Indonesia Leads Initiative for Sustainable Palm Oil Standards Amid EU Regulation Criticism

In a significant move to bolster sustainable palm oil production, Indonesia's Deputy Foreign Minister Arif Havas Oegroseno announced a strategic initiative aimed at developing palm oil standards through collaboration with BRICS nations and other global South organizations. This announcement, made during the Bioenergy Industry Opportunities and Challenges seminar in Jakarta, comes as the European Union's newly passed deforestation regulation (EUDR) faces mounting criticism from countries in the global South.

The EUDR, set to take effect at the end of 2025, has drawn ire for its lack of acknowledgment of the sustainability initiatives already in place in producing nations. Oegroseno emphasized the necessity of establishing independent benchmarks that reflect the realities of developing countries rather than adhering to standards imposed by jurisdictions where palm oil is not cultivated. This initiative is seen as a pivotal shift; Indonesia intends to take the lead in shaping global agricultural standards rather than merely reacting to them.

Both Indonesia and Malaysia, the world’s largest producers of palm oil, have enacted public policies aimed at enhancing the sustainability of their palm oil industries. Indonesia's mandatory Indonesian Sustainable Palm Oil (ISPO) certification scheme, enforced through a 2020 presidential regulation, requires all growers—including smallholders—to achieve certification by 2025.

This comprehensive standard encompasses legal compliance, environmental protection, and labor rights. Despite these efforts, independent smallholders face difficulties in meeting the costs associated with certification, and watchdogs have raised concerns regarding gaps in peatland protection and enforcement.

Meanwhile, Malaysia's palm oil industry is governed by over 60 regulations, including the mandatory Malaysian Sustainable Palm Oil (MSPO) certification, which became compulsory in 2020. The introduction of MSPO 2.0 in 2022 further tightened regulations surrounding deforestation, labor conditions, and traceability.

By the end of 2024, approximately 86 percent of Malaysian plantations were certified, with authorities targeting over 95 percent coverage by 2025. Notably, Malaysia has seen a 13 percent reduction in primary forest loss in 2024 compared to the previous year.

Both nations argue that the EUDR fails to recognize their sustainability efforts, prompting them to join a joint task force with the EU to align certification and traceability standards. However, a coalition of NGOs has warned that delaying the EUDR's implementation could jeopardize global forest protection, emphasizing the need for robust regulation to address environmental and human rights issues tied to supply chains.

The European Commission, while facing pressure to adjust the EUDR, maintains its commitment to the legislation, asserting that simplification guidelines will reduce administrative burdens for companies. Nonetheless, producing countries are poised to develop their standards if the EU does not align its regulations with the sustainability initiatives already undertaken. The Indonesian government has articulated that laws addressing deforestation must balance environmental imperatives with development realities, cautioning that misapplied protections could inadvertently harm the communities they are designed to support.