Pablo Pacheco, Cecilia Luttrell and Heru Komarudin Public-private governance arrangements for sustainable palm oil in Indonesia Pablo Pacheco, Cecilia Luttrell and Heru Komarudin Layout: Title Slide Variation: none World Bank Conference Washington, March 2018

OIL PALM IN INDONESIA 10.5 36.0 2.1 3.5 53% 25 3.0 42% ~850 Million hectares cultivated 36.0 Million tons CPO Farmers 2.1 Million households 3.5 Tons CPO/ha/yr 53% global CPO supply Indonesia Labor 3.0 Million people Smallholders 42% of total planted area 25 corporate groups control most of supply ~850 Palm oil mills

THE PLEDGES AS THEY STAND About 283 companies along the value chain made commitments to support sustainable palm oil supply – 113 on ‘zero deforestation’ Pledges are individual and collective Prominent pledges on ‘zero deforestation’, including main consumer goods companies (CGC), producers, processors and traders of palm oil are: Consumer Goods Forum (2010) on zero net deforestation Sustainable Palm Oil Manifesto, SPOM (July 2014) The New York declaration on forests (Sep. 2014) Indonesian Palm oil Pledge, IPOP (Sep. 2014) / disbanded Pledges on ‘zero deforestation’ have been embraced by the largest corporate groups (producers, processors and traders) but have not yet reached to their third-party suppliers, particularly mid-size companies Based on http://supply-change.org/commodity/palm, accessed on January 25, 2018

CHALLENGES IN SUPPLY CHAIN GOVERNANCE Efforts made to develop coherent zero deforestation rules and integrate into certification - upward convergence Little apparent corporate interest in comprehensive co- regulation, yet some initiatives at sub-national level Lack of commitment to smallholders, weak consideration to food security, and iLUC Challenging to address zero deforestation through certification due to its supply chain orientation While growing, still limited emphasis on territorial and landscape approaches to address spillovers More prominent role of state institutions required (e.g. land use planning, tenure security, extension services)

MORE COMPLEX GOVERNANCE APPROACHES Amsterdam Declaration Regulations: How to be designed in a way that acknowledges the lack of state’s enforcement capacity and avoids vested political interests? Incentives: How to align with interests of economic growth while embracing environmental concerns? Political support: How to channel for public (rather than individual) benefits while supporting more equitable distribution of benefits? NY Declaration PRAI SPOM

INITIATIVES AT THE SUB-NATIONAL LEVEL Policy formulation and agenda setting: Jurisdictional Approaches (Seruyan, MuBa), Landscape Approaches (Sumsel, Kalbar IDH), and Green Growth strategies and development plans (Sumsel, Kalbar) Rule setting and government regulations: Regulations on sustainability (Kalteng, Sumsel), and for HCV (Seruyan, Ketapang) Implementation/compliance/enforcement: addressing legality, and registration of smallholders (INOBU), and I4PT land reform Incentives and finance: several more innovative schemes are being putting in place in Kalteng and Sumsel (e.g. IFC, SNV) Oversight and monitoring/evaluation: Multi-stakeholder processes mainly at the provincial level (Kalbar, Sumsel) Our focus at the sub-national level has been in three provinces and five districts. Kotawaringin Barat, Seruyan and Kapuas in Central Kalimantan (Kalteng); Ketapang in West Kalimantan (Kalbar); and Musi Banyuasin (MuBa) in South Sumatra (Sumsel).

COMPLEMENTARITIES, SUBSTITUTION AND ANTAGONISMS A barrier in the implementation of private standards is the lack of integration into government systems, yet some complementarity is emerging More antagonism at the implementation, enforcement and monitoring stages. Yet, non-state actors moving from antagonism to substitution Some groups act as advocates maintaining pressure on the sector, and others as intermediary facilitators working with government and companies Substitution since non-state actors’ initiatives are intended to replace state function and by definition are designed to by-pass government. NGOs and other civil society organizations are positioning themselves in a middle ground between international standards and the state

KEY LESSONS ON THE DESIGN AND PROCESS There are issues of legitimacy depending on ‘who’ sets up and implement the initiatives There are several directions of change in the interaction between public and private actors Many state functions are still fundamental for enabling the private commitments The importance of buy in and shared objectives, but something not easy to achieve The risk of facing a lower degree of integration into existing government systems The importance of intermediaries as ‘facilitators’, and the role of individual ’champions’

THE WAY FORWARD Source: Pacheco et al. 2017 Linking better regulatory frameworks and private voluntary standards Closing the gaps between international and national sustainability criteria Advancing agreements on collaborative partnerships, acknowledging local views Supporting good performance with fiscal transfers and incentives Innovating in setting up inclusive business and financing models Platforms for knowledge exchange on innovations and best practices Embracing jurisdictional/ territorial- based initiatives and interventions

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