Used in various production of consumer goods from chocolate to instant noodles, detergent to shampoo, palm oil is the most consumed vegetable oil globally with increasing demand and unprecedented consumption and production growth. Palm oil, which is one of Indonesia’s biggest export commodities, is predicted to contribute to more than 14% of forest loss over 2005-2015, totaling 117,000 hectares annually. In light of the recent Paris Agreement and ongoing UN Sustainable Development Goals (SDGs), pressure is growing on public and private sectors as well as the government to halt forest loss caused by palm oil production.
Palm oil supply chain is associated with many environmental challenges, such as biodiversity loss and greenhouse gas emissions. Capitalism-based economy does not properly recognize these environmental costs in business model and policymaking. Although markets for conservation and ecosystem services are available and widely recognized as one of the solutions to minimize negative environmental impacts, they have difficulties scaling up because they are not adequately connected to the market. As a result, these conservation efforts likely depend on insecure funding like philanthropy or corporate social responsibility (CSR) budgets that are short-term and produce limited impact.
Delivering large-scale, transparent, and impactful conservation and restoration financing efforts require structural change. To date, the sustainable palm oil cultivation sector expands its support to a widening range of sustainability commitments and supply chain actors. Contributing to this effort, Lestari Capital has taken a role in bridging the environmental, finance, and commodity sectors. Lestari Capital provides the channels for private companies that seek to link specific sustainability goals and associated high-value conservation projects in need of funding.
Earlier this month (8/4/2021), Lestari Capital launched the ‘Rimba Collective’ initiative that aims to deliver US$ 1 billion to protect and restore forests in Southeast Asia over a 25-year duration. Poised to be one of the largest private sector-enabled forest conservation initiatives, Rimba Collective is backed by consumer goods giants PepsiCo, Nestlé, Procter & Gamble, and palm oil trader Wilmar International. The initiative aims to protect and restore over 500,000 hectares of tropical forests, starting in Indonesia, before expanding to other Southeast Asia countries.
As part of its efforts to create transformational change in supply chain, Rimba Collective is the scheme where conservation funding is intended to become an embedded cost of doing business. The companies support Rimba Collective in terms of funding which distributes finance to conservation projects. Payments are made by the companies in a long term, expectedly up to 25 years, based on independently verified conservation outcomes. Companies may claim these outcomes against their sustainability commitments in the proportion of funds they contributed. Projects funded by Rimba Collective will be prioritized based on the potential to protect and restore large, continuous areas of natural ecosystems and critical habitats, such as primary rainforest, mangroves, and peatland. All projects shall undergo the third-party verification measuring three key impacts: biodiversity benefits, social benefits, and climate and area-based benefits.
Rimba Collective is designed to fulfill a range of corporate sustainability commitments such as ‘no deforestation, no peat, no exploitation’ (NDPE) compliant supply chains, corporate net-zero targets, and Science-Based Targets (SBTs). According to Michal Zrust, Co-founder and Chief Sustainability Officer of Lestari Capital, this mechanism directly complements existing efforts to build the palm oil supply chain more sustainable. Linking conservation funding directly with company operations has the potential to be a game-changer for forest protection and restoration, he said in the press release.
The initiative targets to expand to more corporate partners and beneficiaries when the initiative becomes operational at the end of 2021. It could potentially be applied to other forest-risk commodities such as soy, rubber, coffee, and timber. As new companies join, the project portfolio expands, and hopefully, so does the impact on biodiversity, climate, and communities.
For further information on Rimba Collective, visit their website.