The rapid development of Indonesia’s palm oil industry, particularly over the last four decades, which to some extent has been ‘development at all costs’, has generated significant revenues but has caused simultaneously massive environmental degradation. Human rights violations in palm oil plantations are also widely documented. Conflicts associated with land acquisition have led to violence and criminalisation of local communities. Labour related breaches of human rights are also being committed in the palm oil sector, especially child labour. The industry fails to take into account the special needs of women and gender equality does not feature any priority in relevant regulations or policies.
The World Bank Group (WBG) has a long history of investing in the palm oil industry including supporting damaging practices, also in Indonesia. Whilst the EU is showing some leadership on the subject of sustainability of palm oil production, there is no indication from the IFC and the WBG that it plans to follow suit or put in place any similar supporting policies. This is important for the purposes of policy coherence and consistency between the IFC and their investments as well as the use of funds provided by the EU as a major donor to the WBG.
Whilst the IFC and the WBG have sought to ensure their investments in the palm oil sector, promote sustainability and support for smallholders, more can be done. The IFC should put in place new policies that are consistent with those being developed by the EU. In this context, we make the following recommendations :
- The IFC and the WBG should reinstate the moratorium on palm oil-related investments until it has put in place policies and measures that are consistent with and support the EU decisions related to phasing out of investments in unsustainable palm oil and its derivative products by 2030 at the latest ;
- The IFC and the WBG should amend relevant policies related to aviation, including its Environmental, Health and Safety Guidelines for Airlines to ensure it does not invest in further unsustainable palm oil expansion, which may be linked to the increasing demand for biofuels from the aviation sector ;
- The IFC should provide full disclosure on the US$100m investment made in PT Kaldu Sari Nabati Indonesia, including information to evidence that all palm oil provided to the factory will come only from sustainable sources ;
- The IFC, as a member of the RSPO should seek for the inclusion of provisions for human rights in the RSPO’s conflict resolution policies, and support the implementation of the National Action Plan for Business and Human Rights in Indonesia ;
- The IFC should support measures for tracking, independent monitoring and independent verification of pledges made by companies to go deforestation free ;
- As a major contributor to the IFC, the EU should do more to support small holder farmers and help them meet the sustainability criteria through IFC investments ; and
- The EU should put in place regulations that require European companies to only use deforestation.