Download Minutes of RT 7 TASK FORCE ON SMALLHOLDERS (TFS

Minutes of RT 7
TASK FORCE ON SMALLHOLDERS (TFS) MEETING
November 1, 2009
Hotel Istana Kuala Lumpur, Malaysia
Agenda:
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Opening by President of RSPO Jan Kees Vis
Progress Report by TF Leaders
Definitions of smallholders: PNG
Trial Audit: PT Hindoli
Smallholders’ concerns: SPKS
Expanding the role of TFS: OxfamNovib
Experiences from Schokland Fund: Solidaridad
Supporting smallholders: IFC
Group certification: BioCert
Getting smallholders into supply chain
Wrap up
Meeting
Jan Kees Vis, President of RSPO, greeted all participants to the conference. The market on certification
has been growing and he hoped that the initiative on task force on smallholders would take its
momentum. The pick up rate or market on certified sustainable palm oil is slower this year and that is
due to the economic crisis. He wished all participants the best of luck.
Marcus Colchester of Forest Peoples Program continued the session by presenting a slide on Task Force
on Smallholders (TFC). He explained the specific objectives of the meeting are to inform participants of
TF progress especially on the standard setting for ‘scheme smallholders’ including lessons from pilot
audits, review of progress of group certification protocol for the independent smallholders, to question
whether the TF mandate should be expanded to address highlighted issues and to generate ways and
efforts for next steps. He reviewed the agenda of this TFS meeting.
Marcus’ presentation was started by explanation on TFS. Major proportion of palm oil comes from
smallholders which range of 10%-90%. The original P&C conceived mainly with large estates in mind.
Smallholders can’t be expected to have the same documentation for auditors to follow. Smallholders are
complex and varied thus the TFS needs to ensure that they can directly participate in RSPO. The most
important role of TFS is to give space for direct participation of smallholders . The general mandate of
TFS is to ascertain the suitability of the RSPO P&C for smallholders and make proposals on how best
these can be addressed nationally and/or generally. The Steering Group was set up from the last
meeting which includes the TF Leaders: SW and FPP, PNG: PWM, NBPOL, PKPKM, OPRA, Malaysia:
FELDA, NASH, MPOA, Indonesia: IPOC.
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On the mandate of TFS, there are four main issues that should be addressed: smallholders should be
able to get their land rights as production base, to get fair price and credit terms, to improve their
production and to access markets. TFS works on putting the standards. Four aspects of the TFS work are
to develop the generic guidance on how smallholders should be able to addressed properly in RSPO, to
develop trial audits, and to put standard on group certification and to ensure that the standards are
properly adapted as well as to adjust it in the national interpretation (NI). Until last year, TFS has been
waiting for the group certification draft for independent smallholders while also developing the Scheme
Smallholder Guidance (SSG). SSG was adopted by the Board in July 2009 and it can now be used for
audits. Trial audits on the draft have been made and there were much being done at national level.
Marcus expressed his gratefulness for the support given by the Board to TFS.
On compliance by mills, the unit of verification is the mill and its supply base. The chain between
independents and varied mills are very complex and need to be understood for its fluidity. That is one of
the challenges for TFS.
On definition of smallholders, Marcus emphasized that it’s an old definition and has been reiterated for
many times. Independent smallholders are very varied in their situations. ‘Scheme’ smallholders are
structurally bound by contract, by a credit agreement or by planning to a particular mill. These are two
main models which are tried to be addressed by TFS. The scheme smallholders main issues are about
responsibility, indicators, NI on smallholders. The next steps include review Group Certification Protocol.
Ian from PNG NI Working Group continued the session by explaining:
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Oil Palm Smallholders in PNG
Smallholders classification and how it
RSPO has adopted a binary classification system for smallholders: ‘scheme’ and ‘independent’
smallholders. PNG does not fit adequately within this classification system and it’s using the
independent smallholder definition as this best describes the smallholders themselves
Oil palm development in PNG started in 1960s. There are two types of smallholders. This first is Land
Settlement Scheme (LSS) which is the third of all current smallholdings.
