Agriculture and Commodities

Agriculture and Commodities

Demands for commodities have been considered to be a major threat to forest and peatforest land conservation. Inefficient and low-productivity agriculture practices have brought pressure to farm lands, which results in illegal encroachments to protected areas or other threats such as forest and peatland fires. An important part of landscape conservation and landscape management is, therefore, increasing agriculture productivity per unit of farmland. Support to the farmers need to be followed by strict condition that they will not expand illegally, or to areas that are supposed to be conserved. Alternatively, agroforestry keeps much of the conservation values of forests and peatland intact while allowing for some parts of the forests produce commercially-valuable commodities. Agroforestry areas are usually also an appropriate form of conservation, rehabilitation, and development of corridors. Landscape Indonesia will seek to provide financial support in the form of investment facilitation, technical assistance, and incubation (for pre-investment projects). Additionally, Landscape Indonesia is currently providing advisory services to the Roundtable for Sustainable Palm Oil (RSPO) Indonesia in Engaging with the Financial Sector for Sustainable Palm Oil in Indonesia, with Center for International Forestry Research (CIFOR), the World Agroforestry Center (ICRAF), and Profundo. Landscape Indonesia is also partnering with BVRio in Brazil in developing its Responsible Timber Exchange (RTX) for the Indonesian market.

Engaging with the Financial Sector for Sustainable Palm Oil in Indonesia Financial sector is an important stakeholder in the promotion of sustainable palm oil.

Support from the financial sector for sustainable palm oil needs to go beyond rhetoric. It needs to be engrained into internal policies and implementation of the banks and other financial institutions supporting the palm oil sector. Financial sector needs to go beyond mere short-term profitability while disregarding questionable legality and sustainability, and to look at the potential risks of continuing to support unsustainable, let alone illegal, palm oil production practices. Meanwhile, the public and private benefits in supporting sustainable palm oil is increasingly obvious. Already, the risks in continuing support for unsustainable practices have been realized in massive financial risks of non-performing loans (NPL). In 2014, a large palm oil company was fined a record breaking amount of more than $86 million due to its alleged role in severe forest fires that happened that year. Later, in 2015, an Aceh-based company was fined $26 million for landclearing by burning. While this amount was $4 million lower than originally sought by the District Court, it was not insignificant. These kinds of fines that the court handed, happen more frequently than before. More cases remain in the court waiting for their final verdicts, and are expected to follw similar pattern. While reputational risks is increasingly important, demands from key markets also require palm oil products to be entirely sustainable. The financial risks have begun to be more real than before. Their financiers may bear quite a significant impact of the risks that are increasingly faced by the palm oil companies. These risks can no longer be ignored. Landscape Indonesia — in collaboration with the Center for International Forestry Research (CIFOR), The International Center for Research on Agro-Forestry (ICRAF, the World Agroforestry Center), and ProFundo — works with the Roundtable for Sustainable Palm Oil (RSPO) Indonesia to engage the financial sector to address this issue. The group led by Landscape Indonesia is organizing a Platform as a place for discussion with and among players in the financial sector. A “white paper” is developed to compile the financial merits of sustainable palm oil.

Providing Market Access to Responsible Timber Producers through Online Trading Platform Responsible Timber Exchange

The number of legally- and sustainably- certified timber producers in Indonesia has slowed down considerably from its boom about a decade ago or so. This is due to the fact that producers get the certification only when their existing buyers (markets) specifically demand it. Producers of timber products don’t see enough value added of certifiied products anymore. While premium price may be a good way to incentivize certified products, it may not be enough anymore. Producers are more interested in expansion of market access beyond their existing ones as a new incentive. Responsible Timber Exchange (RTX) provides additional access to market that is not only incrementally, but explosively. While (legal and sustainable) certification being the condition of joining the exchange, once there it provides access to thousands of buyers that are actively seeking certified timber products. RTX is developed by a number of non-profit institutions, including BVRio (bvrio.org) in Rio de Janeiro, Brazil, to open access to world market of “responsible” (legal and sustainable) timber products, to benefit both the buyers and the sellers. RTX is a digital platform to promote and facilitate trading of responsible timber products that is integrated with due diligence and risk management systems, designed to facilitate compliance with world-class standards such as Forest Law Enforcement, Governance and Trade (FLEGT) in Europe and Lacey Act in the United States, as well as key national standards such as Ecolabel and Indonesian Forestry Certification Cooperation (IFCC, a part of the Program on Environmental and Forestry Certification, PEFC), and SVLK (Sistem Verifikasi Legalitas Kayu, Timber Legality Verification System). BVRio has started formal partnership with FSC in Brazil (Key Account Partnership), also being a Climate Action Leader of the R20 Regions for Climate Action Initiative, and recipient of Katerva Awards in 2013 for Economy, as well as a partner with Forest Legality Initiative. Having been launched in November 2016, RTX has facilitated 800 offers for timber trades, equivalent with 11 million sq.m — one third of which are FSC-certified. Landscape Indonesia currently represents RTX in Indonesia and will assist BVRio in developing the system further, adopting it into Indonesian legality and sustainability standards, translating it into Indonesian, and introducing it to the responsible timber producers in Indonesia. In the future, Landscape Indonesia will explore the possibility to utilize the system that RTX is based on for other commodities, such as palm oil, rubber, coffee, and others.