Making the “necessary nudge" work for forest and people: A perspective from Indonesia

Panel 2: Options for demand-side regulations: Aligning with producer country priorities

Chatham House Global Forum on Forest Governance14 July 2020

Anggalia Putri PermatasariYayasan Madani Berkelanjutan

220

200

180

160

140

120

100

80

60

40

20

0

Manufacture Industries Wholesale and Retail Trade &Repair of Motor Vehicles

Agriculture, Forestry, and Fishery

217.1 143.5 140.1

Top 3 GDP contributor 2018 - Indonesia (billion USD)

23.9 16.5 16.4 7.1 4.1

Coal Palm oil Oil & gas Pulp, paper & paper products Processed wood

Sources of foreign exchange reserve (2018) - Indonesia(billion USD)

ContextIndonesia’s GDP and foreign exchange reserves still rely heavily on “forest-risk commodities"

Source: Indonesia Economic and Financial Statistics (SEKI)

0

100000

200000

300000

400000

500000

600000

700000

800000

2003

-200

6

2006

-200

9

2009

-201

1

2011

-201

2

2012

-201

3

2013

-201

4

2014

-201

5

2015

-201

6

2016

-201

7

2017

-201

8

Palm oil Timber plantation Logging Coal and minerals

Deforestation in concession area* shows a declining trend, but still significant(in hectares)

Trend of deforestation (in hectares)

Context Deforestation is in decline nationally, but rising in forest-rich provinces, especially in Papua-Maluku region

Source: MoEF, RSPO, CSO database

0

200000

400000

600000

800000

1000000

1200000

2003

-200

6

2006

-200

9

2009

-201

1

2011

-201

2

2012

-201

3

2013

-201

4

2014

-201

5

2015

-201

6

2016

-201

7

2017

-201

8

Nation-wide Papua-Maluku Sulawesi Kalimantan Bali-Nusra Java Sumatera

*The numbers represent Gross Deforestation in accordance with definition used by GOI, which include the loss of timber plantation. The % of repeated deforestation, which indicates the harvesting of timber plantation in 2003-2018 is 11.3%. There are cases of overlap between concession areas, which has not been taken into calculation.

Plantation 35.12%

Property 33.41%

Agriculture 12.93%

Mining 7.07%

Forestry 4.63%Infrastructure 3.90%

Coastal area 2.93%

Agrarian Conflicts

Agrarian conflicts in the plantation sector are the highest in number in 2018, 60% in palm oil plantations

Source: Konsorsium Pembaruan Agraria in Tirto.id (2019), Walhi (2019), CRR (2020)

410Recorded cases of agrarian con�icts in 2018

807,178 Hectares of land affected by con�ict (ha)

87,568Household affected

9 million Hectares of land to be legalized and redistributedunder Jokowi's Agrarian Reform program

163Cases of criminalization of environmental andhuman rights activists in 2018

Palm oil 60.00%

Other 40.00%

Context

Priority Agenda

Governance

Halting deforestation, degradation, and forest and land �res

Stopping land grabbing and ful�lling the rights of forest-dependent peoples

6.6 million Hectares of natural forests in palm oil andtimber plantation concessions

9.5 million Hectares of most threatened natural forestsunprotected by the moratorium

9.1 million vs 0.8million Hectares of palm oil concessions in peatecosystem vs  in protected peat ecosystem

17.5 million Hectares of natural forests under control oflogging companies

3.2 million Hectares of palm oil in forest zone

7 years Since the IP Bill was �rst tabled in theParliament

83%Capacity of palm oil processing covered by NDPEpolicies in Indonesia and Malaysia

Data - One Map

Licensing transparency & accountability

Corruption

Legal/planned deforestation

Illegal deforestation

Peatland drainage

Indigenous People Bill

Social forestry and agrarian reform

FPIC

Protection of human rights defenders

Source: Madani (2019), Coordinating Ministry of Economic Affairs (2019), CRR (2020)

Indonesia has embarked on a

journey to “correct what was right.” A “nudge” from the

“demand-side” may accelerate the

evolution

How demand-side regulations can help

Pushing beyond legality towards sustainability:Protection of all natural forests (not just primary), legal adoption of FPIC, stronger protection of peatland, legal recognition of IP, stronger human rights defenders protection, strengthening ISPO PnC

Making sure that good laws & action plans are enforced/carried out /optimizedEnvironmental Law, Prevention & Eradication of Forest Destruction Law, timber legality assurance system (SVLK), palm oil moratorium, forest & peatland moratorium, NAP on sustainable palm oil plantations, NAP on business and human rights, NAP on corruption prevention, the NDC, including REDD+, IP Bill

Providing alternative avenues for complaints or seeking remedies Possible civil liability or other complaint mechanisms

EU FLEGT

EU HR and Environment Due Diligence

EU Legal Framework for Halting and Reversing EU-Driven Deforestation

Trade & Sustainability Chapter in CEPA

Preferential Treatment for Smallholders in EU Delegated Act on ILUC

Risks and Mitigation

Adverse impacts on the weakest in the supply chain: smallholders, labours, community groups:

declining priceclosed access to marketunemployment

Diversion of exports to countries requiring no or less robust sustainability standards – can result in worse environmental and social conditions in producing countries:

Including domestic consumption

Diplomatic tension & advocacy backlash

2.7 million Palm oil smallholder households in 2018

5.8 million Hectares of community palm oil plantations in2018

1.2 million Hectares of community palm oil plantations inforest zone

4.9%Proportion of smallholder replanting fund fromthe CPO Fund

8 to 16.2 million Workers in palm oil industry

30%-60%Price cut imposed on smallholders' fresh fruitbunches by middlemen

SmallholdersPreferential treatment for certified smallholdersSupport for smallholders certification

LeakageCooperation with other consumer countries, such as EU-China cooperation on legal timber

ConsultationsBuild a consultative forum both with governments, business sectors, and civil society organizations

Source: tempo.co, katadata.co.id, Koalisi Buruh Sawit (2018), wartaekonomi.co.id, mongabay.co.id

Conclusions and Notes

Standards & due diligence are most effective when combined with cooperation to support national frameworks to achieve sustainability & good governance

Increasing trade value of sustainable commodities is vital: preferential sourcing, support schemes for sustainable commodities, not “cheating” by sourcing from unsustainable sources

Direct support for the weakest in the supply chain prevents backlash: farmers, smallholders, community groups, labours

Aligning with producing countries’

priorities is important

because promoting

sustainability and human rights can

easily slip into“trade war”

1. NDC- Roadmap to achieve NDC in the forestry sector- REDD+

2. NAP Sustainable PO- Smallholder capacity development, incl. replanting and GAP- Legality of smallholders- Environment management & monitoring- Data improvement & ISPO acceleration

3. NAP Business and HR- Including HR commitment and due diligence by corporations -

Policies to align with:

Thank You

Thank You!

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References