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Country report 2015 Indonesia

Indonesia program overview

IDH Programs MDG targeted globally Key sustainability issues

Palm Oil MDG 7 and 8 Deforestation

Traceability

Smallholder livelihoods

Pulp & Paper MDG 7 and 8 Deforestation, peat

subsidence, forest & peat fires

Social (land) conflicts

(Water) pollution in

manufacturing process

Tropical Timber MDG 7 and 8 Deforestation

Forest degradation

Coffee MDG 1, 7 and 8 Smallholder productivity Sustainable input availability and use

Farmer organization

Farmer access to finance and bankability

Effectiveness of extension services

Involvement of women and youth

Smallholder livelihoods

Cocoa MDG 1, 7 and 8 Small farm sizes

Low productivity

Lack of access to formal

finance

Spices MDG 1, 7 and 8 Smallholder livelihoods

Good Agricultural Practices

Farmer organization

Tin MDG 7 and 8 Rehabilitation of post mining

sites

Offshore mining threatening

marine ecology

Unsafe working conditions

Aquaculture MDG 1, 7 and 8 Mangrove deforestation

Farm effluents and cross

contamination

Disease surveillance and

environmental monitoring

Farm siting and traceability

Initiative for Sustainable Landscapes (ISLA)

MDG 1, 7 and 8 Natural resource governance

and spatial planning

Deforestation

Peat subsidence

Social (land) conflicts

Rural livelihoods

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Contents Executive Summary ............................................................................................................................. 1

1 Introduction ....................................................................................................................................... 2

Sector-specific introductions ............................................................................................................... 3

2. Program achievements ................................................................................................................. 12

Palm Oil Program ............................................................................................................................... 12

Pulp & Paper Program ....................................................................................................................... 15

Tropical Timber Program ................................................................................................................... 18

Coffee Program ................................................................................................................................. 18

Cocoa Program .................................................................................................................................. 20

Spices Program .................................................................................................................................. 21

Tin Program ....................................................................................................................................... 22

Aquaculture Program ........................................................................................................................ 23

Initiative for Sustainable Landscapes (ISLA) ...................................................................................... 24

3. Project overview per program .................................................................................................... 27

4. Key performance indicators per commodity on country level .............................................. 33

5. Lessons learnt ................................................................................................................................. 36

Cross program lessons ....................................................................................................................... 36

Program specific lessons ................................................................................................................... 37

Conclusion and outlook ..................................................................................................................... 39

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Executive Summary 2015 was the fourth year of IDH’s activities in Indonesia. Eight different sector programs and a

landscape program were implemented. The year also marked the transition from a sector-based

approach towards a landscape-based approach in the country. For the palm oil, pulp and paper, and

ISLA programs, this has resulted in a high level of integration in early 2016. Other programs will

continue their sector-level efforts but are also playing an active role in different focus landscapes.

The most important highlights and key achievements per program were:

Palm Oil: a solid pipeline of projects was built, covering about 20,000 farmers on 40,000 ha. The first projects started implementation. Strategic partnerships with private companies and governments were built for the development of sustainable supply sheds in Aceh and South Sumatra.

Pulp & Paper: a project for protecting and conserving 41,480 ha of peatland and mangrove forest started implementation; baseline studies and management plans for new forest management projects were completed; and agreements were made with APP and APRIL to work on landscape and fire management, integration of the HCS approach and clean manufacturing.

Tropical Timber: 185,330 hectares of tropical forest concessions were certified by the end of 2015 and a significant pipeline was built for certification in 2016

Coffee: The Sustainable Coffee Platform Indonesia was established and developed a national curriculum for training farmers on sustainable agricultural practices. In 5 field level projects, more than 29,000 farmers were trained.

Cocoa: 5,906 cocoa farmers received training and 9,035 obtained certification; the Cocoa Sustainability Partnership (CSP) expanded its membership and activities; a taskforce on Agri-Finance was established.

Spices: Three pilot projects supported farmers to achieve certification, and improve productivity and quality of their products. More than 4,000 farmers were trained, and almost 10,000 ha of spices fields were under sustainable management practices.

Tin: government and key industry players committed to address sustainability issues in the sector and the multi-stakeholder developed of a four-year roadmap towards Sustainable Tin Mining.

Aquaculture: at the end of 2015, the program reached up to 11,500 farmers and workers, accounting for the responsible production of 46,000 MT shrimp ; supports for Aceh Aquaculture Initiative has led to the transformation of the cooperative in which it is now receives direct support, partly, from a commercial financial institution.

Initiative for Sustainable Landscapes (ISLA): completed the inception phase in West Kalimantan and is prepared for implementation in 2016.

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1 Introduction

With its vast and abundant fertile soils and forest and marine resources, Indonesia is a major global

key producer of a wide variety of agri- and aquaculture, mining, and forestry products. The

agricultural sector is an important source of income and employment. Indonesia has a population of

approximately 260 million, of which 120 million live in rural areas, and 50 million of them are

economically active in agriculture (FAO Aquastat, Country Fact Sheet Indonesia). The development of

commodity production for export has been an important driver of Indonesia’s economic growth. In

2015, agricultural exports amounted to 5.6 billion US dollars, equaling 4% of total export (Ministry of

Trade). Furthermore, the tin exports amounted to 1.15 billion US dollar, and the export of paper

products and wood pulp amounted to more than 500 million US dollar (Ministry of Trade). Indonesia

is the number 1 producer and exporter of palm oil and tin world wide, the number 3 cocoa producer,

the number 4 coffee producer, and a top ten producer and exporter of several forest products.

This explains why Indonesia is a strategic intervention country for IDH, with 8 commodity programs

supporting improved environmental and social sustainability through public private partnerships

across the archipelago. These are: Cocoa, Palm Oil, Coffee, Spices, Pulp & Paper, Tropical Timber,

Aquaculture and Tin. The added value of IDH in these sectors is its ability to create, convene and

strengthen public-private partnerships that address the key sustainability issues and to co-invest in

scalable solutions. This ability builds on IDH playing the role of a neutral convener, being able to bring

businesses, government, and civil society together to find practical solutions. Stressing the

importance of precompetitive cooperation, we have been successful to get competitors in several

sectors around the table. Furthermore, we are active in convening stakeholders in both the supply-

side and the demand-side of agricultural value chains. This provides IDH with the unique ability to

ensure that on the one hand, sustainability policies of global industry and retail can be implemented

in a meaningful way, and, on the other hand, the sustainability efforts of producers are rewarded by

global markets.

Since the past two years, IDH has been focusing its efforts on decoupling commodity development

and deforestation, and these are based on the landscape approach. This approach was initially

enacted through “The Initiative for Sustainable Landscapes” (ISLA) that is supporting public private

partnerships in forestry and agriculture related industries including palm oil and pulp and paper in

West Kalimantan. In 2015 we decided to expand this approach towards other critical landscapes in

South Sumatra and Aceh.

The central concept for driving change in these landscapes is production-protection: using a

combination of donor and commercial funding to support investments in improved production

practices, in return for a delivery of conservation, protection and restoration targets. This also

requires cooperation between different land-users in the landscapes, as well as enhanced

cooperation with the government, since many environmental or public good issues need to be

addressed at a bigger scale. These include hydrological management, peat and forest fires prevention

and mitigation, ecosystems or biodiversity conservation, land legality and overlapping status of lands,

and relevant government policies.

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The team of IDH in Indonesia currently consists of 7 FTE and 5 part time senior experts providing

technical and convening support in certain sectors or geographic areas. In the first half of 2016, IDH

Indonesia was formally established as a local foundation.

Sector-specific introductions

Palm Oil

Indonesia is currently the world’s largest producer of palm oil. In 2014, almost 11 million hectares

were planted with oil palm, generating approximately 30 million tons of palm oil. Approximately 35%

of the palm oil is produced by smallholders, 7% by state-owned estates, and more than 50% by

estates of private companies (DG Estate Crops).

Palm oil is of strategic importance to Indonesia’s rural economic development. The sector provides

jobs for the rural population and generates significant export earnings. The exports of refined palm

oil, crude palm oil (CPO) and palm kernel oil had a value of more than 15 billion US dollars in 2015

(Ministry of Trade). Approximately 2.3 million smallholders plant oil palm and an additional 3.3

million people are employed on oil palm plantations (DG Estate Crops). Because of the wide

applicability of palm oil in the food and non-food industries, global demand for palm oil is expected

to increase further after a relative slowdown in 2015. On the domestic market, the subsidies on

biofuel contribute to increased demand. In 2015, CPO production equaled 32.5 million tons. The

Indonesian Palm Oil Association (Gapki) stated that Indonesia has a long-term target of producing 40

million tons of CPO per year from 2020.

There are concerns about whether this increase of production will be sustainable. Tropical forest

conversion and the establishment of oil palm on peat contributing to significant CO2 emissions,

unequal distribution of economic opportunities and benefits between corporations and the rural

population, and land conflicts have been issues in the sector for the past decades. The challenge at

hand is hence to ensure that the sector contributes to environmentally sustainable and inclusive

economic development.

In this context, IDH builds coalitions within the industry to transform these aspirations into workable

solutions, supported by a sound business case in order to achieve the program’s impact claim:

“Avoid potential deforestation due to expansion of palm oil”.

IDH supports smallholders in targeted supply sheds to become organized, increase their

productivity, use better production practices, access working capital and investment finance, and

improve their livelihoods. This should expand market access, reduce pressure to expand into forests

and allow smallholders to become compliant with the responsible sourcing policies of buyers

(through robust monitoring).

