In today’s world, there is no getting away from palm oil. It is a part of all of our lives and as such it is an  extremely complex issue. Yet, the dominant narrative concerning the rise of palm oil in contemporary life  has been, and still remains, over simplistic. Its proponents describe it as a major highway that will deliver  development progress, and its antagonists paint it as the ultimate evil that spreads environmental  destruction and human rights violation in its path as it sweeps through pristine forested landscapes.

Furthermore, like in an oversimplified soap opera, the players in the palm oil story are painted purely black  and white. In reality, the palm-oil industry touts many shades of grey. It is not a case of purely big capital  planting disaster as it converts pristine forest landscapes into vast palm oil plantation, although this is  sometimes a true part of the overall story.

In many cases as well, community members themselves aspire to own plots of this commodity in the name  of financial security. In today’s world, people need money to live. Subsistence is receding into a ‘once upon  a time’, and the poverty or wealth of forest-dependent communities, as time transpires, is becoming more  and more purely defined by their ability to earn hard cash to sustain their living.

The proponents and antagonists of palm oil have numerous diametrical and strongly opposing views. Yet  as evidence builds concerning the negative impacts of reckless palm oil expansion, all are united in their  agreement that a more sustainable way of producing palm oil must be achieved.

Another undeniable agreement among all parties is that achieving sustainability will be an uphill battle.  This agreement is a good starting point, in the search for a better way forward. The good news is also that  more and more players are becoming aware that the issues relating to palm oil are far too complex to be  addressed through a simple blame game approach. All parties have an undeniable part to play in the  Sisyphusian act of creating sustainability in palm oil.

In moving towards sustainability, it is important to understand the world from the viewpoint of all  stakeholders, especially those of the government, the palm oil producers big and small, and those of all  palm oil consumers. Because in some way or the other, in the final analysis, all will need to modify current  behaviour and practices.

Change after all is a function of doing things differently. It is not a function of talking or writing things,  although writing and talking does hold an important part in bringing about change.

In understanding how a government perceives an industry, especially a natural resource industry such as  palm oil, it is useful to use the ‘value chain’ framework as described by Paul Collier, an Oxford University  professor of Economics and Public Policy. He is also the writer of two important books that focus on natural  resource governance, namely The Bottom Billion and The Plundered Planet.

Put simply, the phases of the palm oil value chain for a nation’s economic development would include: (1)  the licensing phase, where the permits to convert lands into plantations are obtained, (2) plantation  development to maturity phase, (3) oil palm processing phase, (4) the collection of revenues by  governments from companies as they make profit from selling their product: crude palm oil. By managing  these four steps through good governance, a nation can have a better chance of transforming natural  resources, such as palm oil, into sustained human and ecological wellbeing for its citizens.

In his book The Plundered Planet, Collier helps us to understand how the overall picture of a natural  resource is developed economically through his encapsulated formulas:

• Nature – Technology + Regulation = Starvation,
• Nature + Technology – Regulation = Plunder,
• Nature + Technology + Regulation (Good Governance) = Prosperity.

If we were to apply this formula in designing the economic development paradigm for sustainable palm oil  in Indonesia, we would need to ensure that all palm oil is planted using ecologically and socially  appropriate technologies, made possible and ensured by good policy and regulatory frameworks which are  implemented and upheld responsibly by government as well as law enforcement officials. While this  formula is simple, applying it into practice in any reality, Indonesia notwithstanding, will be extremely  messy.

Unfortunately for Indonesia today, if we were to take a snapshot of the palm oil industry practice on the  ground, and put it into Colliers formula, what we have is in many cases ‘Nature – Technology – Regulations’.  This paints a bleak future indeed, as it constitutes a race to the bottom in terms of economic, social and  ecological wellbeing, especially for those that live closest to the ground and further away from the capital.

But deal with this mess with fidelity and patience we must, if we want to achieve the goal of sustainable  palm oil production that benefits all, and protects environmental integrity on the way. A classic problem in  the governance of Indonesia’s natural resources, including in the palm oil sector, is the huge gap between

policies and regulations and the practiced reality on the ground. Somehow the government is unable to  walk its policy and regulatory talk.

