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Author: Kusumaningtyas, R. Publisher: CIFOR ISBN: Category : Languages : en Pages : 8
Book Description
Key messages Many stakeholders, including governments, production and processing companies and non-governmental organizations (NGOs), are working towards a more sustainable palm oil sector. Although smallholders account for an important share of oil palm cultivation, the social and environmental challenges of smallholder practices receive relatively little attention.Financial Service Providers (FSPs), such as banks and pension funds, could play a more significant role developing a more sustainable and inclusive palm oil sector by tying Environmental, Social and Governance (ESG) conditions to the financial services they provide to palm oil companies that source products from smallholders.The majority of funds financing the major palm oil companies originate from FSPs based in Asian countries such as Japan, Malaysia, Indonesia and Singapore. Currently, these FSPs do not have adequate ESG policies.European and American FSP policies are more advanced in addressing such issues as deforestation and Roundtable on Sustainable Palm Oil (RSPO) certification. Nevertheless, they still pay very little attention to the inclusion of smallholders in sustainable supply chains.Due to the differences between ESG policies followed by European and American FSPs in comparison to Asian FSPs, palm oil companies still have ample alternatives to access financing with few conditions. As a result, the potentially significant contribution of FSPs to foster a more sustainable palm oil sector remains underutilized.Adoption of more adequate ESG policies by Asian FSPs could occur in the first place through an increased understanding by these FSPs of the financial risks involved in continuing business as usual. Second, peer pressure from European and American FSPs and sustainability initiatives would help. Third, financial regulators in the palm oil production countries increasingly look for instruments to stimulate the financial sector to contribute more to the sustainable development of their economies.
Author: Kusumaningtyas, R. Publisher: CIFOR ISBN: Category : Languages : en Pages : 8
Book Description
Key messages Many stakeholders, including governments, production and processing companies and non-governmental organizations (NGOs), are working towards a more sustainable palm oil sector. Although smallholders account for an important share of oil palm cultivation, the social and environmental challenges of smallholder practices receive relatively little attention.Financial Service Providers (FSPs), such as banks and pension funds, could play a more significant role developing a more sustainable and inclusive palm oil sector by tying Environmental, Social and Governance (ESG) conditions to the financial services they provide to palm oil companies that source products from smallholders.The majority of funds financing the major palm oil companies originate from FSPs based in Asian countries such as Japan, Malaysia, Indonesia and Singapore. Currently, these FSPs do not have adequate ESG policies.European and American FSP policies are more advanced in addressing such issues as deforestation and Roundtable on Sustainable Palm Oil (RSPO) certification. Nevertheless, they still pay very little attention to the inclusion of smallholders in sustainable supply chains.Due to the differences between ESG policies followed by European and American FSPs in comparison to Asian FSPs, palm oil companies still have ample alternatives to access financing with few conditions. As a result, the potentially significant contribution of FSPs to foster a more sustainable palm oil sector remains underutilized.Adoption of more adequate ESG policies by Asian FSPs could occur in the first place through an increased understanding by these FSPs of the financial risks involved in continuing business as usual. Second, peer pressure from European and American FSPs and sustainability initiatives would help. Third, financial regulators in the palm oil production countries increasingly look for instruments to stimulate the financial sector to contribute more to the sustainable development of their economies.
Author: Kusumaningtyas, R. Publisher: CIFOR ISBN: 6023870589 Category : Palm oil industry Languages : en Pages : 54
Book Description
The global palm oil sector faces ongoing threats to sustainability caused by deforestation, peatland development, labor rights violations and land right conflicts. Additionally, integrating smallholders into sustainable palm oil supply chains continues to be a challenge for the industry. Financial service providers (FSPs) could play a role in stimulating sustainability commitments from the palm oil companies they finance. Their potential influence stems from their capacity to set environmental, social and governance (ESG) conditions for financial services. This research shows that European and US FSPs are further along than their counterparts in Asia in adopting policies that include ESG risk assessments as part of the process for providing financial services. However, attention to smallholder inclusion is insufficient in the policies of all FSPs included in this report. Differences between European and US versus Asian FSPs in adopting ESG standards, as well as the unique markets they finance, present a risk that two parallel but separate financial systems could emerge. Efforts by both government and nongovernmental organizations should emphasize the prevention of a two-tiered marketplace with different quality requirements for palm oil. All actors in this sector still require a significant shift in thinking on the benefits of including ESG standards in cultivation and production processes. In palm oil producing countries, the lack of specific banking regulations emphasizing sustainability concerns regarding the sector forms a further hindrance to positive developments.
