Integrity of ISPO Certification

KOMPAS/DIDIE SW

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The government’s readiness to wage a trade war on the European Union over the EU’s plan to ban the use of biofuels made from crude palm oil (CPO) in 2021 (Kompas, 20/3/2018), should not divert our attention from the work that should be done immediately at home.

The task is to strengthen and improve the Indonesian Sustainable Palm Oil (ISPO) certification scheme, including managing the risk of corruption. Improving the integrity of ISPO certification is the best ammunition for winning the trade war.

This agenda is valid and contextual. There are at least three studies underlying the need for executing this plan. The first is the Forest People Programmes report (2017) titled "A Comparison of Leading Palm Oil Certification Standards". Second is the Forest Watch Indonesia report (2017) titled "Six Years of ISPO", which analyzes the enhancement of ISPO instruments in response to negative impacts such as deforestation, peat ecosystem damage, forest and land fires, and tenure conflicts. Third, the European Commission study (2017) titled "Studies on EU Action to Combat Deforestation and Palm Oil", which also analyzes the sustainability of the CPO certification system. These three studies, especially the last, have contributed to establishing the opinion within the EU on the need to prohibit the use of CPO-based biofuels.

If the issue were disappointment over the content of the reports or suspicions over a certain ideology (value), interest or framing behind the studies, it would be easy to deal with. A similar study could be conducted so that not only the findings, but also the research methods, could be used to argue against the findings and the methodologies of the three studies.

If that happened, there would be a thesis-antithesis dialectic that would produce a wholly new synthesis toward expanding the knowledge on sustainable CPO certification.

ISPO integrity

In summary, the three studies stipulate: First, the requirements of the ISPO certification system are the weakest of the seven existing certification systems. The strongest certification systems are ranked in order: 1) RSPO; 2) Roundtable on Sustainable Materials (RSB); 3) Sustainable Agricultural Sustainability Network (SAN); 4) International Sustainability & Carbon Certification (ISCC); 5) High Carbon Stock Approach (HCS); 6) Malaysian Sustainable Palm Oil (MSPO); and 7) Indonesian Sustainable Palm Oil (ISPO). Second, the ISPO certification system is unfair in its treatment of smallholder oil palm farmers. Their lack of access to credit, prices and limited markets are not adequately addressed under the ISPO certification scheme.

One example is the unfair allocation and use of the Palm Oil Plantation Fund (CPO Fund), which is enjoyed mostly by big companies. In fact, the contribution of the smallholders and self-run plantations is quite significant in the palm oil industry. The oil palm plantations controlled by smallholders or farmers amounts to 4.76 million hectares, or 40.81 percent of the total oil palm plantation area.

Third, the quality of the ISPO certification is less credible. The reason is that the transparency and independence of the ISPO commission is weak. In fact, The ISPO commission has the authority to control and determine the entire certification process. Furthermore, formal public consultation is not part of the ISPO certification auditing process.

Fourth, in the last six years, ISPO certification has not been effective in controlling the negative (environmental and social) impacts of the palm oil industry (and derivative CPO products sector). The ISPO certification system has not been able to encourage a change for the better in forest and land-use governance. How can we encourage change in forest and land-use governance if the governance of the ISPO certification itself is problematic?

Therefore, researchers and activists must stop seeking conformity and contributions from ISPO certification to achieve the Sustainable Development Goals (SDGs).

How can the ISPO scheme contribute to the SDGs if its own governance and credibility are in doubt? The main problem is that, although the role and authority of the ISPO commission is important and instrumental, certification is carried out without multi-stakeholder participation, transparency, accountability and public monitoring.

The ISPO commission’s role and authority include recognizing and establishing certification bodies, acknowledging and establishing ISPO consulting institutions and agencies, issuing ISPO certificates with the acknowledgment of certification bodies and establishing task forces to deal with disputes that may arise during the certification and other processes.

Fifth, the ISPO certification system is carried out in the absence of: 1) independent accreditation agencies; 2) clear and orderly complaint mechanisms; and 3) transparent audit results. In addition, restrictions remain weak on activities related to deforestation, peatland conversion, greenhouse gas emissions, tenure, forced labor and child labor.

Sixth, the weak requirements, standards and governance of ISPO certification have the potential to increase the risk of integrity violations within the ISPO system. Potential integrity violations can occur in the process of either accreditation or certification.