Smallholders receive support from a national statutory organization (OPIC) that provides
PNG has about 134 thousand hectares of land. A number of important issues facing smallholders are low
smallholders productivity, high population esp. in LSS areas, limited access of land for development,
poor government support regarding social physical infrastructure. According to UN HDI for oil palm
producing countries, PNG is included in the low HDI country with under 5 percent of oil palm
production. The low productivity needs to be addressed by RSPO. Current RSPO standard on smallholder
definition has affected smallholders in PNG. The criteria of being self-organized, self-managed and selffinanced do not apply to PNG context. As for scheme smallholders, the criteria of structurally bound by
contract, by credit agreement of by planning to a particular mill, does not apply to PNG. NI Working
Group of PNG listed characteristic that may represent smallholders in PNG which are:
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Is the smallholder’s
Definition for PNG ‘Associated’ smallholders: associated smallholders retain legal authority
Guidance for PNG ‘Associated’ smallholders
On human development context, he explained that PNG’s smallholders have a long way to go to reach
the levels of self-reliance and farming mindset that exists in . He went on emphasizing that the low HDI
countries are countries with high level of HIV/AIDS rate.
PT Hindoli’s presentation on the overview of smallholders PT Hindoli toward RSPO certification
Anthony briefly explained the business profile of PT Hindoli and the general layout of Hindoli operations.
He also explained the structure of Hindoli Smallholder scheme. From the management, PT Hindoli has a
Farmers team which directly works with KUD or Indonesian cooperatives. This shows farmers are
directly engage to the company. The organizational structure of cooperative consists of the annual
member meeting, general chairman and government representatives who are involved in monitoring
the cooperatives.
He showed some pictures of the before and after in Hindoli. He emphasized that transparency is very
important in terms of getting the trust from smallholders. Problem and challenges for smallholders
toward RSPO certification is pesticide issue.
Q&A Session
Rafman from Asian Agri questioned PT Hindolin on how far is the role of smalholders in the payment of
RSPO certification. What about the existing area at the moment, is replanting will be differentiated with
new development according to P&C?
Anthony answered by saying that Cargill has subscribed to local laws. The policy is not to plant on peat
and to leave it as conservation area although Indonesian government already amended the law and
actually allow company to plant on peat. From the very beginning when the company developed the
plasma, Cargill policy is always to follow every regulation exists in Indonesia. Everyone is assured to have
certification before the company develops the area. The cost is continuous and it is definitely more that
what is got from the green palm certificate. The company are socializing the benefits to smallholders on
the benefits of green certificate.
Cion Alexander from National SPKS commented on Hindoli’s presentation. He addressed the issue of
transparency of price. Indonesian government regulates fair and appropriate participation of
smallholders in price fixing. He inquires how the company manages to comply that regulation.
Sustainable planting post replanting, whether there are other source of funding. Related to the relation
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between inti and plasma. KUD farmers are being left behind and there was no technical assistance for
them. He inquires how PT Hindoli handle the management of those farmers.
Mr. Anthony responded by saying that inti and plasma farmers have a regular meeting every two weeks
and it is chaired by the head of plantations. Eight companies will meet with the plasma farmers to
decide the price. On the relation, the company has a refreshment course for farmers to socialize
standards that are being put up. Socialization and discussion are keys and Hindoli is always open to that.
Mrs. Rosdiana added that Cargill already has peer program thus they have everything on hand although
plasma still becomes a problem. She questioned PT Hindoli on when doing the certification, what is
being explained to inti or smallholders and how can you persuade them so they can be certified?
A representative of smallholder questioned about independent smallholders. They have a big role but
because of their lack of finance and management, the government still underestimates them. He
questioned how RSPO could see independents as big contributors to the market too.
Mr. Anthony answered the question by Mrs. Rosdiana that Hindoli has been doing a good job in doing
with the farmers.