At global level, IDH convenes the industry in the Traceability Working Group (TWG) to find a

common definition for traceability and develop a roadmap for the steps needed to increase

understanding on the flow of palm oil products on existing land and transparently link to supply

sheds. This will allow companies to ensure that they are sourcing responsibly (for example that their

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supply chain is deforestation-free), and to identify areas where improvement and support is needed,

such as increasing the productivity and sustainability practices of farmers.

Because IDH is active in both the Indonesian supply and global demand arenas, it is well positioned to

ensure the pledges of global and national industry are translated into practice by working with the

producers and smallholders on the ground. Vice versa, experiences with the producers and

smallholders also provide feedback to the pledges and policies of the palm oil buyers and users.

Pulp & Paper

The Pulp & Paper sector in Indonesia is dominated by two players – APP and APRIL. Between them

they control 80% (1.9 million planted hectares) of the plantation resource and over 90% (5.35 million

tons) of the current total pulp production. These two companies have a fierce rivalry for resources

and production.

Until very recently, a significant portion of the raw material supply for the two big companies came

from the clearing of natural forest, including significant areas from peat swamps. This led to strong

attacks on these companies by NGOs and the international community. Based on that pressure, both

now source exclusively from plantation wood. These plantations are however, under constant threat

from disease, animals, fire and encroachment by other cropping. Fire was a massive issue in 2015

causing the loss of many thousands of hectares of forest and creating enormous emissions of GHG

and public suffering due to the haze. The sustainability of peat land plantations is especially

contentious exacerbated by the lack of scientific knowledge on the long term impacts. Downstream

processing of pulp and paper is not without sustainability issues either with some paper factories

located in heavily polluted but densely populated areas. These sustainability issues led IDH to

formulate the following impact claim for the program: “Develop innovative solutions to address

sustainability bottlenecks in the pulp and paper supply chain”.

Many organizations are actively involved in promoting sustainability in the Pulp & Paper sector.

Major NGOs such as Greenpeace and WWF have been successful in slowing and then stopping the

use of natural wood fiber in the manufacturing. Despite these efforts there remains significant

sustainability issues remain and the current NGO strategy of “naming and shaming” is not

automatically creating changes at smaller, less visible players in the supply chain. At present, weak

institutional capacity for sustainability, a lack of sector coordination, little industry-level best

practices, and a lack of clarity on policy and sustainability standards – such as High Carbon Stock

(HCS) – continue to hamper progress towards sustainability by these smaller companies.

In this context, IDH seeks to support improvements and collective learning to scale best practices in

pulp and paper sustain-ability through two work streams, to be implemented at scale:

1. Convening the industry to define a common framework and innovations fore around

sustainable integrated landscape management and clean manufacturing. This includes all

aspects from fire prevention, fire control through to certification, peatland management,

forest protection, forest restoration, production improvement and alternative species. These

will provide models for replication and upscaling across the sector.

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2. Investing in the development of guidelines, toolkits and standards in best peatland

management, responsible social practices, and high carbon stock. This will incentivize the

acceleration of their adoption by producers with the assistance of industry associations.

Tropical Timber

Indonesia has about 131 million ha of state forest land, of which an estimated 20 million is no longer

forested, leaving about 110 million ha as either conservation forest or production forest. About half

of this, or 57 million ha is assigned as production forest. Part of this is under license via a scheme of

long-term timber harvesting concessions, including 25 million ha of natural forest concessions, and

10 million ha for forest plantation concessions. However, only 13 million hectares of licensed forest

concessions are actively managed, where active means the submission to the Ministry of

Environment and Forestry (MoEF) of annual work plans – but due to operational capacity issues the

truly active number of natural forest concessions is even less (MoEF 2014).

One of the key threats to natural forests in Indonesia is the conversion of these forests to agricultural

land uses that have more immediate economic value – for example for palm oil production. By

increasing the economic value of forests without compromising natural integrity (through SFM), the

attractiveness of conversion can be decreased, and degradation can be prevented. This can be

achieved by increasing demand for sustainable tropical timber. Certification is one of the few ways to

verify legality, ahead of implemented Voluntary Partnership Agreements as required under EU law

(and elsewhere).

Within the above context, IDH has defined the 2015 impact claim of the timber program: “9 million

hectares of tropical forest to be sustainably managed by 2015”. The activities in Indonesia

contribute to this global impact claim.

IDH is active in the tropical timber sector in Indonesia via its sector program and increasingly as part

of the landscape approach in particular in West Kalimantan. In the sector program, IDH works

through its partner The Borneo Initiative (TBI). The objective of TBI is to contribute directly to the

increase of certified natural forest areas in Indonesia. TBI has offered support to around 25% of all

active concessions in Indonesia. With the funding provided, forest concessions need to hire a

certification coach. These coaching services are provided by TFF, TFT, GFTN, TNC and Wana Aksara

who also dedicate their own resources to this common certification initiative. By the end of 2015, 1.5

million hectares have been FSC Certified. IDH provides added value to the work of TBI by stimulating

the demand for FSC-certified forest products in Europe via the Sustainable Tropical Timber Coalition

it finances. Furthermore, concessions certified by TBI and other timber concessions are linked into

IDH’s landscape work in West Kalimantan (see below). A key lesson from the sector program has

been that timber concessions are not the only actors influencing land-use and in some cases, even

certified forests are still threatened. The landscape approach that IDH applies in the province of West

Kalimantan provides an opportunity to convene these different land users. Furthermore, the

approach addresses rural livelihoods, which help reduce the pressure on forests created by illegal

logging and smallholder encroachment.

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Coffee

Coffee was the first cash crop where voluntary standards reached scale, especially to address

livelihood challenges for smallholder farmers. Certification/verification although recognized as an

important tool towards sustainability, has not sufficiently addressed the systemic issues for

mainstream coffee related to unsustainable production practices, especially low yields and quality

(resulting in farmer poverty, lack of access to finance) and climate change. To overcome these issues

the IDH-led Sustainable Coffee Program (SCP) targets mainstream impact for coffee farming by up

scaling a more systemic approach to sustainable coffee production. SCP has stretched the pre-

competitive collaboration in the sector by convening front running roasters, traders and NGOs in a

committed sector platform representing 30% of global coffee demand. The impact claim of the SCP

for 2015 is “25% of coffee sales worldwide is sustainable by 2015”. The work in Indonesia

contributed to achieving this target.

Indonesian coffee is produced by an estimated 1.5 million smallholder farmers (of which only 0.5

million are actively managing their crop), with farm sizes averaging less than one hectare of coffee.

Over 60% of Robusta coffee production is concentrated in Southern Sumatra. Indonesian coffee

farmers increasingly lag behind farmers in Brazil and Vietnam in terms of productivity. Indonesia

produces 741 kg of robusta beans per hectare and 500 kg of arabica beans per hectare. In Vietnam

this figure stands at 1,500 kg per hectare and in Brazil at 2,000 kg. Profitability is relatively low at 873

US dollars per hectare (Technoserve, 2013). To become more competitive on the global coffee

market and increase their income, Indonesian farmers can improve on productivity, effective farmer

groups, fertilization and pesticides including access to finance, replanting/grafting, climate and water

management.

The SCP in Indonesia provides support to field level projects with coffee farmers and convenes the

public, private and civil society stakeholders in the sector in the Sustainable Coffee Platform

Indonesia (SCOPI).

IDH led the development of SCOPI and the platform was launched in March 2015. The platform,

consisting of 30 members so far, is already well recognized by all stakeholders. Its executive and

advisory boards and active and the platform employs two full time coordinators. With its members,

SCOPI has developed a multi-year plan to improve coffee sustainability by 2020 and has set up

different task forces that will guide implementation. One of the key tasks accomplished in 2015 was

the development of a National Sustainability Curriculum and Training Manual on Sustainable Robusta

Coffee, with the aim of streamlining and expanding of training on Good Agricultural Practices to

coffee farmers. This was done in close collaboration with the Ministry of Agriculture.

In addition to the work with SCOPI, IDH co-funded 5 field level projects through which 29,688

farmers were trained in 2015. In addition, IDH supported access to a loan of a KUB project organized

by Rabobank Cooperation together with a private sector partner. IDH also convened the different

implementing partners in a learning workshop.

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Cocoa

Indonesia is, with a production of over 400 thousand tons of cocoa (about 10% of global production),

the third largest cocoa producing country in the world (Cocoa Barometer, 2015). There are 1,3

million cocoa farmers in Indonesia. Lack of cultivation expertise, unproductive and aging trees,

limited access to high quality farm inputs, and a high incident of pest and disease infestation hinders

them to unfold their full production potential to improve their livelihood. In this context fits the

global impact claim for 2015 of IDH’s Cocoa Program: “300,000 farmers to have improved

livelihoods by 2015”.

The goal of the Widodo administration is to make Indonesia the largest cocoa production country in

the world and hence takes itself an active role in supporting cocoa production. In 2015, the

Government of Indonesia continued the Cocoa Sustainable Development Program (Pengembangan

Program Kakao Berkelanjutan - PPKB), which was launched in 2014. Through this program, the

government focused on re-planting, rejuvenation and rehabilitation programs, for example

distributes free cocoa seedlings and multi-year free support of agrochemical inputs to cocoa farmers

all over Indonesia. The predecessor of the PPKB struggled to achieve meaningful impact and suffered

from many operational challenges.

