Transitioning from banker to conservationist
The power of who we surround ourselves with
Empowering the local community
The importance of nature-based solutions
How climate solutions can be good for businesses as well
The principles of carbon credits
Changing the lives of the villagers in the projec
We Are Caretakers for Mother Earth
Give Me Another Year
Doing Things for the Right Reason
A New Way of Doing Business
Changing the Behavior of People on the Ground
Read the best-effort transcript below (This technology is still not as good as they say it is…):
Zal Dastur 0:03
Hi, everybody, and welcome to the Social Innovation Podcast. Today I’m sitting here with Dharsono Hartono, the CEO of Rimba Makmur Utama, which manages the Katingan Mentaya Project project. This is the world’s largest nature-based solution, producing more than 7 million tons of carbon credits a year. Dharsono is a previous EY Entrepreneur of the Year. He’s a World Economic Forum, sustainability pioneer, a Schwab Foundation Social Entrepreneur of the Year. And this year, he won the YPO Global Impact Award. Welcome, Hartono.
Dharsono Hartono 0:37
Thank you. Thank you, Zal, for having me today.
Zal Dastur 0:39
Hartono, why don’t you tell us a little bit about the project that you’re working on and how you kind of came to this solution.
Dharsono Hartono 0:47
About 15 years ago, I bumped into my Cornellians friends in Bali. At that time, I was actually attending a palm oil conference, wanting to be a palm oil entrepreneur. And I had a friend from Cornell introduced me to this business and he said, Darsono Why don’t you come to Bali? There’s this annual conference about palm oil. So I was interested. So then I met up with my business partner today, which is resolved to summit Maija. We went to Cornell together, he’s our CEO. He gave me a proposition he said are so no, there’s this new business where you can actually conserve and restore forests, provide sustainable livelihood for the communities and finally make profit. The idea is called triple bottom line. So I told him triple bottom what I mean, it was no, this is the year 2007 where nobody talks about sustainability, but Rizal I think he’s way way ahead of his time. So he challenged me that proposition. I said, that’s that even exists. I mean, from what we know, you know, something has to give, whether it’s the people or the environment, but I, you know, being a good friend haven’t seen him for so long. And he lives in Bali, he offered me to stay for a few more days, so I can learn about this carbon credit. So that, you know, offer that I took to change our life together. So you know, we finally we started embarking into the endeavor of putting the world’s largest needs to be solution today. I think if you look back and said, Why is it possible to do that? I think we can say that, even though both of us really don’t have any background in managing an area in our life at that time. We purely have good intention, then wanting to help to solve the big, two big issues in the world that facing today, which are the climate change issue, as well as the inequality issue. So the project that we embarked in the cutting and MondayA project is the world’s largest nature based solution project. Today, it cover about 157,000 hectares of peatland forests in Central Kalimantan, just to give you an idea as to how big 157,000 hectares is about two and a half times the size of an island of Singapore. So it’s huge. But again, 2007 when the idea came about, I was about to get into a palm oil business and I visited a palm oil plantation before it was about six or 700 hectares at the time, which I think is big already. So when result Romi decided yeah, let’s look into like 600 700 or 1000 hectares project right. So we look into some area then with that size early, the you know, basically in 2007 and then result came to me and said, No, no, no, you’re gonna be a serious player in this business. We want to give global impact, right? You have to be a global player when you know nobody really understand what you do. And I told him that I know this area in Central Kalimantan, that is approximate 200,000 hectares and it’s pitlane. For some of you who are not familiar with peatland is a type of wetland instead of having a mineral soil it actually has content of carbon soil where basically used to be dealt with and they become a soil. And it’s a wetland, but when it got drained because we want to cultivate it into pulp and paper on a plantation or palm oil, it become dried and easily burned. I know some of you who are who live in Singapore probably realized that in the 1998, there’s a lot of haze coming from Indonesia caused by all of forest fires in Indonesia. These are mainly because of the opening of peatland forests. So I think the proposition at that time is if we can conserve and restore this peatland forests, we should be able to get carbon credit. Current credit was not new in 2007. But in the meantime, the same year, Indonesia was also the host of the UNF Triple C or the climate change conference in Bali. That’s That’s why both of us really learned this together. That’s how we get into this project. You know, of course, it took a lot of years for us to finally make it I was the only employee of my company during the first six years. You know while working on getting licensed operate the land. It’s not easy, I guess for us as an entrepreneur, you know, to really hang in there for six years. And thanks to my wife who supported me those six years I, you know, we were held on, but at some experience that I have in terms of if you really have good intention, you want to do the right thing, you see the path, it’s easier said than done. But, but we did it
Zal Dastur 5:21
Darsana way, I think that’s so ironic that you co founded nature based solution project at a conference, or at least got the inspiration at a conference that was dedicated to palm oil, which is, you know, these days kind of vilified in in the media has to be a quite a negative impact on the planet, you started your career in banking. And obviously, this is a big change to come into this. So talk me through a little bit about the thought process that you went through as to give up that career. And to move into something which is, as you said, people weren’t talking about this in 2007, it was very new at the time.
