Indonesia is the top global crude palm oil (CPO) producer and the world's largest exporter of palm oil. Therefore, Indonesian smallholders significantly contribute to the national palm oil sector. Analyzing the numbers, the National Leading Plantation Statistics for 2019-2021 recorded that more than 2.6 million head of households are palm oil smallholders in Indonesia, managing about 40% of the national oil palm plantation area.

Data from the Directorate General of Plantation at the Ministry of Agriculture shows that out of 15.08 million hectares (ha) of total palm oil plantation area in 2021, large private plantations (Perkebunan Besar Swasta/PBS) still dominated with approximately 8.42 million ha (55.84%). People's plantations (Perkebunan Rakyat/PR) followed with 6.08 million ha (40.32%) and state plantations (Perkebunan Besar Negara/PBN) with 579.6 thousand ha (3.84%).

Nevertheless, experts predicted that by 2030, the distribution of palm oil cover will be dominated by people's plantations which may reach 60% in proportion, followed by 36% of private sector's contribution, and around 40% for state-owned plantations. This shows the significant contribution of independent farmers or smallholders in the oil palm plantations governance in Indonesia.


This growth is also followed by market movements encouraging sustainable practices. As the largest export destination, China has now shown that they are slowly implementing sustainable practices in the palm oil sector. This condition indicates the importance of transitioning to more sustainable practices, including among independent smallholder groups.

Certification as The Bridge to Sustainable Practices

As a group that plays an important role in the national palm oil sector governance, strengthening independent smallholders’ roles has become more important in increasing productivity and implementation of sustainable principles. This step can be a bridge to ensure adoption of sustainable principles in oil palm cultivation.

In Indonesia, there are three most-commonly used sustainable palm oil certification schemes, including the Indonesia Sustainable Palm Oil (ISPO) which has been implemented since 2011, the Roundtable Sustainable Palm Oil (RSPO) which has been operating since 2004, and the International Sustainability and Carbon Certification (ISCC) since 2010.

As of June 2021, RSPO has issued 8,442 certifications to smallholders in Indonesia, an increase of 29.5% from 6,520 smallholders in 2020. On the other hand, based on the Palm Oil Plantation Fund Management Agency (BPDP-KS) data, the Indonesian Government had issued ISPO certificates for 5.78 million ha of oil palm plantations until March 2021. From the millions of hectares certified by ISPO, only around 12.7 thousand ha are smallholder plantations, or only about 0.21%.

Challenges in Sustainable Practices

Among many reasons for the low adoption rate of sustainable plantation certification is the need for farmers to join farmer unions, such as village unit cooperatives or farmer group associations, to have access to be certified.

Farmers who operate without any institutional affiliation tend to farm without adhering to the Good Agriculture Practices (GAP). They are also less likely to receive technical support to meet sustainable oil palm farming standards. In addition, according to Agrofarm (2020), ISPO implementation is not easy due to the need for improvement in terms of farmer groups’ readiness to participate in the certification process.

Amid these challenges, Presidential Regulation Number 44/2020 on the Certification System for Sustainable Palm Oil Plantation in Indonesia emphasized the obligation of all palm oil producers to obtain ISPO certification.

Specifically for independent smallholders, the regulatory implementation is accompanied by a five-year grace period until 2025. With the remaining deadline and the low adoption rate of ISPO certification for independent smallholders, implementing ISPO is another challenge.

Benefits of Sustainable Practices for Independent Smallholders

Despite existing challenges, sustainable practices and certification can actually benefits palm oil independent smallholders.

In production aspect, independent smallholders who adopt sustainable principles can increase their productivity—as proven by independent smallholders in Central Kalimantan and North Sumatra who are union members and have obtained the RSPO. They claimed around 10% increase in income. Similarly, a group of farmers in Jambi have also seen increased productivity of up to 1.5 times, from a harvest of 1 ton to  1.5 tons.

Financial benefits from increased productivity has encouraged many of these farmer groups to contribute in providing assistance to the surrounding communities. UD Lestari in North Sumatra, for example, provides ambulances to accommodate the local community’s healthcare needs. Meanwhile, the Merlung Renah Mendaluh Independent Farmers Forum in Jambi initiated a fish breeding and water ecosystems maintenance program to encourage river conservation.

Through the expansion of palm oil certification programs, farmers, through their groups, can also prepare themselves to face market dynamics which, nowadays, has initiated the transition to the need for sustainable practices. Many palm oil consumers have emphasized their preference to only buy sustainable palm oil products.

Domestic and International Acceptability of Indonesian Sustainable Palm Oil

Following the President's mandate in Presidential Instruction (Inpres) Number 6/2019 on the National Action Plan of Indonesian Sustainable Palm Oil 2019-2024, all domestic improvement efforts should be combined with collaboration among actors. It is necessary to maintain market access through the acceptance of Indonesia's sustainable palm oil in export destination countries.

Referring to the results of the multistakeholder workshop in Jakarta on 9 November 2022, there are at least two favorable situations that Indonesia must take advantage of, namely:

1.       Highly conducive trade relations between Indonesia and major Asian countries, such as China and India, are built on a narrative of mutually beneficial relations

2.       The Asian market is still relatively loose compared to the European and American markets, which provides time to accelerate further improvements in the country.

Thus, the government needs to strengthen ISPO diplomacy, considering the certification has yet to be recognized in many export destination countries, including China. Diplomacy to promote sustainable palm oil penetration will not only be useful to ward off negative campaigns against the Indonesian palm oil industry, but also play a major role in Indonesia's export growth which relies on the sector. Thus, palm oil diplomacy needs to be supported by solid coordination from all relevant agencies.

In this case, Indonesia can also learn from Malaysia, the largest CPO producer after Indonesia, which has succeeded in getting Malaysian Sustainable Palm Oil (MSPO) adopted by around 88% of the total oil palm area in 2020. This amount is far greater than ISPO, which only reached about 35% of the total oil palm area in the same period.

Furthermore, Malaysia's proactive approach to China has also paid off. In 2019, the Malaysian Palm Oil Board signed a memorandum of understanding with the China Green Food Development Center (CGFDC), which aims to include the MSPO scheme in its Green Food Label certification. This provided an opportunity for MSPO to enter the Chinese market, an achievement that still needed to be realized for ISPO.

China's policy direction and lessons learned from MSPO promotion could be an opportunity for the Indonesian government and Indonesia's national palm oil stakeholders to gain broader acceptance of ISPO at the international level, starting with China as the largest export destination market. Wider ISPO acceptance can prompt national industry players, including independent smallholders, to implement sustainable practices in the palm oil industry.