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Man transporting palm oil plants in wheelbarrow

Driving a new approach to sustainable palm oil

At the COP 21 climate negotiations in Paris, we announced that we will take a jurisdictional approach to commodity sourcing and will preferentially buy from areas that have in place comprehensive climate and forest policies. Our first example of doing this is in the district of Kotawaringin Barat, Central Kalimantan, Indonesia.

Big improvement opportunities

Smallholders contribute 40% of Indonesia’s palm oil production. But with average productivity 32% lower than that of private plantation companies, there are big opportunities for improvement. However, increasing productivity of smallholders is often constrained by issues such as lack of farmer groups and training, and limited access to markets and finances.

In response, we have signed a three-year Memorandum of Understanding (MoU) with the provincial government of Central Kalimantan, the district government of Kotawaringin Barat and Yayasan Penelitian Inovasi Bumi (INOBU) to support a jurisdictional approach for sourcing sustainable palm oil at village level. We are working with the governments to improve the yields and livelihoods of smallholder farmers, in exchange for their support in the fight against deforestation. This model is also known as ‘Produce & Protect’.

Three key aims

The partnership, which is the first public-private agreement between sub-national governments and an international buyer, aims to:

  • Certify all palm oil smallholders in Pangkalan Tiga village according to RSPO and ISPO principles and criteria
  • Map palm oil smallholders in at least three villages in Kotawaringin Barat district, helping farmers obtain land certificates, business licenses and environmental permits
  • Conduct baseline assessments of palm oil farmer organisations in Umpang and Lada Mandala Jaya villages

The programme initially targeted 600 independent smallholders on approximately 1,400 hectares of land. We are currently targeting another 1,126 smallholders and covering 2,163 hectares to obtain certification based on the principles and criteria of the Roundtable on Sustainable Palm Oil (RSPO). If successful, it has the potential to be expanded to other areas in the district.

The certification of all smallholders in Pangkalan Tiga would make it the first certified ‘sustainable village’ in the world of palm oil. It is the first project for RSPO certified smallholders in Indonesia outside of Sumatra.

It could also be the first project for certifying smallholders according to ISPO standards. In October 2017, the first group out of this batch, consisting of 190 independent smallholders who are part of the Tani Subur Cooperative, achieved RSPO certification through this program. This is the first independent smallholder farmer cooperative to be RSPO and ISPO certified in all of Kalimantan (Indonesian part of Borneo).

By Q1 2019, we aim to certify a total of 1,000 independent smallholder farmers in the district of Kotawaringin Barat, which would be a good achievement considering only 2,091 independent smallholders, covering 4,575 hectares, were RSPO certified in 2018.

A step towards systemic change

The initiative – which takes a different approach to other smallholder certification projects in Indonesia – will tap into government resources and power to support smallholder development. Implementation will be carried out together with the village and district governments, who will also support the monitoring of smallholder performance through a system that was recently established at the provincial and district levels.

“We believe that a production–protection approach to commodity sourcing is the way forward. In the coming years, we will increase our efforts in transforming the sustainable palm oil industry so I am delighted this programme is up and running,” said Dhaval Buch, Chief Procurement Officer at Unilever. “As smallholders play a key role in palm oil production, we are working to help them achieve certification and implement sustainable practices. Partnerships like this are instrumental if we are to achieve the level of systemic change that is necessary across industries and supply chains.”

“The partnership with Unilever is an innovative model of collaborative partnerships between local governments and commodity buyers,” added Silvia Irawan, Executive Director of INOBU.

“We have become more aware of the importance of independent smallholders as there are greater demands for legal, sustainable and traceable global commodity supply chains. We need to make sure, however, that in the pursuit of sustainability we do not penalise these farmers, who are often poor and lack access to inputs and training in good agricultural practices. Overcoming the challenges facing independent smallholders requires working with local governments. The partnership with Unilever has demonstrated what a jurisdictional approach to inclusive and sustainable palm oil production should look like.”