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Inclusion of palm oil smallholders is a tough nut to crack

By By Marieke Leegwater, palm oil programme manager at Solidaridad , 30-Oct-2013

Inclusion of palm oil smallholders is a tough nut to crack

Even though often invisible, palm oil is present in many product formulations. Currently, it is the worlds most used vegetable oil and its production and demand are forecast to grow. 

This expansion – if not planned well – may lead to destruction of valuable forest and the loss of rights for indigenous communities.

Globally 30% of palm oil is produced by smallholders. Clearly, if something is to be done about sustainability of palm oil production, they need to be taken along.

In general, smallholders have lower yields compared to bigger estates. Thus, the inclusion of smallholders and raising their yields presents an opportunity to increase the production of palm oil, without conversion of new lands.

With its globally applicable certification scheme, the Roundtable on Sustainable Palm Oil (RSPO) is well positioned to ensure these smallholders are included in the efforts to create sustainable practices leading to higher yields.

However, while RSPO is making great efforts to include smallholders, so far not even 1% of the global production of certified sustainable palm oil (CSPO) is produced by independent smallholders.

The biggest challenge with respect to including smallholders in certified supply chains is the business case of certification.

For example, the costs and efforts needed for certification are substantial and relatively higher than for estates. And then, the benefits of certification are relatively indirect as the rewards for introduction of better practices often take time to materialise.

Further issues include the difficulty in setting up of an internal control system, the limited access to land titles, and the obligation to analyse and respect lands with high biodiversity values – which are all important requirements within the RSPO standard.

Solidaridad has set the ambition to overcome the above challenges and to drive the inclusion of smallholders in global palm oil supply chains creating profitable business cases. We do this by supporting the set-up of field projects aimed at introducing better practices with smallholders and engaging consumer good manufacturers and other market players to contribute to these projects. This way we create alliances of companies and organisations and build inclusive palm oil supply chains.

A successful demonstration of such a project was our project with the independent, associated smallholders of Keresa Palm Oil mill in Sarawak. It was executed by Keresa Mill in cooperation with one of our partners, Wild Asia, and with financial support of CONO Kaasmakers and Johnson and Johnson.

During the project, Keresa Mill created the Smallholder Group Certification Scheme and invested in better practices of the smallholders. At the end of the project, the Keresa Mill established that it received more Fresh Fruit Bunches (FFB) and of higher quality than before.

At the same time, the smallholders had improved their incomes as they had higher yields and spent less money on fertilizers and chemicals. Here is FoodNavigator-Asia’s report on the subject.

The lessons learned from the Keresa project are now used at bigger scale by Wild Asia in new projects in Malaysia with Cargill and Nestle as partners. The project with Cargill is designed to set up an inclusive supply chain to one of the Cargill refineries in Peninsula Malaysia and include all 2,900 smallholders and dealers that supply one independent mill.

Next to these examples Solidaridad runs smallholder projects in Ghana, Honduras, Ecuador, Guatemala, Honduras, Colombia, Indonesia and Papua New Guinea, all with the aim of smallholder inclusion in palm oil supply chains. 

Looking at our projects we can say, the inclusion of smallholders is a tough nut to crack that requires cooperation of all involved, but it can be done. If your company is interested to assist in cracking the nut, please do get in touch. Together we can move towards an inclusive palm oil supply chain.  

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