1

The Importance of Indonesian Sustainable Palm Oil (ISPO)

for Companies and Smallholders to Support Sustainable Environment and International Business

Presented by :

R. AZIS HIDAYAT

Chairman of the Secretariat ISPO Commission

Special Lectures on Oil Palm WPLACE 2017 Jakarta, 18-20 October 2017

I. Introduction

• Palm Oil is an important commodity and a versatile raw

material for both food and non-food industries. Driven by

international demands, the past few decades have seen a rapid

expansion of palm oil cultivation and production, generating

improvements in livelihoods for millions of Indonesians, also

state income from devisa.

• As the global leader of palm oil production, Indonesia plays an

importance role in mitigating environmental impacts and

ensuring a sustainable product for consumers around the

world.

2

• As part of this commitment, the Indonesian Government has

established the Indonesian Sustainable Palm Oil (ISPO)

standard and certification system; launched by the Ministry of

Agriculture in March 2011 ( the MoA Decree No. 19/2011 ) and

was updated in March 2015 ( the MoA Decree No. 11/2015) is

now known as the ISPO Certification System.

• The aim of ISPO is to ensure the adherence to government laws

and regulations relating to palm oil plantations, around 16 Acts,

Presidential Decrees and Ministry Decrees; so that sustainable

palm oil is produced and support the commitment of the

President of the Republic of Indonesia to reduce national GHG

emissions.

3

• Indonesian Sustainable Palm Oil (ISPO) is a bussiness system

in the field of oil palm plantation which are economically,

socially and environmentally viable based on existing law in

Indonesia and it is compulsory (mandatory).

• ISPO is a policy taken by the Government of Indonesia

through the Ministry of Agriculture in the Indonesian oil palm

sector which expected to overcome various problems raised by

the NGOs such as deforestation, killing endangered animals,

impoverishing farmers and GHG emissions. The attack of the

NGOs seems endless. Indonesian Palm Oil also faced no tariff

barriers which restricted it to be purchased in certain

countries.

II. THE IMPORTANCE OF ISPO

• ISPO intended to encourage the sustainable production of palm

oil by fulfilling its duty to do plantation business in accordance

with existing rules and regulation in Indonesia, to protect and

promote the sustainable production practice as demanded by

the international market.

• For Indonesia, palm oil has a distinctive strategic value in

supporting national development, such as :

- an economic prime mover that stimulate agribusiness

development from upstream rural areas to downstream

export hubs and processing areas,

- able to create significant job opportunities and serve

as a source of income for rural communities and farmers,

- able to produce a commodity highly sought after

internationally that generates significant national revenue.

6

III. THE MAIN ROLE of PALM OIL

in INDONESIA:

7

Palm Oil export 2016 : 12,32% of the total Indonesia exsport or

13,56% from the Non Fuel exsport

Palm Oil Value of export in 2016 US $ 17,8 Miliar ( 25,7 Billion Ton

CPO, PKO, dan derivate; also 5,2 Billion Ton Bungkil dan shell ),

bigger than th 2015 US $ 16,5 Miliar.

B-20 PROGRAM : Product of BIODIESEL 2,7 Billion KL;

IMPACT of BIODIESEL : Reduce GHG Emission 4,49 Billion Ton

CO2; Value added from Downstream Biodiesel Industry Rp 4,4

Triliun; Devisa efficiency & Reduce Fuel Consumption Rp 14,83

Triliun.

The Role of Indonesian Palm Oil as The Biggest

Indonesia Revenue in 2016 ( source : Dr. Bayu Krisnamurthi/ Dirut BPDPKS )

8

A. ISPO

PRIMARY

OBJECTI

VE

Streamline and Enforce Compliance of

Government Regulation for Growers and other

Stakeholders along the Length of the Supply Chain

Position the Sustainable Development of Palm Oil

as an Integral part of the Indonesian Economy and

in the Improvement of Rural Livelihoods

Improve the Competitiveness of Indonesian Palm

Oil within the Global Market

Support Indonesia’s Commitment to Reducing

Green House Gases

IV. WHAT IS ISPO ?

Support Indonesia’s Commitment to Preserve

Natural Resources and The Environment

B.The Basis of ISPO Standard and

Certification System

• ISPO adopted all Indonesian rules and regulations related to

sustainability;

• Adopting regulations and implement it as mandatory standard

which guarantee that all palm oil planters fulfill the Indonesian

regulations;

• For plantation company who do not implement regulations will

be imposed by penalties ;

• The Indonesia sustainability principles also adopt the

international principles;

• Producing ISPO palm oil will reduce deforestation and improve

environment condition.

9

Plantation Classification based on Ministry of Agriculture

Decree No. 7/2009

Plantation Classified as Class I,II,III, could purposed for

ISPO certification process, meanwhile plantation classified

as Class IV and V, needs to be evaluated

ISPO regulation refers to Ministry of Agriculture Decree No.