Dharsono Hartono 5:58
So I used to work in the real estate sector in New York, before I came back to Indonesia. So I was working for PricewaterhouseCoopers, as well as JP Morgan in the real estate department. So when I came to Bali at that time, and have this idea of conserving and restoring forests that provide carbon credit, I treat this as a new asset class. As you know, some of you know there are new there, equity, there’s a bond as a commodity, and I think that this environment is a new asset class, thanks to all Gore, at that time video, remember, 2007 he was involved in the inconvenient truth, you know, documentary and I see that there’s a potential of new asset class coming to the world. And this asset class has to do with the way we did not do well on climate change issue. Hence, carbon credit is going to be a new asset class for people to jump into an investment. Putting my real estate head, I was naive to think what if I want to own this real estate, visa vie forests, I treat this like a real estate? Where will this piece of land appreciate faster than a piece of land that I bought in Jakarta, for example, right? So I was putting my head on, on that real estate background. And I feel like oh, maybe I should bet on this real estate, quote, unquote, which is for us, rather than the typical real estate that I have. So that’s how I started it, I started saying that there is a value on what we own and we operate. But what changed over time is, you know, it’s the impact that what we can contribute. And then, of course, is when you own a land and a real estate, you can build whatever you want to do, you know whether you can build a house, you can do the office building, you can build a lot of things that are also part of development. But when we talk about forest, there are people who live around it, their biodiversity in it as well, I was too naive to think of it as just like an asset class. But I think if you look at how forests and nature works is really is a vital asset for people who live around it, and the biodiversity or stay in it. And more importantly, it’s also give a big fight for the world. So I think that’s something that I don’t see at the time, it was totally something that I was not really looking into it in early part. But throughout this journey, I think, you know, it really boil down to how humanity have done for the past 100 years, I think we are so used to the idea of development, interest, industrialization, that something has to give, which is the environment. And I think with this, you know, experience that we have managing gutting and Muthiah project is a win win solution where we can still have nature, you know, protected, conserved and restored, we can have people who live around the forests, you know, basically have sustainable livelihood and also high productivity. And finally, we can make money. I think this concept was not really understood, then in 2007, but now, with the whole movement of net zero, the effect of climate change is real, the inequality issue is also vital for our existence, you know, we start seeing that maybe, you know, 100 years from now, if you look back, this might be the moment where human finally gets it to a point where we should not treat our Mother Earth like our own. But we should have a mentality that we are just a caretaker for the Mother Earth. So I think that’s a mindset that has really changed me over time. You know, by looking at this as an asset class into something bigger than that.
Zal Dastur 9:34
I certainly hope that we have come to that realization, I think more and more people are starting to see that that we are not the owners of the earth. We are merely the caretakers of it for the next generation and for every generation after that. You mentioned earlier that for the first six years while you were trying to get all the licenses and approvals, which I can imagine would be a very complicated and laborious process. You You mentioned that you know, you were on your own, just talk to us a little bit about the motivation and kind of what kept you going during those six years and going from a banker, salary to entrepreneur, it’s a big, it’s a big shift. And you have to be very self motivated to keep going for that period of time.
