By: Dr Rosediana Suharto
Sustainable palm oil observer
Responsible Sustainable Palm Oil Initiatives (RPOI)
Bogor, Indonesia - According to the report of the World Commission on Environment and Development chaired by Gro Harlem Brundtland entitled “Our Common Future” (United Nation, 1987). It highlighted that humanity can carry out sustainable development (sustainability). This sustainable development is necessary, to ensure the current generation could meet the needs of future generations. The concept of sustainable development is limited by the current technologies, and social organizations are dependent on natural resources and the ability of the ecosystem to mitigate the effects of human activities.
But technologies and social organizations can be scaled up to open opportunities for a new era of economic growth. The World Commission on Environment and Development (WCED), stated that widespread of poverty is inevitable. Sustainable development requires meeting the basic needs of everyone and maximizing every opportunity towards building a better life. A world where poverty is endemic will always be vulnerable against ecological disasters.
Sustainability has become the purpose of businesses, non-profit organizations and government organizations in the last decade, but measuring how far an organization can apply sustainability to reach a rapid sustainable growth, is thought to require a considerable amount of effort.
John Elkington attempted to measure events during mid-1994s by incorporating a new framework to measure performance in American corporates. (Slaper 2011)
Long before Elkington introduces the concept of sustainability as a “"triple bottom line" (TBL) or also known as 3P’s (People, Planet dan Profit), environmentalists were grappling with the size and framework for sustainability.
The academic disciplines have conducted studies and pilot practices of sustainability have more than doubled since the last 30 years. Academics and non-academicians who have conducted studies and practices sustainability, agreed with the definition by Andrew Savitz (2006) for the Triple Bottom Line (TBL). TBL captures the essence of sustainability by measuring the effects from organization activities in the world, includes its profitability and shareholder value, as well as its social, human, and environmental capital. The trick isn’t in defining TBL. The trick is to measure it.
This accounting, is called the triple bottom line (TBL), which goes beyond traditional measures of profit, return on investment, and shareholder value to include environmental and social dimension. Focused on comprehensive investment—that is, performance and the interconnected dimension of profit, people and planet which are interconnected, the reporting of triple bottom line could become an important tool in supporting sustainability purpose.
Responding to this statement, at the end of 1990s, the term 3P’s (People, Planet and Profit) or “triple bottom line (TBL)” was introduced by J. Elkington which emphasized on Brundtland’s report. Based on studies’ result and survey conducted by worldwide expert, there is a relationship between 3P’s and corporate social responsibility (CSR) as well as Sustainable Development.
Application of 3P’s
Marc J. Epstein (2008) conducted an experiment on the application of 3P’s in a number of large companies in the United States and Europe, and the result, companies has shown better performance in three sectors, which is environment, social and economic. Companies gave protection for their employees as how it should be and did other things which are measurable.
Epstein in his book “Making Sustainability Work “(2008) said that “sustainability has been defined as economic development that meets the needs of the present generation without compromising the ability of future generation to meet their own need. For business this include the issues of corporate social responsibility and citizenship along with improve management corporate social and environment impacts and improve stakeholder engagement.”
Epstein explained that sustainability is in great demand and has gotten important attention because:
1. Government regulation and codes of conduct that require companies to give attention and increase their activities for sustainability. Failure to comply with regulations (still to this day) results in company having to pay dearly, includes:
Penalties and fines
Legal cost
Loss of productivity and additional inspections
Potential closure of operations
The related effects on corporate reputations
2. Public Relations
Public and NGO activists are increasingly aware of sustainability, the potential and impact that companies have on society and environment. Identifying social and environmental issues by companies is important for stakeholders and potentially enhancing stakeholders’ relationship can foster loyalty and trust. Gaining license to operates from the government, community and other stakeholders is very important for companies to be able to conduct business sustainably. Good companies’ performance and sustainability can increase a positive reputation for stakeholders and improve relationship with communities. This can improve companies’ performance and productivity.
3. Expenses and Income
Sustainability can create value for company through increased revenue and lower costs. In other words, implementing sustainability is a good business decision. Revenue can be increased through sales due to increased company reputation, especially where public awareness towards company’s environmental and social effect is higher. Identifying areas where what is being done is good for community, environment and company is the key.