Mr. Indris from Malaysia questioned 3 things. First is whether smallholders have absolute land
ownership. Second on the size of land they own and third, on the expense of certification.
Mr. Anthony answered that smallholders have absolute rights in which they own the land forever when
they are certified. The government gives them 2 hectares. The company does not charge the
smallholders for certification.
Mr. Arifin from SPKS questioned about the relation between companies and the smallholders. He
inquires the company to explain what tactics are taken to gain trust and to build good relation with
smallholders. He wonders if smallholders can learn from the experiences of the company.
Mr. Anthony answered by saying that the company is open and always extent the invitation for
smallholders to come and learn from them. Constant communication with farmers is essential in order
to gain feedback from them. Honesty in terms of price calculation is also important to keep in order to
keep good relationship with the farmers. They can always come and audit the books of our selling.
Farmers are involved in a lot of CSR activities and from that we can gain trust from them. Company and
farmers are inseparable.
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Presentation of Smallholders Concerns from SPKS
Mr. Cion Alexander from National SPKS presented the future of nucleus and plasma smallholders. The
problems faced by farmers now is pricing of FFB. He mentioned there is still lack of transparency and
mechanism of pricing especially in Indonesia where farmers do not participate actively within the
process. Another problem is also about replanting in Revitalization of Government’s Program year 20062010. Farmers face problem with the One-Roof Management Pattern (Pola Manajemen Satu Atap) in
which farmers feel they no longer have flexibility in managing and accessing financial sources directly to
the government. Instead, they have to access it through the companies. Farmers are also dealing with
conflicts.
K index is also a concern for farmers. K index consists of 8 components. As a conclusion, production
results of the farmers are stolen by the companies thus it threatens the image of plasma farmers.
Regarding the partnership scheme management, farmers face problem with the one-roof management
system (PSM) in which farmers do not have direct management of the plot. There is limited access to
manage their plantation and this is different compared to plasma plantation. All plots are managed by
nucleus both in new development and replanting. The credit scheme is high-rated and the government
does not allow direct contact between the farmers and the bank. In reality, KUD or cooperatives need to
deal with nucleus or the company to access credit to the bank. Replanting program does not
accommodate political interest of farmers to be independent and gain sovereignty by giving full
authority to the nucleus to manage all plots. The current partnership is considered disadvantaging the
farmers as the companies are not willing to follow the principles.
In terms of conflict resolution, farmers urge RSPO to include full participation of affected farmers to
enable them giving recommendations directly. The mechanism of conflict resolution must be
transparent. Certification of certified companies should be reviewed due to ongoing conflicts between
them and the locals that are still happening.
The farmers hope that there will be no K index in the FFB pricing scheme bourn by farmers and
companies should give compensation for K index and farmers should be participated.
Presentation on Expanding the Role of the TFS
Mr. Johan Verburg of OxfamNovib mentioned about the background of Oxfam International. He raised
an important question on whether RSPO brings real change on the issues most critical to smallholders.
He highlighted several points that have been achieved which include the prevented exclusion from
international trade, more secure condition of work and fair relation between smallholders and mills,
smallholders benefits such as increased security, increased productivity and better bargaining positions
and empowered smallholders.
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He listed a number of program elements that would be required to fill in the benefit level. The benefits
are not only for smallholders group but also for other stakeholder groups in the RSPO e.g. players of
market. It is already agreed that the benefit generated from SPO or increased income would be
dedicated to smallholders. There are approx. nine elements of program that would be needed: specify
smallholder typology, assess different needs of smallholders, support improvement and transitions,
support certification, investigate premium market opportunities, evaluate structures and institutions,
develop and provide additional or alternative structures and institutions e.g. different contractual
arrangement, legal provision, extension of education, etc. , develop and establish new “partnership”
model with mills, develop and establish new replanting and new development models, etc. Oxfam is still
developing more elements of the program.