19/2011 on the Guideline on Indonesian Sustainable Palm Oil

stipulated on 31 March 2011 in the State Sheet No. 179/2011

ISPO implementation is mandatory, with

transparent and dependable certification process

Minister Of Agriculture Decree No. 11/ Permentan/

OT.140/3/2015 its about Indonesian Sustainable Palm Oil

Certification System (ISPO)

C. Legal Aspect

D. Pre- Certification Requirement

• Prior to ISPO certification of oil palm plantation and its mill

shall be assessed in accordance to Minister of Agriculture

Regulation No.07/2009 on Guidelines for plantation Business

Assessment.

• Oil palm plantation will be assessed on the following criteria:

Legal Permit; Plantation Management; Processing; Social

Economy; Environment; and Reporting.

• The plantation will be classified into Class I, II, III, IV and V.

Only oil palm plantation classified as Class I, II, and III are

eligible to apply for ISPO Certification, and submit the

application by the end of September 2015.

11

E. ISPO Certification System

• ISPO Certification system is impartial and independent.

• Certification assessment done by third party which is

Certification Body. The certification body is accredited by

National Accreditation Committee and approved by ISPO

Commission.

• ISPO certification system is in accordance to International

Organization for Standardization (ISO).

• ISPO currently approved 12 Certification Bodies and acknow

ledged 1.142 ISPO Auditors ( Auditor on CB and Internal

Auditor for Companies ).

• The Secretariat of ISPO Commission function to supervise and

to facilitate the activities of Certification Bodies and Training

for ISPO-Auditors.

F. ISPO Sustainability Principles

1. The Legality of Plantation Business,

2. Plantation Management,

3. Protection to the Utilization of Primary Natural

Forest and Peatlands,

4. Environment Management and Monitoring,

5. Responsibilities to Workers,

6. Social Responsibility and Community Economic

Empowerment,

7. Sustainable Business Improvement.

G. Standard of ISPO

Standard of ISPO now should be implement by:

1. Plantation Companies (7 principles)

2. Plantation only without Mill (7 principles)

3. Mill without Plantation (7 principles)

4. Plasma Smallholders (6 principles)

5. Independent Smallholders (4 principles)

The implementation of Standard No. 1, 2 and 3 is

mandatory, while the remaining are voluntary.

H. ISPO Principle & Criteria

• ISPO consist of 7 (seven) Principles, 52 Criteria and

141 Indicators that have been referenced from several

Ministries, such as the Ministry of Agriculture,

Ministry of Environment and Forestry, Ministry of

Manpower, Ministry of Land Board and Landscape,

Ministry of Industry, and Ministry of Trade.

15

I. ISPO Protect Environment

• Strictly, implement Indonesian regulation to protect national

park , natural water resources, river bank, beaches area prone to

natural disaster , forest or grassland with high biodiversity and

historical area.

• ISPO also protect endanger species, flora and fauna plantation

has to observe the present of endanger species and find reasons

and ways to know if this species disappear.

• Endanger species can not be kept/ maintain in the plantations,

without special treatment and permit given by the government/

Ministry of Environment & Forest .

• We do not implement HCV in ISPO but protection as according

to our regulation, it called NKT ( Nilai Konvervasi Tinggi) .

16

J. ISPO - CERTIFICATION BODIES Approved by ISPO Commission

1. Mutu Agung Lestari

2. Tuv Nord Indonesia ( Germany )

3. Sucofindo (Persero)

4. Tuv Rheinland Indonesia (Germany )

5. SAI Global ( Australia )

6. Mutu Hijau Indonesia

7. SGS Indonesia ( Switzerland )

8. BSI Indonesia ( UK )

9. AJA Indonesia ( UK & Italy )

10. Mutu Indonesia Strategis Berkelanjutan

11. Agri Mandiri Lestari

12. Bureau Verietas ( France ) 17

V. The Performance of ISPO

• The Performance of the ISPO Certification ( up to 30

September 2017):

• The Palm Oil Companies and Smallholders participated on

ISPO since 2011 – 2017 : 557 ( 551 Companies, 5 KUD/KSU

Plasma, dan 1 Independent Smallholders Association) :

• Audit Report received by the ISPO Secretariat : 376 ,

• ISPO Certification approved by the ISPO

Commission : 306 ( 81,04 % )

• On going process for approval : 70 Audit Report

18

Realization of ISPO Certification 2011- 2017

On 2013 and 2014 , approval of ISPO Certificates for 63

Companies : Plantation 549,468 Ha and CPO Production

2,821,567 ton;

On April 2015, approval of ISPO Certificates for 33 Companies

: Plantation 297,278 Ha and CPO Production 1,027,484 ton;

On February 2016, approval of ISPO Certificates for 53

Companies : Plantation 205,794.10 Ha and CPO Production

1,103,323.10 ton;

On July 2016, approval of ISPO Certificates for 35 Companies :

Plantation 212,452.29 Ha and CPO Production 1,145,267.87

ton;

19

On December 2016, approval of ISPO Certificates for 42

Companies : Plantation 87,772.06 Ha and CPO Production

332,775.42 ton;

