This page provides an overview of the corporate social responsibility (CSR) risks related to palm oil grown in West Papua in Indonesia.
Indonesia is the world’s largest producer of palm oil. In 2016, Indonesia produced 34.5 million tonnes of palm oil and exported 25.1 million tonnes. The total planted area of oil palm is estimated to be around 12 million hectares and is projected to reach 13 million hectares by 2020.
The Indonesian palm oil industry is dominated by large-scale private enterprises and smallholders, with government-schemes only playing a modest role. Private enterprises produce roughly half of the palm oil and smallholders produce around 40%.
Major ecological threats from palm oil plantations are deforestation, biodiversity loss, and carbon emissions resulting from land use change and forest fires. The disregard of indigenous rights by the palm oil production sector is also an area of high concern. It is reported that a high number of palm oil farms operate under illegal land tenure and licensing schemes, using forced labour or child labour among other business and legal risks. The biggest underlying threats are corruption and weak enforcement of the law.
A number of CSR risks are present in West Papuan palm oil supply chains. The risks are wide ranging and appear across the business, social and environmental areas. If you are sourcing palm oil from West Papua in Indonesia you should take care to ensure the extensive risks identified are not present in your supply chains, or have been sufficiently mitigated.
Score: 38 / 100 in 2018
Rank: 89 out of 180 countries in 2018
A non-legally binding Presidential Instruction suspends the granting of new palm oil licenses in primary natural forest and peat lands. These areas are demarcated on the ‘Indicative Map for Suspension of New Licenses’
There are currently no armed conflicts in Indonesia according to the Council on Foreign Relations' Global Conflict Tracker
According to the Uppsala Conflict Data Program there were 45 deaths from 2010-2017.
1,550,466 hectares of farm throughout Indonesia are certified by the Roundtable on Sustainable Palm Oil (RSPO) until 2018.
2,439,000 hectares of farm throughout Indonesia are certified by the government-defined Indonesian Sustainable Palm Oil (ISPO) standard until 2018.
Information Gathering
Gather information on your supply chain
- Find out the different sources of palm oil
- Determine which source type your palm oil comes from
- Find out the main documents that can be used to indicate legality throughout the supply chain
Sources of palm oil
Palm oil source | Description of source type |
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Smallholder palm oil plantations |
Palm oil from small holder plantations, with one of the following ownership structures:
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Larger scale palm oil plantations |
Palm oil from larger scale palm oil plantations that are either:
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Documents to indicate legality
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Farm level Plantations < 25 hectares:
Plantations > 25 hectares:
OR
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Transport
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Export and customs
And one of the following business licenses:
EU Palm Oil Import Labeling requirements:
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Risk Assessment
Assess the risks in your supply chain
- Find out the main environmental, social and legality risks
- Download the full risk assessment to see more detail
Main environmental, social and legality risks
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Business issues
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Conversion
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Social issues
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Environmental issues
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GMO
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Risk Mitigation
Mitigate the risks in your supply chain
Learn which actions we recommended to mitigate the risks associated with the palm oil sources from West Papua in Indonesia.
Mitigation recommendations
We have two tools to help you mitigate risks for Indonesia palm oil supply chains:
- The Supplier Evaluation Checklist for palm oil from Indonesia will help you identify and specify the risks in your supply chain.
- The Risk Mitigation Guide gives you a detailed overview of risks in Indonesia, and how to mitigate them.
The tools above give you the most information. Below is a summary of our recommended actions to mitigate the risks associated with the palm oil sources from Indonesia.
1. Fully map your supply chain
- Our supply chain mapping tool can help you do this.
2. Obtain and verify documents
Land tenure and business documents
- Land tenure and business documents
- Small-scale plantations less than 25 hectares
- Simplified business license (STDB license): It is a receipt of the sale of land issued by the village head or sub-district head and plantation registration with the district government
- Large-scale plantations greater than 25 hectares:
- Location Permit (Ijin Lokasi license) – grants an applicant the ‘option’ to develop a plantation within a given area, subject to time constraints and other conditions
- Plantation Business Permit (Ijin Usaha Perkebunan (IUP) license) - This grants the holder the right to establish an oil palm plantation within a defined area
- Business Rights Use Permit (Hak Guna Usaha (HGU) license) - Acquired from the local land office after a location permit is obtained. It determines land, business and building use OR A palm oil plantation obtains One-Stop Integrated Service (PTSP) license issued by the Indonesia’s Investment Coordinating Board (BKPM)
- Company-managed or company-owned plantations and state-owned enterprises obtain an Indonesian Sustainable Palm Oil (Permentan No.19/2011) ISPO certificate
- Records of Free Prior Informed Consent and/or a participatory social impact assessment and/or was conducted and copies of negotiated agreements are available
- Evidence that a dispute resolution policy is in place
- Small-scale plantations less than 25 hectares
- Tax related documents
- Value Added Tax and Monthly Withholding Tax Reports - obtain copies from the company to verify taxes are correct and paid
- Sales documents/invoices - confirm that information product type, quantities etc. are correctly stated, and that sales prices are in line with market prices and quantities match the taxes paid
- Receipts for payment of sales taxes, related royalties and other required fees
- Employment-related documents
- List of employees (e.g., request the employer’s payroll list)
- Employment contract agreements (ask for a sample)
- Evidence of insurance (Social Security Agency for Health and Employment)