Presentation on Solidaridad’s SPO Program
Mr. Jan Martin from Solidaridad presented Solidaridad’s SPO Program. He started by introducing
Solidaridad’s profile. Solidaridad is now a global organization with eight offices in all over the world. The
main commodity program is on palm oil, cane sugar and soybean. Certification does not necessarily
solve the problem faced by smallholders. Assurance to retailers and consumers are needed to give short
term yield increase, reduce cost, improve market access, to gain better negotiation skills and to apply
direct payment for certification.
He focused the presentation on experience of SOYPSI India (2009-2011). The program is supported by 3
NGOs and Indian Govt. with the target of 13.500 smallholders participating. The program develops
support for producers through NI of draft RTRS code including definition of major compliance criteria as
well as the creation of new Producer Companies and development of internal control systems. Training
of RTRS practices is also developed.
Mr. Dick Veen continued by presenting Solidaridad’s view on palm oil sector which is palm oil supply
chain. The priorities are plantation companies, independent smallholders, existing smallholders
plantations and future smallholders plantation replanting. The Palm Oil Producer Support Initiative
(POPSI) has the goal of adding value to the palm oil supply chain by supporting oil palm smallholders and
plantation workers. The support of POPSI for producers include smallholder training in Best
Management Practices, smallholder organizations
He emphasized that Best Agricultural Practices is a better term than Best Management Practices. Small
booklet which is written in Bahasa Indonesia language is a sample of training material developed by
Solidaridad in helping famers. He stressed that Solidaridad aims to
Presentation on IFC’s support for Smallholders
Mr. Ernest, Program Management of IFC in Indonesia, talked about IFC’s support for smallholders. He
started the presentation by giving a little overview of IFC’s profile. IFC is a member of the World Bank
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and it works with private sector and it is owned by 182 member countries. It makes unique contribution
to development in enabling private sector to function better in their work area.
Four basic offerings of IFC to clients (client level) are productivity, standards, finance, and sustainability.
Sector level offerings are sector-specific regulatory and eco standard. In global agribusiness, IFC
supports the entire value chain. IFC supports smallholders through investment in agribusiness
companies and food retailers with an extensive small farmer supplier base. Advisory services and
technical assistances are also given to smallholders through companies. The reason IFC works with
companies is to support them in opening employment for smallholders and generally to work with
smallholders. Advisory services is a significant part of IFC’s contribution. Three ongoing projects are
focused on advisory services on palm oil which include review of IFC role within the oil palm industry
Project in Indonesia is trying to look for constraints to SPO development including sustainable
certification by smallholders and IFC works closely with sub-national and national level governments in
Central Kalimantan, West Kalimantan, Riau and Jambi. The other project is biodiversity and agricultural
commodities program in which the objective is to preserve biodiversity within agricultural landscapes
through market transformation in palm oil, soy, cocoa and sugarcane. IFC works with organizations, for
example Fauna and Flora International, Zoological Society of London, RSPO and PanEco Foundation.
Other inputs to RSPO include: greenhouse gas
Q&A Session
Mr. Ardinata, farmer from Riau, questioned the fact that smallholders are expected to use certification
from RSPO. The price for farmers has decreased significantly and RSPO is inquired to support
smallholders so they can get stable income. He also questioned on how farmers can get loan from IFC
and expected for more explanations on the requirements.
 Mr. Cion seconded the fact that the national condition shows a significant decrease on palm oil
price. There are 15 components influencing the price e.g. RSPO (global) price, general
administration price, waste price, labor price and maintenance of farming tools. Manipulation
by companies are assumed to be affecting these components. It is the smallholders hope that
RSPO can develop an international standard as well as incentives for smallholders and
incentives from companies for smallholders.
 Mr. Ernest answered by saying that IFC does not work directly with farmers so they cannot give
loans to farmers. The WB can also lend money to government and not to farmers.
A participant clarified FFB price in Riau. The most influencing factor to determine the price is CPO price.
K Index is required because the process from FFB to CPO also requires cost.
