspects.
related issues into at least
one of those long-term
business plan aspects Figure 3. Proportion of companies integrating forest related issues into any
aspects of long-term strategic business plan

Long-term business objectives (141) 84%

Strategy for long-term business objectives (139) 83%

Financial planning (75) 75%

14
Risk management

3 15
 Risk assessment is a critical tool to identify and measure risk exposure. Comprehensive forest-risk
assessments help companies to view the complete risk landscape, prioritize issues and devise effective
mitigation plans over short and long-time horizons. Forest-related assessments should consider future
scenarios — such as the availability, accessibility and quality of commodities — alongside the impacts on
markets, ecosystems and people.

In 2021, 90% of companies reported conducting

forest-related risk assessments. Of these, only 38%
of companies followed best practice (KPI #5)25. This Barry Callebaut AG
suggests that the remaining 52% did not undertake Switzerland
thorough and sufficient procedures, potentially resulting Barry Callebaut reported the availability of
in poor and inaccurate assessment. Assessments certified sustainable palm oil as a primary risk
which follow best practice fully cover relevant operations driver that can impact demand for its products,
with risks beyond six years, and consider social and potentially costing US$73.6 million. To manage
environmental impacts, and include local communities. this risk, Barry Callebaut reported costs of
US$213,311 which are primarily associated with
Companies continue to report risks related to producing its efforts to maintain relationships with different
and/or sourcing palm oil from Indonesia. 81% of suppliers, its RSPO membership (incl. supplier
companies identified at least one risk that could have a engagement), and to monitor progress regarding
substantial financial or strategic impact on their business. its Sustainable Sourcing Policy for Palm Oil.

Figure 4. Type of risk reported by companies

1%
23% 18%
33%

67%

77% 82% 99%

Reputational
Physical Regulatory Technological
and markets

Yes No

25. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.

16
Furthermore, 44% of companies reported risks related to will limit companies’ access to markets if they do not
sourcing and/or producing palm oil from Indonesia with comply; Indonesian producers could see tighter regulatory
a value of up to US$18.3 billion. This is approximately requirements as a result of the government’s FOLU Net
an 80% increase compared to last year whereby more Sink 2030 commitment.
than US$10 billion value of risk was reported by 38% of
companies. Reputational and market risks were mostly Despite this significant change in policy landscape, only
reported by companies with an estimated value of up to 18% of companies report exposure to regulatory risk. This
US$15.6 billion. However, as under half of companies suggests there is a low awareness among companies
disclosed financial information, the potential financial of the systemic threat that deforestation poses and
impact is likely underestimated. the increased risk of stranded assets. In contrast, 40%
of companies reported that the cost for early action to
These risks are gaining recognition globally. In 2021, there manage identified risks was a fraction of the risk value,
was a strong shift in public policy and regulation to halt estimated at US$656.4 million. Furthermore, 37% of
commodity-driven deforestation. Importing countries companies reported forest-related opportunities with a
such as Germany implemented the Supply Chain Due total value of up to US$7.9 billion. The most reported
Diligence Act26 while the EU proposed to prohibit imports opportunity was increased brand value with value of up to
on deforestation-linked products27. Similar proposals US$5.6 billion.
were made in the UK and the US. These regulations

Firmenich S.A.
Switzerland
Firmenich’s forest-related strategies include collecting and evaluating information to better understand the
impact of each product by conducting life cycle analysis, natural & organic ingredients labeling guidance,
developing new CO2 extraction & innovative gentle extraction techniques, and augmenting clean label
solutions. By communicating the measurable environmental impact to end customers, as a result, Firmenich's
sustainable product branding which includes certified materials could potentially drive expansion into new
markets, including new product lines and types of customers. Firmenich estimated the opportunity to expand
into a new market related to the responsible sourcing of palm oil was around US$10.6 million.

26. Rünz, S. R. (2021). Overview of the German Supply Chain Due Diligence Act. TaylorWessing. https://www.taylorwessing.com/en/insights-and-events/insights/2021/07/overview-of-the-german-
supply-chain-due-diligence-act
27. European Commission. (2021). Proposal for a Regulation on deforestation-free products. https://environment.ec.europa.eu/publications/proposal-regulation-deforestation-free-products_en

17
 Measurement and targets

18
4
Certification

Certification can be used in a company’s efforts to remove deforestation from their operations. By
sourcing certified palm oil, a company can ensure the sustainable production and/or sourcing of palm
oil and understand its impact. This demonstrates compliance with no-deforestation commitments while
safeguarding ecosystems and communities.

48% of companies reporting through CDP mainly rely on third-party certification to monitor and verify the compliance of
their suppliers on No Deforestation, No Peat, No Exploitation (NDPE) commitments28. CDP’s analysis shows that 90% of
companies sourcing palm oil from Indonesia use certification. However, only 2% report that at least 90% of their palm oil
is certified through schemes that provide assurance of no-deforestation or no-conversion (KPI #6).

