05 January 2014

Promoting responsible and fair partnerships in Indonesia


Bunches of ripe fruit are transported by tractor for pressing.

Article

Palm oil is one of Neste Oil’s most important renewable feedstocks. It currently accounts for just under half of our renewable input usage, while waste and residues account for the other half. The sustainability of palm oil production has generated a lot of discussion and criticism. What do local people in Indonesia think about palm oil production and how are oil palms cultivated locally?

An important part of the local economy

Palm oil production represents a major industry in Indonesia. Locals describe the oil palm as at least as important a natural resource and source of pride for Indonesia as the forest industry has been for Finland. The industry is a very important one locally, and many Indonesians find it difficult to understand the criticism that it is subject to in the West.

Pekanbaru on the island of Sumatra is well-known for its oil palm plantations. The area also produces crude oil, but Neste Oil only sources palm oil locally. Neste Oil experts visit local plantations regularly as part of the company’s procurement program. People’s first impression of Pekanbaru can be one of surprise, they say. The airport and the town are much tidier and more modern than visitors might expect, reflecting the benefits that the local oil and palm oil industries have brought to the region in terms of economic prosperity.

Natural cultivation techniques

Plantation workers in Pekanbaru, as elsewhere in Indonesia, use long-handled machetes to cut the ripe fruit from the trees. After collections, the bunches of fruit are transported to pressing plants, some of which recycle their wastewater back to the plantations as fertilizer – a very simple and effective method that reduces the amount of chemicals used on plantations.

Other natural methods are also used, including owls and snakes, which are very effective at keeping pests and rats in check. Natural cultivation techniques require a careful touch and include things like planting flowers to attract specific insects.

Smallholdings have improved people’s standard of living

Neste Oil has steadily increased the amount of palm oil smallholders in its supply chain. The number of smallholders is around 12,000 today. Smallholders are grouped into cooperatives, which organize training for their members, take joint decisions, and oversee the safe storage of farm chemicals.

It is very common for couples to work alongside each other on plantations. Husbands do most to the physically demanding part of the work, cutting and loading the fruit, while their wives clear up the leaves on the ground.

Farming oil palms offers smallholders a significantly higher level of income compared to what they can earn in the textile or rubber industry. Thanks to this higher income, families can send their children to college, for example. Their biggest hope, like parents everywhere, is to provide a better future for their children.

Sustainability is demanding

Sustainability plays a major role in palm oil production and is also very evident on the ground in local plantations. Everyone, including laborers, understands the importance of wearing protecting clothing. Locals also know that certified oil commands a better price and that oil sold to Europe for biofuel purposes must comply with ISCC certification requirements. Neste Oil only buys certified palm oil.

Neste Oil is clearly seen as a responsible partner locally and one with high sustainability standards, according to our experts that visit Indonesia regularly. We select all our local partners carefully and have become well-known for the 16-page form that new suppliers must fill out as part of our due diligence process. Not everyone passes our audit either, as many of the questions are far from easy!