Indonesian smallholders account for 38% of oil palm produced, cultivating an area equivalent to around half of the country’s palm oil plantations. When taken together, smallholder farmers contribute a significant volume to the supply chain for palm oil.
“Smallholders are an important – and growing – part of the oil palm supply chain. Future volume growth is coming from smallholders,” Olivier Tichit, Musim Mas’ Director of Sustainable Supply Chain, told us.
But, small-scale actors are now facing new threats to their inclusion. Large corporations are increasingly requiring traceable commodities in order to achieve their deforestation targets. Regulators in Europe and other importing countries are also implementing more stringent rules in order to discourage international commerce in deforestation-related commodities. These efforts, while backed by positive intentions, could leave smallholders behind.
Tichit thinks this is a real threat. Musim Mas is a palm oil processor. The ‘easy answer’ would be to simply say “no more smallholders” and instead focus on large suppliers with traceable quantities that can be proven deforestation-free. ” It is easy. He explained that you’ll then be fully compliant ,”. “The short-term solution is not going to address deforestation .”
Professor Rachel Garrett from the Department of Environmental Systems Science, Swiss University EHT Zurich agrees. The EU’s Due Diligence Regulations ‘encourage smallholders to shift’, she also worries. It is important to consider other metrics such as smallholder investment and risk factor calculation. Because removing smallholders from the supply chain will not stop deforestation, this is essential.
“All of the policy movements in right now are focused on tracking individual supply chains. Is that our ultimate goal? Is it just about eliminating deforestation in specific supply chains? Is it in global deforestation reduction and the improvement of lives in these areas? It is possible to focus on multiple supply chains ,” if it is the second goal, which she said is more expansive and ambitious.
Raising all boats through a landscape approach
In 2020-2021, Indonesia lost 28.6Mha of tree cover. But the good news is that the country’s deforestation rate has decreased each year since 2016. This positive trend is due to the Indonesian government’s approach, as well as private sector actions. ” The government is very focused on deforestation and has strong enforcement. These no deforestation pledges from corporate sides are starting to show an effect ,” Tichit noted. Professor Garrett believes that regulators and corporations have had positive results from increased corporate accountability. She said that it will be interesting this year because of the fact that global shortages in seed oils have not led to a significant change in deforestation trends.
“Now prices have picked up we have not seen a requisite increase in expansion. Some people are still skeptical about the market signals. Perhaps it is because COVID has made prices rise. But the market signals are having an effect in that companies know large scale expansion will have consequences.”
In a recently launched public-private partnership, Musim Mas, EHT Zurich and IPB University in Indonesia are collaborating on a five-year project to look at what interventions reduce deforestation while safeguarding smallholder inclusion.
“The idea is to focus on the way in which zero deforestation policies and sustainable supply chain policies can achieve their goals of reducing deforestation on the ground while not excluding smallholder farmers, who have a lower ability to comply with such programmes,” explained fellow researcher Janina Grabs, an Assistant Professor of Business and Society at the Department of Society Politics and Sustainability at ESADE Business School in Barcelona. The research team chose to work with Musim Mas because it had a more ambitious approach and was tackling deforestation at the landscape level. The researchers are able to assess whether the’more innovative and ambitious solutions have wider development impacts.
Musim Mas’ strategy is guided by two goals that Tichit stated ‘go hand-in hand’. “One refers to our pledge to no deforestation. The second is our strong pillar on livelihoods, we believe in improving livelihoods.”
The company’s efforts have evolved from direct engagement with the smallholders within its own value chain to now include working with regional governments to support change at a landscape level. It doesn’t matter if Musim Mas helps improve agricultural practices for suppliers who don’t supply the company with food. This is all a way to invest in the future. ” When we direct extend, we tend to do it around our supply chains, but if we are talking about a particular region, we train smallholders in any supply chain. This is a long-term perspective. It will be beneficial for us to make better farmers. Tichit thinks it’s important to influence the practices of smallholders. He believes that smallholders need to be given the chance to improve their yields.
“How do we get people to listen to us when we talk about sustainability? They bring that knowledge of palm. This is the hook. Once we have established a rapport, then we can start to talk about other topics.
“If you can’t talk about palm, smallholders lose interest very quickly. It is important to have a conversation with them about topics that interest them. We come with valuable knowledge.”
The sustainability expert believes that with ‘seemingly simple’ techniques – improved husbandry and more effective use of fertiliser – smallholders can increase yields by as much as 50% without encroaching further into the forest.
Charting an alternative development path
Ultimately, putting an end to deforestation means people need to have alternative paths to economic and social development. The EHT Zurich research team is looking into economic and social indicators that are linked to outreach programs.
“We’re taking a multi-pronged approach in our research. Both in-field survey data and geospatial analysis with satellite imagery are combined. Professor Grabs explained that the type of work they are doing is on the ground with smallholders. It focuses on equity-based livelihood assessments and inclusion in value chain value chains. They also aim to help them reach international sustainable value chains .
The study will examine aspects such as yields and social issues, including female participation in farming, child labor, education, and access. It is expected to last for five years.
Professor Garrett quickly dissociates any link between deforestation rates, which can increase productivity in the short term, and longer-term developmental gains. She argued that alternative paths to development need new investment approaches.
“There is no scientific basis to suggest deforestation leads to development. While it can generate foreign currency temporarily to boost your exchange value, and allow you to import more goods from abroad, this is not sustainable development. Long-lasting development is only possible when agricultural commodities are valued and investments in education, manufacturing, and the community are made.
“If you want development you shouldn’t be investing in extending the frontier with the forest, which is eroding your future basis to support your existing agricultural system. She suggested that you invest the money to get more value from your local agricultural production system by manufacturing value added .
Here again, improved agricultural practices can also help build long-term value as well as delivering environmental gains, Professor Grabs added. “ Adding value to product [will bring community benefits], but in this particular context, it is important to add value to land by increasing yields. She suggested that it is possible to increase returns by improving the land-use practices ,”.
According to Tichit, this long-term vision of development would be supported by placing value on land using a system that is well-developed for land-titling. ” Although it may sound trivial, this is crucial. He explained that there is much to do on land titling, giving value to land titles.
“Why do people not have land titles? What is the real value of a land title? What value does the land title have for an oil palm farmer living in frontier areas? It does what? It doesn’t do much. However, if the land title has a market value, it can be used as collateral for your farm to purchase a bicycle, appliances or send your children to college. This is essential, and we need to put more emphasis on land title. This is a very profound reform. This is a very significant reform that will transform the landscape. It is the next level of smallholder farming in Indonesia.”