Figure 5. Target vs progress on certification

Companies with targets linked to no conversion of natural

ecosystems or no-deforestation commitment on certification (71)
43%

Companies that have a target to source 100% certified

no-deforestation compliant commodities and are making linear 4%
progress towards this target or have achieved it (6)

Companies with at least 90% certified in a no-deforestation compliant

2%
certification per commodity (no credits/no mass balance) (4)

Over half of disclosing companies (56%) rely on the More robust supply chain models are reported by far
Roundtable of Sustainable Palm Oil (RSPO) Mass fewer companies. 26% report sourcing RSPO Segregated
Balance supply chain model to fulfill their sustainable palm oil, which is when only certified sustainable palm
palm oil commitment. This refers to when a supply chain oil is used and kept separate from non-certified palm oil
consists of sustainably sourced RSPO palm oil but can throughout the entire supply chain.
still be mixed with non-certified palm oil due to a lack of
administration. Going further than this is the Identity Preserved model,
which only 7% of companies use. This refers to when the
The Mass Balance and Book and Claim model29 can be end user of the sustainable palm oil can trace its origins
useful in the early stage of a company’s sustainability back to a single and certified identifiable source, such as
journey. However, these models do not monitor the the mill.
supply chain for the presence of sustainable palm oil and
cannot trace palm oil commodities to their source. They Without an adequate certification scheme, palm oil
are therefore not designed to provide assurance on no- products cannot be verified against NDPE commitments.
deforestation products. It is of growing urgency that companies accelerate their
uptake of certified sustainable palm oil while maintaining
robust environmental and social safeguards. Companies
must aim to use Segregated and Identity Preserved
certification to transform their operations and supply chain.

28. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.
29. The supply chain is not monitored for the presence of sustainable palm oil. 23% of companies reporting through CDP use this model.

19
 Figure 6. Number of companies reporting use of palm oil certification scheme

RSPO Mass Balance 94

RSPO Segregated 44

RSPO Credits/Book & Claim 38

RSPO (any type) 33

International Sustainability and Carbon

Certification (ISCC) 11

RSPO Identity Preserved 10

RSPO Producer/Grower certification 9

RA Sustainable Agriculture Network (SAN)

standard
1

Danone
France
On a full year basis Danone achieved 50% Segregated and 48% Mass balance. Because there was no RSPO
segregated palm oil in the US, Danone co-built new solutions with a few Traders. Danone promotes this
strategy to its peers, using it as an opportunity to create demand for fully traceable palm oil. Danone negotiated
long-term contracts with its US suppliers on palm oil to co-build the first segregated RSPO Supply chain for
the US market. Implementation started in December 2020. As a result, by the end of year 94% was RSPO
Segregated and 4% RSPO Mass Balance. The remaining 2% of Danone palm oil is not RSPO certified – this
volume is sourced from and used in Africa. As Danone is committed to achieve 100% Segregated Palm Oil, it
continues to push for a transformative approach in those areas where RSPO certified and Segregated palm oil
is not yet accessible.

20
Traceability

Traceability is critical for companies to track the origin of a palm oil product; as stakeholder perspectives
shift, it is becoming expected that companies can identify deforestation within their supply chains and work
to eliminate harmful practices.

CDP’s analysis found that most companies (87%) have trace their palm oil products highlights the complexity of
traceability systems for their palm oil products. However, the palm oil supply chain and the challenges needed to be
only 25% of companies reported being able to trace more overcome to ensure full traceability.
than 90% of their production or consumption back to at
least the municipality/processing facility level — which The supply chain of palm oil is complex for various
is the minimum level of traceability necessary to start reasons. These include issues surrounding ownership,
identifying deforestation risk (KPI #7). land legality, conflicts of interest and the lack of
consensus on the definition of deforestation30. Supply
Only a handful of companies reported fully tracing chain complexity is consistently reported by companies
their palm oil to mill (9%) and plantation (4%) level. (39%) as the main challenge in eliminating deforestation
Traceability to the plantation level — and to some level from their business model; as palm oil is passed from
to the mill — allows companies to monitor and manage upstream producers to retailers, there are multiple
deforestation risk at or close to the supply sources to changes in which stakeholders own the product. This has
ensure compliance. The low number of companies able to hindered efforts to achieve greater levels of traceability.

Figure 7. Target vs progress on traceability for companies sourcing palm oil from Indonesia

Companies with traceability targets related to their no

deforestation/no-conversion commitments (46) 28%

Companies that have a target to trace 100% of their production or

sourcing back to at least municipality level and are are making linear 16%
progress towards reaching this target or have achieved it (27)

Companies that can trace 100% of their production/ consumption

back to at least municipality or equivalent (no exclusion) (22) 13%

Company being able to trace 100% their palm oil up to mill

level (15) 9%

Company being able to trace 100% their palm oil up to

plantation level (7)
4%

KAO Corporation
Japan
KAO conducted surveys of Tier-4 by contacting Tier-1 suppliers to verify traceability to Tier-4. KAO have
prepared a palm mills map from the palm mills list confirmed by the suppliers and used satellite imagery to
check whether there are national parks, protected forests, and peatlands within a 50km radius of the palm
mill location. KAO also carried out hearings with Tier-1 suppliers to assess risks in their mills. In addition, KAO
carried out an on-site survey by a third-party in response to palm mills that are extremely high risk. If a non-
compliance is suspected, KAO will conduct a fact-finding survey through refineries (Tier-1) in the supply chain,
regarding palm kernel mills (Tier-2), palm oil mills (Tier-3) and plantations (Tier-4). Upon discovery of non-
compliance in this study, KAO will cease doing business with the company and request the company to take
corrective actions and comply with NDPE and HCSA.

