Give them a voice, include smallholders in the palm oil value chain, says Solidaridad Network

Give them a voice, include smallholders in the palm oil value chain, says Solidaridad Network
-A +A

KUALA LUMPUR (Sept 25): In the face of new opportunities and external sustainability agenda, more attention has to be paid as to how companies can better support the three million smallholders worldwide who produce roughly 30% of global palm oil, said international civil society organisation Solidaridad Network.

The organisation in a report “Palm Oil Barometer 2022” said smallholders’ contribution to the overall palm oil supply is expected to rise, as the private sector implement zero-deforestation commitments as governmental moratoriums on large-scale oil palm plantation expansion lead to more scrutiny on bigger estates.

Nevertheless, farmers organisations themselves have a key role to play in contributing to the debate on smallholders and their future.

Such a debate, which engages farmers, as well as the private sector, needs to be fostered in search of better-informed policies and practices, the report said.

“Any type of support that targets local interests rather than national or global goals, would put smallholders in a much better position to fulfil a more active role,” the report, written with the input of smallholder representatives from Asia, Africa and Latin America, said.

Based on the definition by the Roundtable Sustainable Palm Oil (RSPO), smallholders manage  plantations of 50 hectares or less, and can operate independently or in collaboration with companies.

In this definition, the RSPO distinguishes two types of smallholders — scheme smallholders and independent smallholders.

According to the report, fair prices are needed for farmers’ livelihoods and for investments to ensure the long-term viability of their farms and environments.

Although palm oil is increasingly lucrative with a retail value of US$286 billion (US$1:RM4.57) in 2021, smallholder palm oil producers cannot count on deriving a living income from their crop.

The industry's tendency to cut costs to optimise profits, reflects the underlying concern that palm oil buyers (FMCG or fast moving consumer goods, and retail) exhibit little willingness to compensate producers for operating sustainably, for example by paying a premium price or investing in long-term trading relationships.

While some companies demonstrate that they are taking the necessary steps to implement a comprehensive sustainability agenda, the sector needs to substantially improve its actions and investments at the smallholder level, the report emphasised.

Furthermore, after 20 years, RSPO-certified palm oil still only covers 20% of the global palm oil sector, of which independent smallholders make up a negligible 1%.


The report suggests that palm oil stakeholders take a step back and re-evaluate how the palm oil value chain can be made more inclusive.

This can be done by the industry — processors, traders, FMCG and retail — investing in an inclusive production by commiting to a fair value distribution across the supply chain, especially in the the primary line of production, where smallholders are the supplying base. This will be a more sustainable value chain, the report said.

At the industry level, the stakeholders are also urged to buy from the smallholders proportionate to the share of smallholders in national production and not to exclude them when implementing the No Deforestation, No Peat and No Exploitation (NDPE) policies or certification standards.

Smallholders should also be made members or representatives of boards and important organs. They can facilitate smallholder organisations and related social non-governmental organisations and participate in defining, challenging and steering the sustainability agenda.

Public policymakers should include smallholders in the decision-making process and work with different stakeholders, including civil society organisations, to accelerate the implementation of mandatory frameworks and national sustainability standards.

The report said banks and financial institutions also have a role to play. They should include smallholders as part of their sustainability criteria, to ensure all investments combine NDPE policies, with smallholder support to meet requirements and to ensure financial instruments work for smallholders.

“The oil palm is a high-yielding crop grown by millions of smallholder farmers in many countries across tropics, and under the right conditions, this crop can generate a living income while the farmers work in balance with nature.

However, all too often, the conditions are not right. Smallholders are rarely heard. They don’t feel ownership over their own futures, Solidaridad Network executive director Jeroen Douglas said in the report.

They received “too little in return for their hard work”, and are “forced to take unfair financial risks”.

All these factors limit the force for positive change, Douglas said.

The report is supported an co-signed by smallholders representatives including Malaysia’s Dayak Oil Palm Planters Association, Indonesia’s Oil Palm Research Institute, Honduras’ National Federation of Palm Oil Smallholders, and Ghana’s Oil Palm Development Association.