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Mrs. Rosdiana commented that in order to get loan, smallholders must have guarantee. Therefore, they
require the guarantee from their nucleus. She inquired clarification from Mr. Cion on whether the oneroof management pattern has been implemented for 25 years.
 Mr. Cion explained about the revitalization program by the government. Under the PSM (OneRoof Management Pattern), farmers have very limited access to their plantations and KUD or
cooperatives have never been involved in price fixing thus causing great loss to farmers.
Mr. Ian questioned on how RSPO can cover all situations.
Afternoon Session
The afternoon session was opened by Mr. Marcus Colchester. The breakout group session focused in
finalizing the protocol
Presentation on RSPO Group Smallholders Scheme
Mr. Agung Prawoto of BIOCert Indonesia presented the RSPO Group Smallholders Scheme. Group
certification is joint certification of a group of oil palm growers with the certification applying to the.
There are three key elements of GCS. GCS set out the requirements to be met for certification.
Accreditation requirements for group certification and group certification requirements.
Group certification implies a central body that ensures the group adopts standard or common practices
and manage an Internal Control System (ICS), also all small farmers with their production and
Group certification can be accessed by members who grow oil palm, groups with the capacity to control
and evaluate all members, groups that have adequate resources to support and impartial entity to
manage a viable internal control system objectively and independently, and fulfill at least a batch of CPO
production in the mill. FFB from individual members of the group are traded as a group and not
individually.
Models of groups consist of membership groups or farms organization, collected independent
outgrowers, and federation of groups.
Producer organizations can obtain RSPO certification if they comply with the standards and all the Group
Certification Requirements. The type of RSPO certificate for group certification is Certified FFB which is
FFB from a certified smallholders group. The requirements of RSPO Groups Certification are compliance
with the standard, ICS unit of the producer organization, internal control system which includes ICS
structure and content, internal assessment system, and . On traceability, it’s important that product
with RSPO certification come from farms that have been certified. ICS unit must have a system for
preventing mixing of certified and uncertified products (FFB) from the farm to the mill.
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Breakout Session
The main questions for breakout groups are:
1. Finalizing the protocol (group 1 and 2)
2. Adapting the protocol to national realities (group 3 and 4)
3. Implications of the protocol for P&C (G&I) for independent smallholders (group 5)
Group 1 discussed the finalization of protocol. Regarding traceability and documentation, the group
suggested that someone (traceability working group) will have to work on traceability where it is
required. Registration of traders is not compulsory in Indonesia which may cause problems. On
equitable benefit sharing, certificate trade (green palm) enables full premium to be transferred to
smallholders. Book and Claim needs a watertight registration system. Basis of circulation would need
derivatives/extraction parameters to be agreed. RSPO should use its revenue to cover the cost of group
scheme. On flexibility of market access, the group recommends it in order to enable.
The intermediaries or boundaries of group scheme are:
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Group certification does not necessarily require joint marketing
Vicinity is not a criterion
Management group is required, but this does not necessarily have to be an existing group
Group manager has to be an RSPO member because this entity is responsible to implement the
group certification protocol.
Clear criteria on who can or cannot be involved as group
On models for groups, the group came up with more lists of models such as coops, associations,
producer companies, self-organized groups, mills, and trader/middlemen.
Group 2 mentioned several things:
1. Dibentuknya kelompok tani dalam hal manajemen administrasi kebun e.g. establishment of
maps of groups,
2. Fair distribution of benefit. Independent smallholders will get incentives or fee and its
distribution should be fair.
3. Keluasan pasar. Products are better to be collected in one place and then marketed to selected
mills. But this does not mean that farmers can sign contract with
4. Due to limited access of smallholders, they require a third party to help them deliver the
products to mills on time.
5. On group models, independent smallholders association or federation of smallholder groups
which are both mentioned in the protocol are considered suitable to Indonesia’s condition.
