Blogs: Supply Chain

In his keynote speech during the supplier workshop organized by GAR in March 2016, Bayu Krisnamurthi President Director of Indonesia Estate-Crop Fund for Palm Oil (BPDP Sawit) called on suppliers to be catalysts in transforming the Indonesian palm oil industry especially in the face of international demands for sustainable palm oil production. Read more below.

The Indonesian palm oil sector is undergoing rapid transformation, which is driven by better understanding of the importance of sustainable practices to ensure the longevity of the business, as well as the growing demand for sustainable products from various markets. The situation has brought a clearer path and direction for the Indonesian Palm Oil players in the future when it comes to sustainability.

We have seen strong indications from national regulators, European counterparts well as neighboring countries about their commitment towards sustainability. This shift will very soon be the new benchmark against which we are expected to operate.

Currently, European countries have committed to use 100 percent sustainable palm oil by 2020. Just within one year, the import fees by a European country for non-sustainable palm oil will be EUR30 more than the sustainable. If previously we thought the COP 21 discussion in Paris was just another chitchat, looking at these developments, it is as real as it gets.

Our natural reaction would be to complain, disagree and demand that the government change this situation. And while the government is giving its best effort to fight for this, we cannot avoid the fact that until we have achieved an agreement to lift these rules, we will still need to adhere to the situation and standard.

Bayu Krisnamurthi, President Director of Indonesia Estate-Crop Fund for Palm Oil (BPDP Sawit) speaking at the GAR Supplier Workshop in Medan

In this circumstance, perhaps selling our products to our friends in China and India would be a viable option; after all they are more lenient in terms of sustainability standards and accommodating compared to the Europeans. But we need to be careful and mindful because we will see more changes in the future; even today China’s expenditure for sustainability is much more than the European countries. Though this fact doesn’t necessarily directly impact the palm oil industry, it gives an idea about what the future will bring and the commitment of that country towards sustainability.

“The Indonesian palm oil sector is entering an important phase of change that will affect us all. These changes are not something for us to avoid or put aside”

As a supplier, you are the catalyst of change. Suppliers play a very important role in the palm oil value chain that can drive change. By adopting sustainability to improve competitiveness in the value chain, transformation can be organically driven.

Furthermore, ISPO (Indonesian Sustainable Palm Oil System) is part of Indonesian government policy that needs to be followed by all industry players in the country. As an example, fresh fruit bunch from the government conservation area are categorized as illegal. It also means receiving, buying and processing fruit coming from plantation that is breaking this regulation and sustainability standard is breaking the law.

We can imagine that in the near future it will be very difficult to sell non-sustainable crude palm oil as markets that will only buy sustainable palm oil will expand rapidly. So, the question is do we want to continue insisting on our stance and refusing to adapt, while other countries are slowly or rapidly adapting to changes?

My standpoint is let’s not fight the wave of change towards sustainability, instead let’s find a better way on how we can make the illegal to be legal and the uncertified to be certified. We need to adapt, we need to change, we need to see sustainability as part of what we need and what we want, and by adapting we will make today better than yesterday and hopefully tomorrow will even be better than today.

Sustainable palm oil is what we want, not because somebody tells us to comply, not because we have signed an agreement on it, but because we want the income from palm oil to be sustained from generation to generation.