4. Social and moral obligations
If company brings negative effect on environment and community, then company is responsible for implementing sustainability. Personal concern for social and moral obligation has made several corporate executive and senior management implement sustainability as one of their strategies. Corporate leader recognizes the tight relationship between business and community, and redefines economic, environmental and social responsibility around the concept of sustainability. A large number of corporate leaders has adopted sustainability for each of the reasons listed above
In Marc J. Epstein’s book (2008), there are more than 95 companies that implement sustainability principles and reduce environmental impact, for example, Addidas Solomon, British American Tobacco, Cadburry – Schweppes, Coca Cola, Colgate, Unilever, Hennes & Mauritz, Dow Chemical, Dupont, etc.
The conclusion is that sustainability related to environment and greenhouse gases, social and economic is very important for company and community. However, lately environmental issue had a huge impact because it felt like the effect of climate change has increase and causing economic difficulties. Many countries have given special attention to this issue. Country needed to achieve net zero emission to reach commitments to the Paris Agreement. It states that the global average temperature rise must be “well below 2°C above pre-industrial levels and make effort to limit temperature increase to 1,5°C”.
Understanding and implementation of sustainability at several countries and organizations
In fact, numerous parties interpret sustainability differently. European Union (EU) stated that sustainability with much more consideration on land use change (the type of land planted on its land coverage) and greenhouse gas (GHG) emission saving. As for biofuels, EU did not take into account social and economic criteria in its implementation of sustainability. For the calculation of GHG emission from the Direct Land Use change (DLUC), emission is also calculated from Indirect Land Use Change (ILUC). If emission from ILUC is higher than DLUC’s emission, therefore emission from DLUC is ignored. For biofuels or biodiesel from food and feed stock, the usage for transport in Europe is reduced to only 7% in 2023 and phase out of palm oil methyl ester (PME) will end in 2030.
In one of the explanations, EU stated that they could also limit the use of biofuel from palm oil by using instruments that have been implemented, for example subsidies and anti-dumping duty.
In order for palm oil to be used in the manufacturing of biofuels / PME, it must be certified as sustainability low ILUC risk whereas the criteria are difficult to accomplish. This is in accordance to the regulation contained in Commission Regulation on rules to verify sustainability and greenhouse gas emissions saving criteria and low indirect land-use change-risk 146 (2022) C (2022)3740.
Implementation of sustainability in United States (US)
On November 2021, United States government published The Long-Term Strategy of the United States: Pathways to Net-Zero Greenhouse Gas Emissions by 2050 by United States Department of State and the United States Executive Office of the President, Washington DC. Signed by John Kerry, Special Presidential Envoy for Climate and Gina Mc Carthy, National Climate Advisor. On December 2021, the US President inaugurate the implementation of The Federal Sustainability Plan.
Based on President Biden’s Executive Order to catalyze industry and clean energy through Federal Sustainability Plan and The Long-Term Strategies (together it was referred to as “The Federal Sustainability Plan “) sets out various ambitious goals to reach emission reduction. This is consistent with President Biden’s goal of reducing glasshouse gases emission in US by 50-52 percent from 2005 levels by 2030 and limiting global warming to 1,5 degrees Celsius, as science demands. Through Federal Sustainability Plan, Federal Government is going to achieve the following:
Details of each program within the Federal Sustainability Plan is as follow:
On December 2021, President Biden signed an Executive Order directing the Federal Government to use its procurement scale and power to reach these three ambitious goals:
One hundred percent carbon pollution-free electricity (CFE) by 2030, where half is supplied by local clean energy to reach 24/7 demands
Acquire one hundred percent zero-emission vehicle (ZEV) by 2035, this includes 100 percent acquisition of net-zero light-duty vehicle by 2027;
Net-zero emission through Federal purchase;
This executive action is a part of the President’s broader commitment to increase investment in clean technology industry, as well as accelerating America towards achieving a carbon-free electricity sector by 2035.
United States policy prioritizes net zero emission in all industry, with the purpose of reducing global temperature changes. This executive action is thought to be able to protect natural damage, and workers. Due to climate change, it is estimated by the people of US will lose their job because of extreme weather, new widespread of diseases, natural destruction and loss of biodiversity, etc. For the continuity of industry and life, emission in all sectors must be reduced by the United States’ Nationally Determined Contribution (NDC), is 50-52% from 2005 levels by 2030.
Like the European Union, United States also imposes tough administration for the palm oil biodiesel imported from Indonesia and provisions related to emission level as well as ILUC emission and other provisions. Indonesia has faced at least 2 times anti-dumping duty from the US, as was done by the European Union. This is because, according to them, Indonesia has caused a high number of land change especially from the forest and that has caused high emission.
