Palm Oil

 Market Transformation Strategy Focused on Indonesia, Policy Barriers, and Increasing Demand


At program inception, an analysis of both internationally traded commodities and biodiversity hotspots, combined with a thorough selection process, identified palm oil as the priority commodity. A Market Transformation Strategy (MTS) was agreed upon by both the IFC and RSPO for reducing the impact of palm oil production on biodiversity of global importance.


The primary geographic focus of the MTS was on Indonesia and Malaysia, due to their global standing as the two primary producing countries; a secondary geographic focus was placed on west and central Africa. The MTS defined four short-term goals meant to be met within three to five years.


Making it Easier to Do the Right Thing

The first goal was the removal of policy-related barriers to the adoption of biodiversity-friendly management practices in the palm oil sector in these geographic areas. BACP grantees worked toward better policies by generating accurate maps of high conservation value areas and creating land use planning tools for use by policymakers. They produced reports on legal policy barriers and spatial planning processes, and lobbied local, provincial, regional and national governments.


The second goal of the MTS was to implement alternative production methods with a proven positive impact on biodiversity and significant potential for development and replication, at both the farm and landscape levels. Grantees developed protocols, databases, and tools to allow producers to assess, monitor and protect HCV areas in existing plantations. Online information clearinghouses were developed and workshops held to make companies and smallholders aware of and able to access these tools. Grantees also analyzed the profitability of palm oil cultivation on already degraded land as an alternative to new deforestation, undertaking a study and running a pilot project with smallholder farmers to establish a plantation on degraded land.


Making it Pay to Do the Right Thing

Third, the MTS aimed to increase demand for RSPO-certified palm oil by cooperating with and building capacity within the RSPO and its multi-stakeholder membership base. Grantees provided formal guidance into the revision of RSPO principles and criteria. Capacity-building work to help producers meet RSPO criteria meant that by 2012, the amount of RSPO certified palm oil had climbed to over 14% of total production.


Finally, the MTS aimed to create a role for finance to play in reducing negative impacts of palm oil on biodiversity. Grantees worked to advance the development of REDD+ carbon financing schemes in landscapes dominated by oil palm, and issue reports exploring frameworks to formalize HCV area management with concessions and secure financial support for HCV protection.