Dharsono Hartono 10:16
Yes, I think the first six years is one of the most exciting time of my life. When I get involved in this business, I think when wrestled challenged me to do this proposition. He also said that I also know you know, in order for us to get this lesson, you have to promise me that you’re not going to bribe anybody throughout the process. I think it’s not easy in Indonesia, you know, when you are applying for such a big area, and a lot of the government, you know, are not very familiar with the type of business we are in. So it takes a lot of time and effort to really educate and talk to them. So those six years, I spent a lot of time talking with the government, convince them that they should give a license or company, I remember three years has passed, and my wife came to me and said, Hey, what’s, you know, what’s the update on your project, as the only employee of the company, I have to rely on my wife, as a supporter, or the family see random asset management firm? And without her support? I don’t think you know that the project, whatever access, so three years pass, and he said that, what’s going on? Where is there any light at the end of the tunnel with the licenses? And, of course, at that time, with licensing, sometimes, things are so unpredictable. And she even said that, you know, you used to work in the finance before. There’s a term called cup loss, your cut loss and you move on, right? I remember that moment when she challenged me that and it happens that I went to visit the village right after that conversation, I did not answer her I went to the village in our area of 157,000 hectares. It’s bounded by two River, which is the cutting and river and the entire river. Hence, the project is called cutting on my entire project community live along the river. So it’s a lot of villages along the river, you know, so some of the river you know, then you have sometimes you have to transport. When you have to go to one village to another village, you have to take a boat. So I remember one morning when I was finished setting the site, one village, I remember village Kampala you, I’m heading to a bigger village called Mandawa. And I took a boat, which is a private boat, but the river is quite flat. So it basically says a simple boat that you bring you to one village to the other village and there is a girl who is going to high school, who is going to school, his high school student, she was going to school that morning. So as I entered the board, I chatted with her, I asked her, you know how she she was and she told me that is I think it was 16 years old. And she said that she’s going to high school in another next door village, and surreal like school, and she wants to be a teacher one day. So as we arrive in the village where she is going to schools, he stepped off from the boat, and she just walked out without paying. Whereas me, you know, the boat owner charge me. So for somebody who is always curious and always asked question, I asked the boat owner, how comes he did not have to pay him I have to pay? I think the answer that he gave me really changed my perspective of how I can do things. He said, If he wants to go to school, we should not charge somebody if they want to go to school. So suddenly, I have this things in my mind and brain and said, Wow, this community really wants to help one another. And I can see with our presence here, we’re going to achieve bigger things than that. So after that trip, I went back to Jakarta, I told my wife give me another year. So there’s a lot of moment of give me another year, until finally the sixth year we finally get the license and we managed to get some finance, you know, once the license is being granted, technically, we have rights of the carbon. So you know, you will need to have a right to manage the area in order to be able to produce the carbon. So there’s a lot of moments where I was inspired by what I see on the field that kept me going. There’s a lot of people who I talked to that give me strength throughout those six years. I think it’s not easy. When you’re entrepreneur, you’re out there by yourself. You thought that you’re fighting alone. Of course Rizal is always supporting me. But I think it’s just that I was lucky and very fortunate that I was always with the people that give me a lot of support and really betting that I will succeed. So I think it’s important when we are I guess, Pioneer what we do, we have to find that ally, because it’s so easy to just give up and just like okay, but let’s do something else. So I’m grateful and fortunate for all those friends, and all the supporters, all the communities that I met first six years that really shaped who I am today and how the project is today.
Zal Dastur 14:51
That’s a really inspiring story about especially persevering in the difficult times and when things can seem the darkest I’m curious to know a little bit more about the importance of nature based solutions when it comes to solving the climate crisis. So can you just expand a bit more on that?
