in partnership with Commitments in-Country: Companies, Palm, & Commitments that Count in Indonesia, 2020 An analysis based upon Supply Change data February 2020 EDITORS AUTHORS CONTRIBUTORS Stephen Donofrio, Director Philip Rothrock, Senior Associate Kate Ellis, Research Assistant Patrick Maguire, Senior Manager Laura Weatherer, Associate Ciro Calderon, Research Assistant Report Contact: [email protected] Commitments in-Country: Companies, Palm, & Commitments that Count in Indonesia, 2019 i Table of Contents Glossary ..........................................................................................................iv Introduction to Supply Change ..............................................................................1 About this Report ...............................................................................................1 Section 1: Country Context ................................................................................. 2 Palm-Driven Deforestation in Indonesia ...............................................................................2 Drivers of Palm Oil Production and Consumption ................................................................3 Section 2: Corporate Ambition to Address Palm-Driven Deforestation in Indonesia .......6 Key Findings .........................................................................................................................8 Section 3: New Trends and Implications for Implementation of Sustainability Commitments Among Companies and Investors ....................................................16 Appendix .................................................................................................................. xxi References .......................................................................................................................xxvii Acknowledgements .........................................................................................................xxxii Commitments in-Country: ii Companies, Palm, & Commitments that Count in Indonesia, 2020 List of Figures Figure 1: Top 10 Countries Losing the Most Tropical Primary Rainforest in 2018 ..............2 Figure 2: Business Information Summary of 108 Supply Change Companies Active in Indonesian Palm Supply Chains, 2019 ...................................................................6 Figure 3: Number of Companies Active in Indonesian Palm Supply Chains with and without Commitments, 2019 ................................................................................. 7 Figure 4: Comparison of Company Uptake of AFi Methods to Ensure Supplies are Known or Controlled to Assure Commitment Compliance ..........................................13 Figure 5: Proportion of 108 Companies with Indonesian Palm Supply Chains Providing Support to Smallholders, 2019 ...............................................................14 List of Tables Table 1: Key Commitment Goals and Procurement Policies of Companies Believed to Be Sourcing or Producing Palm Products from Indonesia .............................. 11 Table 2: Company Disclosure of Adherence to Legal and Voluntary Sustainability Standards ..................................................................................................... 11 Table 3: Organizations and Initiatives Supporting Cattle Production in Paraguay ........................................................................................................................ xxi Table 4: List of 108 Companies Believed to Be Active in Indonesian Palm Oil Supply Chains .....................................................................................................xxiii Commitments in-Country: Companies, Palm, & Commitments that Count in Indonesia, 2020 iii Glossary Certifcation conservation values, such as the presence of rare or Company commits to purchasing commodities certifed by endemic species, the provision of ecosystem services, an independent third party, applying specifed and unspec- sacred cultural sites, or resources harvested by local ifed standards. In certain cases, company commitments residents. are considered to adhere to proprietary internal certifcation ◾ High Carbon Stock: High Carbon Stock (HCS) areas of systems. viable natural forest with high carbon and biodiversity Certifed Sustainable Palm Oil (CSPO) storage identifed using the HCS approach. Palm oil produced on oil palm plantations that has been ◾ Peatland: Wetlands that contain peat soil. Peatlands independently audited and certifed against the Roundtable store large amounts of carbon, support high levels of for Sustainable Palm Oil (RSPO) standard. biodiversity, and provide essential ecosystem services Commitment such as food prevention. Any publicly-available corporate statement related to a ◾ Wildlife, Biodiversity: Protection of wildlife and biodi- particular commodity, certifed commodities or credits; versity in the vicinity of production activities in forest supply chain traceability; supplier certifcation; bilateral landscapes. purchase agreements; and any other targets for low/zero ◾ Greenhouse Gas Emissions Management: Reduction deforestation or ecological degradation. of greenhouse gas (GHG) emissions from producer No Deforestation, No Peat, No Exploitation (NDPE) operations in forest landscapes. A type of policy that many companies (both upstream and ◾ Legality: Compliance with environmental laws at the downstream) have, which states that the production of site of production globally (which would include Indone- palm oil (by the company or in its supply chain) will involve sian law, unless otherwise specifed). no deforestation, development on peatland, and/or the ◾ Free, Prior and Informed Consent (FPIC): Outlined exploitation of workers or local communities. in the United Nations Declaration on the Rights of Traceability Indigenous Peoples (UNDRIP), it is a specifc right that belongs to indigenous peoples, which is It allows them A company’s ability to determine the origin or intermediate to give or withhold consent to a project that may affect source of a commodity within its supply chain (e.g., 100% them or their territories, especially actions affecting of palm oil is traceable to the plantation). their lands, territories and natural resources. As part of Zero Deforestation our methodology, Supply Change only counts company A company commits to “zero deforestation,” “no-deforest- aspirations to adhere to this if they specifcally use the ation,” “deforestation free” or similar language that implies term FPIC (FAO 2016). “no deforestation anywhere,” whether the company has ◾ Fire Prevention/ Control: Measures that reduce the defned the term or not. risk of fre for production in forest landscapes, includ- Zero Net Deforestation ing prohibiting burning as a means of clearing land, In its commitment, a company “acknowledges that some prohibiting peatland drainage, supporting frefghting forest loss could be offset by forest restoration and affores- activities, etc. tation on degraded land.” This can be achieved through ◾ Grievance Mechanism: Formal process that individu- direct restoration or the purchase of forest carbon offsets, als, communities, workers, and/or civil society organ- biodiversity offsets, or other environmental currencies. izations can use to voice complaints about company Company Supply Chain Levels activities that they perceive as problematic, usually with regards to human rights. ◾ Producer: An oil palm plantation owner/manager, inde- pendent smallholder, or cooperative member. ◾ Supporting Smallholders: Supply Change defnes this as any fnancial, technical, logistical, or other assistance ◾ Processor: A palm oil mill or refnery operator. companies report providing smallholder producers (i.e., ◾ Trader: An importer, exporter, and/or seller of non-fn- small family farms less than 50 hectares). ished palm products within the country of production. ◾ Independent Smallholders: Are generally self-man- ◾ Manufacturer: A manufacturer of products containing aged and not bound by a contract. These groups often palm derivatives for consumption. receive funding from government services but are ◾ Retailer: A retailer, wholesaler, grocery, co-op, super- otherwise highly self-suffcient. market, restaurant or other type of organization where ◾ Schemed/ Associated Smallholders: Often managed consumers can buy products containing palm directly by a particular mill and bound by a contract. These from the company. smallholders are required to follow a certain set of oper- Key Commitment Goals and Procurement ating procedures outlined by the processor company Policies for Palm Commitments: group for which the mill is associated. ◾ High Conservation Value: High Conservation Value (HCV) areas are natural habitats that possess inherent Commitments in-Country: iv Companies, Palm, & Commitments that Count in Indonesia, 2020 Introduction to Supply Change Forest Trends’ Supply Change Initiative draws from publicly The role of Supply Change is to catalog, organize, and available data to track a global set of companies, represent- compare this data in a meaningful way. Keeping pace as a ing all levels of the supply chain from producers to retailers, centralized, free, and publicly available information center and their commitments to address commodity-driven is essential to ensure that all stakeholders may make use of deforestation related to the “big four” commodities – palm, Supply Change as a tool for learning about and evaluating soy, timber & pulp, and cattle. In an effort