The failure of many key palm oil producers to align to the ISPO standards is expected to threaten the Indonesian palm oil market following a resolution by the EU parliament.
The Indonesian palm oil industry is facing trade sanctions to the EU market following a resolution by the EU parliament to regulate sustainable energy sources. MEPs have voted overwhelmingly to ban biofuels made from vegetable oils including palm oil by 2020, to prevent the EU’s renewable transport targets from inadvertently contributing to deforestation.
Indonesian palm oil players have been combating a negative perception of unsustainable palm oil production with the introduction of the ISPO certification. ISPO certification is a compulsory standard which aims to support the sustainable production and use of palm oil while minimizing adverse environmental and social impacts. It also seeks to improve the capacity of small farmers to produce sustainable palm oil, and will promote the Indonesian Sustainable Palm Oil System (ISPO) in the international community. ISPO is a mandatory national sustainable palm oil certification scheme managed by the Ministry of Agriculture.
To date, only 12% of the palm oil producers have been certified. However, large players in the palm oil industry with the capacity to get certified continue to disregard the regulation largely due to short term gains. Companies like Eagle High plantations controlled by the tycoon Peter Sondakh who controls a significant portion of the palm oil production are among the companies that have completely disregarded this requirement. Other notable examples are Best Agro and Astra.
There are however some long term minded players like Sinar Mas who have taken the initiative to get their operations certified and continue to push forward a sustainable agenda to ensure the growth of the palm oil sector is not affected in major markets.