NDPE update
DSNG’s has committed to fully implement its
NDPE
policy throughout its supply chain by 2025. Since 2021, the company has focused on their seven concessions and six mills in the East Kalimantan province, which accounts for nearly 75% of DSNG’s
CPO
production. DSNG will now focus on implementing the policy across their other operations, located in three other provinces in Kalimantan. Achieving NDPE compliance of third-party suppliers is the most challenging aspect of implementing an NDPE. This is especially relevant for large players like DSNG, who source from a diverse pool of external suppliers, including palm oil concessions, cooperatives, and independent smallholders.
Convincing smallholder farmers to assist the company in capturing the outline of their farm as a geospatial data point (polygon) has been challenging other buyers do not require this. The challenge is bigger in cases where DSNG’s relationship with the smallholders is managed through intermediaries, such as local dealers. This reality hints that farm-level NDPE implementation of independent smallholders is still uncommon today. Despite NDPE commitments from most of Indonesia’s top-10 palm oil producers, NDPE compliance is often implemented at the level of CPO mills only.
In 2023, DSNG increased their number of staff dedicated to NDPE implementation and established new partnerships with service providers for the collection and analysis of their supply chain data. Considering the large volumes of traceability data, specialized software is required to manage these data. In collaboration with &Green, the company embarked on projects to better understand the impact on deforestation rates in the landscape, including areas outside their concessions.
Implementation of ESMS
In 2023, the
ESAP
contracted with &Green was completed. This is &Green’s first investment to fully work through their ESAP and complete all items, which is an important milestone in achieving transformational change for the company. The investment means that the company will now continue to perfect their E&S risk management systems as part of the continuous improvement process of the newly established
ESMS
and will report this to &Green. DSNG also capitalizes on the ESMS to access additional funding from international investors, such as the Asian Development Bank.
Considerable efforts were undertaken in various concessions to manage the resident orangutan populations and improve their habitat. This includes efforts to manage newly arriving individuals that are displaced from habitat loss outside of DSNG’s concessions by activities of other companies.
Notably, DSNG won the RSPO Innovation Reward for their capture of methane from mill effluent ponds to use as biogas (CNG) in community owned-and-operated transportation trucks, reducing the carbon footprint of this activity. DSNG was also recognized as one of the top 200 (out of >20,000) companies by Forbes Asia demonstrating sustainable long-term business performance, responsible environmental management and corporate governance.
Financial performance
DSNG has met all its financial commitments over the year (i.e. its interest payments and financial covenants) and continues to be a strong counterparty for &Green. Despite the turbulent market conditions in 2023 with declining palm oil prices and high fertilizer costs, DSNG was able to deliver substantial performance with an EBITDA margin of 25% and a net profit margin of 9%. The company continues to reduce its leverage while increasing its asset base, investing in emissions reduction and other forest-positive initiatives, including the completion of the second biogas production plant in the year.