Blogs

5 Insights for Navigating the World of Regulatory Changes

23 May 2023


By Devane Sharma and Yeo Yu Teng

In a world where environmental concerns are at the forefront, businesses face an ever-evolving regulatory landscape that demands their attention, such as the recent European Union Deforestation-free Regulation (EUDR).

At Musim Mas’ May 2023 Sustainability Townhall, the company’s management highlighted their priorities for the future. Let’s delve into the key takeaways from this event and explore how businesses can navigate the world of regulatory changes to foster sustainability and positive impact.

1. The regulatory landscape is changing – collaboration is a must

Following the Rio Convention of 1992, and especially after the 2015 Paris Agreement at COP21, governments worldwide are accelerating climate change commitments and regulations.

The EU Parliament has adopted the EUDR, and we expect it’ll be published by the commission shortly. It’s a “due diligence” act, in essence, one that assesses risk. Similarly, the USA FOREST Act of 2021, subsequently the New York State Deforestation-Free Procurement Act, and UK Schedule 17 of the Environment Act of 2021 are regulations that prohibit deforestation-linked commodities.

Musim Mas is firmly committed to No Deforestation and welcomes these regulations. However, with 90% of the palm oil we process coming from third-party suppliers, we recognize the need for a framework to assess and monitor deforestation risks. It cannot be done alone. We engage our suppliers in several ways, covering both primary and secondary suppliers.

European lawmakers vote on climate change issues at the European Parliament in Strasbourg, eastern France, Tuesday, September 13, 2022. Source: Human Rights Watch

2. EUDR and other regulatory frameworks must include smallholders

The upcoming EUDR regulation risks excluding smallholders from the supply chain, who comprise 41% of oil palm planted areas in Indonesia. This could have disastrous consequences for millions of smallholder livelihoods who lack the resources to comply. There’s also a risk of rising palm oil prices, which might increase food prices.

Musim Mas acknowledges this concern and emphasizes their commitment to inclusivity. Although smallholders don’t directly supply Musim Mas, the company runs Indonesia’s largest independent smallholder training program, benefiting over 41,000 farmers across 85,000 hectares.

Musim Mas has also established Smallholder Hubs, where we train Village Extension Officers on a train-the-trainer basis. These hubs also serve as multi-stakeholder hubs where local governments and other palm oil players can pool resources to benefit smallholder farmers. Musim Mas will continue to engage smallholders as they’re essential stakeholders in advancing sustainability in the palm oil industry.

Independent Smallholders undergoing Musim Mas’ training program

3. Deforestation-free commitments aren’t sufficient – verification and reporting are a must

Simply making deforestation-free commitments isn’t enough. Since 2021, Musim Mas has implemented a deforestation-free Risk Management Framework (RMF) that overlays our supply base against our Traceability-To-Plantation Areas to assess risk. This is in addition to tools such as the High Carbon Stock Approach (HCSA) to guide our conservation efforts.

We then worked with the Palm Oil Innovation Group (POIG) to develop a more comprehensive toolkit, the Integrated Reporting Framework, which is independently verified. We’ll continue ramping up our verification efforts for a deforestation-free supply chain.

4. Accounting for Scope 3 carbon emissions is a must – it’s essential to work across the supply chain

While Musim Mas has already reported its Scope 1 and 2 emissions, accounting for Scope 3 emissions poses a challenge. The palm oil value chain is a lengthy one that runs long before the commodity reaches large-scale plantations like Musim Mas, which demands collaboration with suppliers and other stakeholders to assess these emissions accurately.

Musim Mas is working with the South Pole consultancy to account for its Scope 3 emissions in alignment with the Greenhouse Gas Protocol. This collaborative effort will also help set high-level reduction targets beyond carbon accounting, making progress toward a more sustainable supply chain.

5. Working with your suppliers and customers in a single landscape is the way forward

Palm oil isn’t the only commodity grown in our operation areas. We recognize the need for an integrated framework to truly bring about meaningful changes to the forests, biodiversity, and local livelihoods, for which we need to work with other actors in the landscape. This includes national and local governments, civil society, suppliers, and even our competitors.

An example is Musim Mas’ Aceh Landscape Strategy, where we have a five-year strategy to achieve our No Deforestation, No Peat, and No Exploitation (NDPE) policy by working across the landscape. Aceh is home to 87% of the Leuser Ecosystem, one of the world’s most biologically diverse and threatened tropical forest landscapes.

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