Webinar Recap: Corporate Reporting Standard in The EU and Indonesia
December 9, 2022
November 24th marked the end of our webinar series on Corporate Reporting Standards. A big thank you to all attendees and experts for the interactive sessions. Time for a recap!
Over the course of the last months, we have worked on a project with Germanwatch called “G7-G20 Track 2 Dialog”, financed by the German Federal Ministry of Economic Cooperation and Development. This project aims at assisting the dialogue between civil society actors and political decision-makers to strengthen cooperation between the governments within the G7 and G20. We have mainly focused on Indonesia throughout this project, as it held the G20 presidency this year, and as it is one of the key suppliers to the EU.
First Webinar: The Impact of Corporate Reporting Standards
On Thursday, November 17, we kicked off the webinar series with a session focusing on the impact of the EU Supply Chain and Deforestation Law on Indonesian Businesses. In this webinar, we took a deep dive into a set of key EU legislative proposals, to assess in how far Indonesian businesses benefit from the new, emerging reporting framework – or may find it challenging to adjust. We also discussed what the EU can do to help Indonesian businesses dealing with this new reality. The following speakers were present to give their views:
- Dr. Elisabeth Hoch (Senior Advisor at Climate & Company)
- Louise Simon (Analyst at Climate & Company)
- Pak Timer Manurung (Chairman of Auriga Nusantara)
- Sonya Dyah (CIFOR Researcher)
- Prof. Nyoman Pujawan (President of ISCEA)
Dr. Elisabeth Hoch introduced us to the Green Deal and its implications for fighting deforestation. Following this, Louise Simon gave a presenatation about two closely related policy proposals of the EU, the Corporate Sustainability Due Diligence Directive (CSDDD) and the Regulation on Deforestation-free Products. The CSDDD aims to ensure that companies comply with standards through a due diligence process, which is visualised in the figure below.
Source: OECD (2018)
The Regulation on Deforestation-free Products strives to minimise the EU’s consumption of products linked to deforestation and forest degradation. The focus is on seven risk commodities: cattle, cocoa, coffee, palm oil, rubber, soy, and wood, as well as derived products (such as beef, furniture, or chocolate), whilst other commodities, such as maize, will potentially be added in the future. These products can only be exported from the EU or imported to the EU if they are deforestation free and in compliance with legislation in the production country.
Subsequently, Pak Timer Manurung enlightened us on the aspects of land use and forestry components for achieving sustainability. He warned that palm oil farms, timber plantations, and mining activities are currently expanding in Indonesia. Both plantations and agriculture are major causes of deforestation. What makes it increasingly difficult to fight these processes, is that the palm oil business is dominated by a few major industrial players. The lobbying power of these dominant powers is a potent force to be reckoned with in the fight against deforestation.
Following these interesting insights, Sonya Dyah talked about her research on increasing the sustainability of Indonesia’s palm oil industry. Indonesia is a vital player in the palm oil business, as it is both the largest producer and exporter as well as largest consumer of palm oil. The conclusion of her research is that making the palm oil industry more sustainable is not a sole responsibility for producers. Commitments of both consumers and producers are needed. Sonya Dyah also warned that as almost all of the palm oil that is traded comes from small farmers, it is likely that they will face various challenges in implementing these policies later.
Afterwards, Prof. Nyoman Pujawan addressed the potential challenges and opportunities for Indonesian exporting businesses of the proposed EU regulations. He mentioned that the exact operational definition of deforestation has not been set and as it is still unclear how the process of due diligence will be conducted. As such, his main concern is that not every company will be ready for this new regulation. Moreover, he warned that not all products from different countries will receive the same treatment from the EU. Good assessment criteria, clarity about certification, and guarantees that the rights of all parties are weighed fairly, is essential going forward.
Then, all the presenters participated in a panel discussion on how the cooperation between Europe and Indonesia on supply chain matters can be improved. The panellists agreed that higher levels of cooperation are required to help Indonesian producers. Further, Indonesian companies should have time to understand the EU legislation and implement this in their own businesses. An important point that the Indonesian stakeholders brought up is that different commodities have a distinct effect on biodiversity and should be treated indivdually.
