Agribusiness Conference Promotes Corporate-Smallholder Partnerships

In October 2014, the Department of Agribusiness and the Faculty of Economics and Management at Bogor Agricultural University came together with the Indonesian Agricultural Economic Community (PERHEPI) to host a conference on the benefits of close ties between palm oil companies and smallholders. The experts at the conference lectured and led discussions on the theme “Partnership Programs between Palm Oil Companies with Smallholders to Increase National Income.” Many of the best practices they promoted are similar to those Asian Agri has maintained for more than 25 years.

The conference participants noted that the growth of Indonesia’s vital agricultural sector has been hampered by the poor conditions under which smallholders live, although the labor and dedication of these individuals contribute substantially to the nation’s economic development. Many smallholders experience economic discrimination, in that they are forced to accept prices for their products that are predetermined by brokers. In contrast, Indonesia’s palm oil production companies, including Asian Agri, have maintained strong partnerships with smallholders for the benefit of all stakeholders.

Asian Agri, one of the RGE Group of natural resources-development corporations under the direction of chairman and founder Sukanto Tanoto, has worked to develop positive plasma scheme partnerships with smallholders since the late 1980s. Like other progressive palm oil companies, Asian Agri provides agricultural, plantation management, and entrepreneurship training programs for its smallholders. In addition, Asian Agri’s emphasis on environmentally sound business practices led its team to offer premium payments in excess of $200,000 USD to its smallholders in Jambi and Riau Provinces who obtained certificates of sustainability.

Relationships with local village cooperatives, as well as with forward-thinking companies such as Asian Agri, have translated into profits and a higher standard of living for numerous Indonesian smallholders. The cooperatives regulate sales and promote proper agricultural techniques, enabling the farmers to generate a steady income stream each month. The Association of People’s Nucleus Company the Palm Oil Growers (AspekPIR) recently presented Asian Agri with an award in acknowledgement of the company’s efforts to improve the welfare of smallholders, particularly those working the land in Riau Province.

 

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Doing Well While Doing Good

Apical’s Commitment to Forests Apical Group Ltd., one of Indonesia’s chief processors and exporters of palm oil, is part of the RGE Group established by entrepreneur Sukanto Tanoto. Under Mr. Tanoto’s leadership, Apical has worked to show the industry that ensuring the greater social good also benefits bottom-line profits. Every entrepreneur should also be aware of the interconnectedness between social good and bottom-line profits. In today’s context, doing well in the business is not enough – every company should strive towards both doing well and doing good.

In September 2014, Apical announced its support for the provisions of the New York Declaration on Forests, a document signed during the United Nations Climate Summit held that month. Among other means of engagement, the summit offered an opportunity for the international private sector to discuss and promote business-based strategies for combating climate change. The New York Declaration includes a goal of cutting deforestation in half by the year 2020 and completely eradicating it by 2030.

The measure drew expressions of agreement from a broad spectrum of business and government leaders, as well as from indigenous communities, who are affected the most by the problem. Some experts noted that the document attempts to encourage businesses to build environmental sustainability into their existing value chains, and to realize that doing so can increase profits as well. Some corporations, such as Sukanto Tanoto’s Apical, have already demonstrated their understanding of these principles. Mr. Tanoto’s three-fold philosophy of doing good for the company, communities, and the planet is the guiding principle of Apical and the other natural resources manufacturing firms within RGE Group.

Apical maintains a membership in the Roundtable on Sustainable Palm Oil, and it is a founding member of the Business Council for Sustainable Development Singapore. The company’s history reflects its long-term focus on contributing to the social infrastructure of the communities in which it does business, and to pioneering solutions for food security and forest conservation. In addition, the company has pledged to monitor sustainability practices along its entire production and distribution chain.