Author: Bronkhorst, E. Publisher: CIFOR ISBN: 6023870597 Category : Economic assistance Languages : en Pages : 46
Book Description
The objective of this study was to evaluate past and current policies and smallholder financing schemes in the palm oil industry in Indonesia and Malaysia. The outcomes of these models for smallholders were also evaluated, in terms of income security, sustainable practices and environmental impact. Finally, financing schemes that could contribute to more sustainable smallholder oil palm development were analyzed, and compared to past and existing schemes. The focus of this study is on oil palm smallholders, who play a crucial role in the palm oil production industry and account for the vast majority of oil palm cultivation in Malaysia, and even more so in Indonesia. A number of past and current financing schemes in Indonesia and Malaysia were evaluated through a literature analysis and field assessment. In Malaysia, the main long-term financing challenges faced by smallholders have been solved by large government-sponsored financing schemes and are, thus, less relevant for the report’s discussion. As such, the case studies regarding current innovative financing schemes are restricted geographically to Indonesia. The report proposes potential models to increase the mobilization of long-term finance to smallholders in the palm oil sector. Furthermore, it identifies and reflects on the key enabling conditions that would help overcome the bottlenecks in smallholder long-term financing and create an enabling environment for sustainable oil palm investments. These are: 1) incentives to meet sustainability requirements including Good Agricultural Practices, RSPO certification and deforestation-free production; 2) land tenure security; 3) improved market linkages between smallholders and mills; 4) support for FSPs to assess and manage risks; and 5) strong and effective smallholder organizations.
Author: Sahara Publisher: CIFOR ISBN: Category : Languages : en Pages : 4
Book Description
Key messages Smallholder farmers require significant financing to establish, maintain and replant their oil palm plantations, in order to both increase productivity and improve the quality of the fresh fruit bunches (FFB) produced.Smallholders are also limited in their capacity to self-finance their plantation operations.There is a significant gap, both in terms of amount and accessibility, between the demand smallholders in the palm oil sector make for credit and the supply of that credit by banks and financial institutions.The majority of credit approved for smallholders can only be used for working capital and cannot cover the costs of replanting or accommodate the timeframe required for it.A credit maturity gap also exists in the majority of financing schemes, with loan repayment schedules beginning immediately after fund disbursement. Few financing schemes consider oil palm farmers' initial wait for a harvest, and thus provide loans with a grace period adapted to these timescales.Risk sharing gaps are visible when farmers repay their loans, as any variation or volatility in production costs and palm oil prices is borne by producers.Legal gaps are also evident, with many smallholders not holding proper documentation, which prevents them for using their land as collateral to access credit from banks.These gaps reduce the possibility of smallholders accessing formal credit, which in turn drives an informal local lending market with higher interest rates.In order to improve formal credit access for smallholder oil palm farmers, the different gaps (i.e. maturity, risk and legal) must be addressed.
Author: Idsert Jelsma Publisher: Eburon Uitgeverij B.V. ISBN: 9463012575 Category : Political Science Languages : en Pages : 174
Book Description
In search of sustainable and inclusive palm oil production builds on the old debate regarding the role of smallholder farmers in society and links it to the integration of smallholders into modern global value chains. Since the peak in global agro-commodity prices in 2007/08, interest in agriculture has increased again among policymakers and in the private sector. Modern global value chains provide opportunities for smallholder farmers but also increasingly dictate conditions in terms of production practices, and thereby determine conditions for inclusion. The Indonesian oil palm sector provides an interesting case regarding smallholder inclusion in modern global value chains and the role they play in sustainable agro-commodity production. Palm oil production in Indonesia has thrived due to insertion in global value chains, experienced massive smallholder engagement, faces considerable sustainability challenges and illustrates the impacts sustainability initiatives can have on smallholders. It thus provides a promising case to further explore the nexus of sustainable and inclusive development, smallholder agriculture and policy. The primary aim of this book is to advance the understanding of how the oil palm sector can be made more sustainable and inclusive. It does so by exploring independent and organized oil palm smallholders in Sumatra, explaining their emergence and performance, and discussing strategies to improve their performance. Whereas the smallholder oil palm sector clearly has its unique characteristics, this book unpicks some stereotypical views on smallholders and highlights the dynamics impacting farmers’ organizations over time, and thereby contributes to debates on the future of farming.
