The importance of implementing ESG in supporting the sustainability of the palm oil industry

Jakarta, 6 December 2021 — The palm oil industry in Indonesia is one of the strategic commodities that makes a major contribution to the economic and social growth of society. Palm oil is still one of Indonesia's mainstay commodities and is the largest foreign exchange.

As mentioned by the Ministry of Trade, the government encourages a sustainable palm oil industry, which must be built by prioritising a balance between Environmental, Social, and Governance (ESG) aspects. This is in line with the commitment to sustainable development as regulated in the National Medium-Term Development Plan (RPJMN) 2020-2024.

To ensure the sustainability of the palm oil industry, the government issued various regulations that focus on good governance of oil palm plantations. One of these is Presidential Instruction No. 6 of 2019 concerning the National Action Plan for Sustainable Oil Palm Plantations (RAN KSB) for 2019 - 2024.

In accordance with the government's commitment, Yusup Lemanah, PwC Indonesia Partner expressed his opinion during a webinar session held by PwC Indonesia entitled ESG Value Creation Journey in the Palm Oil Industry, "Along with global expectations for industry players to carry out sustainable and responsible business practices, we view the importance of understanding by the plantation industry players, especially those engaged in the palm oil industry, on environmental, social and governance aspects in their operational activities. Therefore, industry players must immediately adjust their policies and strategies to comply with global ESG standards and then apply them in the entire chain of their operational activities.”

What would be the challenges to ensure the success of the implementation of ESG?

Many factors influence the success of ESG implementation as stated by Lucas Kurniawan, President Director at PT Austindo Nusantara Jaya Tbk who said, “The implementation of ESG is not only the responsibility of one function but is the responsibility of every employee. The direction from top management is also the key to the successful implementation of ESG coupled with how ESG is reflected in the company’s values. The company must also have a reliable reporting system and platform to support the data for material topics that we want to present and discuss in our sustainability report.”

Olivier Tichit, Director of Sustainable Supply Chain di PT Musim Mas, said, “As a plantation player, we have to manage our place in the landscape. Thus, public reporting is unavoidable and transparency is really important. We have to show what we are doing and how we are improving our performance, and show it on the report. Reporting shows transparency, transparency fosters trust, and trust is good for business.”

In line with PwC's commitment to continue to build trust and deliver sustainable results, we must prepare for this transformational journey and the need for collaboration of all stakeholders, including the government, civil society and local citizens, in driving the success of sustainable ecosystem development. Readiness to implement this commitment will also contribute positively to both the Indonesian economy and society.