Public and private actions for shifting towards sustainable production of beef and palm oil

Pablo PachecoLand and Poverty Conference

Washington, 2016

HIGHLIGHTS Slowdown of deforestation in Brazil but with growing supply of soy and beef Persistent expansion of oil palm in Indonesia with pressures on forests and peatlands More progressive regulations and institutional arrangements are in place in Brazil Less synergies between public and private initiatives and actions in Indonesia Lessons can be learned from Brazil about what is feasible and desirable Still much to do in how to promote sustainable production that work for all Some social and environmental risks have still not been addressed in Brazil

THE CONTEXT

We have entered an era of commitments from public and private actors Governments are committing to reduce their GHG emissions and LEDS Companies are committing to support deforestation-free supply chains Landholders are increasingly prompted to adjust to these commitments Available technologies and tools to monitor impacts at wider scales Still no consensus on definitions, targets to be achieved and timeframes Enforcement of progressive regulations to halt deforestation is crucial But it is also the efforts of companies to accomplish their commitments

THE CHALLENGE Halting deforestation is not just about forests because of the collateral implications It provides an unique opportunity to trigger intensification and sustainable land uses But, it also leads to some associated social and environmental risks Sustainable options require of investment and production models that:

- Make economic sense to all stakeholders involved in the short and long term- Equitably share the costs and benefits from new policy and market conditions- Support empowerment of local actors that embrace sustainable land uses

Solutions to deforestation have also to guide new agrarian transitions The outcomes have to be acceptable to wider society outside forest areas

OPPORTUNITIES AND RISKS There are some unique opportunities

- Stopping deforestation leads to reduction of GHG emissions and mitigate climate change

- Reduces investments in low production systems and stimulates recovery of degraded pastures

But there are also some likely risks- Leakage to other vulnerable ecosystems, for example

Cerrado or other Amazonian countries- Medium-scale ranchers locked in a situation with lack

of access to credit and in need to invest to intensify- Some social risks since smallholders can be excluded

from supply chains due to capacity constraints- Also environmental risks due to adoption of artificial

solutions for increasing productivity and profits- May also lead to retarded economic development of

less developed regions or municipalities

BEEF CATTLE IN THE BRAZILIAN AMAZON

Total cattle population

81Million heads

Slaughterhouses

95In the Brazilian Legal Amazon

Cattle population

in smallholding

s 20%out of total

BLA

Pasture lands

60%out of total deforested

lands

Cattle population

38%out of total in the country

Stocking ratio

1.0Head/ha

3corporate

groups control most of the supply

10.5

Million hectares

cultivated

Labor

3.0Million people

27.8Million tons

CPO

Smallholders

42%of total

cultivated area

~600 Palm oil mills

25corporate

groups control most of the supply

Indonesia

3.5Tons

CPO/ha/yr

53%global CPO

supply

PALM OIL IN INDONESIA

Farmers

2.1Million

households

PUBLIC AND PRIVATE ARRANGEMENTS IN BRAZIL

Soybean moratoria – stimulated soy expansion on pasture lands The black list of municipalities - “green municipalities” model A key step: the environmental rural registry [TAC and CAR] The cattle agreement – involving JBS, Marfrig, and Minerva Significant legal reforms - approval of the new Forest Code Policies: insurance, land use planning, finance schemes for LCA

LESSONS FROM THE ACHIEVEMENTS Clear legal frameworks as well as distribution of

responsibilities among different levels of government Enforce regulations consistently based on

transparent monitoring open to the wider society Governments at intermediate levels play a key role

in land registration, planning and enforcement Institutional mechanisms to make accountable to

individual producers and company buyers Economic policy instruments (e.g. public credit,

fiscal transfers) to support environmental regulations Agreements among key actors (e.g. retailers,

industry and state) and compliance monitoring

SOME UNRESOLVED ISSUES

Limited adoption of good management practices for cattle beef Intensification with artificial and costly systems based on chemical inputs Medium-scale and smallholders more constrained to adopt new systems Deforestation is linked to smallholders often still expanding in frontier areas Persistence of leakage and laundry due to complex cattle beef value chains High-risk areas often related to lack of titling, and poor infrastructure Lack of positive incentives for producers to overcome constraints

WHAT LESSONS FOR INDONESIA? Agreed map among state actors identifying “go” and “no go” areas Clear sanction mechanisms with disclosure of non-compliant producers Transparent monitoring with open access of outcomes to wider society Promote compliance of environmental law under unclear tenure rights

BUT greater attention should be placed on: Identification of measures to support intensification Positive incentives for supporting the reduction of yield gaps Design of frameworks to incentivize inclusive business models

WAYS AHEAD

Increasing control and incentives in the supply chains- Extend the traceability from direct to indirect suppliers- Monitor and rewards for improvements in performance- Technical assistance with flexible technological packages- Investments in productive infrastructure and logistics

Policies to lower risk and increase investment attractiveness- Land regularization and clarification of tenure rights- Land taxation with differentiated rates depending on use- Integrate environmental criteria in commercial lending

Jurisdictional and/or territorial arrangements- Systems to monitor social and environmental performance- Certification processes with independent systems of verification- Fiscal incentives to support good environmental performance- Policies of preferential procurement by processors/industry

KEY QUESTIONS What are the unfinished tasks of the Brazilian policy framework to support smallholders

after deforestation slowdown in the Amazon? What positive incentives are needed? What more synergies between the public and private sector are needed to facilitate the

transitions towards more sustainable land uses and intensive production systems? What are the initiatives implemented by the beef industry in Brazil to foster more

sustainable supply chains? What else is needed to foster adoption of good practices? Is it possible to integrate supply chain and landscape management approaches? What

innovative perspectives have evolved in Brazil with potential for scaling up? What are the public and private arrangements needed in Indonesia to halt deforestation

and peatlands conversion while supporting more inclusive business models?