Poor governance as reflected in a breakdown of law and regulatory enforcement in the plantation sector is  obvious in two first phases of the palm oil value-chain. A flawed licensing process, for the palm-oil  plantation permitting process has resulted in land tenure conflict issues of a debilitating scale. In 2012  alone, according to HuMa, there were 232 natural resource and land conflicts in 98 Districts/Cities in 22  Provinces throughout Indonesia. These conflicts involved 2,043,287 hectares of land, 315 communities, as  well as 119 plantation, 72 timber, and 17 mining companies.

Further down the value-chain, local governments have shown a total lack of ability to ensure policies and  regulations for the development and management of plantations. In this phase, there are good rules in  place, for example those that regulate the allowed technology for land clearing. Fire is clearly prohibited,  yet every year the palm oil industry experiences runaway wild fires that are detrimental to all. It is the  implementation of governance or lack off it, during these two first value chain phases of the industrial  value-chain that will need to be fundamentally improved in creating a palm oil industry that is in line with  green economy principles.

Finally, at the revenue collection phase of the palm oil value chain, governments have proven to be  relatively able to carry out their job. The main source of government revenue in the palm oil sector is the  export tax on CPO which, according to the World Bank, ranges from zero percent if the export reference  price is less than US$500 per ton, to 25 percent when the domestic reference price is greater than  US$1,300 per ton. According to CIFOR’s Forest News Blog, in 2008, CPO generated US$12.4 billion in  foreign exchange from exports and at least US$1 billion in export taxes.

What these figures tell us is that when it comes to revenue collection, the government is able to implement  quite complex administrative processes relatively effectively. It is high time that this effectiveness also  becomes the norm in governing the entire palm-oil value chain right from the earliest phase of the licensing  process. From a public policy perspective, it is inexcusable that until now, governments have only focused  on ensuring that the revenue aspects of the oil-palm industry is running well, while at the same time  ignoring the implementation of government responsibility throughout the rest of the sector’s economic  process. And indeed, pressure to do so has encouraged the government of Indonesia to develop the ISPO,  or Indonesia Sustainable Palm Oil standard. The way this has been designed, with a focus on ensuring the  implementation of all rules and regulations effectively, makes ISPO into a tool which can be used to bridge  the gap between policy and practice in governing the oil palm sector.

In improving governance beyond rhetoric, it is important to begin from the realities where governments  stand. As such it is important that all stakeholders, government, business and civil society alike, effectively  collaborate in making ISPO a valuable and internationally recognized part of Indonesia’s green  development strategy.

Focus and long-term commitment to process will be important because real improvement on the ground  is always slow to manifest, and cannot be rushed for the sake of advocacy-driven media victories. Change  is created through new ways of doing things, and ISPO offers the basic framework to begin building a  foundation for a more sustainable way of doing governance and business in the palm oil sector in  Indonesia. It is not perfect, neither is it a magic bullet, but it is an important stepping stone. Better  governance can be delivered throughout the palm-oil value chain, and as such can more effectively deliver  an increasingly sustainable palm oil sector.

Many are critical of ISPO, and many of the criticisms are well founded, and improvement will indeed need  to be made continuously. Keeping in mind that the government must be open to continued improvement,  and will need to always involve all stakeholders in the process of doing so, ISPO constitutes a good  fundamental bridge to help the Government of Indonesia cross over from being stuck in talk—into the  motion of walk. Patience and focus will be needed from all stakeholders, especially from civil society and development donors who focus on delivering sustainability. There will be a need for a Sisyphus-like

determination and dedication to the process of helping the government of Indonesia to walk its talk. If we  fail, they fail, and if they fail, we are all doomed

Chandra Kirana is Director of Green Economy Initiatives at Daemeter Consulting. This article first appeared  in Tempo Magazine’s Special RSPO Report on 12 November 2013.