30. Lyons-White, J. L. W., & Knight, A. T. K. (2018). Palm oil supply chain complexity impedes implementation of corporate no-deforestation commitments. ScienceDirect. https://www.sciencedirect.
com/science/article/pii/S0959378017310117

21
 Targets

81%
For policies and commitments to be implemented effectively, specific
targets must be set. Regular reporting of progress against set targets allows
companies, investors and other CDP data users to track a company’s efforts
of companies report in establishing ethical, deforestation-free supply chains.
forest-related targets
Despite this, only CDP’s analysis found that companies goals to source 100% no-deforestation

52%
sourcing palm oil from Indonesia certified commodities by 2030 were
are lacking ambitious targets and making progress on this target, while
milestones. While 81% of companies 16% have reported making progress on
link their targets with a report forest-related targets, only 52% their traceability targets. These involve
no-deforestation/ no- link their targets with a no-deforestation/ tracing 100% of palm oil supply back to
conversion commitment no-conversion commitment, whether the municipality or equivalent level at a
related to traceability, certification, minimum (KPI #8).

66%
of companies report third-
compliance, supplier engagement or
ecosystem restoration. There is an urgent need for better
transparency within supply chains to
party certification targets Sufficient progress in achieving identify where forest-related risks can be
But only targets is uncommon among reporting reduced most.

4%
companies. Only 4% of companies with

were making progress on

their goal to source 100%
no-deforestation certified
commodities by 2030 Figure 8. Type of target reported by companies

Third-party certification 66%

43%

39%
Traceability
28%

11%
Assess and/or verify compliance
8%

10%
Engagement with direct suppliers
7%

10%
Engagement with smallholders
5%

2%
Ecosystem restoration
2%

1%
Engagement with indirect suppliers
1%

No link with no-deforestation/ no-conversion commitments

Link with no-deforestation/ no-conversion commitments

22
Compliance

To achieve ethical supply chains, companies need systems in place to control, monitor and verify compliance
with no-deforestation targets. Robust monitoring and verification of targets facilitates accountability,
ensuring that a company is complying with their targets and managing their supply chain effectively.
Through establishing compliance mechanisms, suppliers not in line with no-deforestation goals can be
engaged and informed of corrective actions to take. Capacity building will be key in enabling companies to
better manage their supply chains; CDP’s Supply Chain Forest Program offers support to help them do so.

Data reported in 2021 indicates that 69% of companies Figure 9. Response to non-compliance in supply chains
have a system to control, monitor, or verify their
70 50%
suppliers’ compliance on no-deforestation policies. Only
64
32% of companies that have a no-deforestation policy or 45%
comprehensive commitment have such a system which 60

further covers all relevant direct operations and more 40%

than 90% of total volume in compliance (KPI #9)31. 50 35%

To manage non-compliance, there are several routes 40 30%

40
commonly taken by companies. ‘Retain and engage’ is
34
reported as the most common response to non-compliant 25%

suppliers (44%)33. This means that the buyer continues 30

20%
to purchase the palm oil product while engaging with the
supplier to resolve any non-compliance(s)34. 15%
20

When non-compliant suppliers are identified, buyers 10%

should take follow-up actions to address and resolve 10

5%
non-compliance. The most common action is to provide
1
information on appropriate steps that can be taken, 0 0%
which was reported by 44% of companies35. No Exclude Suspend & Retain &
response engage engage

Figure 10. Procedures to address and resolve non-compliance with suppliers

Assessing the efficacy and efforts of non-compliant supplier

actions through consistent and quantified metrics (35) 24%

Re-integrating suppliers back into supply chain based on the

successful and verifiable completion of activities (48) 33%

Developing time-bound targets and milestones to bring suppliers

back into compliance (56) 39%

Providing information on appropriate actions that can be taken to

address non-compliance (64) 44%

31. These numbers are out of 137 companies reporting to the question, ie those disclosing through the full-tier questionnaire that have a forest-related policy or public commitment and a system
to monitor compliance.
32. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.
33. Accountability Framework. (2019). Operational Guidance on Supply Chain Management. Accountability Framework. https://accountability-framework.org/wp-content/uploads/2019/06/Oper-
ational_Guidance_Supply_Chain_Management.pdf
34. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.

23
 Legal compliance

72%
Assessment of compliance through using legal frameworks within supply
chains represents good due diligence when sourcing from forest-risk
countries. It demonstrates to investors and other CDP data users that the
of companies report
company respects forest regulations and mandatory labor standards in
assessing legal
compliance within their countries of operations.
supply chains
Data disclosed through CDP showed that 79% of companies reported assessing legal
Despite this, only
compliance within their supply chains related to either their suppliers, their owned and/

7%
report assessing legal
or managed land, or both35 (KPI #10). Despite the importance of legal compliance, 20%
of companies reported no assessment in their supply chains36.

compliance from both

suppliers and owned/ Figure 11. Detail on assessment of legal compliance
managed land
Yes, from suppliers (103) 72%