6. On risk assessment, the group agrees to follow the protocol.
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In general, Indonesian independent smallholders support the protocol because of the different situation
from smallholders in Europe. The system of people hegemony (kerakyatan) is a fundamental system of
Indonesian society.
Group 3 mentioned that there are various legal procedure and titles on community land. There are also
different situation among countries. The risk of absence of legal title is that the community cannot gain
access to credit and other important things. Example in Columbia shows a good law on community land
but as long as there are internal conflicts, it’s always hard for the smallholders to defend their rights.
The group recommends
Group 4 mentioned there are a lot of cases where farmers do not obtain ownership certificate, they only
posses letter from the head of the community leaders. Many communal land in Papua have been
exploited, therefore models to protect communal rights should be inserted into RSPO. Communal rights
should be regarded and acknowledged as ownership rights that applies the same as legal titles. That
way, customary rights can be protected without differentiating it from the legal rights.
A participant commented by bringing a case example of Riau. There are thousands of hectares of forest
which have been managed individually. He questioned whether these forests can be entitled to
ownership.
Mr. Marcus explained by saying that RSPO is trying to increase inclusion and the NI’s task is to ensure
the government addresses issues identified by RSPO.
Group 5 found there is a difficulty in getting records of smallholders. Therefore it should not be included
in P&C. Fertilizers are also rarely used by smallholders and most of them are illiterate and therefore the
group felt it should not be made mandatory in the P&C. P&C is also recommended to be simplified in
order for smallholders to understand them better and this should be mentioned by NI.
Presentation on Book and Claim by GreenPalm
B&C works in multiple origins with common freight, shared storage and continuous processing. In the
GreenPalm system, a producer can place an offer. The buyers calculate their palm oil consumption and
they place bid covering volume. When bids and offers are displayed on the marked screen, the system
automatically matches and e-mails are sent to both parties. Afterwards, producer receives full value of
certificate and end users redeems certificate in which they have right to make a sustainable claim and
buys physical oil from preferred supplier at mainstream price.
GreenPalm established a proposal to trade directly from smallholder to end product manufacturer.
Smallholders receive full value of certificate with the agreed conversion made. They can sell physical
FFB’s into their usual market at the mainstream price. GreenPalm has 180.000 certificates traded in the
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first 12 months. Of the 11 producers certified, 10 are members of GreenPalm and 8 of whom have been
‘financially rewarded’.
A participant commented that in order to trade directly, smallholders need to be members of RSPO but
in fact they are only certified through their companies.
Mr. Bob mentioned that through GreenPalm it is possible to link the producer and end users directly in
the supply chain, but it is correct that smallholders should be members of RSPO.
Mr. Agung added that public consultancy is a good media to get good input from other stakeholders.
From the breakout group, there are many valuable inputs to be considered in revising the substance of
protocol. RSPO asks BIOCert to socialize and to gain input from independent smallholders on the ground
on whether the protocol is applicable or not. Regarding the timeline, BIOCert will revise the protocol
based on the inputs by the end of November this year and they will carry out training for interested
independent smallholders in Malaysia and Indonesia as inquired by RSPO.
Mrs. Rosediana commented if BIOCert should also produce a guidelines for the protocol, this means
they need to produce two different documents which are the protocol and the guidelines. Before
conducting the trainings, these documents need to be discussed first.
Wrap Up Session
Mr. Marcus highlighted several issues discussed in the task force meeting. The President of RSPO
emphasized that RSPO is committed to ensuring smallholders gain access to CSPO market. On certifying
scheme smallholders, the standard has been approved and plots are underway
From smallholders, the key issues are pricing, replanting, the need for smallholders to gain more
autonomy, also the need for a transition towards more sovereignty over land and livelihood as well as
the need to resolve conflict esp. over land.
Regarding mandate of TFS, there are wider issues that need to be addressed by TFS.
From the group discussion, it was emphasized how individual farmers must group to afford certification
and they must self regulate and self assess as well as to market collectively. It is the task of NI to suit
these to the national reality.
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