Dharsono Hartono 15:15
So if you look at the profile of our planet greenhouse gases, there’s about 18%. You know, our annual emission is due to deforestation. So I think the way that we manage the forests are not optimal. But I think we usually cut forests and we convert it into pulp and paper or palm oil, hence, all this emission happen. So there has to be a way to compensate people who wants to conserve and restore it for us, if we want to achieve the goal of less than one and a half degrees Celsius by the by the next century. So I think hence this whole carbon credit come in, right. And the term nature based solution really resonate to a lot of people is because we need nature for survival. Right? Nature will always be here. The question can be, will we be here when No, when we destroy all the nature, so I think nature is the most effective way for us to solve this climate change issue. I’ll give you an example why things have changed significantly as well. When I started this project 15 years ago, nature based solution was not popular. From a term perspective, there is an initiative called our EDD, which is reducing emissions from deforestation and degradation. So this is our EDD Plus is a type of project that we were involved in. For the past five years, people start changing narrative and using the Terminator based solution, and somehow irrationally, easier for people to understand that we need to protect nature, we need to conserve nature. And it’s the best solution that we have. But I think it’s also because it was timely. I mean, when I talked to a lot of people, during my our early days, people always feel that the project that we do is very noble, is very noble things that we do, you know, is a great thing that we do. And somehow things that I worked for an NGO, they never thought about this as a business. Because I think we never understand that this can be part of a business. But I when I talk to, you know, basically the younger generation, they really feel that this is important for the future. And a lot of them actually see that as a potential making this base as a business rather than just, you know, doing the right thing. Because 15 years ago, people will love to talk about this. But nobody’s willing to finance it. It’s like you talk to people what you do everybody’s agree that you’re doing the right thing. They love what you do, but nobody’s willing to put the money into what you do it is it was frustrating. In the beginning, you think that, you know,
this is something that you do, but nobody understand what the impact and the benefit of what you do. But I think the past three years or four years, all these effects of climate change really hit people. And I think, you know, more and more people are serious and willing to put effort and finance to solve this climate change issue. And I see the movement of this net zero really come in place. If you look at the past few years, a lot of companies start basically making commitment of net zero in their operation. And I think that’s how the demand really picked up. While at the same time cutting on Monday project as the world’s largest project, we also transparently show to the world that this is a new way of doing business. Some people earlier those days, the early days, will frame a big company like us is a new colonialism. So we manage a big chunk of land, and then you wouldn’t make a lot of money out of it. But I think the transformation of our project, I think on my entire project, transparently show that we have to work with communities, then we have to transparently work with communities and show the result becomes one of the most transparent business, you know, we are selling carbon credit that is not tangible, right, we’re not selling something physical. So it comes with a lot of scrutiny, how we do it, what we do with it, and how it affects the climate as well as the people. So all these things are being recorded through our certification. So we have to do this transparently. We have to show to the world that you know we’re doing this for the right reason, and we’re doing this and you can count on what we do. Maybe I will go through what qualify a carbon credit project. There are three big principles that a carbon credit project need to follow if they want to issue credits. First is called the permanence principle. So what you are doing today, it has to be permanent at least 2030 years. You cannot take that you cannot just cut the trees today, restore it tomorrow and do it all over again. Second, is the principle of additionality. What’s what That additionality means. additionality is a concept of what would have happened to this area with or without your intervention. So for example, I give you an example of let’s say Yosemite National Park in the US, is a national park. So technically, without my intervention, the three cannot be cut. With my intervention, the three will still be there. So what I’m doing technically is not additional. So you will not be able to produce carbon credit in that type of forests. In Indonesia, in cutting an entire project, it’s a production for us. So if 15 years ago, we didn’t go through the process the application, somebody will come in and take over this area and convert it into pulp and paper, that conversion is going to create the mission. And the fact is, we are here today, we prevent that to happen, we get we were given credit for what we do, because otherwise those emissions will happen. So imagine, you know, every year if, with the pulp and paper operation, there’s emission that happened. And every year since then we did not convert this into pulp and paper, then every year, we can quantify the carbon credit that we produce. And this is transparently written in our project design document, it’s a public record. This is what the plan is. The third principle, which is one of the most important principle is the principle of leakage. Or leakage means if your intervention, the community start moving elsewhere and DeForest elsewhere, you don’t get credit. So basically, this third principle is to protect the inclusive activities of the project, right. It’s about inclusive, working with community. So with that kind of three principle, you know, we believe that this is a new way of doing business, and we have to do it right, we have to do it transparently. So the journey of cutting an entire project 15 years, make people realize that this is one of the most transparent business and this is one of the most, I guess, not only that it’s transparent is one of the most inclusive business in the world where we work increasingly with communities. Hence, people don’t see colonialism anymore. But I think it’s sometimes it takes a process to understand just like me learning this myself. For the first six years, more and more people now realize that nature based solution is really it is an effective way to combat climate change. But more importantly, it really is for the people community surrounded so a good NBS project have to involve communities have to show that transparently that you are really helping the communities who live in that area.