Asian Agri Refuses to Source Illegal Palm Oil

As a successful entrepreneur owning large corporations, it is important to receive certifications from trustworthy third parties to ensure your credibility in quality and practices. It may not be an easy or fast process but it is a required step to ensure your accountability to the stakeholders. Asian Agri, one of the natural resources production companies under the direction of the RGE Group and its founder, Indonesian businessman Sukanto Tanoto, operates with a production capacity of 1 million tons of palm oil annually. Asian Agri, which is among the world’s largest manufacturers in its market sector, has committed its efforts to sourcing only legally obtained palm oil product. The company has recently placed an emphasis on requiring legal certification regarding the provenance of all freshly harvest fruit product from each third-party supplier and wholly independent farmer with whom it conducts transactions.

As part of its partnership with the local communities with whom it does business, Asian Agri has provided close to 29,000 smallholder families who farm its lands on Sumatra with a wide range of social and economic benefits. Of the company’s 160,000 hectares of total land area, some 60,000 are developed in cooperation with smallholding families who participate in its Plasma/KKPA programs. Mr. Tanoto remains highly engaged with the day-to-day operations of his companies and has charged each of them with maintaining a high level of transparency and responsiveness to their smallholders and to the public.

Legally harvested palm oil

Asian Agri has stepped up its focus on environmental good stewardship through increased attention to the problem of illegal palm oil entering the market. Through stringent attention to documenting that the produce it acquires is completely legal, the company hopes to build increased sustainability into the supply chain. Asian Agri also advocates for the closure of illegal palm oil plantations and for added efforts to protect forest land in the regions where it operates.

Illegal palm oil production and sales in Indonesia have created an economic system that will not be easy to eradicate. Several non-governmental organizations have expressed concern about the fact that some illegal palm oil continues to seep into the products of a number of high-profile manufacturers. Yet Asian Agri and several of its fellow palm oil producers plan to dedicate continued efforts to prevent deforestation, illicit land use, and environmental degradation.

 

Sukanto Tanoto – Sustainable Entrepreneurship for the 21st Century

Sustainable Palm Oil

Sukanto Tanoto, who directs the work of multiple companies under the $15 billion corporate umbrella of the RGE Group, is an Indonesian-born entrepreneur who worked his way to success through his determined efforts and dedication to constant education and self-improvement. Mr. Tanoto continues to emphasize these values throughout his businesses and the philanthropic work of the Tanoto Foundation, which aims to provide educational assistance and to empower workers, students, and others in Indonesia, Singapore, China, and beyond Southeast Asia. In addition, he maintains a strong focus on the long-term sustainability of his companies and the communities in which they do business.

 

Sustainable Palm Oil

Sukanto Tanoto believes that environmental sustainability and a focus on the needs of all stakeholders are essential to long-term profitability and good corporate citizenship. His company Asian Agri, which is based in Indonesia, maintains facilities in three locations on Sumatra, partnering with local smallholder farmers to manage some 60,000 hectares of palm oil plantation land. One of the country’s largest such operations, Asian Agri, works to harvest its palm oil product in a manner that supports the conservation of the environment and empowers local farmers, as well as other considerations of the greater social welfare.

Under Sukanto Tanoto’s leadership, Asian Agri has delivered numerous economic, social, and educational benefits to its nearly 30,000 partner smallholder families. In addition, Mr. Tanoto has worked directly with Amanah, a smallholder palm farmer group, assisting members in earning certification in sustainability practices. In 2013, due to his support, Amanah became the first organization of Indonesian smallholders to receive such certification.

Recently, in an effort to encourage sustainable palm production among farmers, Asian Agri shared premiums or extra proceeds from exports totaling $220,000 with the representatives of Village Unit Cooperatives (KUD) in the Jambi and Riau provinces. The products produced through these farming methods have been well-received in the international markets.

Freddy Wijaya, general manager of Asian Agri, said that farmers have been encouraged to plant sustainable palm not only for the opportunity to obtain premiums, but also to achieve long-term sustainability.

European countries tend to favor sustainable palm oil because the production process does not cause environmental damage. Farmers have found more market certainty in Europe, where they have a wider margin and can cover greater production costs.

International authorities, writing in peer-reviewed journals, have described this type of sustainability entrepreneurship as providing responsible stewardship of resources, as well as long-term opportunities for worker advancement, in addition to the traditional entrepreneurial emphasis on profits. A concentration on sustainability also tends to drive companies in the positive direction of increased innovation in products, processes, and services.