A farmer holding the fruits of their harvest in East Kalimantan, Indonesia. Photo by Moses Ceaser / CIFOR-ICRAF

You might not know it, but your supermarkets’ shelves are heaving with palm oil. It’s found in about half of all the products usually found there—from shampoo to chocolate to lipstick. The versatile, highly stable, odourless and colourless liquid makes up 40% of global vegetable oil usage. And that’s grown on under 6% of all of the land used to produce vegetable oils—evidence of its high efficiency and productivity. In recent years, it’s also become a popular feedstock for bioenergy. 

As is often the case, the product’s superpower is also its challenge. Demand for palm oil has doubled over the last few decades—and continues to rise. As a result, the global palm oil industry faces increasing pressure to ensure that its practices align with environmental responsibility and social accountability. 

To this end, Indonesia, which is one of the world’s largest producers of the commodity, has been exploring the potential of applying an integrated Jurisdictional Approach (JA) framework to palm oil production. Such an approach is centred on developing and enforcing sustainable palm oil production at provincial or district levels, rather than at the level of plantations or companies. This can have significant environmental and social benefits, such as reducing the likelihood of displacing deforestation elsewhere in a district and facilitating smallholders’ access to sustainable value chains.

“JAs can address some of the key issues associated with a project-based approach, including leakage, additionality, permanence, social safeguards, certification exclusion, externality and benefit sharing,” said Center for International Forestry Research and World Agroforestry (CIFOR-ICRAF) senior scientist Herry Purnomo during the 3rd national workshop on Strengthening Sustainable Palm Oil For Community Welfare and Climate Crisis Mitigation held on January 2024.

For a JA to gain purchasers’ confidence, its processes need to be supported by credible value chain traceability. To that end, CIFOR-ICRAF scientists recently published a study exploring value chain traceability within JAs. The work focused on two districts currently applying JAs—Pelalawan in Riau Province and Kutai Kartanegara in East Kalimantan Province—and analyzed value chains from national exporters down to management at plantation level, including stages in palm oil processing and distribution. Baseline data was supported by companies’ certification documents and traceability reports.

The results were mixed. “[We found that] traceability varies depending on the category of the value chain, the type of certification scheme and the type of plantation management model,” said lead author Ani Adiwinata. “It also varies according to stages in the value chain and the variations in each of these stages. The highest proportion of traceability cases was found in the two stages of ‘mill to plantation’ and ‘refinery to mill’.”

Aerial view of oil palm plantation in Pelalawan Riau, Indonesia. Photo by Fajrin Hanafi / CIFOR-ICRAF

In Pelalawan, for instance, the researchers found that only 56% of oil palm plantation locations and names could be identified, although average traceability levels were above 80% for mills to plantations, refineries to mills and crude palm oil (CPO) production. “Traceability was possible for 42% of all oil palm plantations managed by plantation companies, though 34% still had traceability levels below 25%,” they said. “The same was true for two other management models—plantations owned by exporter companies, and plantations managed independently by communities—where significant numbers had traceability levels below 25%.” 

In Kutai Kartanegara, traceability overall was slightly higher. The locations and names of around 66% of oil palm plantations in Kutai Kartanegara were identifiable, and traceability levels along value chains averaged above 90% for refineries to mills, CPO production and palm kernel oil (PKO) production from third-party suppliers and other supply sources. “Traceability levels from mills to plantations were above 75% for 63% of oil palm plantations managed by companies, while traceability levels for the remaining 37% were below 25%,” said the co-authors. “Meanwhile, for independent, community-managed plantations, out of a total of 16 cases where data were available, 50% had traceability levels above 75%, while the other 50% had traceability levels below 25%.”

Across both sites, the co-authors highlighted the influential role of exporters and export groups—the majority of which are multinational. Exporters, they said, usually operate across jurisdictional boundaries of districts, provinces and islands to support the implementation of effective JAs. “Mapped value chains show the necessity for an MoU under JAs between districts in the province, between provinces in the same region, and between regions, to connect business practitioners in value chains located outside single district administrations,” said the co-authors. “This ensures effective traceability monitoring mechanisms for business practitioners’ value chain governance.”

The findings also emphasized the critical role of district governments, which “play an important role in leading the JA, based on responsible practices within and across administrative boundaries, by involving various stakeholders collaboratively,” said Adiwinata. Ultimately, she concluded, “understanding value chain structures and dynamics at the district and national levels is vital for policymakers, industry stakeholders and other parties in applying effective JAs to foster palm oil industry sustainability in Indonesia.”

Acknowledgements

This research was conducted as part of the CIFOR-ICRAF project ‘Scaling Jurisdictional Approaches in the Indonesian Palm Oil Sector,’ funded by the Walmart Foundation. The research aims to increase the preparedness of four palm oil-producing regions to implement Jurisdictional Programs (JPs) through participatory, multistakeholder and gender-inclusive approaches and to synthesize lessons learned from studies in these districts to strengthen Jurisdictional Approaches (JAs) at the national level.