Why Indonesia’s objection to EUDR have global support

palm oil magazine
Edi Suhardi & Agam Fatchurrochman

PALMOILMAGAZINE, JAKARTA – The Indonesian Palm Oil Association (Gapki) has been delighted that its opposition since 2022 to the European Union Deforestation-free Products Regulation (EUDR) for a vast number of agricultural products, notably palm oil, has been supported by governments and business associations across the world.

Last week, the US government and farm producers urged the European Union (EU) to postpone the enforcement of the EUDR which is scheduled to come into effect on Dec 31, to ban the import of farm products produced from land that was deforested after December 2020.

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The United States supported the concerns of Asian, South American and African countries that the EUDR would sharply increase the administrative burdens imposed on smallholder farmers because of the requirement to prove that imported products did not originate from deforested areas, relying on geological and satellite data.

We can imagine the complex and byzantine bureaucratic procedures that must be fulfilled in the comprehensive due diligence and strict traceability obligations.

In fact, even within the EU itself, the agriculture ministers of around 20 member states – led by Austria and Finland – warned in April that the EUDR would create new bureaucratic hurdles for the farm sector at the risk of harming investment and distorting competition.

Gapki chairman Eddy Martono said that as a result of widespread resentment towards the time-bound implementation and convoluted parameters of the EUDR, it is expected that the requirements will be further clarified, and its implementation will be delayed.

A postponement would allow EU lawmakers to increase clarity on the detailed criteria and enable the affected parties, such as the producing countries and importing companies in the EU, to prepare to comply with the requirements.

Indonesia, the world’s largest producer of palm oil, has been strongly campaigning against the EUDR not because of ignorance regarding deforestation but because implementing the regulation is not technically or administratively feasible, especially by the estimated six million oil palm smallholders in the country and hundreds of millions of other farmers in Africa, Latin America and Asia.

Other commodities subject to the EUDR are rubber, coffee, cocoa, soy, wood, cattle and their derivatives.

Indonesia, besides being the world’s largest palm oil producer with an annual output of 51 million tonnes, is also the world’s second-largest producer of rubber and a major supplier of wood, coffee and cocoa.

Senior officials of the Office of the Coordinating Economic Minister and Florika Fink-Hooijer, the European Commission’s director-general for the environment, met in Bali on May 21 on the sidelines of the World Water Forum to discuss Indonesia’s transition to deforestation-free supply chains, but failed to reach an agreement.

The EU insisted on enforcing the EUDR later this year even with the risk of interrupting trade flows.

Indonesia’s strong opposition to the EUDR should not be interpreted as the country ignoring the vital importance of protecting forests and mitigating climate-change impacts.

The Indonesian government and the private sector have been implementing efforts to enhance the traceability and transparency of supply chains of sustainable commodities under the National Dashboard Initiative, which includes the role of smallholders.

But Indonesia, like most other developing countries, needs more time to complete the review of the legal requirements, especially for smallholders, who in the case of Indonesian palm oil, account for about 40% of total plantations.

Smallholders also own most of the rubber, coffee and cocoa plantations.

The efforts aim to improve the technical complexity related to mapping, the due diligence process, data privacy and traceability obligations to make supply chains more sustainable.

The problem is that compliance with the EUDR requires rigorous documentation of supply chains, traceability and compliance with local laws and regulations.

One of the primary barriers for Indonesian exporters lies in due diligence and the abundance of data points and legal documents companies need to collect.

Certainly, smallholders and medium-scale plantation firms need more time and technical assistance to cope with the supply chain challenges because of the lack of infrastructure and resources to ensure compliance with the traceability requirements.

Only a tiny number of the estimated tens of millions of oil palm, rubber, coffee and cocoa smallholders can demonstrate geolocation and proof of land legality.

Many small and medium enterprises operate in remote regions with limited access to technology and understanding of the complex EU regulations.

Moreover, implementing the traceability system and monitoring mechanisms to track the origin of products throughout the supply chain requires significant investment in technology and capacity building, imposing substantial costs.

Hence the Indonesian government together with private plantation companies should cooperate in negotiating with the EU Commission about the necessary adjustments to the requirements of the EUDR and the timeline for its implementation. The next opportunity for such dialogue is the third meeting of the joint Indonesia-Malaysia and EU Task Force in Brussels, scheduled for September.

However, the campaign to amend the EUDR requirements should not loosen the Indonesian commitment to strengthen sustainable practices in its commodity production.

Both the government and the private sector should continue demonstrating a strong commitment to environmental stewardship and responsible business practices. The implementation of the Indonesian Sustainable Palm Oil programme should be sped up.

At the end of the day, conscientious consumers around the world, increasingly concerned about climate change and the effects of environmental degradation on the quality of their lives, will prefer farm commodities produced with socially and environmentally sustainable practices.

Likewise, farm producers, both smallholders and bigger companies, must strive to comply with environmental, social and governance (ESG) principles, otherwise their products will not be accepted by the market. And socially responsible investors will shun companies that do not abide by the ESG principles.

By: Edi Suhardi & Agam Fatchurrochman

The writers are sustainability analysts and executives of the Indonesian Oil Palm Association (GAPKI). The views expressed are their own.

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