An important overarching sustainability issue in the sector is the difference in opinions on how to

achieve higher cocoa productivity and farmer incomes between the public and private sector.

Whereas the government is in favor of providing free inputs to farmers, the private sector is of the

opinion that this hampers the development of a commercial cocoa farm services industry in

Indonesia, whereby farmers invest in their farm.

IDH contributes to the sustainable development of the cocoa sector in Indonesia via two main

streams of activities:

1. The Sustainable Cocoa Production Program (SCPP). This program is implemented by the NGO

Swisscontact. The overall objective of SCPP is to increase the farmer household income from cocoa

by 75% and the reduction of Greenhouse Gas emissions from the cocoa sector by 20%. SCPP work

with central and decentral government, as well as with a large number of international cocoa

traders, processors and users. Within this program Swisscontact has implemented four projects that

were part of IDH’s global Cocoa Productivity and Quality Program (CPQP), which ended in 2015. The

private sector partners in these projects were Ecom, Nestlé, Olam and Mars.

2. The Cocoa Sustainability Partnership (CSP). This is a platform with members of the public and

private domain including all major cocoa traders, various public organizations and civil society

organizations. This platform aims to align public and private partners on the actions needed to

achieve sustainability of the Indonesian cocoa industry. The CSP is therefore an important vehicle to

IDH and its private sector partners to work towards a more constructive collaboration with the

Indonesian government. IDH supports the CSP financially and in kind through active engagement and

leadership in several task forces of the platform. IDH is a member of the board since 2010, and was

elected end 2015 as the chairman of the board.

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By chairing the “Governments and Donors” taskforce and by assuming chairmanship of the board

end 2015, IDH has worked hard to foster cooperation between CSP and the Government. As a result

of IDH’s convening efforts, the Ministry of Coordinating Economic Affairs is now part of the advisory

board of the CSP, and an agreement was signed in March 2016 for cooperation in the above

mentioned PPKB program to improve its impact. Furthermore, IDH succeeded to bring Nestlé on

board of the SCP as an additional private sector member. In the task forces of the CSP, IDH brings in

knowledge and experience from the cocoa sector in West Africa, notably on fertilizers and service

delivery models.

Spices

Indonesia is the second largest world exporter of cinnamon, the third for pepper, as well as for

nutmeg, mace and cardamons (ITC). The country plays a crucial role in supplying the European spices

market.

The Sustainable Spices Initiative (SSI), hosted by IDH, brings together leading national and

international processors, blenders, food industry/brands, retailers and NGOs to transform the sector

sustainably. The SSI is developing and benchmarking sustainability standards recognized by the

market, implementing pilot projects leading to the first certified volumes, and sharing good practices

and learnings. Convening local government and market actors has become increasingly important in

the spices program. This approach is now implemented in India, Vietnam and Madagascar, but not

yet in Indonesia. The focus in Indonesia was on implementing three pilot projects with Indonesian

producers, European off-takers, and NGOs supporting project design, implementation and

management. The projects cover the products white pepper, cassia (cinnamon), and nutmeg in the

regions Bangka, Kerinci, and Maluku respectively.

When the pilot projects started 3 years ago, sustainability was very new to the spices sector. The

pilot projects were co-funded to produce the first sustainable supply for the European spices market

and to make the spices sector familiar with sustainability. Making sustainable supply available

contributes to the objective of SSI to have 20% of all pepper imported in the EU to be produced

sustainably.

Tin

Indonesia benefits economically and socially from the production of one-third of the world’s mined

tin each year, the vast majority of which comes from the two focus islands of the program, Bangka

and Belitung.

Indonesian Ministries overseeing the sector include the Ministries of Trade, Mining and Mineral

Resources, Marine Affairs and Fisheries, Environment and Forestry. A significant part of the

Indonesian mining industry is under direct control of the government (public companies), therefore

this government endorsement is crucial. Furthermore, a number of medium to large sized private

companies are active in tin mining, as well as informal, small and artisanal miners. On the civil society

side, the environmental NGO WALHI (Friends of the Earth) is especially concerned with the negative

environmental impacts of tin mining.

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Reports of unsafe working conditions and environmental concerns, including the damaging of coral

reefs by offshore mining and the limited rehabilitation of post mining areas, in Indonesia’s tin

industry are concerning and are a major reason for the establishment of the IDH Tin Working group

in 2013. The goal of the IDH Tin Working Group is to positively contribute to addressing the

sustainability challenges of tin mining and smelting in Indonesia, while recognizing the economic

benefits of the sector. In this context originated the Program’s impact claim for 2015: “Explore

interventions for post-mined land reclamation and low impact offshore mining; create ownership

for the improvement agenda with local stakeholders”.

Members of the IDH Tin Working Group include global tin users (downstream and midstream

industry), the Electronics Industry Citizenship Coalition EICC, Friends of the Earth, and the global tin

trade association ITRI. The TWG works with local partners from the Indonesian tin industry (including

PT Timah and AETI, the association of private tin smelters), and the Indonesian government both

centrally as well as from Bangka and Belitung.

After a situational analysis conducted in 2013-14, the TWG committed to and followed a one-year

multi-phased action plan, from July 2014 until July 2015. The action plan enabled the TWG to

successfully engage with international and local stakeholders, such as the national and regional

governments, and key mining companies. Getting their buy-in was instrumental for entering the next

phase of our intervention: designing a single four-year Roadmap of Sustainable Tin Mining

Operations in Indonesia.

As the convener of the TWG members and of the local Indonesian stakeholders, IDH coordinated

each phase of the program, while making sure that stakeholders are an inclusive part of the decision-

making process and, where possible, the implementation.

Aquaculture

Indonesia is one of the world’s largest shrimp producing and exporting countries with over 650,000

ha of land being used for shrimp farming (Aquaculture Statistics, 2013). The shrimp farming industry

in Indonesia first took off in the late 80’s in East Java (Banyuwangi and Situbondo), West Java

(Tangerang, Serang) and Lampung. Whereas the sector initially focused at farming black tiger shrimp

(P. monodon) – widespread disease outbreaks in 1996 – 1997 made the industry shift to intensified

production of whiteleg shrimp (L. vannamei). Current production exceeds 500,000 MT per year

(MMAF, 2014).

Mangrove deforestation, farm effluents and cross contamination affecting water quality, feed

sourcing and efficiency, disease surveillance and environmental monitoring, farm siting and

traceability are key sustainability issues for the Indonesian shrimp industry to overcome. Especially

the water quality issue linked to disease risks is prevalent given the landscape with tens of thousands

of smallholders whose ponds are more or less interlinked into the same watersheds. A holistic,

landscape (zonal) approach is needed to mitigate cumulative impacts.

The importance of Indonesia as shrimp producer as well as the above mentioned sustainability issues

in the sector, explain the importance of the contribution of Indonesia to the program’s impact claim:

“15% of EU imports of pangasius, shrimp and tilapia to be responsibly produced by 2015”.

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IDH is active in Indonesia through its Farmers In Transition (FIT) Fund (www.fitfund.com). The Fund

supports producers to shift to more responsible practices, especially focusing on improving aquatic

animal health management as well as the use and sourcing of aquaculture feeds, as the two key

drivers for responsible production. The FIT Fund is operational in the Indonesian aquaculture

landscape through two of its key implementing partners: SFP and WorldFish. Within the current

project scope these partners are providing BMP trainings on aquatic animal health and feed

management, biosecurity, zonal management and fish handling to over 10.000 beneficiaries. Both

partners strongly align with local and national government (MMAF, Department of Fisheries, Brackish

Water Center) and industry organizations (Shrimp Club Indonesia, KPRI Budidaya Mina) within the

scope of the IDH program. The sustainability and improvement framework provided through the FIT

Fund is the instrumental driver for current market transformation efforts, recognized and

operationalized by both WorldFish and SFP.

Given the fact that a large part of the Indonesian aquaculture products are consumed locally or

exported to other Asian markets, the aquaculture program aims to enhance its efforts with regard to

convening public and private stakeholders locally around a joint sustainability agenda. This will be

closely linked to the landscape approach, because issues such as water quality have an impact

beyond the sector.

Initiative for Sustainable Landscapes (ISLA)

The Initiative for Sustainable Landscapes (ISLA) started its implementation in 2015. It differs from

other programs in IDH by taking a “landscape approach” to development, instead of a sectoral

approach. The landscape approach is about engaging stakeholders from multiple economic sectors,

government and civil society to improve the management of natural resources, contributing to

improved rural livelihoods. In Indonesia, IDH selected the Province of West Kalimantan as a focus

landscape in Indonesia based on a global “Call for Landscapes” organized in 2014.

West Kalimantan covers an area of 14.7 million hectares and consists of diverse ecosystems ranging

from peat lands to coastal mangroves to highland forests. These ecosystems are home to many

endemic species such as orangutan, as well as a source of water, fire and flood control and

microclimate regulation. Indigenous people living in the landscape base their livelihoods primarily on

rice farming, rubber, palm oil and a range of smaller scale agricultural crops. Policy incentives to

encourage commodity growth have contributed to the challenge of competing claims for land use. A

balance needs to be found between large scale commodity production and maintaining natural

forest and peat ecosystems for biodiversity conservation, ecosystem services and use by local

communities.