23%
No, we do not assess legal
compliance (29) 20%

Yes, from both suppliers and

of companies used owned/managed land (10) 7%
ISPO to assess
compliance of their
Yes, from owned and/or
Indonesia palm oil managed land (1) 1%
products in 2021

Initiated by the GoI, the Indonesian to assess compliance of their Indonesia

Sustainable Palm Oil (ISPO) certification palm oil products38.
was rolled out in 2011. This serves as
a mandatory requirement for all palm In 2020, approximately 32% of Indonesia’s
oil plantations operating in Indonesia total palm oil plantation area was ISPO
— including smallholders — to address certified39. Yet despite managing 40%
legal, environmental and social issues of the total palm oil area40 only 0.19% of
surrounding palm oil. Often referred to total smallholder plantations were ISPO
as Indonesia’s legal standard for palm certified42. This lack of certification poses
oil operations, ISPO’s criteria is based on a legal risk within a company’s palm
existing legal and regulatory requirements, oil operations, making it increasingly
notably the Indonesian Environmental important for smallholder farmers to be
Feasibility Assessment (AMDAL)37. In supported in the transition towards a
2021, 23% companies reported using ISPO no-deforestation future.

35. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.
36. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.
37. EFECA (2020) Palm Oil Certification Schemes: ISPO. Efeca. https://www.efeca.com/wp-content/uploads/2020/03/Certification-Scheme-ISPO-Infobriefing-5-Part-2-Final.pdf
38. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.
39. Mongabay. (2020). Indonesia aims for sustainability certification for oil palm smallholders, Mongabay. https://news.mongabay.com/2020/04/indonesia-aims-for-sustainability-certifica-
tion-for-oil-palm-smallholders/
40. Dikin, A., Gartina, D., Sukriya, R.L.L. (2020) Statistik Perkebunan Indonesia 2018–2020: Kelapa Sawit; Sekretariat Direktorat Jenderal Perkebunan. https://ditjenbun.pertanian.go.id/template/up-
loads/2021/04/BUKU-STATISTIK-PERKEBUNAN-2019-2021-OK.pdf
41. Pramudya, E.P., Wibowo, L.R., Nurfatriani, F., Nawireja, I.K., Kurniasari, D.R., Hutabarat, S., Kadarusman, Y.B., Iswardhani, A.O., Rafik, R. (2022) Incentives for Palm Oil Smallholders in Mandatory
Certification in Indonesia. MDPI. https://www.mdpi.com/2073-445X/11/4/576

24
Value chain engagement

5
 Smallholder engagement

36%
Smallholder farmers experience significant challenges, notably economic and
educational barriers42. Independent smallholders are particularly vulnerable
due to these challenges as well as market insecurity43. Smallholders play a
of companies critical role in Indonesia’s palm oil production. They manage around 40% of
report working with total Indonesia’s plantations44 which is expected to rise to 60% by 203045. It is
smallholders
fundamental that companies engage with and support smallholders. Despite
Despite this, only this, only 44% of companies reported working with smallholders to reduce

17%
deforestation and/or the conversion of natural ecosystems46. Only 8% provide
support to independent smallholders47.
of companies provide Businesses must recognize the importance of providing technical and financial
financial and technical
support to smallholders support to smallholders if no-deforestation/no-conversion commitments are
to be met48. Without this support, any efforts to reduce deforestation cannot be
transformative as key social factors such as poverty are not being addressed or
alleviated. An intersectional approach is essential given that these social factors
are deeply intertwined with issues related to deforestation49.

Despite being critical, provision of meaningful financial and technical support is

uncommon among reporting companies with only 17% reporting this action50.

Figure 12. Smallholder engagement

Not working with

smallholders (55) 38%

Working with
smallholders (52) 36%

Working with independent

smallholders (11) 8%

Working with scheme/plasma

smallholders (1) 1%

42. Accountability Framework. (2019). Terms and definitions. https://accountability-framework.org/wp-content/uploads/2019/07/Definitions.pdf

43. WR (2018). Smallholder Farmers Are Key to Making the Palm Oil Industry Sustainable. https://www.wri.org/insights/smallholder-farmers-are-key-making-palm-oil-industry-sustainable
44. DJP 2015 via 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.
45. Saragih, B (2017): Oil palm smallholders in Indonesia: Origin, development strategy and contribution to the national economy. https://www.iopri.org/wp-content/uploads/2017/10/WPLACE-17-1.1.-
OIL-PALM-SMALLHOLDER-Bungaran-Saragih.pdf
46. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.
47. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.
48. Climate Focus (2020). Company Progress in Engaging Smallholders to Implement Zero Deforestation Commitments in Cocoa and Palm Oil. https://climatefocus.com/wp-content/up-
loads/2022/06/20200312-Smallholder-Cocoa-Palm-Report-Edited_FINAL_0.pdf
49. Ibid
50. These numbers refer to the percentage of companies disclosing through the full-tier questionnaire.