This ambitious level has become the basis for European Union’s Intended NDC that targeted lower glasshouse gases emission aby 40% of 1990 levels by 2030.
Roundtable on Sustainable Palm Oil (RSPO)
Since 2000s the world of palm oil has been shocked by various issues raised by NGOs, especially the implementation of sustainability. This is an example of environmental damage due to oil palm cultivation as well as GHG emission because of land change, labor welfare, forced labor, child labor, gender equality, etc. At the beginning of this new millennium, not many people understand what sustainability meant.
In 2001, WWF began exploring the possibility of creating a roundtable for sustainable palm oil. The result was an informal partnership between Aarhus United UK Ltd, Golden Hope Plantations Berhad, Migros, Malaysian Palm Oil Association, Sainsbury’s and Unilever together with WWF in 2002.
In response to global push for sustainable palm oil management, Roundtable on Sustainable Palm Oil (RSPO) was formed in 2004 with the purpose of promoting the growth and usage of palm oil products through credible global standard and involvement of stakeholders. Its founders are the same as those in collaboration with WWF, which are Aarhus United UK Ltd., Karlshamns AB (Swedia), Malaysian Palm Oil Association (MPOA), Migros Genossenschafts Bund (Switzerland), Unilever NV (Netherlands), and Worldwide Fund for Nature (WWF). The following organizations have also been an active member within RSPO Executive Board since its inception, Golden Hope Plantations Berhad (Malaysia), Loders Croklaan (Netherlands), Pacic Rim Palm Oil Ltd (Singapore), and The Body Shop (UK). Head Quarter of this organization is located in Zurich, Swiss, meanwhile the secretariat is located in Kuala Lumpur with a Representative Office in Jakarta. RSPO is registered in Swiss as NGO.
RSPO is the first organization that set up a sustainability system for a palm oil plantation which aims to produce sustainable CPO because the fruit it produced is intended to be used as industrial raw material. This is done with the purpose of producing end products with other treatments such as biofuels, butter, toiletries, etc.
In response to global push for sustainable palm oil management, Roundtable on Sustainable Palm Oil (RSPO) was formed in 2004 with the purpose of promoting the growth and usage of palm oil products through credible global standard and involvement of stakeholders.
Sustainability within RSPO is an implementation of a sustainable system for palm oil plantation through implementation of Good Agricultural Practices and also detecting Glasshouse Gasses (GHG) emission and reducing activities that increase GHG. To reduce greenhouse gasses emission, land that has high carbon stock such as forest, peatlands and old shrubs is forbidden for plantation. RSPO also requires its member not to plant in area that have High Conservation Value (HCV), where six different HCV must be applied, different from land with high carbon stock. HCV contains other things, such as biodiversity, ecosystem and habitats, ecosystem services, communities’ needs and culture. It can be concluded that fruits produced through plantation that implement RSPO’s P&C are sustainable fruits and will produce sustainable CPO.
In its application in the global market, a standardized product can be traded at the request of buyer through ship order with cost insurance and freight (CIF), and of course not free on board (FOB) where palm oil is sold on the ship and can be bought by buyer in different countries. This is to ensure the traceability of the palm oil.
There are 2 modules on the supply chain requirements for mills mechanism, which are:
1. Identity Preserved
A palm oil mill / factory is considered to implement Identity Preserved (IP) if FFB processed by the mill comes from a certified plantation. RSPO’s Principles and Criteria (RSPO P&C), or contrary to the Group Certification Scheme.
Certification for CPO mill is needed to verified volume and source of FFB that went into the mill, the implementation of any processing controls (for example, if physical segregation is used) and the volume of sales of RSPO certified product.
2. Mass Balance
A mill or factory is considered to produce palm oil as Mass Balance (MB) if that mill processed FFB from a RSPO certified plantation and uncertified plantation. Mill may source FFB from uncertified farmers, besides from certified supplier or third party. In this scenario, mill can only claim the palm oil product’s volume produced from processing certified FFB as MB.
RSPO still tolerates uncertified products to provide opportunities for uncertified farmers due to inability to fulfill principles and criteria. Likewise with the Mass Balance provisions in the article 35 from Renewable Energy Directive on the promotion of the use of energy from renewable sources (recast) (EU Directive 2019/2001), but in EU RED, mass balance is not the difference due to uncertified raw material, but because of the difference in energy content. For audit, EU also sets a different rule.
