- Indonesia and the EU have signed an agreement that includes key acknowledgement of Indonesia’s sustainability systems;
- The move is a step in the right direction for cooperation on palm oil and broader sustainability issues.
The Indonesia-EU FTA has brought recongition to Indonesia Sustainable Palm Oil (ISPO), Indonesia’s palm oil certification system.
The text of the agreement, which was released this month, contains a ‘Palm Oil Protocol’, which aims to increase trade in palm oil and cooperation on sustainability issues.
Crucially, there is an acknowledgement of ISPO, which states:
“[Indonesia and the EU] acknowledge the role that ISPO and other relevant sustainability assurance schemes can play with respect to facilitating compliance of operators with trade-related sustainability regulatory requirements of relevance for palm oil products, if the laws and regulations of the Parties allow for the use of such schemes.”
And more importantly, the agreement seeks — in principle at least — to increase the uptake and adoption of ISPO:
“[Indonesia and the EU] strive to develop initiatives to foster the contribution of ISPO and other relevant sustainability
assurance schemes to the sustainability of production throughout the palm oil supply chain and to enhanced bilateral trade in sustainable palm oil products. These may include carrying out activities to improve the contribution of relevant sustainability assurance schemes’ to facilitate compliance of operators with trade-related sustainability regulatory requirements, including with a view to support the improvement of the ISPO’s ability to facilitate compliance of operators with relevant Union trade-related sustainability regulatory requirements, also in view of exploring practical arrangements, including requirements for possible future recognition in accordance with the Union’s relevant regulatory requirements.”
In other words, this represents a push to have ISPO adapted to EUDR compliance, with the possibility of full recognition within the EUDR. At the moment, the EUDR doesn’t recognise any certification schemes, and it may never.
However, the inclusion represents a good-faith move by the European Union to at the very least acknowledge the importance and significance on ISPO to Indonesia’s palm oil stakeholders.
In addition to the acknowledgement of Indonesia’s approach to sustainability, the agreement also establishes bilateral cooperation channels on palm oil.
Although there isn’t a standalone cooperative group, there’s a requirement for both parties to ensure that the Palm Oil Protocol is always considered under the relevant consultation mechanisms under the agreement.
This might not seem like a big deal. However, it does provide a meaningful forum for airing grievances related to the treatment of palm oil in the European market.
It may also lead to a better understanding of the importance of palm oil to Indonesia’s social and economic fabric, which has been sorely lacking among European lawmakers, for example.
The agreement also contains a binding sustainability chapter. In most FTAs, including EU agreements, the sustainability chapter is non-binding. Although sustainability issues will be taken seriously in these agreements, they don’t have the ‘weight’ of more conventional trade issues.
In this agreement, the Trade and Sustainable Development (TSD) chapter has access to the agreement’s main dispute resolution mechanisms — if the TSD committee can’t resolve a dispute.
For both parties, it will mean honoring their specific commitments on sustainability, from labour law enforcement to good-faith actions on deforestation.
ISPO acknowledgement in the FTA isn’t yet ‘recognition’ under the EUDR. That won’t happen until the EUDR itself opens the door to certification systems. It is, however, a step in the right direction.