26
Figure 13. Smallholder engagement approach

Musim Mas
34% Singapore
Musim Mas works closely with smallholders
through various programmes. These include
a smallholder scheme programme; aiding in
capacity building for best management practices
22% and certified products; and an Initiate Fire Free
Village Programme (FFVP). As of December
2020, Musim Mas’ FFVP covered 75 villages
17%
spanning 468,569 hectares and conducted 144
trainings in the communities. Additionally, Musim
Mas supports joint monitoring of conservation
areas, provides a CSR program to smallholders,
and is piloting a smallholder certification scheme
with IFC (International Finance Corporation). As
of 2020, 2,092 smallholders have been RSPO-
certified, and Musim Mas is further working on
the implementation of an Extension Service
Capacity Supply chain Financial and Platform for its landscape areas to extend
building mapping commercial
support services to independent smallholders in the
third-party supply chain.

27
 Direct supplier engagement

Forest-positive and net-zero commitments are gaining momentum. To fulfil these commitments, companies
must ensure their supply chains are protecting forests, natural ecosystems, and local communities.
Simultaneously, decarbonization must be incorporated into all aspects of their business models. This can be
achieved through reducing Scope 151, Scope 252 and Scope 353 greenhouse gas (GHG) emissions.

Scope 3 emissions have the most significant impact, Figure 14. Number of companies reporting through CDP
accounting for approximately 24% of global emissions54. that produce and/or source palm oil from Indonesia,
One company demonstrating this is Hershey’s; they reported broken down by supply chain stage
that 94.4% of its total GHG emissions fall under Scope 3,
with 41.5% of these coming from land-use change55. 111
2020 2021

Net-zero and forest-positive economies cannot be

achieved without companies engaging, influencing and 83

supporting their suppliers to accelerate the adoption

of sustainable commodity production. Whether this is
achieved through adopting more regenerative practices,
community inclusion, or improved land-use management, 37
40
33
these approaches are central to protect forests and 27
ultimately limiting global temperature rise to 1.5°C. 20
16
9 11

In 2021, 83% of processors, traders, manufacturers

and retailers sourcing palm oil from Indonesia reported
engaging with their direct suppliers. However, only 35%
reported taking further action by providing financial and
Producer Processor Trader Manufacturer Retailer
technical support to these same suppliers (KPI #12).

Figure 15. Type of direct supplier engagement

Supplier questionnaires on environmental and social social

indicators (80) 48%

Supplier audits (55) 33%

Developing or distributing supply chain mapping tool (44) 26%

Organizing capacity building events (37) 22%

Offering on-site training and technical assistance (32) 19%

Investing in pilot projects (26) 16%

Disseminating technical materials (26) 16%

Financial incentives for certified products (22) 13%

Paying higher prices linked to best agricultural practices (13) 8%

Long-term contracts linked to forest related commitments (13) 8%

Purchase guarantee linked to best agricultural practices (4) 2%

Offering credit lines linked to best agricultural practices (2) 1%

51. Scope 1 emissions refer to direct greenhouse (GHG) emissions that occur from sources that are controlled or owned by an organization. This includes all land-use emissions from companies that
own or control land to produce agricultural and forest-risk commodities (GHG Protocol).
52. Scope 2 emissions refer to indirect GHG emissions associated with any purchases of electricity, steam, heat, or cooling (GHG Protocol).
53. Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly impacts in its value chain. This includes the
emissions linked to downstream companies where sourced commodities are being produced from forest-risk products through the AFOLU sector (GHG Protocol).
54. Crippa et al. (2021). Food systems are responsible for a third of global anthropogenic GHG emissions. Nature https://www.nature.com/articles/s43016-021-00225-9
55. Hershey company (2021). 2020 Sustainability Report. https://www.thehersheycompany.com/content/dam/hershey-corporate/documents/pdf/hershey_2020_sustainability_report_.pdf

28
Beyond first-tier supplier engagement

Among traders, manufacturers and retailers, engagement beyond the first-

tier is reported by 53% companies56 (KPI #13). As first-tier refers to direct
suppliers, engagement can depend on the stage of the value chain that
the buyer is a part of. Engagement beyond the first-tier focuses mainly on
capacity building and supply chain mapping. The most common approach
includes distributing supplier questionnaires on socio-ecological indicators
(27%) and supply chain mapping tools (24%).

Neste Oyj
Finland
Since 2015, Neste engaged with 20 palm oil suppliers for biofuel through
Traceability, Human Rights and Greenhouse Gas workshops to foster a
dialogue about suppliers’ concerns. To implement the Neste Responsible
Sourcing Principle, it benchmarked its supplier guidelines against the
Accountability Framework. Its core processes for sustainable sourcing of
renewable raw materials include supplier engagement and submission
of proof of sustainability documents, managed by Neste’s Supplier
Sustainability Portal (SSP). In 2020, the portal became fully operational
which supports Neste’s suppliers in the development of sustainability
policies, management systems, transparency, traceability, due diligence and
continuous improvements.

56. Out of companies disclosing through the full-tier questionnaire.

29
 Enabling greater transparency and actions towards a
forest-positive future

CDP’s Supply Chain membership program helps companies

to tackle their environmental impact, putting suppliers on their
own pathway towards environmental excellence. Purchasing
members request their suppliers to disclose through CDP and
provide details about relevant impacts related to climate change,
forest, and water. Through CDP forests disclosure, these suppliers
are engaged to increase transparency and progress to remove
deforestation and forest degradation from their operations.

