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Pathways to sustainable trade and
system dynamic simulation
Prof. Dr. Herry Purnomo1,2, Sonya Dyah Kusumadewi1 , Beni Okarda1 , Lila Juniyanti1,3, Salwa Nadhira1
1CIFOR-ICRAF Indonesia Country Program
2IPB University
3National Research and Innovation Agency (BRIN)
How green is palm oil trade from Indonesia? (From supply side)
86%
14%
Deforestation cut off year 2010
Not from deforestation From deforestation
99%
1%
Deforestation cut off year 2020
Not from deforestation From deforestation
86%
14%
by Soil type
Mineral Peat
80%
20%
by Land status
Other use land (APL) State forest
By cut off year 2010 or 2020, >60% palm oil from Indonesia are not from deforestation and peatland.
Why green trade for palm oil
sustainability in Indonesia?
Our findings suggest that:
• Sustainable oil palm in Indonesia
defines as no-deforestation and
employment.
• Trade and governance is matter
to achieve sustainability of oil
palm sector in Indonesia.
• Green consumer behaviour is
one of key variables of trade
factor.
(Purnomo et al., 2023)
How green is palm oil trade from Indonesia? (From demand side)
-
5
10
15
20
25
30
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Million
tons
CPO and Palm Oil Derivative Products Export Volume
EU Developed countries (Potential green consumer) Rest of World China India SEA Pakistan
Total Export – 2022:
25 Million tons
55% of total production
Only few palm oil from
Indonesia went to
“green” market
meanwhile from supply
side, Indonesia
possible to cover all
export volume with
palm oil that is not from
deforestation and not
from peatland.
What are the impact of global green trade initiatives in Indonesia?
A value chain dynamic model: POTLAS (Palm Oil Trade and Landscape Simulation)
Plantations (corporate,
smallholder, state-
owned)
Mill
Refinery
Domestic
markets
Forest and
conservation
areas
Non-forest
lands
Palm oil supply chain Output indicators
UK forest-risk
commodity
EU
deforestation-
free product
Voluntary
certification
(RSPO)
Plantation
extent
FFB, CPO/
PKO, and
refined palm
oil
Value added
CO2 eq.
emission or
sequestration
Employment
Government
income
Trade schemes
Land uses
and
biodiversity
Global markets
Source: Purnomo et al., 2022
What are the impact of global green trade initiatives in Indonesia?
Source: Purnomo et al., 2022
Sub-national case study of Kotawaringin Barat district
What are the impact of global green trade initiatives in Indonesia?
National case study: EU Deforestation-Free Regulation
Reconciliation is possible but how to compensate economic loss?
Pathways to sustainable trade of palm oil
to address global green trade initiatives and climate crisis
as results of series of TRADE Hub stakeholder consultation
Stakeholder
consultation in
September 2023
Policy Dialogue
and workshop
for the roadmap
in April 2023
Case study EU
Deforestation-
free regulation:
Roundtable in
December 2022
96 participants from
51 different institutions
• Policy dialogue: 450
hybrid participants
from 258
organizations
• Workshop: 56
participants from 40
organizations
602 hybrid
participants from
270 different
institutions
Common vision and action tracks
Common vision: Sustainable trade system through respecting smallholders’ and IPLC
rights and environmental justice with multistakeholder collaboration
Action track Pathway
0: Common Understanding Build and harmonize a concept of sustainability among consumers and producers that
reflects each other’s priorities
1: Sustainable consumption Promote and create demand for sustainable palm oil, including in the domestic market
and derivatives industries
2: Production system Ensure sustainable practices by small- and large-scale producers
3: Markets Connect smallholders to markets for sustainable produce and create market incentive
schemes
4: Benefits Ensure benefits are shared between all actors along value chains
5: Fair system Ensure cost and risk burdens for a sustainable transformation are distributed fairly
between producers and consumers
6: Access to finance Provide better access to existing finance schemes and/or create alternative schemes
for smallholder farmers
7: Communication Improve communication between actors, sectors and levels to ensure respect for each
other’s interests
Key actions needed:
1. Support for smallholders that recognizes their diversity/typology;
2. A harmonized system with a common accountability framework/platform;
3. Fair incentive schemes between producers and consumers;
4. A stronger multistakeholder forum and collaboration.
Consumers: Provide incentives for producers to strive towards sustainability
Smallholders: Implement sustainable practices and improve business models with support
Public sector: Establish an accountability framework; integrate and harmonize policies; enable
incentive mechanisms; support smallholders
Private sector: Implement sustainable practices and improve achievement, transparency and
traceability; connect sustainable palm oil supply chains with end consumers (manufacturers);
support, and connect with smallholders producing sustainable palm oil
Civil society, media and academia: Promote collective actions and connect the dots for small
but impactful initiatives; provide and distribute credible information.
What stakeholders can do:
CIFOR-ICRAF
The Center for International Forestry Research and World Agroforestry (CIFOR-ICRAF) harnesses
the power of trees, forests and agroforestry landscapes to address the most pressing global
challenges of our time –biodiversity loss, climate change, food security, livelihoods and inequity.
CIFOR and ICRAF are CGIAR Research Centers.
