Promoting sustainable oil palm production by independent smallholders in Indonesia: Perspectives from non-state actors

Indonesia is the world’s largest producer of palm oil, responsible for 60 percent of global production. While contributing to economic growth, the expansion of palm oil production has been a key driver of deforestation in the country. Most deforestation linked to palm oil has historically been driven by large-scale producers. Smallholders are however increasingly identified as important actors in relation to the deforestation of forests and peatlands in Indonesia.

The area cultivated by smallholders has seen a massive expansion in the last two decades, from less than 1.6 to 5.8 million hectares between 2001 and 2018. Indonesian smallholders currently supply 38 percent of palm oil production, while covering nearly half of the country’s area of oil palm plantations. Engaging with this group of smallholders is thus a crucial part of efforts to build a sustainable palm oil sector in Indonesia.

The biggest challenges for forest-friendly independent smallholders

Climate Focus and Meridian conducted desk research and interviews with non-state actors on the biggest challenges are that independent smallholders face in producing forest-friendly palm oil. The top five challenges include:

  • The lack of access to finance and technical support remains a key barrier to smallholder productivity, which is a major factor driving the expansion into forests.
  • The lack of tenure documentation continues to be an obstacle for independent smallholders to access finance for intensification.
  • The lack of organization among independent smallholders hinders collective action to improve productivity and environmental practices.
  • Companies face challenges in establishing smallholder traceability and helping them to comply with sustainability requirements.
  • Independent smallholders face barriers and lack incentives to join certification schemes.

Solutions for integrating smallholders in zero-deforestation supply chains

Check out the paper, which was funded by GIZ, to learn about potential solutions for better integrating independent smallholders in sustainable and zero-deforestation supply chains. The recommendations are framed for organizations working directly with smallholders, governments, companies as well as financial institutions.