In 2021, 822 suppliers worldwide were requested by 21 purchasing

companies to provide information on the actions being taken to
tackle deforestation. Of these, only four suppliers were located
in Indonesia. As this report has highlighted, the palm oil sector in
Indonesia is a global hub for palm oil production and is having a
severe impact on forests, ecosystems and people. It is therefore
of critical importance that suppliers in Indonesia are engaged with
if they are to transition towards a forest-positive, no-deforestation
future. This is a matter of both ecological and economic urgency. It
is in a company’s best interest to take action.

The CDP forests questionnaire is equipped and annually renewed

with relevant questions that drive action to transition towards
forest-positive futures. Downstream companies can use this
platform to ensure that their direct and beyond first-tier suppliers -
particularly those in high-risk production areas — are well-informed
and guided to fulfil their clients’ sourcing policies and wider
industry expectations.

30
Forest-related external activities or initiatives

Transformation towards a sustainable palm oil sector calls for collective actions from all stakeholders
across the supply chain. To ensure that supply chains are free from deforestation, companies must align
their sustainability goals with stakeholders upstream in the production landscape.

Encouragingly, 84% of companies reported participating Riau. These companies work with non-profit organizations
in external initiatives to promote the implementation of to eliminate deforestation from their supply chains
their forest-related policies and commitments. However, and align this goal with achieving the subnational
only 14% are involved in jurisdictional approaches57 (KPI government’s sustainability objectives.
#14). Almost 50% of these companies reported engaging
stakeholders beyond their value chain through landscape To understand a company’s implementation of these
and jurisdictional approaches, contributing to positive approaches, CDP has introduced a new set of questions
impacts in Indonesia’s production landscape58. in the 2022 forests questionnaire. These explore the
overall initiative, type of engagement, goals, actions, and
From 2021, nine companies disclosed that they are monitoring of progress within companies’ landscape and
sourcing from Riau, Indonesia and are involved in a jurisdictional approaches.
landscape project in the Siak and Pelalawan districts of

Figure 16. The 10 biggest palm oil sourcing areas as disclosed by companies vs number of companies involved in
landscape/jurisdictional approaches in the respective sourcing areas

21 2

29 9
20
41 18
1 2
25
21 25
25
# Number of companies 23

# Number of companies
involved in LA/JA

PepsiCo
United States
Engaging in landscape approaches directly supports PepsiCo’s strategy of achieving the 100% No
Deforestation, No Peat, No Exploitation (NDPE) commitment. Apart from joining the coalition of companies
to develop deforestation-free supply chains throughout the Siak Pelalawan Landscape Project in Indonesia,
PepsiCo voluntarily pursued an ecosystem restoration project together with other companies under the Coalition
for Sustainable Livelihoods in Aceh Tamiang District, Aceh Province, Indonesia.

57. Jurisdictional approach is a type of landscape approach to advance shared sustainability goals where the landscape is defined by administrative of sub-national governments and the approach is
implemented with a high-level of government involvement.
58. Landscape approach involve a collaboration of stakeholders within a landscape to advance shared sustainability goals and reconcile and optimize multiple social, economic, and environmental ob-
jective across multiple economic sectors and land uses. They are implemented through processes of integrated landscape management, convening diverse stakeholders to develop and implement
land use plan, policies, investments and other interventions.

31
Ecosystem restoration and protection

6
Restoration activities The GoI has committed to curb 60% of its emissions by 2030 through
can reduce a country's transforming Indonesia’s FOLU sector into a net carbon sink. Reducing
emissions by up to deforestation and restoring degraded land is essential to achieve targets

35%
related to this commitment.
by 2030
Restoration, such as set-aside land Any remediation efforts taken should be
But only and agroforestry, can re-establish the monitored to demonstrate the delivery

6,600ha natural function of ecosystems, increase

biodiversity and enhance essential
ecosystem services. In Indonesia,
of environmental and social impacts.
Only 49% of companies reporting to
CDP conducted timely monitoring and
of land has been restoration could reduce up to 35% of the measured the outcomes of their relevant
restored between 2018
country’s emissions by 203059. Despite project(s) (KPI #15).
and 2020
this, the total area of restoration in
Indonesia is minimal, with only 6,600ha of The need to restore Indonesian forests
land restored from 2018 to 202060. is increasingly urgent given the scale at
which palm oil production is perpetuating

61%
of companies
CDP urges companies to go beyond
removing deforestation from their supply
chains by protecting and restoring
forest degradation. Furthermore, as
Indonesia’s dry season has become
more severe, a growing area of forest
producing, sourcing degraded forests within or outside of their is being converted into grassland and
or using Indonesian operations. In 2021, 61% of companies shrubland due to increased fire activity61.
palm oil products producing, sourcing or using Indonesian Environmental drivers such as this
are supporting or palm oil products were supporting or emphasize the urgency to restore forests
implementing initiatives
focused on ecosystem implementing initiatives focused on given the coupled risk that unsustainable
restoration and/or ecosystem restoration and/or protection palm oil plantations and mismanaged
protection within some part of their global operations fire poses to ecosystems, climate and
(in Indonesia or otherwise). 17% of public health.
17% of companies have
implemented and/or companies reported implementing or
supported restoration supporting initiatives in Indonesia itself,
initiatives in Indonesia the majority being forest restoration.