Second Webinar: The Importance of Corporate Reporting
On Thursday, November 24, the second session of the webinar series on why climate and nature reporting is crucial for the CBD Global Biodiversity Framework and Indonesia took place. In this webinar, we talked about the international disclosure landscape and what role it can play to accelerate Indonesian deforestation commitments.The following speakers were present to give their views:
- Katharina Brandt (Senior Policy Advisor at Germanwatch)
- Katharina Erdmann (Analyst at Climate & Company)
- Desi Adhariani (Lecturer at Universitas Indonesia)
- Henry Purnomo (Senior Scientist at CIFOR)
- Teguh Triono (DSNG’s Sustainability Engagement Lead)
In the introduction, Katharina Brandt emphasized the importance of forests for our planet. Not only do forest host 80% of the animal species and 1.6 billion people, they also absorb one-third of total carbon emissions. As Indonesia, together with Brazil and Congo, is one of the main deforestation countries, it is crucial to examine measures to tackle the current deforestation rates.
Katharina Erdmann then gave an overview of the international disclosure landscape and its importance to protect the climate and nature. She argued sustainability disclosure is a precondition for “shifting the trillions” and for identifying environmental risks. Current initiatives around sustainability disclosure like EFRAG (European Financial Reporting Advisory Group), ISSB (International Sustainable Standards Board), and TNFD (Taskforce on Nature-related Financial Disclosures) are a step into the good direction, but do not suffice in providing proper disclosure. With the COP15 in Montreal coming up soon, Katharina Erdmann states that this COP should become the Paris for biodiversity, as the post-2022 Global Diversity Framework should be adopted there.
Desi Adhariani lectured us on the initiation of biodiversity disclosure from the Indonesian government. She and her research team observed that Indonesian companies are starting to realize the importance of biodiversity. Another outcome of her research is that the size of the company’s board has a positive effect on the company’s biodiversity disclosure. As main takeaway for us, she emphasized the “local wisdom” in the construction of biodiversity disclosures in Indonesia. In the end, the experts around biodiversity are the local people, she argued. Moreover, Desi Adhariani stressed the need to increase accountability for Indonesian companies and the potential of using machine learning and social media to capture biodiversity information.
Then, Henry Purnomo provided us perspectives from both the public and private sector in Indonesia. He argued that public and private sector commitments towards reducing carbon emissions and deforestation matter. To reach zero deforestation, however, commitments must involve radical shifts in current policy, with stricter law enforcement, among others. Lastly, he talked about Net FOLU (forestry and land use) Sink 2030. This plan of the Indonesian government aims to improve the absorption level of land, to balance it or even make it higher than the emission level of the FOLU sector in 2030.
At last, Teguh Triono gave us insights in how Indonesian private companies currently disclose and report deforestation and biodiversity information. This contextualized the discussion we had beforehand and gave a practical view of the problems Indonesian companies are facing regarding the need to meet regulatory standards. A problem that Teguh Triono mentioned is the wide range of different standards, each requiring different elements, that are implemented by his company. In order to ease implementation of the upcoming policies, this process needs to be simplified, to avoid a ‘bureaucratic nightmare.’
Also in this webinar, we ended with a panel discussion. This time the question was: is Target 15 of the proposed Global Diversity Framework an effective measure to combat deforestation? Teguh Triono stressed that for Target 15 to work, the measures should be implemented by all stakeholders. Disclosure could help, but it is also important to look at what people at an individual level need for their livelihood. Henry Purnomo highlighted the excessive costs of assessing the nature level. Moreover, he warned that medium-scale companies are hard to incorporate, as a lot of corruption is going on within these forms. Good governance in the form of a watchdog could be a solution to tackle this issue.
We look back with immense joy on the webinar series and would like to thank the attendees and panellists once more for their interesting insights. We would like to highlight some key takeaways:
- Indonesian companies need help with the implementation of the policy proposals of the EU. This will both help the Indonesian companies adjusting to the new reality as well as decrease deforestation rates.
- The EU should carefully examine segmentation options for different commodities. Cocoa, palm oil, and wood, for instance, all ask for individual regulatory approaches, rather than one-size-fits-all policies.
- More caution should be given to enforcing the potentially implemented deforestation regulation. Good governance at the Indonesian national level is essential to successfully fight deforestation.
More information and resources:
For the first session, you can find the presentation materials here, and the recorded webinar here. For the second session, you can find the presentation materials here, and the recorded webinar here. If you have any questions or suggestions regarding this topic, feel free to reach out to us! We would love to get in touch.
Picture credit: Giacomo d’Orlando / Climate Visuals