HOW REA INTEGRATES SUSTAINABILITY IN ITS CORE PRACTICES THROUGH CERTIFICATION

Sustainability certification provides third party verification that national and international standards for environmentally and socially responsible palm oil production are being achieved and maintained.

Further, it encourages companies to improve their policies and practices by establishing higher premia for certified products. Our goal at REA is to create a culture of sustainability that is embedded in every level of the organisation, so that each department and every individual is aware of the importance of their role in achieving sustainability across our operations. To this end, in August 2014 the group recruited a plantation-based Head of Sustainability who has since built a team of sustainability officers responsible for monitoring each of the group’s estates and mills. This team expands as new estates are developed. The sustainability department is not just responsible for ensuring that the group complies with the standards of each certification scheme, but also provides regular in-house training on sustainability-related issues in an effort to ingrain sustainable working practices into the everyday operations of the group. The sustainability team also works with the heads of each department to develop key performance indicators for the workforce and sustainability agreements for third party contractors that are in line with our sustainability commitments.

Multiple certification schemes and standards focused on palm oil production exist, such as the Roundtable on Sustainable Palm oil (RSPO) standard and the Indonesian Sustainable Palm Oil (ISPO) standard. Further, general schemes and standards exist, such as the International Sustainability and Carbon Certification (ISCC) scheme, focused on zero-deforestation and transparent feedstock supply chains and measurement of greenhouse gas emissions. The group remains committed to ensuring that all of its plantations and mills achieve and maintain, amongst others, RSPO, ISPO and ISCC certification.

The Roundtable on Sustainable Palm Oil (RSPO)

The Roundtable on Sustainable Palm Oil (RSPO) is a multi-stakeholder organisation which aims to promote the production and use of palm oil in a way that is ‘legal, economically viable, environmentally appropriate and socially beneficial’. The group has been a member of the RSPO since 2007 and is committed to implementing the RSPO principles and criteria for sustainable palm oil production throughout the group"s palm oil operations. The group has contributed to the development of the RSPO by actively participating in the Biodiversity and (HCV) working group and the GHG emissions reduction working group.

REA Kaltim’s two oldest oil mills, Perdana (POM) and Cakra (COM), were first certified in 2011 along with their supply chains. Each year since, these mills and their supply chains have undergone assessments to monitor their continued compliance with the RSPO standard. In 2016, POM, COM, the COM kernel crushing plant (KCP) and their supply chains along with the group’s downstream bulking station successfully passed the full recertification audits that are required every five years. Their certification, therefore, remains valid until 2021. Annual surveillance audits were also successfully completed during 2018.

In 2017, the Certification Body SCCS awarded the group’s third oil mill at Satria (SOM) RSPO certification for its mill and KCP. Subsequently, there was a change in the regulations whereby a mill is no longer eligible for certification unless the estates that supply the mill are also certified in accordance with the RSPO principles and criteria. This led to the SOM certification being rescinded pending certification of the Satria estate that supplies it, although SOM’s KCP retained its certification.

As previously reported, there remains an outstanding HCV compensation liability at Satria estate regarding a small area of land that was cleared in 2008 prior to conducting an HCV assessment. The group’s proposal that clarifies the precise extent and location of the land in question and sets out how the group intends to compensate for the cleared land is being reviewed by the RSPO. SOM and its supply base underwent a stage 1 preliminary audit in November 2018 and a follow-up certification audit is now scheduled for December 2019.

A second HCV compensation proposal regarding approximately 959 hectares of land cleared at CDM has also been submitted to the RSPO in furtherance of the group’s commitment to achieve full RSPO certification for all of its operations. RSPO has responded positively to the objectives, timeline and proposed compensation set out in the plan. Once implementation has been agreed, the compensation payments will be settled over several years as part of a time-bound plan which was agreed with RSPO for RSPO certification by 2023.

RSPO Supply Chain Certification

In 2012, REA obtained RSPO supply chain certification (SCC). This allows the group to sell its RSPO certified CPO and CPKO to buyers committed to purchasing RSPO certified sustainable palm oil (CSPO).