Figure 16. Type of ecosystem restoration and protection projects

implemented in Indonesia
17

5
3 3
2
1

Forest ecosystem Other ecosystem Biodiversity

Agroforestry Reforestation Set aside land
restoration restoration offsetting

59. Basuki, I., Adinugroho, W.C., Utomo, N.A., Syaugi, A., Tryanto, D.H., Krisnawati, H., Cook-Patton, S.C., Novita, N. (2022). Reforestation Opportunities in Indonesia: Mitigating Climate Change and
Achieving Sustainable Development Goals. MDPI. https://www.mdpi.com/1999-4907/13/3/447
60. Jong, H. N. (2021). Deforestation in Indonesia hits record low, but experts fear a rebound. Mongabay. https://news.mongabay.com/2021/03/2021-deforestation-in-indonesia-hits-record-low-but-
experts-fear-a-rebound/
61. Kemen G Austin et al (2019). What causes deforestation in Indonesia? Environ. Res. Lett. 14 024007. https://iopscience.iop.org/article/10.1088/1748-9326/aaf6db/pdf

33
 The way forward

Most companies reporting through CDP were lacking ambition to decouple

deforestation from Indonesian palm oil supply chains. No companies have
met all relevant KPIs in addressing deforestation. Only 17% of companies
reported progress in maturity level, with the majority continuing to take
limited action. Given stakeholders’ increased concern and awareness of the
issues related to deforestation, companies risk increasing their exposure to
forest-related risks if they do not strengthen their policies and commitments
and accelerate their rate of change.

Companies need to set robust policies Opportunities exist for companies

and commitments which integrate both to tackle environmental and social
environmental and social issues. These forest-risks within their value chains.
should be coupled with ambitious, Jurisdictional or landscape initiatives are
measurable and time-bound targets to amongst some of the approaches that
ensure compliance with no-deforestation offer a tool for downstream companies
commitments. Such targets include to reduce supply chain risks and
increasing traceability back to plantation contribute to sustainable development in
level alongside adopting more stringent the production landscape.
certifications such as Segregated and
Identity Preserved. Deforestation presents a systemic issue
that can only be tackled collectively.
Downstream companies must ensure Given its global extent and influence
supplier accountability towards NDPE within supply chains, multi-stakeholder
commitments and maintain progress in collaboration is essential alongside
their sustainability journey. At the same recognizing that forests are crucial for
time, they need to provide meaningful the global market. In taking action to
technical and financial support to their protect and restore Indonesian forests,
suppliers - especially smallholders - to companies will not only enhance their
accelerate the transition. CDP’s disclosure sustainability commitments but they
mechanism facilitates the monitoring will be supporting biodiversity, climate
of supplier progress and enables them, action and local communities. Through
their investors, lenders and governments enhanced transparency and action, there
to make better informed decisions to can be financial, environmental and
continue driving improvement. social benefits for all.

34
Annex:
Key Performance Indicators

Category KPI KPI Description Question Number AFI Principle* 2020 2021

TOTAL DISCLOSURE 130 167

104 135
1 Companies where one of five key board positions has oversight of forest-related issues - Board Chair, Director on Board, Chief
F4.1, F4.1a
Core Principle 4:
Company systems to drive
Executive Officer (CEO), Chief Financial Officer (CFO), Chief Risk Officer (CRO).
Board-level oversight implementation 90% 94%

Companies with either a publicly available general or commodity specific company-wide no-deforestation policy with social 18 36
2 elements, remediation and restoration. Commitment to eliminate conversion of natural ecosystems, commitment to eliminate
F4.5, F4.5a, F4.5b
deforestation, commitment to no-deforestation, to no planting on peatlands and to no exploitation (NDPE), commitment to Core Principle 1:
Policy 14% 22%
remediation, restoration and/or compensation of past harms, commitment to protect rights and livelihoods of local communities. Protection of forests and other
natural ecosystems
Governance
2 3
Companies with a public no-deforestation (no-conversion of natural ecosystems, zero gross deforestation/no-deforestation) Core Principle 2:
forests-related commitment with social elements, remediation and restoration that is timebound, set to be completed by 2030, Respect for human rights
3 includes a cutoff date before 2020, with Free, Prior, Informed Consent (FPIC), covers 100% of production/consumption and applies
to all relevant operations. Includes commitments to operations in accordance with the UN Declaration on the Rights of Indigenous F4.6, F4.6b Core Principle 3:
Commitments Peoples, remediate any adverse impacts on indigenous people and local communities, adoption of the UN International Labour Specification of commitments 2% 2%
Organization principles, resolution of complaints and conflicts through an open, transparent and consultative process, recognition
of legal and customary land tenure rights, restoration and compensation to address past deforestation and/or conversion.

