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<\/p>\nSomething strange is happening in the palm oil sector.\u00a0Despite the impending enforcement of the EU Deforestation Regulation (EUDR), numerous companies are intensifying their investment in landscape initiatives. <\/p>\n
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This phenomenon is surprising as many of us feared that the EUDR would push companies away from sourcing from higher forest-risk jurisdictions.<\/p>\n
Some companies are segregating mills and refineries for Europe and focusing on sourcing from plantations distant from remaining forest, and away from smallholder supply.<\/p>\n
But others are making new investments in landscape initiatives in Indonesia and Malaysia which include many thousands of small farmers.<\/p>\n
A report released recently by the Tropical Forest Alliance (TFA), CDP and Proforest identified a total of 37 landscape and jurisdictional approaches supported by companies and focused on palm production, surpassing any other commodity sector.<\/p>\n
It reflects IDH\u2019s experience in Aceh, where stalwart partners like Unilever, Pepsico and Musim Mas are now being joined by a growing roster of buyers and traders including Mars, Apical, GAR and Mondel\u0113z.<\/p>\n
What explains this apparent contradiction between regulatory pressure to narrow on the lowest compliance risks and companies\u2019 willingness to invest in some higher-risk landscapes?<\/p>\n
There are several possible explanations.<\/p>\n
Deforestation risk can fall quickly in the best landscape initiatives<\/strong><\/p>\n The evidence for how landscape approaches can reduce deforestation is growing.<\/p>\n In Mato Grosso in Brazil, which has had a state-wide jurisdictional approach for eight years, Amazon deforestation barely increased under the Bolsonaro government, in contrast to many other states in the Legal Amazon which saw a big jump.<\/p>\n In Aceh Tamiang, Indonesia, deforestation fell to just 30 hectares in 2021 from over 400 hectares in previous years as a coordinated deforestation alert and action plan took effect.<\/p>\n The success of the landscape coalition in Aceh Tamiang is now inspiring new partnerships in other forest-risk districts in the Aceh buffer zone around the Leuser Ecosystem.<\/p>\n Also, smallholders are the best hope for growing palm oil supply.\u00a0Palm is currently described by traders as a “sellers\u2019 market” with surging demand in Asia and many mills operating under capacity.<\/p>\n There is limited room to grow supply from plantations in Malaysia or Indonesia, given their forest protection policies.<\/p>\n This creates a business case for companies to invest in the growth of independent small farmer productivity, and landscape initiatives allow them to do this in coordination with other business and farmer groups.<\/p>\n Jurisdictional approaches to EUDR traceability are likely to be more cost-effective in smallholder-dominated sourcing areas<\/strong><\/p>\n The costs of tracing forest risk commodity supply can be very high and can repeat every year as smallholders switch buyers.<\/p>\n One service provider estimates that costs are in the range of \u20ac6-14 per farm to compile and map geolocation and land title data.<\/p>\n This data is often already held by the government, so with backing from local authorities who are part of landscape agreements, these costs can be shared.<\/p>\n There is also the tantalizing prospect of jurisdictional traceability being recognized by the EU if a verified deforestation-free area can compile geolocation data at the district level rather than physically trace commodities from the farm level through many layers of the local supply chain.<\/p>\n The Vietnamese government is backing an IDH pilot with ten coffee companies in the central highlands which will compare the costs of different approaches to traceability.<\/p>\n