The inception phase of the program in 2015 has led to the selection of a focus area of 2 million

hectares, including large parts of the districts Kubu Raya, Kayong Utara and Ketapang. Approximately

1 million hectares of the selected landscape are still covered with forest (primary, secondary, logged)

and 560,000 ha of the landscape is peat land. Like South Sumatra, West Kalimantan has many fire

hotspots occurring this year.

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The development landscape in West Kalimantan is characterized by the absence of joint efforts by

public, private and civil actors. There are several international NGOs focusing on nature conservation

and local NGOs focusing on community development, but both have limited experience and capacity

of working with the private sector as major land user in the province. The relations between civil

society and the government are mixed and even tense in some cases. IDH supports all actors in

designing new public-private landscape management concepts, focusing on how to reduce the

opportunity costs of forest and peat land protection, while ensuring socio-economic development of

the rural population.

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2. Program achievements

Palm Oil Program

The IDH Palm Oil program officially launched late 2013, and the program gained traction in 2015. Strong relationships with palm oil producers, buyers and

users as well as governments of key producing provinces have been built in the sector in 2015. The number of projects that started actual implementation in

2015 was lower than targeted, but a catch up in 2016 is expected.

Program impact claim on the global level

Planned country activities for 2015

Progress Explanation for any type of deviation

Avoid potential

deforestation due

to expansion of

palm oil

Certify the first

smallholders in the

program against RSPO

standards in North and

South Sumatra. Trial

monitoring the World

Resources Institute’s

(WRI) Global Forest

Watch system,

supported by the mills.

The program’s call for proposals was successful, and

IDH has reached agreements with relevant partners

such as Cargill/Winrock and Asian Agri. It is expected

that contracts to support training in good agricultural

practice of at least another 13,000 farmers in key

supply sheds will be signed by Q3 2016. More than

350 smallholders have received sustainability

training and group organization support in 2015. A

catch up in 2016 is expected.

IDH works with WRI, Daemeter and Rainforest

Alliance to support the development of a risk

assessment tool for palm oil production by the

Traceability Working Group (TWG) members.

Together we align environmental risk assessment

methodologies at industry level and develop desktop

social risk assessment tools. This will be presented to

the TWG in early 2016 and will support mills to

effectively monitor their risks.

The target was for 10,000 smallholders to be organized, 2,000

smallholders to be trained in GAP and 150 certified. Only

about 350 have been trained and none have been certified.

Certification of the first smallholders in the program was not

achieved in 2015 due to bureaucratic delays, baseline data,

and operational issues and challenges with government

bureaucracy (e.g. slow progress on land registration). Poor

performance on training and organization was due to slow

progress with London Sumatra to late delivery of consultant

baseline report and long contracting period for supporting

implementer, as well as the collapse of a planned project

with Prosympac as a result of the company’s internal

problems.

IDH organized meetings in Jakarta and South Sumatra with

partners to discuss expediting the process to meet the 2015

target. One of the plans agreed was to pilot the acceleration

of legalization for farmers (namely STDB and SPPL) together

with the provincial and district government. IDH expects to

catch up in 2016.

13

Prototype innovative

financing for small-

holders in partnership

with one of the biggest

palm oil companies

supporting the

smallholders in

replanting.

An initial project was shelved when it became clear that

interest rates available from IDH financial partners

(FMO) were not lower than could be offered by local

banks. IDH is now exploring new projects and have

made significant progress with a different grower on a

new innovative finance project in South Sumatra. The

project will likely involve de-risking for commercial

smallholder loans in partnership with Wilmar, Nestle,

local banks and ABN AMRO. This project is also

innovative in the context of providing an alternative

livelihood to farmers during the “valley of death” period

(four-year immature period) – e.g. chicken farming to

cater the needs of Nestle.

Progress has been slower than expected due to the

abandonment of the original project. However, we are now

moving forward with the new project and hope to begin

implementation in 2017. 2016 will be spent on project

design, due diligence, farmer capacity building and

preparation, ahead of replanting and funds disbursement in

2017 (if the project is approved once due diligence and

design are complete).

Collaborate with Nestle

and TFT on at least one

project site.

IDH is working with several major TFT members

(Wilmar, Musim Mas, Cargill) and are cooperating with

TFT through the IPOP group in developing a program for

Aceh.

IDH is in discussions with Nestle regarding the

innovative finance project mentioned above, and will

shortly sign an MOU to formalize this, expected in Q2

2016.

IDH has made slower progress than anticipated since our

working areas were not previously aligned, but we expect

these relationships to develop into productive partnerships

now that we are working in similar areas such as Aceh and

South Sumatra.

14

Develop further

strategic partnerships

(e.g. with Wilmar,

Cargill, GAR and local

companies such as

Sampoerna Agri) on

projects on the ground.

IDH has continued to develop strong relationships, as

evidenced by our role as a convener in the Aceh supply

shed (mandated by IPOP Secretariat with GAR, Wilmar

and Musim Mas) as well as new projects/proposals

elsewhere with Cargill, Wilmar, Asian Agri, Makin, and

others covering more than 20,000 farmers and 40,000

hectares. In 2015, we agreed and signed projects to

work with Cargill in Riau and Wilmar in Sabah, with

further deals including ANJ, Bumitama, PT. Pasifik Agro

Sentosa in West Kalimantan, Asian Agri in Jambi (on

border with South Sumatra) and Makin in South

Sumatra expected to be signed in 2016. IDH also signed

a MoU with IPOP to lead work in Aceh, and with

Zoological Society London (ZSL) to collaborate on a

major landscape program in South Sumatra. A MoU with

the governor of South Sumatra on green growth plan

development was signed in late 2015. Commitment to

develop sustainable palm oil supply sheds in South

Sumatra was jointly declared in November 2015, and a

MoU with CPO Fund was also prepared.

Play a convening role in

relation to supply sheds.

IDH was asked by major growers to convene Indonesian

Palm Oil Pledge (IPOP) members and other stakeholders

around the development of a supply shed in the

province of Aceh and the threatened Leuser ecosystem.

In September 2015, IDH signed an agreement with IPOP

to co-fund investigative work together in Aceh. Based

on this, IDH has developed a concept which will be

proposed to the IPOP group in 2016.

IDH has also been asked by the governor of South

Sumatra to convene private stakeholders around a

multi-commodity supply shed, building on our existing

15

projects in the province. IDH co-chaired a workshop

initiated by the governor on this concept in mid-2015,

and a further focus group discussion (FGD) was held in

November 2015. The November FGD was followed by a

declaration of support from major and mid-sized palm

oil companies in the province to support the

development of a sustainable palm oil supply shed,

starting with strong action on fire prevention. IDH also

supported the governor in articulating a vision and

roadmap for development of the supply shed, which will

cover critical areas such as land legality, peatland

management, productivity and improved conservation.

Since then, IDH has also been working closely with the

Estate Crops Investment Fund (CPO Fund) to develop

pipeline projects for improved sustainability and

productivity in the province.

Pulp & Paper Program

Although significant progress has been made in opening up dialogues with key stakeholders in the sector, driving the program forward proved to be more

difficult than originally envisaged. Although a landscape project with significant scale started in 2015, the targeted number of hectares under sustainable

management were not achieved. The start of interventions related to clean manufacturing was delayed. The acceptance of the High Carbon Stock (HCS)

approach by government is slow due to political sensitivities.

Program impact claim on the global level

Planned country activities for 2015

Progress Explanation for any type of deviation

Develop

innovative

solutions to

address

sustainability

Increase areas under

sustainable forest

management and

reduce social conflict

by supporting a

Convened multi-stakeholder parties in the coastal area

of landscape Kubu Raya to develop a project for

protecting and conserving 41,480 ha of peatland and

mangrove forest.

IDH realized that achieving sustainable forest management

covering 400.000 ha or providing training for 20.000 forest

communities members, as targeted in West Kalimantan,

would take longer than was expected to achieve. However,

there is opportunity to work in other provinces such as South

16

bottlenecks in

the pulp and

paper supply

chain

sustainable landscape

project initiated by the

private sector. This will

include group

certification and

alternative livelihood

development on

400,000 hectares in

West Kalimantan.

Completed baseline study for integrated sustainable

forest management as a starting action to convene

five forestry companies covering 328,420 ha in Kubu

Raya, Kayong Utara and Ketapang districts in West

Kalimantan. The project implementation will start in

2016.

Became the main partner of Asia Pulp and Paper (APP)

in supporting its landscape approach for their

concessions in West Kalimantan and South Sumatera

(and parts of Jambi) covering an area of almost one

million ha of pulp plantation. A number of projects are

in development with APP with further progress

expected in 2016.

MOU signed with the governor of South Sumatra for

Green Growth Plan that includes sustainable forest

management practices and covering around 900.000

ha of industrial forest plantation.

Entered early phase of partnership with the Governor

of West Kalimantan and Governors’ Climate and Forest

Task Force that aims to realize the implementation of

sustainable forest management practices within

forestry concessions.

Supported the ZSL landscape consortium in South

Sumatera that is funded by the Norwegian and UK

Governments. This covers more than 1 million ha of

land consisting of mixed commodities and protected

areas mainly in Musi Banyuasin and Banyuasin

Districts.

Supported West Kalimantan Government in preparing

the proposal to the National Government for Forest

Management Unit (KPH) Development in Kubu Raya

district, by providing the baseline study and

Sumatra and Jambi provinces where reaching the 400.000 ha

target is more realistic.

SMEs that the program targeted in the private sector are

reluctant to partake in a collaborative/landscape initiative.

