Investor Presentaiton
Climate Sustainability
Sustainability advances in agri-business present another
emergent opportunity
The Roundtable on Sustainable Palm Oil
(RSPO), the world's largest non-profit
organisation for ethical palm oil production,
issues sustainability certifications when palm
oil is produced without causing harm to
environment or society
Principles and criteria for sustainable
palm oil production created by the RSPO
✓ Fair working conditions.
✓ Protection of lands and rights for indigenous groups
✓ No clearing of primary forest
✓ Preservation of wildlife on plantations
✓ Lowering of GHG emissions
✓ Decreased industrial pollution
Additional ESG-related benefits include
reduced use of pesticides, reduction of
workplace accidents and enhanced productivity
Indonesian Sustainable Palm Oil (ISPO) certification
was introduced in 2011 by the Ministry of Agriculture
Regulation No.19/Permentan/OT.140/3/2011, and
updated by Ministry of Agriculture Decree
No. 11/2015 and Decree No. 38/2020. ISPO
certification has been mandatory for all producers
other than smallholder farmers since 2014; ISPO
certification is set to be mandatory for smallholders
by 2025
51% of global RSPO-certified palm oil came
from Indonesia, and 42% from Malaysia, in 2020
Global RSPO-certified production
area has grown considerably
M HA
3.5
3.26
3.05
3.0
2.81
2.51
2.5
2.0
1.5
1.0
0.5
0
2017
2018
2019
2020
Indonesia remains committed to transitioning
towards biofuel and away from fossil fuels
B20 programme mandated 20% palm oil in fuel, so-called
biodiesel, for vehicles and heavy machinery from end-2018
2018 B20
Indonesia's biofuel
demand is expected to
rise to 190m tonnes by
2050, from 28.9m
tonnes in 2020
2020 B30
2022 | B40
2025 B50
0
10
20
30
40
50
Plantations still present social and labour
challenges
Payment below
minimum wage
Adopted piece-rate pay
remuneration system,
in which workers are paid for
productivity rather than time
Concerns around
child labour
Particularly in areas with limited
access to schooling and
childcare facilities
Exposure to
hazardous chemicals
Mainly used as pesticides and
herbicides in plantations
Food insecurity
Pest and saltwater intrusions
can limit crop yields;
expansion of plantations
reduces land available for
edible crops
Palm oil action and COP26
recommitment to end deforestation
Palm oil industry plans to ramp up efforts to
help smallholder farmers - which account for
6.7m ha, or 75% of the country's total
plantations replace old plants with new
crops. This is necessary to maintain or raise
yields without increasing land use. Challenges
for smallholder farmers include potential loss of
income during the replanting process; the
required use of certified seeds; and adherence
to fertilisation and land-clearing practices
without burning.
Agri-business opportunity
The sustainable development of
Indonesian agri-business offers
benefits for multiple stakeholders, with
51% of global RSPO-certified palm oil
produced in Indonesia in 2020. This
indicates better protection for
indigenous groups, native flora and
fauna biodiversity. Plantations are
increasingly aiming to be self-
sufficient in terms of energy usage,
including the use of oil palm shells
in boilers and methane gas projects.
The move towards biofuel presents
another opportunity for local value
addition. Sustainability advancements
can raise international perceptions
of Indonesia, create opportunities for
smallholder farmers and reduce
reliance on energy imports. More
remains to be done to address social
and governance-related challenges.
PwC
OBG ESG Report
O
OXFORD
BUSINESS
GROUP
Sources: Human Rights Watch; ISPO; Mongbay; RSPO ; WWF
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