Author: Sophia M Gnych Publisher: CIFOR ISBN: 6023870198 Category : Palm oil Languages : en Pages : 63
Book Description
Evolving international sustainability norms demand greater environmental and social responsibility from business across global commodity chains – from countries of origin to countries of consumption. Conventional commandand-control regulation has had limited success in addressing negative environmental and social impacts. As a result, advocacy groups and NGOs have championed a diversity of market-based and multi-stakeholder governance approaches aimed at shifting the private sector towards delivering more sustainable business models. Multiple non-state, market-driven social and environmental standards have emerged for palm oil. Through interviews with growers and key stakeholders in the Indonesian palm oil industry this occasional paper explores the motivations driving the uptake of sustainability standards, as well as the factors supporting and preventing implementation of sustainability standards, and asks, what model of sustainable oil palm agriculture is ultimately being built?
Author: Ordway, E.M. Publisher: CIFOR ISBN: Category : Languages : en Pages : 8
Book Description
The Congo Basin is rich in biodiversity and stores an estimated 25%-30% of the world’s tropical forest carbon stocks. As agricultural land becomes increasingly scarce in Southeast Asia, and regulatory pressures continue to intensify, the Congo Basin could become the next frontier for oil palm expansion. Most of the roughly 280 million hectares (Mha) of additional land suitable for oil palm in the Congo Basin are found in the Democratic Republic of Congo (60%), Cameroon (11%) and the Republic of Congo (10%). Many heavily forested countries in the Congo Basin are setting national targets to increase production to meet national and regional demands. Land area allocated to oil palm increased by 40% in the Congo Basin and five additional top-producing countries in Africa between 1990 and 2017. Without intervention, future production increases in the region will likely come from expansion rather than intensification due to low crop and processing yields, possibly at the expense of forest. Sustainability strategies initiated by companies and aimed at certifying palm oil mills are unlikely to be effective at curbing deforestation in the Congo Basin. Smallholder farmers are an engine of growth in the region’s palm oil sector, and recent evidence suggests they are actively clearing forest to expand. Because of the proliferation of non-industrial processing facilities (artisanal mills), a substantial fraction of the palm oil produced by smallholders never passes through a company’s jurisdiction. Smallholders are also disadvantaged by power imbalances and limited access to technical and financial resources. Including smallholders in sustainability strategies offers opportunities to achieve multisectoral goals. Recommendations to improve the sustainability of the palm oil sector in the Congo Basin include (1) improving access to finance for smallholders and non-industrial mill managers; (2) implementing policies to safeguard natural resources and facilitate access to appropriate market opportunities that offer incentives to prevent future deforestation; (3) intensifying production by replanting aging plantations, rehabilitating abandoned plantations with disease-resistant and high-yielding varieties, and increasing fertilization, without further expansion into high conservation value or high carbon stock forest areas; and (4) improving processing capacity and extraction rates by upgrading mill technologies. Sustainable palm oil development in the Congo Basin will require careful consideration of the governance, institutional, environmental and socioeconomic factors that underpin the complex regional supply chains.
Author: Pirard, R. Publisher: CIFOR ISBN: Category : Languages : en Pages : 57
Book Description
The palm oil sector has been targeted by NGOs for its alleged negative environmental and social impacts. In this regard Indonesia represents a major challenge because it is home to some of the largest tropical forests in the world. A recent wave of corporate sustainability commitments peaked with the New York Declaration on Forests in September 2014, which emerged amidst the development of other standards and initiatives toward sustainable palm oil production. This process has made this field very complex, especially in Indonesia. The present study aims at clarifying the positions taken by the various stakeholders and assesses the level of political support and the functioning of policy networks. Results from our Policy Network Analysis based on the survey of 59 institutions representing all types of stakeholders (e.g. government, corporate, NGO) at all levels (international, Indonesian and local) show that standards and initiatives for sustainability have contrasting visibility and impact among stakeholders. In this context, RSPO stands as a reference, with the efforts by the Government of Indonesia to promote its own standard with ISPO yet to gain traction. While IPOP was a well-appreciated initiative and a symbol of zero-deforestation commitments, opposition to it by the government and conflicting interests have resulted in its disbandment. Overall, the lack of progress for sustainable palm oil practices on the ground, in the view of respondents, seems to be caused by political and legal barriers rather than technical challenges or economic losses at a country level.