Government prepares sustainable certification of downstream palm oil products
This article has been translated by PwC Indonesia as part of our Plantation News Highlights service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily
4 January 2023
By: Tri Listiyarini
Jakarta - The government is preparing a certification system for sustainable palm oil for downstream products. The certification includes six principles that must be satisfied, including that downstream palm oil products must be derived from crude palm oil (CPO) or crude palm kernel oil (CPKO) that has been certified as Indonesian Sustainable Palm Oil (ISPO).
The Industry Ministry’s Director General of Agroindustry Putu Juli Ardika said that his agency has prepared an Industry Minister Regulation draft for sustainable palm oil certification for downstream products. “Upstream ISPO has been available for the upstream palm oil [products]. Now we have also prepared the draft for downstream ISPO. We have coordinated this draft with the Coordinating Minister for Economic Affairs so that the presidential regulation [concerning ISPO] is revised first,” he explained.
Putu Juli Ardika, speaking at the 2022 Indonesian Palm Oil Forum (FOSI) at the end of November 2022, said that, with the existence of the ISPO for downstream palm oil products, downstream palm oil products in Indonesia would fulfil the supply chain traceability aspect that buyers want in the international market. “Upstream ISPO and downstream ISPO would have and fulfil the traceability aspect, which is an important element, in addition to the sustainability aspect,” said Putu.
According to Presidential Regulation No. 44 of 2020 on the Indonesian Sustainable Palm Oil Plantation Certification System, the ISPO aspect covers four matters, namely legality, economy, social affairs and culture, and the environment. The upstream ISPO refers to the Forestry Minister Regulation No. 38 of 2020, which has seven principles, namely the legality of the plantation business and the implementation of good plantation practices; management of the environment, natural resources, and biodiversity; responsibility for labour practices; social responsibility and community economic empowerment; transparency; and sustainable business improvement.
Meanwhile, (upstream) ISPO principles and criteria are regulated based on laws and regulations related to natural resource management which include legal, economic, sociocultural, and environmental aspects. The existence of ISPO is guaranteed by the Government of Indonesia, thus it is mandatory for oil palm plantation business actors, including planters.
The six principles of sustainable palm oil certification for downstream products include, first, using ISPO-certified CPO/CPKO raw materials as the main prerequisite for industry (supply chain) certification. Second, having legality for industrial business and supply chain (licensing and/or registration). Third, complying with the guidelines/procedures for downstream industry production and supply chain. Fourth, prioritising the achievement of stakeholder welfare, environmental and/or sociocultural sustainability. Fifth, being oriented towards market acceptance of high added value downstream industry products. Sixth, educational certification to achieve a massive certification rate.
Running properly
Putu explained that the national palm oil downstreaming program has been running properly. This is marked by the increased dominance of refined product exports compared to crude palm oil (CPO and CPKO) exports. In 2019, the portion of refined palm oil exports was 78.49% while that of crude products was 21.5%. In 2020, the portion of refined palm oil exports was 78.04% while that of crude products was 21.95%. In 2021, the portion of refined palm oil exports was 92.38% while that of crude products was 7.52%. “In 2022, until September, the portion of refined palm oil exports was 93.34% while that of crude products was only 6.66%. This means that the national palm oil downstreaming program has been running properly,” said Putu Juli as observed via the Instiper Yogyakarta’s social media channel on Tuesday (03/01/2023).
He also explained that, at the end of 2011, the number/types of downstream products produced by Indonesia were only around 48 types, and since 2020 the number has grown into more than 168 types. The types of downstream products that are supervised by the Industry Ministry consist of intermediate products such as PKE (palm kernel expeller), crude palm kernel (PK) olein, crude PK stearin, RBD (refined, bleached, deodorised palm oil) (bulk), RBD palm stearin (bulk), RBD palm olein (bulk), palm fatty acid distillate, crude palm stearin, crude palm olein, and split crude oils.
Furthermore, advanced downstream palm oil products include salt palm stearin, hard stearin, mid olein, margarine, shortening, interesterified oils, hydrogenated fats, specialty fats, oleo fatty acids, oleo fatty alcohols, refining glycerine, and palm wax. In addition, there are also downstream palm oil products in the form of phytonutrients and biomaterials, including red palm oil, beta-carotene, tocopherol, tocotrienols, betaine, glycerine, vitamin E, and palm amide. On the other hand, bioplastics, biohydrocarbons, and biolubricants are currently being developed.