- Salary payment receipts
- A valid passport, work visas (limited stay permit (VITAS) and card (KITAS)), passed medical exam for migrant employees
- Policies and procedures confirming ILO Fundamental Conventions are upheld
- Publicly available information about the plantation confirms low corporate CSR risk
- Policies and procedures confirming ILO Fundamental Conventions are upheld
- Health and Safety related documents
- Health & Safety policies and procedures
- Work health and safety training certificate from an independent institute or the Ministry of Manpower and Transmigration
- Workplace deaths records
- Annual sustainability reports - check if the palm oil plantation regularly reports on its Occupational Safety and Health (OSH) management system
- Environmental documents
- Environmental Impact Assessment (AMDAL)
- Environmental Monitoring Document (Rencana Pemantauan Lingkungan, RPL)
- Environmental Management Document (Rencana Pengelolaan Lingkungan, RKL)
- Indicative Maps for Postponement of new permit (PIPIB)
- Land Cover Map by the Ministry of Environment and Forestry (Kementerian Lingkungan Hidup dan Kehutanan, KLHK)
- Biodiversity surveys and High Conservation Value (HCV) assessments
- Conversation/High Conservation Value (HCV) management plans
- Historical remote sensing imagery evidence to confirm no conversion of primary forest, peatlands and HCVs post-November 2005
- The Programme for Environmental Performance Rating (PROPER, http://proper.menlh.go.id/portal/) gives a colour grading that does not indicate high risk. The PROPER rating award is an initiative of Indonesia’s Ministry of Environment
- Global Forest Watch maps (http://www.globalforestwatch.org/map) and Peatland Hydrological Unit maps confirm the palm oil supply area does not overlap any protected areas nor locally protected areas
- Remote sensing time series images confirm a low risk of deforestation and fires use for land conversion
- Trade and transport documents
- Valid transport documents
- Taxpayer identification number (NPWP)
- One of the following business licenses:
- Trade license (SIUP) from the Ministry of Trade
- Manufacturing license from the Ministry of Industry
- Other license issued by the relevant authority
- PMA license issued by the Investment Coordinating Board (BKPM).
- Exporter identification number (APE)
- Pemberitahuan Ekspor Barang (PEB) containing information on:
- Exporter
- Recipient
- Customs broker
- Means of transport
- Country of destination
- The goods (type, quantity, container number, relevant documents)
- Letter(s) of credit (L/C)
3. Consult stakeholders
- Indonesia’s Investment Coordinating Board (BKPM) confirms that the company has a PTSP license
- The ISPO website confirms that a large-scale plantation has an Indonesian Sustainable Palm Oil (ISPO) certificate
- The provincial Province National Land Agency (BPN Province) Office confirms the validity of the HGU license
- NGOs (such as Forest Peoples Programme, Sawit Watch, Rainforest Action Network, Global Platform of Indigenous and Community lands, Greenpeace, Friends of the Earth) and media reports (such as Mongabay.com, greenomics.org, red-monitor.org, thejakartapost.com, eyesontheforest.org) confirm that there are not any land tenure disputes or developments on land claimed by indigenous and traditional peoples
- Indigenous communities, local communities, landowners and other stakeholders confirm that land tenure rights are clear and, where applicable, the lease of the land has been agreed by all the landowners
- Indigenous communities and local communities confirm that customary and/or indigenous peoples' rights are upheld and there are no significant disputes
- Indigenous communities, local communities, landowners and other stakeholders confirm that there are not any court orders or other legal decisions that mean that the company is not allowed to operate due to conflicts of land tenure
- indigenous communities and local communities confirm that customary and / or indigenous peoples' rights are upheld and there is an absence of significant disputes
- The Directorate General of Tax (PBB) confirms the validity of the Monthly Withholding Tax reports and that the operation is up-to-date in the payment of the applicable taxes
- The Local Manpower and Transmigration office confirms that all employees are registered
- The Ministry of Health confirms that all employees are registered with them
- The Social Security Agency for Health and Employment confirms that all valid insurances are in place
- Training organisations (such as SGS, BSI, Nebosh Group) confirm that they have provided a certificate safety training for safety. OR the Ministry of Manpower and Transmigration confirms that the palm oil plantation has a valid H&S training certificate
- The local authority and/or through accredited relevant audit reports confirm all legally required environmental documents (AMDAL, RKL, RPL,) are valid
- The Corruption Eradication Commission's (KPK) annual reports do not contain evidence of illegalities. The KPK is engaged in highly visible efforts to improve legal compliance in industrial land licensing to ensure compliance with environmental requirements and detect overlaps with protected areas and other industrial land use licenses http://www.kpk.go.id/id
- Relevant local authorities and/or local stakeholders confirm that land has not been cleared or prepared, including by fire
4. Carry out on-site verification
- Confirm that the plantation is within the authorised boundaries noted on the relevant licenses
- Confirm that all safety and health regulations are followed and all required safety equipment is used
- Confirm that an Environmental Impact Assessment (AMADAL) was carried out and meets all the legal requirements
- Confirm that environmental controls are implemented in the field
- Confirm that management plans for protected sites, species and High Conservation Values are implemented and monitored
- Confirm that maps/remote sensing images (for protected areas, deforestation, land tenure conflict, fire risk) reflect reality
- Confirm that all workers are employed according to the regulations and required contracts and:
- Hold certificates of competence required for the function that they perform
- Are covered by mandatory insurance policies
- Are paid a salary which is officially stated by the employer according to legal requirements
- Are above the minimum age for both palm oil activities and hazardous work
- Are paid at least the legally established minimum wage
- Confirm that the company does not employ unregistered workers, either on probation, or who receive government benefits for the unemployed
- Confirm that there has been an active consultation and/or participatory social impact assessment and/or Free Prior Informed Consent was obtained and that there is a dispute-resolution mechanism in place