18
INDOFOOD AGRI RESOURCES LTD
SUSTAINABILITY REPORT 2014
OUR SUSTAINABILITY
CONTEXT
Indonesia may become the 7
th
largest economy in the world by
2030
1
with a middle class set to grow by 90 million people. As
rising domestic and export demand will eventually take a toll
on the country’s natural resources, the Indonesian government
is safeguarding food security by pursuing an ambitious
programme to increase yields and output of agricultural
food crops. It sees value in strengthening industries such
as palm oil, where it has global competitive advantage, to
boost Indonesia’s self
-
reliance as a net exporter of basic food
staples.
Oil palm expansions by smallholders and agriculture
corporations have been a powerful driver for Indonesia’s
economic development. The industry contributes significantly
to Indonesia’s agriculture exports. It helps to eradicate
poverty by providing jobs and better living conditions in rural
communities. As at 2014, Indonesia has over ten million
hectares of oil palms
2
.
At the same time, agricultural expansion has become a major
contributor of carbon emissions and environmental issues. Land
-
use changes account for 70% of Indonesia’s total GHG emissions,
and the attrition of Indonesia’s unique ecology and rainforests. A
significant part of the solution lies in sustainable farming.
Since 2010, the Indonesian government, through its National
Mitigation Actions programme and National Action Plan for
Reducing Greenhouse Gas Emissions (RAN – GRK Rencana
Aksi Nasional Penurunan Emisi Gas Rumah Kaca), has aimed
to cut carbon emissions by 26% by 2020, with an additional
15% contingent upon receiving international support. The
focus sectors for GHG reductions are forestry, peat lands,
agriculture, energy, industry, transportation and waste.
Other concerns relate to social conflict arising from land
ownership and the right to Free, Prior and Informed Consent
(FPIC) for indigenous people. The FPIC principle refers to
the right of a community to give or withhold its consent to
proposed projects that may affect the lands it customarily
owns, occupies or uses. In Indonesia, efforts to minimise
environmental impact and optimise social benefits of palm
oil have led to mandatory standards such as the ISPO and
voluntary standards as the RSPO.
As the industry grows, there is a greater need for corporate
social responsibility, accountability, as well as a clear
system of measurement and monitoring by government and
industry leaders, in order to balance the economic, social and
environmental priorities and achieve Indonesia’s sustainability
goals.
Government
-
led initiatives, such as the Partnership for
Indonesian Sustainable Agriculture (PISAgro) provide a
multi
-
stakeholder model for tackling Indonesia’s agricultural
challenges. IndoAgri is a member of the palm oil working
group under PISAgro.
1
McKinsey Global Institute (2012). The archipelago economy: Unleashing Indonesia’s potential.
2
Ministry of Agriculture (2014). Agricultural Statistics 2014.