This is because they find it financially challenging to

contribute with cash and because they greatly feel the

imbalance in resources compared to the major industry

players. They also worry that the poor past reputation of the

major players will reflect badly upon them.

17

management plans

Engaged with APRIL in developing the generic model

of its Fire Free Village concept and the development of

a national fire free alliance.

Engaged with and advised the Government of South

Sumatera for the development of a provincial level fire

prevention and control plan.

Support the

government of

Indonesia and industry

in the development of

high carbon stock

standard/guidance in

order to help define

‘go/no go’ areas for

development.

Made significant progress in engaging with government

where IDH facilitated the process of government

understanding for the HCS standard. This was mostly

within the Ministry of Environment and Forestry. IDH also

successfully encouraged APRIL to incorporate the HCS

standard in their sustainability commitment. IDH is also

pushing for convergence between HCSA (mainly driven by

mixed pulp and palm companies) and HCS+ study (driven

by palm companies). This is significant for industry

players.

IDH realized that the government sees HCS approach to be an

international and private sector driven approach whose initial

development did not involve the government. The current

HCS standard/ guidance also does not fit with the current

government regulations in some key areas. As the result the

government does not yet endorse the implementation of the

HCS approach and does not acknowledge it as a valid

standard. Therefore, IDH’s main focus is to continue

supporting the private sector, while looking for opportunities

to reengage with the government.

Upscale clean

manufacturing by

supporting producers

to improve resource-

efficiency and clean

production by

benchmarking and

implementing good

manufacturing

practices.

Made agreement with one APP mill in implementing pilot

of clean manufacturing project in 2016.

IDH discovered that the clean manufacturing concept is still

new for the sector especially in Indonesia and that most mills

are not willing to spend more if it is not mandated by the

government. There is little current incentive from the market

for clean, manufacturing application (e.g. energy efficiency,

waste and water use management). IDH thus learned that

convening pulp and paper mills requires a different approach

such as involving the buyers to achieve market pressure.

18

Tropical Timber Program

The target for the certification of natural forest areas has not been achieved due to delays in various (government) processes, which are not uncommon in

Indonesia. Yet, IDH expects that these delays will be compensated for in 2016, so that the 2016 end target can still be achieved.

Program impact

claim on the

global level

Planned country

activities for 2015 Progress Explanation for any type of deviation

9 million hectares

of tropical forest

to be sustainably

managed by 2015

Support certification of

natural forest areas in

Indonesia, by providing

co-funded services that

are crucial to achieve

certification.

The Borneo Initiative (TBI) certified 185,330 hectares in

2015, including the world’s first certified mangrove

forests. Concerning market links, TBI focused on

improving trade links, and is on target regarding the

number of importers relationships have been established

with.

In 2015, the target of The Borneo Initiative (TBI) was to

certify 703,165 hectares of forest, while only 185,330

hectares were actually certified by the end of 2015, due to

delays on government approval of management plans, delays

in awarding certificates after the audits had taken place, etc.

TBI is facing severe delays but foresees no long-term

problems as the pipeline of the program has sufficient

hectares to realize the 2016 end target.

Coffee Program

The Sustainable Coffee Platform Indonesia was established and developed a national curriculum for training farmers on sustainable agricultural practices.

The roll-out of the curriculum was delayed to Q33 2016. In 5 field level projects, more than 29,000 farmers were trained, achieving the target set for 2015.

Program impact

claim on the

global level

Planned country

activities for 2015 Progress Explanation for any type of deviation

25% of coffee

sales worldwide

to be sustainable

by 2015

Establish a well-

functioning public-

private dialogue

platform in Indonesia

The Sustainable Coffee Platform Indonesia (SCOP)I was

launched on 31st March 2015. IDH was leading the

development of SCOPISCOPI is already recognized by

coffee stakeholders (government, private sector and

civil society) in Indonesia as a progressive platform.

19

SCOPI has 30 active members (1 member, Syngenta

resigned as member of SCOPI) and productive board

members (Executive and Supervisory boards), and

employs 2 fulltime coordinators.

Develop and agree on

a common national

sustainability

curriculum (NSC) for

robusta to address

nationally agreed

sector priorities to be

rolled out by both

public and private

extensionists.

In close cooperation with the Ministry of Agriculture the

Taskforce on transfer Technique already developed the

National Sustainability Curriculum and Manual Training

on Sustainable Robusta Coffee. 1000 copies are printed

and will be used to train trainers and farmers on GAP

and GMP. The roll-out of the curriculum is planned for

Q3 2016.

The roll-out of the curriculum was delayed, because the

coordination with a large amount of stakeholders in the

development of the curriculum took more time than planned.

The first training of trainers of both public and private

extensionists took place in June 2016

At farm level, Field

Level Projects (FLPs)

ensure large scale

prototyping of

effective and

innovative farmer

improvement

approaches to

encourage private

sector partners to

increase and upscale

their investments in

sustainable

production. For 2015

28000 farmers were

targeted.

Through IDH co-funded field level projects 29,688

farmers were trained. A learning workshop was

oragnized among project implementers to discuss and

learn from common challenges.

20

Cocoa Program

All CPQP field level projects have been completed as planned by the end of 2015. The evaluation of this program is postponed to the second half of 2016.

The work related to capital financing for cocoa farmers is still in the scoping phase and will continue in 2016 and beyond.

Program impact claim on the global level

Planned country activities for 2015

Progress Explanation for any type of deviation

300,000 farmers

to have improved

livelihoods by

2015

• Closing of the four

CPQP projects with

Mars, Nestlé, Olam and

Ecom.

• Evaluate the

program’s

achievements.

• Share lessons learned

and knowledge among

the partners at country

level.

While all four CPQP project have ended by December

2015, the evaluation and sharing of lessons learned has

been postponed to Q3 2016.

The focus will be on providing an aggregated overview

of what has been achieved within the CPQP program

and what innovations learnings happened during its

execution. This evaluation will reflect on all CPQP

project in Indonesia but also West Africa.

Due to staff changes, the evolution and sharing of has been

delayed and will take place in Q3 2016 instead.

• Scope cocoa working

capital financing for

farmers in Indonesia:

• Innovate financial

mechanisms to

support farmers’

business development,

“business leading

model”.

• Develop extension

• A Taskforce (TF) on Agri-Finance of Cocoa

sustainability Partnership (CSP) was established. This TF

is lead by IFC, while the members consist of

representative of the private sector (Mars, Mondelez,

Olam, Nestle) and NGO (IDH, Swisscontact, IFC,

Brightwater Foundation).

• A MoU was signed between CSP and Ministry of

Agriculture (MoA) on cooperation program synergy

between CSP and MoA on Sustainable cocoa

development in Indonesia.

• CSP need to have better management and governance by

enhance capacity of the secretariat members (currently there

are 8 members of staff).

• The taskforces are organized and established but there have

no concrete result yet. In 2016 it is expected that some

taskforces have significant and tangible result which can

provide information on the impact of behavior change at

farmers level (adoption levels are increased).

21

services to improve

economic performance

of cocoa producers

(farmers) through

inclusive business

development.

• Strengthen cocoa

producer (farmer)

forum capacity on

organization and

services development.

• CSP grows as a PPP platform for sustainable cocoa

development in Indonesia which main members of CSP

are private sectors. Other members are NGOs, research

institutes, cocoa association and farmer’s forums.

• CSP endorsed by national and regional governments

as a main partners working on cocoa sustainability.

Spices Program

In 2015 three spices projects were being implemented; in nutmeg cassia and white pepper. The nutmeg project was finalized by the end of 2015. Due to the

training in this project they are ready to be included in a financial credit project in 2016 (without co-funding of IDH). The cassia and white pepper projects

experienced some delays and will be finalized in 2016.

Program impact

claim on the

global level

Planned country

activities for 2015 Progress Explanation for any type of deviation

20% of all pepper

imported in the

EU to be

produced

sustainably

Finalizing the

implementation of 3

pilot projects

1 project finalized, 2 projects extended In the spices sector sustainability is very new. Our partners

learned it is difficult to find reliable and experienced

implementing partners and that this is key. Not having an

experienced implementing partner, or not having a strong

relation with the implementing partner leads to ineffective

trainings and delays.

There are no good training materials available because:

addressing sustainability is so new in the spices sector and

the Indonesia spices sector is very scattered. This is an extra

set back in implementing the pilot projects.

22

Tin Program

The program achieved some of its key milestones, including the commitment of government and key industry players to address sustainability issues in the

sector and the multi-stakeholder developed of a four-year roadmap towards Sustainable Tin Mining. At the end of 2015 however, IDH made a conscious

decision not to exit the program as planned because structures to support the local implementation of the roadmap were not yet in place.

Program impact claim on the global level

Planned country activities for 2015 Progress (for Tin there are no KPIs)

Explore

interventions for

post-mined land

reclamation and

low impact

offshore mining;

create ownership

for the

improvement

agenda with local

stakeholders

Identify a scalable supply chain incentive

for the stimulation of onshore land

reclamation and offshore environmental

impact mitigation in Indonesia.

Environmental Impact Assessments (EIAs) of five Indonesian tin mining companies were brought into

the public domain for further scrutiny, based on which an extensive assessment and advice report was

published by the NCEA (Netherlands Commission for Environmental Assessment). The

recommendations of the NCEA have been included in the roadmap to stimulate best practices.

