The governance arrangements of sustainable oil palm initiatives in Indonesia Multilevel interactions between public and private actors

• Such initiatives include the development of government standards for sustainable palm oil, legislation related to the setting aside of conservation areas, a ‘wave’ of provincial and district Green Growth programs, a focus on jurisdictional approaches, and efforts around smallholder registration. These have been accompanied by the emergence of a number of political ‘champions’ in the form of provincial and district leaders.


Introduction
The palm oil sector in Indonesia has seen the adoption of zero deforestation commitments by some large companies in the form of various pledges around No Deforestation, No Peat and No Exploitation (NDPE).At the same time, at the national and subnational levels, new governance arrangements are emerging for sustainability initiatives involving government, the private sector and other non-state actors.Our review (Luttrell et al 2018), which was carried out in 2016-2017 explored the interactions between public and private sectors in a selection of these sustainability initiatives in three provinces and four districts: Kotawaringan Barat, Suruyan in Central Kalimantan, Ketapang in West Kalimantan and Musi Banyuasin in South Sumatra (see Table 1).We interviewed 154 respondents: 79 government, 54 NGO, 17 privatesector and 3 donor respondents at the national and subnational levels.The key question was the ways in which private standards and actors are pushing sustainability reforms and the ways in which related initiatives are likely to bring some degree of transformation in the sector.
There are a number of discourses around sustainability of palm oil in Indonesia.These include hopes that the sector will support the expansion of palm oil by taking care of environmental protection while simultaneously contributing to improve infrastructure, economic growth and poverty reduction.At the same time there are DOI: 10.17528/cifor/006901 | cifor.orgCIFOR infobriefs provide concise, accurate, peer-reviewed information on current topics in forest research concerns over the dependence of the rural economy on a single commodity, and about food security, the high concentration of land in a few companies and associated land conflicts and environmental impacts.Significant governance challenges have been identified.There is little coordination between sectoral agencies and levels of government, which has resulted in a significant area of overlapping permits.Palm oil expansion has been related to the patronage connections between officials and the business sector (McCarthy 2011, Li 2017).This, in turn, has led to the development of plantations without social and environmental safeguards.The ongoing debate around the relevance of Indonesia's oligarchs (Mietzner 2012) is pertinent here, as this legacy is said to persist heavily in the business sector (Gellert 2015), which has led to the continued influence of vested interests in maintaining business-as-usual (Wakker 2006).

The range of hybrid interactions in sustainability initiatives
These sustainability initiatives have created new forms of governance relationships, and most notably a shift in the types of functions that were once the sole domain of the state.Some initiatives are independent and formulated outside of the state, while others interact with, and support or undermine state actions.At each jurisdictional level, a range of agendas and several initiatives are aligned with each other.This situation is captured in the notion of 'hybrid governance,' which has emerged to explain new forms of governance involving interactions of different constellations of NGOs and private sector actors with the state.The new sustainability initiatives are shifting the boundary between those actions considered to be within the state's remit and those for which it is acceptable for non-state actors to be responsible (Bartley 2007).The notion developed on the one hand out of a dissatisfaction with state regulatory control and the suggestion that hybrid institutions bring new opportunities for policy and service delivery to achieve goals that the public or private sectors would struggle to achieve alone (Agrawal and Lemos 2007).On the other hand, there are concerns that private actors entering into roles that have traditionally been those of the public sector may act to serve certain interests in a nondemocratic manner (Biermann and Pattberg 2008).
Our interviews reflected this dichotomy.Some actors outside the government expressed the view that service delivery/implementation can be carried out more effectively and efficiently by non-state actors.On the other hand, concerns were raised about legitimacy and that the private actors may be stepping outside of their authority into areas of state function and thus undermining state capacity and accountability.Lambin et al.'s (2014) typology of interactions captures the range of optimism and pessimism over the outcome of hybrid governance through proposing categories of interactions as to whether they are "complementary" to, providing "substitution" for or are "antagonistic" to each other.
In terms of complementarity, we see examples where private actions are filling implementation gaps (stakeholder registration), where learning is occurring between the public and the private realms (around High Conservation Value [HCV]) and where state regulations are reinforcing private standards (such as ISPO).In terms of the latter, we

Features encouraging "complementarity" in hybrid initiatives
By examining the initiatives, we can identify a number of common features concerning the design of sustainability initiatives and the interaction between the private and public sectors.

State function is needed to facilitate the implementation of private standards
The authority of the state in implementation remains strong and plays a fundamental role in providing and enforcing regulations, to managing implementation and to providing oversight.A focus on jurisdictional approaches and on state initiatives such as ISPO and KEE (the recognition of a new conservation area status) has brought attention to the role of the state and to the potential complementary functions of non-state initiatives.All initiatives reviewed rely on the presence of state capacity and processes to operate, or are vulnerable to being blocked by its absence.One of the greatest barriers faced by the implementation of private standards is lack of integration into government systems and/ or deficient regulations and enforcement.Until recently, there has been little corporate interest in co-regulation or integration with government systems.For example, in the early days of their development, few international processes around private standards development (HCV, HCS1 , RSPO) engaged significantly with the Indonesian Government.This has arguably led to confusion and some push-back (see the collapse of IPOP and the government's rejection of RSPO) (Hospes 2014).

