23 December 2022

The European Union (EU) has approved legislation to ban companies from selling coffee, beef, soy, chocolate, rubber and some palm oil derivatives linked to deforestation into the EU market. The law requires companies to produce a due diligence statement showing that the supply chain has not contributed to forest destruction before selling goods to the EU. If goods sold to the EU market are linked to deforestation, large fines will be imposed.

Responding to this, Vice Chairman of the North Sumatra Association of Indonesian Entrepreneurs (APINDOSU) in charge of plantations and agriculture, Usli Sarsi said he was not surprised. This is not the first time, but has repeatedly banned the import of palm oil derivative products into the EU market on the grounds that they are not environmentally friendly.

“The law banning products related to deforestation will definitely have an impact on Indonesia's CPO exports to the European Union. But it is very small,” said Usli Sarsi who is also the President Director of PT Mahkota Group Tbk, Thursday (15/12).

According to him, deforestation problems such as logging activities for agriculture, plantations, livestock or settlements in the last 10 years have been minimal or even non-existent. The government has handled deforestation very well. The government must prove that deforestation in Indonesia is no longer happening by strengthening data and facts. In addition, he said, the palm oil industry in Indonesia has many Indonesian Sustainable Palm Oil (ISPo) certifications. This shows that the palm oil industry in Indonesia is environmentally friendly.

“We hope that ISPo certification can convince the European Union that the Indonesian palm oil industry is environmentally friendly,” he said.​

Downstream

EU countries will continue to limit palm oil entering the European market with environmental issues. According to him, this restriction is done to save their vegetable oil production in the EU. This ban is because vegetable oils cannot compete with palm oil, which costs less to produce and produces more.

The downstreaming of palm oil for domestic needs by the government is very appropriate. That way Indonesia's palm oil dependence on other countries will be reduced.

In 2023, the government will increase the palm oil blend in diesel to 35 percent. With a 5 percent increase, 5 million tons of palm oil will be needed for diesel fuel. This amount is the same as the demand for CPO to Europe. Therefore, CPO production exported to Europe can be used for biodiesel needs in Indonesia.

There are 17 million people in Indonesia who directly or indirectly depend on the palm oil industry. Therefore, the palm oil industry must continue to be improved in order to provide welfare. So far, the unstable price of palm oil has affected the income of palm oil farmers. This will affect palm oil production in the next one to two years due to the inability of farmers to buy fertilizer.

Governance must continue to be carried out, so that the utilization of palm oil can be carried out from downstream to upstream. The trick is that all parties can collaborate between private companies, the government and all communities so that the palm oil industry is carried out in the integration of all sectors.

“This highly eco-friendly industry is rarely talked about,” Usli says.

Empty palm kernel stalks, which have been used for fuel stoves and have an impact on air pollution, are now processed into compost. Farmers have been using chemical fertilizers.

Long-term use of chemical fertilizers can cause hard soil and reduce soil fertility. With the availability of empty palm kernel from the remaining CPO production, compost fertilizer can be increased and the price of compost fertilizer from empty palm kernel can be cheaper. To maintain soil fertility, 70 percent compost and 30 percent chemical fertilizer should be used.

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