Zal Dastur 22:42
You had mentioned these companies that are making Net Zero pledges. And I know recently there has been a few companies Ryanair being one of them, where people have questioned what they were doing for these pledges. So some of them accusing them of greenwashing because Ryanair says they offset their flights by having one acre of forest or something like that. So it’s not even close to what they need to be doing. How do you go about protecting the reputation, because obviously, this is a really important way to balance the polluters with the non polluters. But obviously, reputation is a very important part of the carbon credit system. So how do you maintain
Dharsono Hartono 23:19
that? So early days, you know, upset, it was not very popular, for the reason that you stated, basically, that a lot of NGO worried that offset will give a jail free card for all these polluters, right, they’re like, I’m just going to continue to pollute this. And then if I can offset it with project like Darsana, then I’ll be fine. But I think if you realize the past five years, you start seeing all this company are actually trying their best to also reduce their carbon footprint, right, they’re trying their best to basically decarbonize the whole system. And finally, once they cannot do that, or it takes some time to do that, they buy offset. So I think the you know, the world has changed in a way that 15 years ago people will think offset as a way to get out from you know, a jail break pass, but now it’s actually offset is a bridge for us to reach net zero time. So, a lot of the company if you will, when they claim into net zero, it is a long term process, you can expect suddenly to claim that zero and not emitting any carbon today right away right. So there is a transitional period hence, they are willing to buy offset to compensate that but the whole offset works because of the way we see Planet Earth as one big greenhouse gas. If one places can save the other places can pollute as long as our target is clear. I think we will still be able to achieve that one and have degrees Celsius global warming that we want. Unfortunately, because carbon credit is not The tangible product, a lot of people still don’t understand it. But they will, you know, sometimes when you cannot touch it, you cannot feel it, you don’t really have a sense of it, you don’t understand the product, and you tend to be more of the skeptical one. But I think we welcome people to come to our project and see the benefit of investing in nature based solution, you know, clearly, you can see that the nature, you know, is protected, the communities are productive, you know, they are not deforesting anymore. And finally, the biodiversity is still maintained well, so I think it needs some time for people to understand this product, but I can see the real benefit, because we have been working on the ground and see the impact that we give to the climate and the people.
Zal Dastur 25:46
So something I’ve been very curious about, you mentioned that the size of land that you are managing is, you know, more than twice the size of Singapore. How do you protect that? Or how, you know, how is there a security? Or how do you make sure that there is no logging or illegal farming that takes place on such a vast space of land?
Dharsono Hartono 26:07
It’s funny, somebody asked me a similar question. But few months ago, I said, I also know how many security people do you employ to guard this area? And really caught me by surprise, because my answer is none. We don’t use security. I think the approach of nature based solution if you do it, well, it’s about changing the behavior on people from the ground. We know that this like I mentioned earlier, humanity hasn’t been doing productive things for the earth, right? We’ve been doing all these things that extractive and exploitative, that it becomes our nature to do that same thing for people on the ground as well. You know, we have farmers so used to deforesting because they want to convert into palm oil, or they use slash and burn methodology to clear their land. Because it’s easy, it’s cost effective, hence, we come in and actually start changing their behavior. It’s not easy to do that, I can tell you, you know, I remember when I visited one of the village in 2015, we start introducing the no burning no chemical activities for the farmers. You know, we call it the climate smart agriculture. And I spoke to about 200 people that I remember, and guess how many people are interested to join our effort by not doing burning and not doing chemical? Only to?