Simulation of Indonesian
Palm Oil Sustainability
(SIPOS)
https://bit.ly/cifor_sipos

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Pathways to sustainable trade and system dynamic simulation

  • 1. Pathways to sustainable trade and system dynamic simulation Prof. Dr. Herry Purnomo1,2, Sonya Dyah Kusumadewi1 , Beni Okarda1 , Lila Juniyanti1,3, Salwa Nadhira1 1CIFOR-ICRAF Indonesia Country Program 2IPB University 3National Research and Innovation Agency (BRIN)
  • 2. How green is palm oil trade from Indonesia? (From supply side) 86% 14% Deforestation cut off year 2010 Not from deforestation From deforestation 99% 1% Deforestation cut off year 2020 Not from deforestation From deforestation 86% 14% by Soil type Mineral Peat 80% 20% by Land status Other use land (APL) State forest By cut off year 2010 or 2020, >60% palm oil from Indonesia are not from deforestation and peatland.
  • 3. Why green trade for palm oil sustainability in Indonesia? Our findings suggest that: • Sustainable oil palm in Indonesia defines as no-deforestation and employment. • Trade and governance is matter to achieve sustainability of oil palm sector in Indonesia. • Green consumer behaviour is one of key variables of trade factor. (Purnomo et al., 2023)
  • 4. How green is palm oil trade from Indonesia? (From demand side) - 5 10 15 20 25 30 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Million tons CPO and Palm Oil Derivative Products Export Volume EU Developed countries (Potential green consumer) Rest of World China India SEA Pakistan Total Export – 2022: 25 Million tons 55% of total production Only few palm oil from Indonesia went to “green” market meanwhile from supply side, Indonesia possible to cover all export volume with palm oil that is not from deforestation and not from peatland.
  • 5. What are the impact of global green trade initiatives in Indonesia? A value chain dynamic model: POTLAS (Palm Oil Trade and Landscape Simulation) Plantations (corporate, smallholder, state- owned) Mill Refinery Domestic markets Forest and conservation areas Non-forest lands Palm oil supply chain Output indicators UK forest-risk commodity EU deforestation- free product Voluntary certification (RSPO) Plantation extent FFB, CPO/ PKO, and refined palm oil Value added CO2 eq. emission or sequestration Employment Government income Trade schemes Land uses and biodiversity Global markets Source: Purnomo et al., 2022
  • 6. What are the impact of global green trade initiatives in Indonesia? Source: Purnomo et al., 2022 Sub-national case study of Kotawaringin Barat district
  • 7. What are the impact of global green trade initiatives in Indonesia? National case study: EU Deforestation-Free Regulation Reconciliation is possible but how to compensate economic loss?
  • 8. Pathways to sustainable trade of palm oil to address global green trade initiatives and climate crisis as results of series of TRADE Hub stakeholder consultation Stakeholder consultation in September 2023 Policy Dialogue and workshop for the roadmap in April 2023 Case study EU Deforestation- free regulation: Roundtable in December 2022 96 participants from 51 different institutions • Policy dialogue: 450 hybrid participants from 258 organizations • Workshop: 56 participants from 40 organizations 602 hybrid participants from 270 different institutions
  • 9. Common vision and action tracks Common vision: Sustainable trade system through respecting smallholders’ and IPLC rights and environmental justice with multistakeholder collaboration Action track Pathway 0: Common Understanding Build and harmonize a concept of sustainability among consumers and producers that reflects each other’s priorities 1: Sustainable consumption Promote and create demand for sustainable palm oil, including in the domestic market and derivatives industries 2: Production system Ensure sustainable practices by small- and large-scale producers 3: Markets Connect smallholders to markets for sustainable produce and create market incentive schemes 4: Benefits Ensure benefits are shared between all actors along value chains 5: Fair system Ensure cost and risk burdens for a sustainable transformation are distributed fairly between producers and consumers 6: Access to finance Provide better access to existing finance schemes and/or create alternative schemes for smallholder farmers 7: Communication Improve communication between actors, sectors and levels to ensure respect for each other’s interests
  • 10. Key actions needed: 1. Support for smallholders that recognizes their diversity/typology; 2. A harmonized system with a common accountability framework/platform; 3. Fair incentive schemes between producers and consumers; 4. A stronger multistakeholder forum and collaboration. Consumers: Provide incentives for producers to strive towards sustainability Smallholders: Implement sustainable practices and improve business models with support Public sector: Establish an accountability framework; integrate and harmonize policies; enable incentive mechanisms; support smallholders Private sector: Implement sustainable practices and improve achievement, transparency and traceability; connect sustainable palm oil supply chains with end consumers (manufacturers); support, and connect with smallholders producing sustainable palm oil Civil society, media and academia: Promote collective actions and connect the dots for small but impactful initiatives; provide and distribute credible information. What stakeholders can do:
  • 11. CIFOR-ICRAF The Center for International Forestry Research and World Agroforestry (CIFOR-ICRAF) harnesses the power of trees, forests and agroforestry landscapes to address the most pressing global challenges of our time –biodiversity loss, climate change, food security, livelihoods and inequity. CIFOR and ICRAF are CGIAR Research Centers. Simulation of Indonesian Palm Oil Sustainability (SIPOS) https://bit.ly/cifor_sipos