The risk of integrity violation concerns the probability of bribery, gratuities and other illicit payments. In the absence of adequate public or stakeholder control mechanisms, conflicts of interest may arise in management or anticorruption management, and the potential exists that certification bodies might bribe assessors during accreditation. On the other hand, there is also a possibility that the accrediting body may sell their accreditation. This can also occur during the certification process.

The potential for bribery exists in certification bodies’ effort to obtain the ISPO commission’s recognition. On the other hand, it could also be that the ISPO commission may resell ISPO certificates.

There also exists the potential for auditees (the companies applying for ISPO certification) to bribe the certification body’s auditor during the audit.

Not learning from experience

Why have we built an ISPO certification system that still has so many weaknesses?

In fact, we already have experience in establishing a Timber Legality Verification System (SVLK) that is recognized by the EU. The SVLK was initiated by the Multi-stakeholder Forestry Program (MFP), under the umbrella of the Forest Law Enforcement, Governance and Trade-Voluntary Partnership Agreement (FLGT-VPA), a cooperation between the EU and Indonesia. The cooperation scheme has successfully resolved the timber trade between Indonesia and the EU; the CPO trade dispute between Indonesia and the EU is not the first.

There are many lessons and much knowledge Indonesia can gain from accreditation and certification programs. Why were they not used when designing the ISPO certification system? If a comparative study were needed, a simple visit to the Agriculture Ministry and the Environment and Forestry Ministry would have sufficed.

Why did we build an ISPO commission whose governance, independence and integrity are doubtable? In fact, we are experienced in and good at building many commissions with excellent integrity. We have the Corruption Eradication Commission (KPK), the General Elections Commission (KPU), the Business Competition Supervisory Commission (KPPU), the Ombudsman and others.

In fact, with such experience and skills, we should be able to design an ISPO commission with good governance, independence and high integrity. There is a likelihood that strong vested interests, inward-looking orientation, and sectoral egos within the Agriculture Ministry may have affected the process of designing the ISPO certification system. This is why the system we have is weak.

Moratorium and changes

The palm oil industry plays an important role in the Indonesian economy. It is the top foreign exchange earner that also employs many laborers and other workers. Therefore, the EU’s plan to ban the use of CPO-based biofuels must be addressed seriously and appropriately.

First, the government must improve the integrity of ISPO certification. How? Halt certification until the design of ISPO version 2.0 is completed and implemented. As of December 2017, only 346 palm oil companies – or 20.49 percent of all palm oil companies – had been ISPO certified. In terms of production, only 8.76 million tons (24 percent of total CPO production) were ISPO certified.

The most important components of ISPO version 2.0 are: 1) improve certification governance so it is more participatory, accountable and transparent (including the requirements for companies/farmers groups to view audit results); 2) improve the membership, posture, authority, integrity, freedom and independence of the ISPO commission; 3) clarify and improve the role of the National Accreditation Committee (KAN) as a free and independent accrediting body; 4) clarify and improve the role of the ISPO certification bodies; and then 5) upgrade ISPO certification standards and requirements, including better and fair smallholder treatment; 6) expand the restrictions on deforestation activities, peatland conversion and greenhouse gas emissions; 7) adopt and implement SNI ISO 37001 on bribery risk management by certification bodies.

As part of its duties in accrediting certification bodies, KAN should not only assess quality control and environmental management, but also bribery risk management.

Finally, 8) upgrade Agriculture Ministry Regulation No.11 /Permentan/OT.140/3/2015 on ISPO certification, which will be no longer adequate to regulate these proposed changes.

A presidential regulation on ISPO certification may be more appropriate to fulfill the regulatory needs of these changes.

Second, the government can persuade the EU to clone/expand the FLEGT-VPA cooperation. If the cooperation is presently devoted to the establishment of a timber/forest certification system, it can be directed and dedicated to building the ISPO certification. In other words, we can use the SLVK mechanism in the ISPO certification system.

In taking these two steps, the Indonesia-EU trade dispute over CPO-based biofuels can be resolved. Keep calm and keep trading.

Dedi Haryadi, Chairman of Beyond Anti-Corruption; Researcher at Indonesian Ecolabel Institute (LEI)