Zal Dastur 27:27
I’m surprised it’s so high,
Dharsono Hartono 27:31
even to but I think you know, it is it’s not easy to change behavior, right? I mean, it takes it take us few years to really show that to this farmers that we can do this without burning and without chemical, and you’re going to have higher productivity. In the meantime, we also work closely with the farmers creating circular economy, where we provide finance, we provide capacity building for them, when they produce all this product that they have, we are also the buyer. So I think it’s a you know, you really have to look at this holistically in terms of how you approach the community. First, you have to make sure that you gain the social capital, once you get the social capital, technically, you can do a lot of things. And you can actually change their behavior slowly. So our focus is in livelihood health, as well. And most, I was the only employee for the first six years, but now we have closer to about 200 full time employees. And during the dry seasons, because it’s very the area can be prone to fire we employ another 600 firefighters. So it is a big organization now. But we start building this with the premises that we want to empower the local communities. So if you look at our profile of our company, 80% of 80 to 90% of our employees are actually local, local, because I strongly believe that we want to build the next leaders among the people that we work with, I think only through this transformation and inspiring the younger generation that we can make the change because otherwise we will still be in the same paradigm that we used to we get used to in the past where you know, we take nature for granted. We you know we converted into pulp and paper or palm oil, and we don’t use a lot of activities that actually can save the environment and but also providing high productivity. So our company came in, and most of our employees are community organizers. So they come in and really help the communities to become better in achieving higher productivity by not deforesting
Zal Dastur 29:38
Toronto, I read a story that you had shared about I believe it was coconut sugar. Yes. And could you maybe just retell that a little bit as a way to show how you were improving the livelihoods of these farmers by bringing buyers and sellers together.
Dharsono Hartono 29:57
So outside our concession area, there’s about 12,000 hectares of coconut plantation owned by the communities. I remember when I visited the villages, they all come to me and say there are so no, can you help us to sell this coconut? Can you do something with it? Because I think you know, the price of coconut is fresh coconut or copper is usually low, can you help us so like we can have higher productivity product coming out of it. I remember, I think a year or two years after I went to visit that village, I was approached by Unilever is the global brand of, you know, unit, Unilever actually bought a local brand that produce soy sauce. And like, you know, soy sauce in the Eastern country where it’s salty, Indonesia have a soy sauce, that is sweet soy sauce. It’s mostly made by coconut sugar. So you know, when Unilever came to us and said that, oh, you have a coconut plantation in this area, you know, maybe you can start sourcing coconut sugar coming out of it. And we look into it. And we all we we realize that in order for you to produce coconut sugar, you have to climb the tree twice a day. And you never let the flower bloom into fruit, but you have to SAP it. Hence, basically you get this pure sugar coming out that you collect every day. You know, in the morning, you SAP it, you know, the mind the membrane that you SAP, technically, then the liquid can fall out and then you collect it. And then in afternoon, you pick it up and then you can cook it and they become coconut sugar. And of course, when we look into this business, it is very promising because a one hectares of coconut sugar plantation can only produce about I think it’s about 750,000 rupiah, which is in this case about more or less $50 a month. Whereas if you change it into coconut sugar, you can get about $200. You know, basically you’re talking about quite a big multiple. And then when you look at this, and we look into the communities, there are only two or three people doing it. The reason why they’re doing it is because this is common practice in Java. And some of the Japanese farmer has migrated to our area and they do it. But again, it’s about changing behavior. Hence, we finally work with Unilever. Basically, we built coconut farmer training center. So we train the farmers in terms of how they can claim the trees, how to SAP it. And finally, now we have more than 500 farmers involved in this. But even this process takes some time takes like a really a year or two. Now we have our own product, there’s a local product called an entire suite, which is a product that produce in and managed by the local corporative. Now they sell not only coconut sugar, they also have coffee, they have also have coconut oil, cashew and others. So I think it’s about how we can empower the communities to become a enterpreneur itself. So I think this is something that really resonate to us. I also want to share with you our new development of project and investment in one of the small villages. In the middle of our concession, we found out that there are a lot of fish farming activities. One particular fish type that they form is a snake head fish. And this fish has very high content of albumin, which is a pharmaceutical product that needed if you after you have your operation. So what we are doing the next 12 to 24 months is we’re going to invest a lot in this particular village. Instead of having just the fishermen producing, you know, farming fish, we actually will create the industry in the village, we want to convert this fish into a high quality pharmaceutical product. And we’re investing with renewable energy solar panel as an energy source. And then we work with a MIT winning award inventors to do this. So all of this can happen Xcel because we get funding from the carbon credit. All this carbon financing that we receive is actually really put it back to the communities so they can protect the environment and more importantly, we can make them become more productive. I think that’s why we are very excited about this process because now we can leapfrog from a traditional farming into much higher value products because that’s what they crave for.
Zal Dastur 34:26
Dharsono I want to thank you so much for your time today. I really learned a lot particularly about nature based solutions. So thank you.
Dharsono Hartono 34:34
You’re most welcome Zal.