KAO, APICAL AND ASIAN AGRI LAUNCH 'SMILE' PROGRAM TO HELP OIL PALM SMALLHOLDERS IMPROVE YIELDS, ACQUIRE CERTIFICATIONS, AND SECURE PREMIUMS

JAKARTA, INDONESIA - Media OutReach - 15 October 2020 - Three leading companies in the palm oil industry -- Kao Corporation, Apical Group, and Asian Agri -- have launched a new sustainability initiative to help independent oil palm smallholders in Indonesia improve their yields, acquire international certification, and eventually secure sales premiums from selling certified palm oil.

Known as SMILE or the SMallholder Inclusion for better Livelihood & Empowerment program, the collaboration is between downstream producer Kao Corporation, mid-stream processor, exporter and trader Apical Group, as well as upstream producer Asian Agri .

The 11-year initiative seeks to continue to build a more sustainable palm oil value chain by working with independent smallholders. Independent smallholders contribute more than 28% to Indonesia's overall palm oil market^[1].

The collaboration recognizes that independent smallholders are private business owners who are challenged to increase their yield and productivity but may neither have the knowledge nor the technical expertise to do so.

As the world's most widely used vegetable oil, palm oil has a wide range of uses, including processed foods, cooking oil, biodiesel fuel, and as a raw material for detergent manufacturing. Global production of palm oil stands at 75million tons per year^[2]and is expected to grow to 111.3 million tons by 2025^[3]. There is now a greater focus in Indonesia on improving palm oil productivity while minimizing the need for the extensification of existing agricultural land. This not only helps to safeguard food security, but serves to balance social, environmental and economic needs.

Kao Corporation, Apical Group, and Asian Agri are implementing activities in accordance with the framework provided by the Roundtable on Sustainable Palm Oil (RSPO), and working to ensure traceability as far as the oil palm plantation, in order to build an environmentally-friendly, socially-aware supply chain. While the palm oil industry has moved forward with national certification schemes such as Indonesian Sustainable Palm Oil (ISPO) or multi-stakeholder led collaborations like the RSPO, certification for independent smallholders has only recently gained momentum. SMILE seeks to bridge the knowledge gap of independent smallholders by partnering with them and leveraging on the success that companies such as Asian Agri have demonstrated with its long-time partnerships with smallholders.

SMILE will assemble a team of experts with extensive experience in the areas of plantation management and agronomy to work with 5,000 independent smallholders that manage approximately 18,000 ha of plantations in the provinces of North Sumatra, Riau and Jambi. Through customized seminars and workshops, the team will:

• Educate farmers on how to improve their yields and sustainably manage their farms, as well as on the importance of staying committed to sustainable practices such as no-deforestation and zero-burning, no exploitation.
• Provide support for RSPO Certification.
• Provide training on how to implement robust safety measures across their estates, and safety equipment (including safety helmets, gloves, and fire extinguishers).

This upscaling and provision of equipment will be implemented from 2020 to 2030 with a view of helping independent smallholders secure RSPO certifications by 2030. Once certified, these smallholders will be eligible to receive certified palm oil premiums averaging 5% higher than non-certified palm oil. As part of RSPO requirements as well as the companies' commitment to help the community collectively realize the UN Sustainable Development Goals (SDGs), SMILE includes initiatives that promote greater inclusion and improved livelihoods via empowerment initiatives for communities.

The goal to improve the livelihoods of the independent smallholders will be through enhanced productivity with no-deforestation, no-peat land and no-exploitation. Throughout SMILE's implementation, the three companies will regularly engage various stakeholders such as NGOs, NPOs, and community leaders to ensure competent delivery of training, adequate allocation of equipment, timely provision of needs at the estate and community level, as well as optimized collaboration towards building a more sustainable and traceable supply chain.