If it can be proven that a specific batch of CPO or CPKO originated from an RSPO certified estate and mill, it can be sold as Identity Preserved or Segregated certified sustainable CPO or CPKO. If the certified product mixes with non-certified products in the supply chain, then it can be sold as certified sustainable CPO or CPKO using a mass balance system. This requires records to be kept that demonstrate that the volume of CPO and CPKO sold as sustainable palm oil does not exceed the amount produced by the upstream RSPO certified mills over a specified time period.

At present, the mass balance system is preferable for REA because it enables the group to continue to purchase FFB from independent smallholders who are not yet RSPO certified.

By continuing to engage with these smallholders, the group can assist them in improving their farming practices, which should enable them to obtain RSPO certification in the future. If REA had chosen to produce segregated CSPO, REA would have had to exclude these smallholders from its supply chain. For many of these smallholders, this would prevent them from obtaining income from their land due to there being very few alternative palm oil mills near enough to process their FFB. More information about how REA is working with smallholders to improve their practices can be found here.

International Sustainability and Carbon Certification

The International Sustainability and Carbon Certification (ISCC) is a multi-stakeholder initiative and sustainability certification system. The defining feature of the ISCC standard is that it requires that the net GHG emissions associated with the production and use of palm oil as a biofuel must be at least 35% lower than if the equivalent amount of energy was generated by burning fossil fuels. Due to the fact that biodiesel produced from ISCC certified palm oil is deemed to meet the requirements of the European Union Renewable Energy Directive (EU RED), EU member states can count biodiesel produced from ISCC certified palm oil towards their renewable energy targets.

REA’s established oil palm estates, two mills, and transhipment terminal first obtained ISCC certification in 2012. REA’s third mill obtained certification in 2015. Surveillance audits are conducted annually and recertification audits are conducted every five years. Following recertification audits, certificates were renewed in respect of all three of the group’s oil mills during 2018.

The majority of the ISCC certified CPO produced by the group is sold to the biodiesel market.

Indonesian Sustainable Palm Oil (ISPO)

The ISPO standard is a policy adopted by the Ministry of Agriculture on behalf of the Indonesian Government and is mandatory for all oil palm companies operating in Indonesia. REA Kaltim’s six estates and two mills first achieved ISPO certification in 2016 and have passed annual surveillance audits each year subsequently. The SYB mill and two estates obtained ISPO certification in November 2018. ISPO does not apply to immature or development estates.

Certified sales

The group uses the RSPO PalmTrace system, developed and managed by UTZ, for certifying transfers of oil palm products from mills to refineries. Sales of (CPO) and (CPKO) are registered in one of three available categories: “Identity Preserved”, “Segregated” or “Mass Balance”. RSPO PalmTrace also offers a marketplace and the option to register off market deals through a “Book and Claim” system for RSPO credits; such registration confirms that the applicable CPO and CPKO was produced by an RSPO certified company.

CPO cannot be sold with two certificates at the same time, so the group has to decide which certification should apply to each sale. The reason that little CPO and CPKO is sold under RSPO certification is that, in the context of the overall market for such oils, the group’s monthly production is relatively small which makes the logistics of finding a suitable buyer challenging.

Production and sales of certified CPO and CPKO are shown below:

  Tonnes 2018 Production 2018 Sales
    CPO   CPKO   CPO   CPKO 
  RSPO physical  25,058   8,376   3,001   – 
  RSPO credits  –   –   11,503   1,127 
  ISCC  118,828   –   88,131   – 
  Other (not certified)  73,835   7,719   89,590*   14,370 
  Total  217,721   16,095   192,225   15,497 
  *includes some certified CPO production that was sold without any sustainability premium            

ISO 14001

ISO 14001 is the international standard for an effective environmental management system that supports organisations in the development and implementation of environmental policies and objectives. The group maintains certification, which is subject to annual renewal, for all of the REA Kaltim and SYB estates and mills as well as the bulking station.

The group’s mills are rated annually under the Program for Pollution Control Evaluation and Rating (PROPER) at both provincial and national levels. A blue rating denotes that environmental management standards meet the regulatory requirements.

    Provincial   National 
  POM  Blue   Blue 
  COM  Blue   Blue 
  SOM  Blue   (awaiting POME permit)