85 123
4 Companies that integrate forest-related issues into all parts of their long-term strategic business plans: financial planning, long-term
F5.1
Core Principle 4:
Company systems to drive
business objectives and strategy for long-term objectives.
Strategy implementation 65% 74%
Strategy

38 55

5 Companies who conduct a comprehensive forest-related risk assessment: full coverage of relevant operations with risks beyond 6
years considered and availability of forest risk commodities, quality of forest risk commodities, impact of activity on the status of
F2.1, F2.1a, F2.1b,
Core Principle 5:
Supply chain assessment and
Risk F2.1c
Risk assessment ecosystems and habitats, social impacts, local communities are included in the assessment. traceability 33% 38%
Management

6 4
6 Companies with at least 90% of total production/consumption volume of a commodity certified in a no-deforestation compliant
F6.3, F6.3a
certification.
Certification Core Principle 5: 5% 2%
Supply chain assessment and
traceability 24 27
7 Companies that can trace more than 90% of their production/consumption volume of a commodity back to at least municipality or
F6.2, F6.2a
equivalent level.
Traceability 18% 16%

Measuring and 8 6
Targets Companies that have achieved or are making linear progress towards targets to source 100% no-deforestation certified commodities.
6% 4%
8 F6.1, F6.1a N/A
Targets 24 27
Companies that have achieved or are making linear progress towards targets to trace 100% of supply back to at least municipality
or equivalent level.
18% 16%

35
 Annex:
Key Performance Indicators

Category KPI KPI Description Question Number AFI Principle* 2020 2021

3562 44
9 Companies that have either a no-deforestation policy or comprehensive commitment and have a system to control, monitor, or verify
F6.4, F6.4a
compliance and this system covers all relevant direct operations or supply chains and more than 90% of total volume in compliance.
Compliance 33% 32%
Core Principle 11:
Measuring and Monitoring and verification
86 114
Targets 10 Companies that produce or source commodities from regions with a high deforestation risk and assess their own compliance and/
F6.6
or the compliance of their suppliers with forest regulations and/or mandatory standards.
Legal compliance 75% 79%

Companies working with smallholders to support good agricultural practices and reduce deforestation and/or conversion of natural 32 43
11 ecosystems by providing financial or technical assistance to help them achieve this. Financial or technical assistance includes
Supply chain engagement F6.7
offering on-site technical assistance and extension services, investing in pilot projects, paying higher prices linked to best agricultural
Smallholder practices, and financial incentives for certified products. 28% 30%

Processors, traders, manufacturers and retailers working with direct suppliers to support and improve their capacity to comply 39 58
12 with forest-related policies, commitments, and other requirements and are providing financial or technical support to help them Core Principle 6:
Supply chain engagement achieve this. Financial or technical assistance includes offering on-site training and technical assistance, investing in pilot projects, F6.8 Managing for supply chain
Direct suppliers paying higher prices linked to best agricultural practices, financial incentives for certified products, offering credit lines linked to best compliance
30% 35%
agricultural practices.

Value Chain
Engagement 45 69
13 Traders, manufacturers or retailers working beyond first-tier suppliers to manage and mitigate deforestation risks through supply
Supply chain engagement chain mapping or capacity building. F6.9
Beyond first-tier suppliers 45% 53%

10 23
14 Companies participating in external activities or initiatives to promote the implementation of their forests-related policies and
Core Principle 10:
Forest-related external F6.10 Collaboration for landscape and
commitments through jurisdictional approaches.
activities or initiatives sectoral sustainability
8% 14%

49 71

Ecosystem 15 Companies supporting or implementing projects focused on ecosystem restoration and protection with timely63 monitoring and
F6.12, F6.12a N/A
Beyond no-deforestation measured outcomes.
Restoration and
47% 49%
Protection

62. These numbers are out of 105 companies reporting to the question, ie those disclosing through the full-tier questionnaire that have a forest-related policy or public commitment and a system to monitor compliance.
63. 'Timely’ is defined here as up to every two years.
36
 DISCLOSURE INSIGHT ACTION

Authors Acknowledgements

Rini Setiawati Our colleagues from CDP

Senior Manager, Forests
Thomas Maddox
[email protected]
Viera Ukropcova
Maddy Bravery
Tania Trestya Putri
Bronagh Sheridan
Senior Corporate Engagement Officer,
Emily Peddle
Forests
Thomas Winward
[email protected]
Nur Arifiandi
Rida Nurafiati
Special thanks
Senior Corporate Engagement Officer,
Forests Nadia Bishai
[email protected]

CDP Southeast Asia and Oceania

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Cheung Hing Industrial Building
12P Smithfield Road, Kennedy Town
Hong Kong
www.cdp.net

About CDP
CDP is a global environmental non-profit that runs the world’s environmental disclosure system for investors,
companies, cities and governments to assess their impact and take urgent action to build a truly sustainable
economy. Founded in 2000 and working with more than 680 financial institutions with over $130 trillion in assets, CDP
pioneered using capital markets and corporate procurement to motivate companies to disclose their environmental
impacts, and to reduce greenhouse gas emissions, safeguard water resources and protect forests. Over 14,000
organizations around the world disclosed data through CDP in 2021, including more than 13,000 companies worth
over 64% of global market capitalization, and over 1,200 cities, states and regions. Fully TCFD aligned, CDP holds the
largest environmental database in the world, and CDP scores are widely used to drive investment and procurement
decisions towards a zero carbon, sustainable and resilient economy. CDP is a founding member of the Science Based
Targets initiative, We Mean Business Coalition, The Investor Agenda and the Net Zero Asset Managers initiative.
Visit cdp.net or follow us @CDP to find out more.