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Responsible palm oil exists, and is critical to Indonesia’s economy

Posted: Oct 10, 2018 5 minute read J. Joelianto

This article was originally published on on 8 October 2018.

In a recent interview, Oil World Executive Director Thomas Mielke called for major palm oil producers to work together and send the message that palm oil could be sustainably produced, especially at a time when resistance is seen against palm oil in many countries.

As someone who drives the commercial growth of this crop in Indonesia, I know first-hand the stigma that surrounds the industry that’s partly fuelled by little information shared about responsible palm oil farming and its impact on the nation’s economy. That stigma became the inspiration of our Extraordinary Everyday campaign, where my company works to reverse that trend by providing easily understandable, fact-based information about our palm oil business to consumers.

The shifting patterns of oil palm: From colonial import to key economic driver

Originating from Africa, the oil palm was introduced into Malaysia and Indonesia in the colonial period, where the climatic growing conditions were found to be ideally suited for oil palms. Today, Indonesia is the world’s largest palm oil producer, responsible for about 53 percent of the world’s palm oil production[1], presenting strong growth drivers for a nation with a reliance on agriculture. On average, oil palm produces nearly four tonnes of oil per hectare, which is roughly five times, eight times, and ten times higher than rapeseed, sunflower, and soybean yields, respectively. But unlike other oils, it requires 10 times less land to produce the same amount of oil making it the most versatile and high-yielding oil crop. This efficiency along with the suitable climate condition presents Indonesia with a perfect opportunity to leverage palm oil production as a pillar to fuel economic growth.

People are often surprised to know that Indonesia’s palm oil industry, which contributes 1.5-2.5 percent of the nation’s gross domestic product (GDP)[2], is not dominated by big companies, but by smallholders who own more than 40 percent of all palm oil estates in Indonesia. Palm oil provides employment for an estimated four million people directly and 12 million people indirectly across various parts of the supply chain, from farmers, and millers, to engineers, and marketers. This explains why the palm oil industry is such an important economic driver for the nation, and the sustainability of it has been a pressing agenda for the government, farmers, companies, and non-governmental organisations (NGOs).

However, the large, diverse and complex makeup of local palm oil farmers make it extremely difficult to manage the farming process and guarantee product quality. This is especially true for independent smallholder farmers, who historically managed their crops with little to no training or supervision. Most are used to outdated-farming methods which overuse agricultural chemicals, chemical fertilisers, and the “slash and burn” approach of clearing more land rather than investing in replanting and minimising their environmental impacts. This led to lower yields of harvest, hard manual labour and deteriorating soil quality, colouring the perception of this palm oil.

Reversing the stigma: The ongoing efforts of GAR

GAR’s team
The team I work with to advocate GAR’s sustainable practices.

Recognising the damage of outdated farming practices, GAR has been taking active initiatives and interventions to address the problem. Take forest conservation as an example, GAR was one of the first major agri-businesses in the world to publish a Forest Conservation Policy in partnership with The Forest Trust (TFT). Since then, GAR has assessed the concession areas and mapped 72,000 hectares (an area equivalent to the size of Singapore) for conservation. This helps us sustainably manage forests and halt biodiversity loss. What’s more, we also employ technology to monitor deforestation across all our estates, for example, a satellite-based monitoring and radar technology.

GAR is fully committed to building a fully traceable and transparent supply chain. Agriculture supply chains are usually complex and involve a multitude of stakeholders. To address this issue, GAR conducts smallholder farmers mapping so that we can guarantee the provenance of our raw materials to customers and ensure sustained adoption of responsible palm oil production practices. What’s more, our supply chain team visits our suppliers across Indonesia every week to review compliance and conduct rigorous result analysis, design the right support and intervention strategies. The rigorous and frequent engagement has led to 100% Traceability to Plantation (TTP) for all GAR-owned mills. We are now working towards 100% TTP for all mills by 2020.

Ensuring sustainability to a wider community

At GAR, we believe that sustainability should be upheld across all farming practices, not only in palm oil. Every farmer, whichever farmland he works in and no matter what he grows, deserves to learn modern farming techniques and enjoy higher income while leaving minimal environmental footprint. That is why we make efforts to support the farming communities around our plantations. Take Yatimin as an example, he was trained in GAR’s “no fire village” programme on integrated farming techniques, and started to use organic fertilisers instead of clearing land by burning. Since then, he doubled the yield of his farm and his monthly income jumped from IDR 1,000,000 to IDR 2,500,000.

We endeavour to ensure the safety, affordability, and quality of palm oil products across various stages of the palm oil journey. This journey – from plantation to products – also allows us to create job opportunities throughout the value chain. For example, Punjung, one of the 80 researchers at GAR, works to reformulate products by eliminating all trans-fatty acids in palm oil products. Her work transformed the nutritional values of downstream palm oil products such as margarines and shortening.  With the improvement of the downstream products industry, we are able to increase palm oil’s value at home in Indonesia, supporting the advancement of the national economy.

For many Indonesians, palm oil is not only important, it’s essential. To the nation, it is a commodity pivotal to economic growth. We see the social need, as well as commercial opportunities in supporting smallholders to farm with higher productivity and less environmental footprint – a fact that we aim to share with more people. We also believe that sustainability can only be achieved when there is a balance between economic opportunity, environmental protection, and social welfare. And we look forward to providing exactly that for our local farmers, as well as future generations.

If you’d like to learn more about GAR’s commitment to responsible and sustainable palm oil production, you can find our latest sustainability report here.

About the author: J. Joelianto is a Trading Director at Sinar Mas Agribusiness and Food, part of the Golden Agri-Resources (GAR) group of companies.

[1] Global Palm Oil Production
[2] Palm Oil in Indonesia

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