The shifting roles of non-state actors
Across the initiatives, NGOs and civil society actors have adopted two distinctive, and sometimes, overlapping, roles.On the one hand, there are groups that play an advocacy role campaigning and maintaining pressure on the sector.On the other hand, some intermediary facilitators work closely with government and/or companies to build capacity and push certain ideas.At the subnational level some alliances are developing between the private sector, local governments and political leaders (governors and bupatis).Similarly, there is a wide variation of NGO-company relationships, of confrontation followed by collaboration, critical advocacy, collaboration to develop and monitor standards, and those providing services or consultancy inputs.

A reliance on non-state actors in an oversight role requires capacity building
Multistakeholder processes have become an important part of hybrid governance, and in particular through their role in generating credibility as a result of introducing a perception of independence.Indeed, many of the initiatives rely on local NGOs that can monitor commitments and maintain pressure on the sustainability of the supply chain.However, this capacity varies, and in some regions, is limited.In West Kalimantan, NGOs have successfully used the RSPO complaints systems to hold various RSPO members to account.In South Sumatra, the capacity of NGOs to engage with the RSPO complaints system is more limited.In Central Kalimantan, NGOs experience with the RSPO complaints mechanism was that it was slow and ineffectual.
Advocacy NGOs had some success in pushing zero deforestation objectives at the international level.However, they were less successful in tackling governance and enforcement barriers at the national level and in getting companies to voluntarily and consistently implement standards.As there have traditionally been few formal ways for NGOs and other non-state actors to work with the executive, interaction has tended to take place through informal or personal means.Recently some line ministries have opened to a wider range of academic and civil society input.This trend is also seen at the provincial level with the creation of various multistakeholder forums and attempts to coordinate NGOs.

Non-state actors substituting for state function
Few, if any, of the initiatives reviewed involve direct relationships between the companies and government.Most rely on intermediaries in the form of NGOs and research organizations to facilitate the relationship between companies and government, and to play capacitybuilding roles.Thus, the role of non-state actors cannot be simply reduced to the pressure they exert on companies; they also actively design emerging institutions.These organizations are positioning themselves in a middle ground between international standards and the state, for example, some proactively sought to work with, and assist, governors' advisors who had already been engaging with jurisdictional approaches.Reliance on intermediaries does bring challenges due to the risk that initiatives driven by intermediaries collapse after their involvement ends and because of the practicalities of scaling out.In addition, as donors or international NGOs/foundations fund many of the initiatives, some local government stakeholders perceive them to be based on outsider agendas.This, in turn, creates challenges for ownership.The introduction of a new form of intermediary non-state actor has added complexity to the picture: many of these intermediaries are profit-making organizations playing more of a service-provision role and are not responding to demands for accountability or with a constituency base.
Many initiatives work predominantly through advisory teams associated with governors or regents.In West Kalimantan and South Sumatra, these special advisors play an important role in influencing the governors and enabling them to engage internationally around issues of sustainability.These 'champions' benefit from international exposure, which enhances their reputation and differentiates them from other politicians.This brings crucial political support for the initiatives and can bring rapid action.However, it does raise the challenge of how to avoid political manipulation and how to survive short electoral cycles when key individuals change position.
A lack of direct engagement with the sector agencies does risk a lack of integration into overall government systems.
It also raises technical issues of low capacity as well as the risk of reduced ownership.Some experience suggests that initiative proponents who have worked together with government through formal processes tend to have more chance of success than those who prepare the 'product' and then pass it to government for implementation.

Complementarity between the national and subnational levels
New alliances are developing between provincial governments and companies, and between the Ministry of Forestry (MoEF) and advocacy NGOs, all of which are relevant to the national-subnational dynamics.Indeed, there is some evidence of antagonism and unease from the center about the regions gaining too much power around the land use debate.At the same time, some companies that have announced plans to implement their commitments have been accused by the MoEF of challenged by government for operating outside their authority over land classification.
Others view these dynamics as part of the wider power play between the national and the subnational levels and concerns of the center about maintaining power over the regions.

The challenge of replication: The need for incentives
The development of pilot initiatives such as those occurring around jurisdictional approaches is important as a proof of concept.Furthermore, it signals to the national level and the market that local government is motivated around sustainability objectives.However, there has been some criticism that only the 'easy' sites are being chosen to enable 'NGO showcasing' rather than focusing on the challenges of more complex scenarios and the question of transferability.
Incentives are a key part of creating interest and maintaining momentum behind initiatives, particularly for jurisdictional approaches.Those promoting jurisdictional approaches are in danger of raising expectations without full communication of the hurdles and the potential costs involved.Lack of capacity at the local government level is noted as a significant challenge.A key issue is the amount of capacity and financial input needed by both the state and companies.For example, despite the identification and protection of HCVs being a requirement of RSPO and therefore linked to the incentive of market access through RSPO compliance, the question of who will pay for HCV setasides is voiced as a common concern.

