Strengthening Governance of the Downstream Palm Oil Industry: Implementation of ISPO Certification through Minister of Industry Regulation No. 38 of 2025

Background: Standardising Sustainability for the Downstream Industry

As a follow-up to Presidential Regulation No. 16 of 2025 on the Indonesian Sustainable Palm Oil (ISPO) Certification System, the Ministry of Industry issued Minister of Industry Regulation No. 38 of 2025 to provide technical provisions for ISPO certification for the downstream palm oil industry. This regulation ensures that palm oil derivative products comply with national standards on legality, traceability, and sustainability across the downstream value chain.

This regulation fills in the technical details not elaborated in the Presidential Regulation, including procedures for certification audits, documentation requirements, monitoring mechanisms, and the system of sanctions for industrial companies that fail to comply with ISPO requirements.

Key Provisions on ISPO Certification for the Downstream Palm Oil Industry under Minister of Industry Regulation No. 38 of 2025

1. Certification Obligations for the Downstream Industry

All companies engaged in the processing and manufacturing of palm oil derivatives are required to hold a valid ISPO Certificate. This obligation applies to downstream activities producing refined palm oil products, oleochemicals, food and non-food palm-based products, including cooking oil, margarine, specialty fats, palm-based animal feed, and other derivative outputs.

The scope of regulated business activities is determined based on the Indonesian Standard Industrial Classification (KBLI) listed in the annexe to Minister of Industry Regulation No. 38 of 2025, which specifically covers downstream palm oil processing and manufacturing activities.

2. Certification Principles and Criteria

The regulation applies the core ISPO principles to downstream industrial activities, covering:

• Legal compliance, including business licences, tax identification numbers (NPWP), and trademark legality.

• Supply chain traceability, through supplier verification, supply chain models, and traceability of raw material origins.

• Sustainable business improvement, relating to product quality, operational efficiency, and environmental management.

Each principle is supported by indicators and parameters that are verified through audits.

3. ISPO Certification Process

The certification process includes:

• verification of document completeness;

• Stage 1 and Stage 2 audits;

• assessment by the certification body;

• issuance of the certificate, including provisions on the use of the ISPO logo on products.

Audit duration is determined based on the company’s production capacity.

4. Surveillance and Recertification

Companies are required to undergo annual surveillance audits and recertification every five years.

5. Certificate Transfer

Companies may transfer their certification from one ISPO Certification Body to another through an established transfer mechanism.

6. Administrative Sanctions

Companies that fail to comply with the provisions may be subject to:

• written warnings;

• administrative fines;

• temporary suspension of business activities.

7. Guidance and Supervision

The Ministry of Industry carries out guidance, facilitation, and supervision to ensure that certification implementation is conducted in accordance with regulatory requirements.

Why This Regulation Matters

1. Alignment of Sustainability Standards

For the first time, the downstream palm oil industry is explicitly subject to mandatory sustainability standards under the ISPO system.

2. Strengthening Product Traceability

Supply chain requirements ensure that palm oil products can be traced back to the origin of their raw materials.

3. Supporting Global Market Competitiveness

Global demand for sustainably produced palm oil continues to grow; ISPO certification serves as a tool to maintain credibility and market access.

4. More Systematic Oversight

Annual surveillance and standardised audit requirements ensure consistent implementation of sustainability practices.

Effective Date and Transition Period

Minister of Industry Regulation No. 38 of 2025 sets out two key timelines:

1. Six-Month Transition Period

Article 49 stipulates that the regulation enters into force six months after its promulgation. If promulgated on 3 November 2025, the regulation will become effective in May 2026.

2. Mandatory Certification from 19 March 2027

Article 48 stipulates that the downstream industry must hold an ISPO Certificate starting 19 March 2027. This provides companies with time to prepare traceability systems, documentation, and audit processes.

Relationship with Presidential Regulation No. 16 of 2025

Minister of Industry Regulation No. 38 of 2025 serves as the technical implementing regulation of Presidential Regulation No. 16 of 2025, which constitutes the national legal framework for the ISPO system. The Presidential Regulation establishes:

• ISPO obligations for all actors across the palm oil value chain;

• ISPO principles and institutional structure;

• the audit and assessment framework;

• reporting and oversight obligations.

Minister of Industry Regulation No. 38 of 2025 then details the technical implementation specifically for the downstream industry, ensuring that the mandate of the Presidential Regulation is operationalised through structured audit mechanisms, surveillance, and sanctions.

Conclusion

Minister of Industry Regulation No. 38 of 2025 is a key regulatory instrument in strengthening the governance of Indonesia’s downstream palm oil industry. With a six-month transition period and full certification obligations taking effect on 19 March 2027, industry players are given time to adjust internal systems, enhance traceability, and fulfil legal requirements. As a technical implementing regulation of Presidential Regulation No. 16 of 2025, this regulation provides a structured framework to ensure that ISPO sustainability standards can be applied consistently across the downstream value chain, reinforcing the credibility of Indonesian palm oil products in global markets.