In accordance with the previous discussion, it can be concluded that EU, US, RSPO has implemented sustainability, if examined at a glance, all are based on 3P’s principles. EU prioritizes saving emission with the purpose of reducing effect from climate change. However, arguments have been made in various forums including between countries, that EU conducted assessment on a less scientific basis, by including indirect land use change, as emission from indirect land use change (ILUC).
Implementation of Sustainability in Indonesia
Implementation of sustainability in Indonesia started by implementing sustainability system in palm oil plantation to produce sustainable fruit, and then processed to become sustainable oil and in this case, it become Crude Palm Oil (CPO). A sustainable CPO is a tradable product, meanwhile FFB is traded only locally. For it to be traded in an international market, the product or CPO must fulfill WTO Annex 1 Technical Barrier to Trade (TBT) requirements.
Sustainable system is known as Principles and Criteria, Indonesian Sustainable Palm Oil (ISPO), which was initially in its preparation influenced heavily by RSPO’s Principles and Criteria, and so is their trading model. Even so, at the beginning, ISPO principles and criteria still implement ISO series guide in its certification system, audit and accreditation.
In order for this system to be credible, every aspect within it must fulfill international standard for example certification and audit as well as accreditation; and all these provisions can be found in the ISO documents. Because Indonesia， which in this case National Standardization Agency (NSA) is a member of International Organization for Standardization (ISO) and ISO has 167 member nations, it is expected that every standard that fulfill ISO, should be adopted by its member nations.
Therefore, it is very important that there is harmony between ongoing ISPO standard with ISO, so that ISPO is not only a certification tool in the country but also accepted globally.
In Indonesia, the requirement to become an auditor should also follow SNI ISO 19011 regarding Management System Audit Guidelines and generally auditors have also been trained for ISO 19011, if implementing other provisions then it will be difficult to find auditor capable of conducting the audit. Auditor must also be equipped with ISO 14001 & ISO 9001 to increase the competency in understanding environmental management and system management.
At this time, various reports allegedly indicated that many auditors had not been able to demonstrate SNI ISO 19011 at the time of ISPO audit. It is important for all auditor to understand and be aligned with international standard, so that they can compete in international market. Every auditor should also be equipped with ISO 14001 and other ISO standards to implement environmental standard and 3P’s standard in other sustainability (for example social) in carrying out their duty as sustainability certification auditor.
Principles and Criteria complied in the first phase (ISPO 2015) are intended after field test will be submitted to the National Standardization Agency (NSA) to be processed into Indonesian National Standardization (INS) so that CPO can be traded in accordance to Law Number 20 of 2014 regarding Standardization and Conformity Assessment as well as Law Number 34 of 2018 regarding Standardization System and National Conformity Assessment. Aforementioned approach will also facilitate partnership with other foreign Standardization Agency with the provisions of Mutual Recognition Arrangement (MRA).
The thoughts were conveyed because the standard and provision applied to any commodities are not only for the purpose of meeting demands of market and buyer. Besides the standard, there are also measure similar to them, for example Principles and Criteria. As it is known, standard is a trading instrument. Therefore, in the inception and implementation of standard for Indonesia should be sensitive to market demand, but must not be a burden for Indonesian commodities.
Net Zero Emission
Related to the President’s commitment at Glasgow during UNFCCC Meeting in 2022 that Indonesia will also implement clean industry and net zero emission by 2030 and the highest achievement is expected in 2050.
Palm oil industry is always accused by foreign stakeholder in various publications, as the biggest emission contributor, meanwhile emission from electricity supply, transport, industry, building and household are not mentioned.
To overcome this, scientific research should be done, and involve not only scientist and expert in the country, but also from foreign country. It is advisable to research emission from palm oil plantation industry, from production process to finished goods and the planning or target to reach net zero emission. We should remember that compared to other commodities, palm oil industry is the first industry that implement sustainability. The long-term plan to reduce emission is published by Ministry of Environment and Forestry entitled INDONESIA Long-Term Strategy for Low Carbon and Climate Resilience 2050 (Indonesia LTS-LCCR 2050), whereas the estimated production and emission from palm oil plantation are also outlined within it.
Indonesia should have a plan of net zero emission for all activities that produced emission, not just plantations and deforestation, but also include other activities such as electricity, industry, transportation, building, household, etc.