On April 2017, approval of ISPO Certificates for 38

Companies and 2 Smallholders ( KUD Plasma dan 1 Asosiasi

Kebun Swadaya ) : Plantation 249,543.37 Ha CPO Production

861,425.82 ton;

On August 2017, approval of ISPO Certificates for 40

Companies : Plantation 202,427.17 Ha and CPO Production

861,425.82 ton; 539,265.88 ton;

The Total Approval of ISPO Certificate 306,

Plantation 1,882,075.85 Ha and CPO Production

8,147,013.63 ton;

20

VI. Penalties

• If until the end of September 2015, oil palm

plantation companies do not implement ISPO or do

not apply for ISPO, their classification class will be

revoked to Class IV. This means that they can not

apply for ISPO certification.

• They will be given reminder 3 times in the span of 4

months and failing to comply to this requirements thus do

not implement ISPO, its Plantations Business Lisence

(IUP) will be revoked and later their HGU can also be

removed.

1. UNDP ( United Nation Development Program )

2. RSPO ( Roundtable Sustainable Palm Oil )

3. ISCC ( International Sustainable Carbon Certification )

4. IFC ( International Finance Corporation )

5. CI (Conservation International)

6. ILO (International Labour Organization )

7. IDH the Sustainable Trade Initiative.

8. INOBU (Inovasi Bumi).

9. Leadership Park Institute

22

VII. Partnership ISPO with International

Organization for Independent Smallholders

Partnership for Independent Smallholders

1. Joint Project Ministry of Agriculture with UNDP is assisting

independent smallholders to be certified by ISPO:

- The pilot project are in Riau, South Sumatera and West Kalimantan,

- So far survey already done in Riau, then it will continue to West

Kalimantan and South Sumatera,

- On 2016 SPOI-UNDP have a plan to certify 2,200 Smallholders in

Riau province; has been audited on December 2016,

- Realization : Amanah Smallholders Association received ISPO

Certification for 400 Ha/ 200 KK on April 2017.

2. The Secretariat ISPO Commission- MoA have joint project with Internatio

nal Finance Corporation (IFC) in assisting independent smallholders to be

certified by ISPO:

- The pilot project are in Rantau Prapat at South Sumatera,

- The Secretariate ISPO Commission will established the socialization dan

give ISPO training for the Local Government, Extention Workers, Palm Oil

Association and Farmers.

3. The Secretariat ISPO Commission- MoA have joint project with

Conservation International (CI) is assisting independent small holders to

be certified by ISPO :

- On March 2017, The Secretariat ISPO Commission established the

socialization dan give training about ISPO for the Local Government,

Extention Workers, Palm Oil Association and Farmers at Sorong and

Manokwari -West Papua.

Also, on April 2017 at Rantau Prapat- North Sumatera.

25

4. The Secretariat ISPO Commission- MoA established partner

ship with RSPO ( Rountable on Sustainability Palm Oil ) on

Joint Study and Combined Audit for Palm Oil Sustainable

Certificate- The pilot project are in South Sumatera.

5. The Secretariat ISPO Commission- MoA established partner

ship with International Sustainable and Carbon Certification

(ISCC) on training and promotion.

On August 2017, ISPO have joined Basic Training ISCC at

Bali. We’ll establish for Independent Farmers at Jambi.

26

6. The Secretariat ISPO Commission- MoA will establish partner

ship with IDH to prepare the smallholders for audit ISPO

toward Palm Oil Sustainable Certificate :

- The pilot project will be in Lalan-South Sumatera.

7. The Secretariat ISPO Commission- MoA will establish partner

ship with InoBu ( Inovasi Bumi ) to prepare the smallholders

for audit ISPO toward Palm Oil Sustainable Certificate :

- The pilot project will be in Central Kalimantan.

8. On going process, The Secretariat ISPO Commission- MoA will

establish partnership with International Labour Organization

(ILO) : observation and joint information on Palm Oil Worker.

VIII. ISPO International Promotion and

Diplomacy

• In 2015, the Government of the Republic of Indonesia

organized ISPO delegation to promote ISPO to India,

Netherlands, Belgium and Germany.

• ISPO Commission also visited European Commission

for ISPO Standard for Renewable Energy approval

under the coordination of Indonesian Embassy in

Brussels.

28

ISPO CERTI

FICATION

Improve Productivity and Yield through the

Improvement of Good Agriculture Practices (GAP)

Improve Stakeholders and Buyers Trust

Competitive Advantage both Domestically and

Internationally due to Renewed Credibility

Improved Management of Corporate Social

Responsibility through the Reduction of Negative

Environmental and Societal Impact

VI. The Benefits of ISPO Certification

for Growers

Confidence in Complete Regulatory Compliance,

also Increased Support,Knowledge Sharing, as an

Objective Campaign.

1ST INTERNATIONAL CONFERENCE – ISPO :

11-12 April 2017 at Jakarta Convention Center

29

Thank You Very much,

ISPO is The TRULLY SUSTAINABILITY