Conclusions
Some of the emerging sustainability initiatives are helping to implement immediate and specific sustainability objectives; they fill implementation gaps, bear some operational costs and speed up regulatory change.However, movement of such changes through the policy process and implementation take time.This delay is combined with reluctance from some elements of the private sector and slow action from some parts of government.So, it is yet unclear how much selected individuals and companies acquiring 'sustainability champion' status produces a trickledown effect that permeates change throughout the system.Thus, there is a key question as to whether these are transformative actions or ad hoc responses to particular market pressures.There are suggestions that they are creating showcase examples around specific interventions that might work at one scale but do not necessarily shift overall political transactions.
Our analysis stresses the importance of designing sustainably initiatives with reference to the wider political economy of the sector and the agendas involved, to avoid the initiatives themselves perpetuating the status quo.Lambin et al. (2018) point out that zero-deforestation initiatives by individual companies may fail to target the forms of deforestation that are most difficult to address, particularly those associated with illegality or poor forest governance.Concerns have been raised, for example, over the way i) that ISPO risks becoming a tick box exercise that legitimizes poor process by not addressing underlying problems in permit allocation and FPIC 2 ; ii) that the Oil Palm Plantation Fund has predominantly benefitted a handful of major players in the sector; iii) that pressure for solving the legality issues may encourage a 'quick fix' through the formalization of land tenure; iv) that the setting aside of HCV areas alone does not help address more fundamental failings in the land classification and spatial planning processes; or v) that smallholders' registration and mapping do not lead to the triggering of a state response but rather lead to an increased expectation that the private sector will perform this role.
To bring about the transformation, interactions would need to weather political cycles and trigger more and higherlevel cumulative changes.A focus on specific sustainability 2 Free, Prior and Informed Consent issues and market-based standards can act to divert efforts from more fundamental reform processes across the landscape of the sector.It is yet unclear whether the new public-private initiatives we see emerging are engaging around on-going nationally embedded processes for reform.Such processes include debates around agrarian reform, addressing state revenue loss, license review and social forestry.Aligning sustainability initiatives with these agendas is crucial to avoid undermining them.

Recommendations
• Mixing private and public actors and institutions in the design of sustainability initiatives needs attention to processes of legitimacy.This includes ensuring clarity over the boundaries between the state and non-state actors in terms of their functions and mandate and a grounding of this in a constitutional or legal basis.

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Sustainability initiatives need to engage in more problematic governance contexts rather than remaining as showcase examples.

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Integrating initiatives into executive systems can help weather short and uncertain electoral cycles, particularly for those with long time scales or that require action across multiple jurisdictions.

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Non-state actors may act more effectively in some cases by strengthening the capacity of public authority and accountability; in other cases, their actions can weaken or undermine such public systems.

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Initiatives based on the commitment of individual champions that are not embedded in wider bureaucratic systems may face sustainability challenges.

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Non-state actors can play distinct roles, -from intermediaries implementing the initiatives to independent oversight; these roles require different degrees of legitimacy due to their different mandates.

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Non-state actors and institutions are likely to require capacity building in order to effectively assist in carrying out state functions.Not to address capacity needs can significantly compromise the effectiveness and legitimacy of the initiatives.

Table 1 . A range of initiatives reviewed Policy stage Initiative reviewed
the role that ISPO is playing at the national level as well as the various subnational regulations regarding conservation set-asides for palm oil.These provide an example of the state designing legislation in response to non-state actions and strengthening regulations for the adoption of voluntary standardsboth of which encourage private standards to converge.Complementarity is also seen in the example of government participating in multistakeholder processes and collaborating with non-state actors over sustainability issues such as seen in the design of HCV policies and the development of 'landscape management' programs by various companies in Indonesia.
(Jong and Jacobson 2017) (BPDP or CPO Fund); traceability systems for smallholder integration and access to markets through certification, smallholder financing; fiscal incentives for local government Oversight, transparency and monitoring:Multistakeholder processes (Sekber process, West Kalimantan; MuBa SATGAS process); and multistakeholder forums (associated with the ISPO process and Forum Kelapa Sawit Berkelanjutan Indonesia[FoKSBI]) a The Sustainable Trade Initiative b Institut Penelitian Inovasi Bumi can point toIn substitution, the state takes over a function previously fulfilled by a private actor or vice versa.This is encapsulated in the process around the development of the regulation for Kawasan Ecosystem Essential (KEE), where private-sector standards are being adopted into law (here, the definition of conservation areas matches HCV's six categories) and in the development of ISPO, which is intended to replace RSPO.Conversely, in the implementation of district-level regulations such as Seruyan's district-level regulation on HCV set-asides, non-state actors are deciding not only the location of HCV areas but also the definition of what is HCV.Initiatives involving smallholder mapping and wider jurisdictional approaches have also raised questions about where decisions are made, what the responsibilities of actors involved are and the level of state formality required.suchasstate audits.Antagonism can also be seen where weak governance and corruption prevent the full implementation of private standards.For example, Law No. 39/2014 on plantations has been much criticized for undermining principles of sustainability in favor of large company interests(Jong and Jacobson 2017).