Obtain local buy-in from the Indonesian

government and the local miners and

smelters, reflected in a group of three to

eight smelters (including state-owned

PT Timah) that commit to addressing

the most pressing sustainability issues in

Bangka and Belitung. This will entail

discussions between the local convener,

the relevant authorities, and local

smelters.

IDH secured (formal, in writing) support from the four related Indonesian ministries, as well as from all

the local provinces of Bangka and Belitung, to work together with the local companies to address the

sustainability issues of the sector. In addition, the leading tin smelters in Bangka became engaged

formally (the Indonesian Association of Tin Exporters via a Memorandum of Understanding) and

informally (PT Timah in a joined meeting with the TWG representatives).

Translate the commitments of the local

smelter group into a concrete

implementation plan.

A four-year Roadmap of Sustainable Tin Mining Operations in Indonesia was developed through a

multi-stakeholder strategy, including different roles for the industry, government and civil society. It

includes programmatic interventions to achieve the program sustainability goals.

23

Broaden the representation of the

entire downstream user industry for

tin.1

IDH strengthened the TWG by engaging two tin plate companies (Tata Steel and Arcelor Mittal) and the

biggest solder company (Alpha) which expanded the engagement of the various downstream user

industries towards the upstream supply.

Create the necessary incentives that

midstream and downstream tin users

(TWG private members) can implement

to incentivize front-running smelters to

implement the roadmap and support

lasting tin industry transformation.2

In collaboration with other TWG members, IDH developed a TWG Incentive Guide that describes the

ways that downstream industry can support and incentivize upstream industry in Indonesia to

implement more sustainable tin mining practices. The members of the TWG have endorsed the guide's

principles, which will be publicly shared on the IDH website.

Aquaculture Program

Investments in scalable and cost-effective producer support (with a focus on shrimp farming) are well on track. The building blocks for a national public-

private partnership around aquaculture are in place, but have not been formalized yet.

Program impact claim on the global level

Planned country activities for 2015

Progress Explanation for any type of deviation

15% of EU

imports of

pangasius,

shrimp and

tilapia to be

responsibly

produced by

Through the FIT Fund,

IDH will further co-

invest in scalable and

cost-effective producer

support (with a focus

on shrimp farming).

This will enable

farmers to improve

In Indonesia, the FIT Fund has instigated two large field-

level projects in Indonesia, accounting for €650K in

private sector investments, targeting improved working

conditions and reducing environmental pollution through

implementation of good farming practices.

Through contracting an ambitious zonal management rollout

project, implemented by SFP and co-funded by Walmart

Foundation, IDH has been able to significantly increase the

leverage of the FIT Fund in Indonesia, adding 10,000 farmers

across 10 regions to the portfolio.

1 This activity was not formally part of the annual plan for 2015 but it is nevertheless part of the TWG agenda and contributes to the initiative’s credibility.

2 This activity was not formally part of the 2015 Annual plan, however provided IDH’s exit strategy, there was need to work towards developing linkages between upstream

and downstream players to incentivize the supply creation of responsible tin, and the implementation of roadmap.

24

2015 business performance,

reduce impact on the

environment, improve

social responsibility,

and increase supply

chain resilience.

The total impact of the program in Indonesia now reaches

up to 11,500 farmers and workers, and the responsible

production of 46,000 MT shrimp.

Strengthen scalable

public-private

partnerships in at least

four key countries of

production.

A scoping study to work on responsible health and feed

management has started in Indonesia, outlining the

potential future role of IDH to convene public and private

sector actors within these countries.

The building blocks for a national public-private partnership

around aquaculture are in place through our partnership with

SFP, but have not been formalized yet.

Initiative for Sustainable Landscapes (ISLA)

The inception phase took longer than expected and IDH had to revise the original business case for the engagement with companies in West Kalimantan.

Together with internal capacity constraints, this contributed to a delay of the implementation phase to 2016.

Program impact claim on the global level

Planned country activities for 2015

Progress Explanation for any type of deviation

Overall targets

for ISLA in 2015:

Shared trend

and problem

analysis as a

basis for

joint vision

of multi-

stakeholder

Capacity building:

• Contract a landscape

manager

• Make agreements

with implementing

partners

NGOs/consultants Aidenvironment and FFI were

contracted as implementing partners for the program

inception phase lasting from May through December. A

senior landscape manager was hired, and was shortly

promoted to IDH country director. An interim manager

was recruited to fill part of the gap.

We were unsuccessful in contracting a full-time landscape

manager in West Kalimantan. After a trial period with a part-

time consultant, the program is now again managed by the

IDH office in Jakarta.

Data collection:

• Make inventory of

available (baseline)

data about landscape.

Extensive baseline mapping of the area and description of

the key supply chains were completed. Maps and

documents include all concession areas and owners,

remaining HCV areas, peatland, and forest cover.

The original business rationale for the landscape (land swaps

as part of RSPO) proved to be insufficient, and a new business

cases needs to be developed in 2016 and beyond.

25

coalitions

per

landscape

Intervention

planning for

the 2016-

2018 period

on the basis

of the joint

vision well-

functioning

multi-

stakeholder

coalitions

with a clear

governance

structure

ISLA

learnings are

mainstreame

d inside and

outside IDH

• Conduct

complimentary

baseline studies (e.g.

remote sensing)

Project planning and

stakeholder

management: refine

vision/approach;

define landscape

boundaries,

stakeholder mapping

and engagement

strategy; hold regular

meetings; set up

governance

structure.

Stakeholder mapping and definition of the boundaries

have been completed. The vision and approach to the

landscape have been further defined – also using focused

group discussions with relevant stakeholders – but will

need to be continuously improved.

IDH, together with Aidenvironment and FFI, engaged

private-sector partners and started developing projects in

sub-areas within the bigger landscape.

Relatively little progress was made on multi-stakeholder

convening. This was partly due to the lack of capacity (a full-

time manager) of IDH in the landscape.

Joint actions:

• Define/agree on first

interventions.

• Start implementing.

Focus areas for the first interventions have been

identified, and discussions with private-sector

companies around intervention ideas have started.

Joint actions have not yet started. IDH expects the

first interventions to start in Q2 2016.

Joint actions have not yet started. IDH expects the first

interventions to start in Q2 2016.

Co-funding:

Identify and secure co-

funding.

In December 2015, IDH secured additional investments in

the West Kalimantan landscape from

NICFI.

The private sector is willing and able to co-fund

projects of a substantial size.

The government’s Crude Palm Oil (CPO) fund is another

source of co-funding, and an MoU is in progress.

26

Communication:

Develop and

disseminate

communication

materials.

Presentations and leaflets were developed and used

throughout the year. The landscape was promoted at a

number of events such as the RSPO Round Table in

November 2015 by IDH and Aidenvironment.

27

3. Project overview per program In the following table each project per program is listed, including the partners IDH works with. For each project the planned as well as the progress

on key performance indicators (KPI) are indicated and linked up to the global impact claim of each commodity program.

Project title Partners Planned key project KPIs for 2015 Progress per key project

KPIs for 2015

Contribution to global impact

claim

Palm Oil

IndoAgri Sustainable

Smallholder Program

Lonsum (IndoAgri group), RSPO Number of smallholders trained

in palm oil GAP: 1,150

More time than expected

was needed for the

establishment of a baseline

and building internal

capacity, hence no progress

on the KPIs has been

achieved.

In the 2015 program plan, the

overall rationale was that

contributing to increased

smallholder productivity on

land already planted with oil

palm and (deforestation free)

traceability will (indirectly)

contribute to reduced

deforestation. This assumption

hence applies to all projects

listed here. Yet, in 2015 IDH

has learned that substantial

changes in governance and a

reduction of the opportunity

costs for not deforesting are

needed in addition to support

to agricultural production and

traceability to achieve a

reduction in deforestation.

Number of hectares

certified/verified sustainable: 318

Change in smallholder

productivity: 20%

Number of farmers in effective

farmer organisations: 300

Proportion of mills linked to a

monitoring or verification system:

100%

28

SHARP funding 2015-2016 for Responsible Supply Shed (RSS) framework

3

Proforest, several private partners Formal recognition from key

private stakeholders of the value

of RSS: at least 10 companies

acknowledging value of RSS

framework

Palm oil in SEA - Prosympac,

P&G, Wilmar, Unilever, GAR

(5)

Number of major companies

committed to implementation of

RSS at scale (totalling at least

100,000 ha): 1

0, but P&G now piloting

with a view to scaling up

and discussions ongoing

with Wilmar

A simplified HCV for Smallholders

approach proven for application:

completion controlled field test in

Sumatra

Completed with group of

palm oil smallholders

seeking to achieve RSPO

Group Certification

Endorsement by key private

stakeholders of the simplified

HCV tool: 10 companies

None, but keen interest

from IPOP Secretariat

reflecting felt need for the 5

company members of IPOP.

Number of major companies

involved in field implementation

of RSS and HCV tools: 6 2: Prosympac and P&G

PTPN3 Sustainable Smallholder Program

PTPN3, De Guru, RSPO Private sector sustainability

investments in the project:

74,151 USD 5,523 USD

3 This was a globally implemented project. KPIs and targets listed here are only those that are applicable to Indonesia. The targets listed here are global targets (unless

stated otherwise), yet the results are specific to Indonesia only.

29

Number smallholder producers

aggregated by project partner to

efficiently receive services: 150

75

Number of M/F smallholders

trained on key subjects for

sustainable production,

environmental and social

sustainability issues:

M: 132, F: 18

M: 63

F: 12

Adoption rate by producers of

improved practices: 60% 30%

Ha of Farmland area where

trained practices (GAP, RSPO

P&C) are applied: 1,160 525ha

Yield improvement from baseline

(MT FFB/ha/yr on average): 21

(basline 15.7)

19.87

Traceability reporting platform

FoodReg, Unilever Number of leading companies

signed up and using the platform

9

Volume of product containing PO/PK received by buyers and recorded on KnownSources during Q3 2015

500,000 mt

List of unique coordinates believed to be mills, prior to validation

3,834

30

Validation of mill GPS data, internally or incorporated from external parties

2,200

Tropical Timber

The Borneo Initiative The Borneo Initiative

652.000 ha FSC certified 185.330 ha FSC certified

9 million hectares of tropical forest to be sustainably managed by 2015

Coffee4

Coffee Made Happy in Semendo

Applicant: Jacobs Douwe Egberts (JDE) Implementing partner: Ecom - IndoCafCo (ICC)

Number of farmers trained: 3,000

Number of farmers trained: 2,746

25% of coffee sales worldwide to be sustainable by 2015

Mondelez Neumann Stiftung Indonesia

Applicant: Jacobs Douwe Egberts (JDE) Implementing partner: Hanns R. Neumann Stiftung North America Inc.( HRNS)

Number of farmers trained: 2,000

Number of farmers trained: 3,474

Strengthening the smallholder Robusta sector in Sumatra, Indonesia

Applicant: Hanns R. Neumann Stiftung North America Inc.( HRNS) J.M. Implementing partner Smucker Company (Orrville, OH, U.S.A.)

Number of farmers trained: 2,000

Number of farmers trained: 4,019

Green and Social Coffee Sumatra

Applicant: Hivos South East Asia Implementing partner: Ecom - IndoCafCo (ICC)

Number of farmers trained: 5,000

Number of farmers trained: 2,049

Scaled sustainability through brand led collaboration

Implementing Partner: Rainforest Alliance

Number of farmers trained: 18,000

Number of farmers trained: 18,875

4 Due to the competitiveness of the FLPs in the coffee sector and hence the confidentiality of monitoring data, we can only report on the number of farmers trained.

31

Cocoa

CPQP Swisscontact, Mars, ECOM, Nestlé and Olam

Nr of farmers trained in certification modules: 5,500 5,906

300,000 farmers to have improved livelihoods by 2015

Nr of producers certified: 14,500 9,035

Area (ha) of cocoa trees rehabilitated: 3,900

8,039

Average volume (kg/ha) of inorganic fertilizer used per hectare of land: 572 (global target)

274

Volume (mt) of cocoa produced – certified: 925 7,125

Average yield (kg/ha/year): 1,000 689

Value (USD) of financial products provided to producer groups/organizations: 300,000

32,900

Nr of institutions/entities trained: 65 (55 public, 10 private) 6 (only private)

Nr of best practices shared in sector (through websites, events, etc.): 1

2

Spices

Sustainable Cassia

production Kerinci;

Cassia Coop Number of farmers trained:

1,072 farmers

ha under sustainable practices:

3,000ha

Number of farmers trained:

1,072 farmers

ha under sustainable

practices: 2,958 ha

Contribution to spices program

overall objective by brining

the first sustainable certified

cassia supplies to the market

and sets an example for the

rest of the sector

32

Empowering smallholders

for sustainable nutmeg

production; Nutmeg in the

Mollucas

ICCO and Agriproducts Number of farmers trained:

3,000 farmers

ha under sustainable practices:

10.000 ha

Number of farmers trained:

2,853 farmers

ha under sustainable

practices: 6986 ha

Contribution to spices program

overall objective by brining

sustainable nutmeg supplies

to the market and sets an

example for the rest of the

sector

Stainable Production of

Muntok White Pepper in

West Bangka

Verstegen Spices & Sauces BV,

Hivos, PT Can

Number of farmers trained: 305

farmers

ha under sustainable practices:

193 ha

Number of farmers trained:

174 farmers

ha under sustainable

practices: 0 ha

Contribution to spices program

overall objective by brining

sustainable white pepper

supplies to the market and sets

an example for the rest of the

sector

Aquaculture

Sustainable Shrimp Farming

in Aceh, Indonesia

WorldFish, Aceh Aquaculture

Cooperative (AAC)

AAC members: 450

FCR: 1.5 1.3

Survival: 60 85%

AAC members: 341

FCR:1.44

Survival: 71%

15% of EU imports of

pangasius, shrimp and tilapia

to be responsibly produced by

2015 Adopting a zonal management approach

SFP, Walmart Foundation BMP & zonal training: 10,000 farmers Survival:60% 70%

BMP & zonal training: 5,000 Survival: not yet available

33

4. Key performance indicators per commodity on country level This table links the KPIs at global level to those at the country level. It shows how the

achievements at country level in 2015 contributed to the overall programs targets for 2015.

Please note that for Apparel, Pulp & Paper and Tin and the Initiative for Sustainable Landscapes

(ISLA) no KPIs have been defined in the annual plan for 2015 due to the development phase of

these programs.

Palm Oil Program KPIs

Coffee Program KPIs

KPI

Overall program

Target 2015

Result 2015

Country level 2015

Target 2015

Result 2015

Deviation explanation

Number of

smallholders trained

in palm oil GAP

(T): 2000

(R):353

(T): 1300

(R): 75

Poor performance on training

and organization was due to

slow progress with

London Sumatra (late delivery

of consultant baseline report

and long contracting period

for supporting implementer),

as well as the collapse of a

planned project with

Prosympac as a result of the

company’s internal problems.

Number of supply

sheds facilitated

by IDH

(T): 2

(R): 2

(T): 2

(R): 2

KPI

Overall program

Target 2015

Result 2015

Country level 2015

Target 2015

Result 2015

Deviation explanation

Number of farmers

trained

(directly and

indirectly)

directly (T): 100,000

indirectly (T): 400,000

directly (R): 120,000

indirectly (R): )100,000

directly (T):28,000

indirectly (T): 70,000

directly (R):29,688

indirectly (R): 0

The indirectly reached

farmers will be reached

through training farmers on

the National Sustainability

Curriculum (NSC). The NSC

has been developed but the

training of trainers started

only in 2016.

34

Cocoa Program KPIs

KPI

Overall program

Target 2015

Result 2015

Country level 2015

Target 2015

Result 2015

Deviation explanation

Number of farmer

trained in

certification module

(T): 62,000

(R): 102,427

(T): 5,500

(R): 5,906

Value (in US $) of

financial products

provided to producer

groups

(T): 11,290,000

(R): 26,658,419

(T):300,000

(R): 32.900

Volume of metric

tones of certified

cocoa

(T): 68,656

(R): 200,456

(T): 925

(R): 7.125

Tropical Timber Program KPIs

KPI

Overall program

Target 2015

Result 2015

Country level 2015

Target 2015

Result 2015

Deviation explanation

Number of hectares

of forest under

certified sustainable

management (T): 3 million

(R): 7,271 million

(T): 703.165

(R): 185.330

Due to delays on government

approval of management

plans, delays in awarding

certificates after the audits

had taken place, etc. TBI faced

severe delays over 2015,

however the 2016 end target

has been achieved at the time

of writing.

Spices Program KPIs

KPI Overall program Target 2015 Result 2015

Country level 2015 Target 2015 Result 2015

Deviation explanation

Number of smallholders trained on sustainable production practices in Spices Producer-support Investment Fund (SPIF)

(T): 3000 (R): 15,922

(T): 4,377 (R): 4,099

On track. Please note that the Country targets are higher than the global targets because in country targets were adjusted on a yearly basis while the country global targets were not

Number of hectares of land managed using sustainable techniques

(T): 4,000 (T) (R): 12,072 (R)

(T): 13,193 ha (R): 9,944 ha

The ha under sustainable production are lower than targeted in Indonesia because the average number of hectares owned by a farmer is significantly lower than expected

35

Aquaculture Program KPIs

KPI Overall program

Target 2015

Result 2015

Country level 2015

Target 2015

Result 2015

Deviation explanation

Volume of

responsibly

produced fish

(whole fish) metric

tons

Shrimp (T): 75,000

Pangasius (T): 0?

Tilapia (T): 0?

Shrimp (R): 64,059

Pangasius (R): 46,000

Tilapia (R): 28,000

Shrimp (T): 27,500

Pangasius (T): 0

Tilapia (T): 0

Shrimp (R): 20,500

Pangasius (R): 0

Tilapia (R): 0

Production output is slightly

lower than targeted which is

related to the slower

membership uptake of AAC.

Exact production figures for

the SFP project (18,500 MT

for 2015) need to be

determined upon final

assessment in summer 2016.

Volume (in metric

tons) of responsible

feed produced

(T): 100,000

(R): 311,558

(T): 36,500

(R) 25,000

Responsible feed sourcing is

lower than targeted related

to the lower uptake of

members by the AAC and

delayed switching to

intensified (= feed usage)

production though not

accounting to the tally of

end-buyers committed to the

program, IDH and its partners

have connected a total of 5

domestic and international

supply chain actors to the

supplier improvement

projects (Grobest Jakarta,

Ecohub, SSP Medan, Shrimp

Club Indonesia, KPRI

Budidaya Mina )

36

5. Lessons learnt

Cross program lessons

2015 was the fourth year of operation in Indonesia. It is a year in which key lessons were learnt,

because all programs were either in the implementation or an advanced scoping stage.

A first important lesson is the need to move from a sector-based approach towards a more

integrated approach at country level. As one can read throughout the report, it has become

increasingly clear that sustainability issues such as deforestation are not confined to a single sector.

These need to be seen from a systems perspective including all land-users. The oil palm, coffee

cocoa, plantation forests, logging concessions, fish ponds and food crops such as rice all compete for

land. Addressing deforestation in one sector may just mean displacing the problem to another

sector.

Second, in order to support socioeconomic and environmental impact, we need to involve the

government more in our activities. There are several reasons for this. In Indonesia, political and

bureaucratic actors are an inextricable part of the production and supply systems of commodities.

Notwithstanding the value of international certification initiatives, only the government is in a

position to create a level playing field for all land-users, instead of only working with the front

runners, while illegality still continues among the laggards. Furthermore, the risk of contributing to

agricultural intensification without improved governance over forest and/or higher benefits for

forest protection, is that it will drive deforestation even further by increasing the opportunity costs.

Related to this, the government needs to be involved in the design and operation of interventions in

order to ensure a sustainable exit strategy for IDH.

Third, there is substantial overlap between sector programs with regard to the government agencies

and public-private platforms that IDH is engaging, as well as regards overlap in geographical areas

where projects are implemented. For example, the palm oil and aquaculture program are both active

in Aceh, the coffee, pulp & paper, and palm oil programs in South Sumatra. This calls for a country-

based or, in some cases, jurisdictional or landscape-based engagement strategy towards these

actors.

Several programs already started deeper engagement with the government as well as a move

towards landscape-based approaches, notably the pulp & paper and the ISLA programs. Lessons

learnt in this context were that building trust between stakeholders, gaining meaningful political

commitments, and creating a shared agenda and vision take time and require intensive interactions

with all stakeholders. Landscape-wide interventions touch multiple stakeholders by definition, and

there are tradeoffs that need to be managed. This requires good stakeholder analysis of the power

balance, distribution of benefits, and risk mitigation options.

However, we also learnt that the move towards a landscape approach in 2015 could not have come

at a better time. It provided IDH with the opportunity to convene some critical and important public

37

and private actors at District and Provincial levels. It coincided with a move to landscape planning by

large Indonesian companies such as Asia Pulp and Paper (APP), and recognition of this approach by

both NGOs and senior public figures.

Program specific lessons

Palm Oil Program

Progress on GAP training has been significantly delayed due to the bureaucratic nature of

farmer land registration. We have learned that this is a major issue across Indonesia. Starting

with South Sumatra, we are working with the provincial government to develop mechanisms

within the civil service to improve the speed and efficiency of this process, so that land titles

can be formalized at scale.

There is an increasing need to link, or facilitate a connection between the commitments on

the ground (supply shed of traceable/verified/sustainable commodities) with the promises

made by downstream supply chain actors. We need to explore the potential for incentives

and shared investments to realize the changes (avoid deforestation, conserve

forests/peat/HCV areas, improve productivity, etc.).

Pulp & Paper Program

Convening pulp and paper industry stakeholders in Indonesia has been challenging for IDH due to a lack of reputation and track record within the pulp and paper sector. Furthermore, the industry, especially at the plantation level, is complex and politicized, where the government is still struggling to prevent deforestation, premium market (incentive) for the products is limited and the big companies in the industry have long had a secretive and “go it alone” approach to business while the remaining small to medium scale forest plantation companies have not made any commitments towards sustainable forest management. We need to put this program in a neutral position and back it up with strong baseline and business case to avoid dragging in the political dimension.

Tropical Timber Program

Sustainable management of forests directly reduces the opportunity costs of prevented

deforestation.

Until now, certification is still the only manner to verify legality, as there is still no FLEGT

timber coming from Indonesia. However, FSC certified tropical timber is a niche product, and

so support to market outreach in Europe and North America is essential. However, on 21

April 2016, the Presidents of Indonesia, the European Commission and the European Council

confirmed that Indonesia had met the final major requirement of the Voluntary Partnership

Agreement and is on course to become the world’s first country to issue FLEGT licenses. This

may change the situation significantly.

Coffee Program

Alignment with government and multi-stakeholder on this NSC development was taking a lot

of times and resource (man power and money), we learned that these time investments are

needed and are rewarded with government support for both the NSC development and role

out of the NSC.

Managing "politics" of groups/associations in the multi stakeholder cooperation is time

consuming

38

Cocoa Program

It is unrealistic to expect national governments to replicate a project which they did not design and have not clearly identified available budget and staff to run within their systems. However, it is still very worthwhile involving local government representatives in activities as it engenders ownership and has indirect flow on effects toward improving government services.

Care should be taken with regard to agro-financing. To ensure that farmers do not end up with debt that they cannot pay, there should be a focus on financial literacy and capacity building as much as on lending.

Ensuring traceability as part of third-party certification systems is highly resource-intensive in remote areas of developing countries and prone to falsification.

Strengthening the capabilities of the Secretariat of the CSP to improve the professionalism and value adding services provided to members will further increase communication, alignment and cooperation between stakeholders working through CSP taskforces (CSP engine) toward a more sustainable future for cocoa farming in Indonesia. Improving the performance of the Secretariat will also encourage greater engagement and commitment from members assuring the sustainability of the CSP itself as an ongoing platform for identifying, prioritizing, developing and implementing solutions for a sustainable cocoa farming system over the long term.

Spices Program

In the spices sector sustainability is very new. Our partners learned it is difficult to find

reliable and experienced implementing partners and that this is key. Not having an

experienced implementing partner, or not having a strong relation with the implementing

partner leads to ineffective trainings and delays.

There is not a strong party in Indonesia that wants to take the lead in sustainability in the

spices sector.

We also learned that there are no easily accessible training manuals for farming spices.

Aquaculture Program

Indonesia will remain a priority country for the IDH Aquaculture Program given it is a key sourcing origin for farmed shrimp. The WorldFish / AAC project in Aceh is progressing very strongly with the AAC as an established and recognized industry organization, providing trainings om BMP and biosecurity to its members and acting as a broker, negotiating on favorable prices for inputs on behalf of their members. Recently the AAC has secured a working capital loan with Rabobank Foundation. The successful application for the Rabobank loan validates the IDH/WorldFish supported business model for the AAC and opens up avenues for public goods investment which will be accessible on the back of similar partnerships as IDH, WorldFish and AAC. For IDH this helps to provide a security of exit from the project.

Tin Program

Harnessing the international market demand through our pre-competitive working group in

order to place sustainability on the agenda of the Indonesia tin mining industry was a critical

factor. IDH used the unique position of the TWG to get the buy in of critical stakeholders in

Indonesia. However to shift brand commitment from CSR engagement to stepping up

sourcing guidelines proves a huge challenge.

39

Ensuring that the Indonesian industry follows up on its commitments towards the roadmap

calls for solid governance structures and operating routines. Setting these requires time, and

especially finding a neutral local convening partner to coordinate and lead it. IDH decided to

continue another year before exiting the tin program to agree with local stakeholders on

ownership of content and implementation of the 2016-2020 roadmap.

Local political realities and historical divergences between industry competitors were more

pronounced than anticipated. In 2016 IDH will also continue to build trust and confidence

between Indonesian mining companies about the pre-competitiveness, importance and

shared benefits of the 2016-2020 roadmap.

Conclusion and outlook

The lessons learnt in 2015 have led to several changes in IDH’s work in Indonesia.

The push for a landscape-based approach that started in 2015 continued into 2016. The ISLA, palm

oil, and pulp & paper programs agreed on sharing resources to jointly address rural livelihood

improvement and environmental issues in three focus geographies: Aceh, South Sumatra, and West

Kalimantan. A significant part of the future financial allocations to these programs will now be spent

on joint interventions in these areas. Other sectors, such as tropical timber, coffee, cocoa and also

aquaculture will play an important role in the landscape-based approaches in these geographic focus

areas. Either they are associated with environmental risks in the landscape or they can provide

alternative land-use options. The timber program, through its partner in Indonesia, has developed a

number of valuable lessons and tools for sustainable forest management, which can be used across

all landscapes. Integrations between the tin and the palm oil program are also visible, with the

planting of oil palm being an option for post-mining land-use. Across all programs, joint field trips and

program planning are already happening.

A lot of work remains to be done however to improve sustainability within the sector framework.

National platforms and strategies in the coffee, cocoa, and tin sectors were established in 2015 to

drive sector transformation, among others via the multi-stakeholder development and dissemination

of national strategies and farmer training curricula. Especially across sectors including smallholder

farmers, we will continue to support professional service delivery mechanisms and develop

innovative finance options as tools in improving rural livelihoods.

IDH will continue to strengthen the links between convening the global demand side and supporting

the Indonesian supply side of agricultural value chains. Especially in palm oil, coffee, and timber this

approach has proven to be successful. In palm oil, for example, IDH has supported the European

Sustainable Palm Oil (ESPO) project, which led in December 2015 to a European commitment to

achieve ‘100% sustainable palm oil in Europe by 2020’. This provides an excellent opportunity to link

the commitments of the industry to source sustainable palm oil to the sustainability efforts

undertaken by producers in Indonesia. In addition, IDH’s excellent network among individual buyers

and users of palm oil also allows us to help establish buying commitments from clients to Indonesian

producers in return for sustainability improvements.