Small farmers not ready as Indonesia looks to impose its palm oil sustainability standard on all

Small farmers not ready as Indonesia looks to impose its palm oil sustainability standard on all
Small farmers not ready as Indonesia looks to impose its palm oil sustainability standard on all


  • The Indonesian government plans to make its sustainable palm oil certification scheme, the ISPO, mandatory for small farmers by 2020. These farmers account for 40 percent of the total oil palm plantation area nationwide, but were exempted from the initial ISPO rollout.
  • A recent study shows that these smallholders are not ready to adopt the standard. They face a variety of challenges, largely stemming from the tenuous nature of their land ownership claims.
  • The Ministry of Agriculture fears that under the existing ISPO compliance regulation, many farmers will end up in prison for failing to comply by the deadline. The government is now drafting an updated ISPO regulation.

JAKARTA — The Indonesian government aims to impose its homegrown sustainability standard for palm oil on all operators, but concerns persist over the readiness of the previously exempt small-scale farmers who manage two-fifths of total plantation area nationwide.

Mandatory participation in the Indonesian Sustainable Palm Oil scheme, or ISPO, was initially aimed at farmers and companies managing plantations of more than 25 hectares (62 acres) in size. This, however, exempts from certification the vast number of smaller plantations that, combined, account for 40 percent of oil palm plantations in the country.

To date, less than 1 percent of independent smallholder farms are certified as sustainable under the ISPO and the Roundtable on Sustainable Palm Oil (RSPO), the world’s largest association for ethical production of palm oil.

The industry has long been associated with social and environmental problems such as forced labor and massive deforestation. The government, aware that any meaningful reform of the industry would have to include small-scale farmers, plans to make ISPO certification mandatory for these smallholders by 2020.

The need to do so will only grow more urgent as the number of such operators continues to increase, expanding their share of Indonesia’s oil palm plantation area to 60 percent by 2030.

“Independent smallholders are thus critical players for bringing sustainable, conflict-free palm oil into reality,” the World Resources Institute (WRI) said in a recent blog post.

However, there are concerns that smallholders, long overlooked by both industry and government for assistance in adopting agricultural best practices, are not ready for ISPO certification.

A truck transports recently harvested oil palm fruit, which will be pressed to make palm oil. Photo by John Cannon.

Obstacles to certification

The independent smallholders in question here differ from so-called plasma farmers, who also manage smallholdings but have agreements in place with larger companies that cover support and logistics, and ultimately guarantee that the companies will buy their palm fruit.

Independent smallholders, by contrast, typically learn how to manage plantations with no training, no supervision, and limited support from the government. The result, says Arya Hadi Dharmawan, a researcher at the Bogor Institute of Agriculture (IPB), is “a sad tale” of a large group of farmers for whom obtaining ISPO certification will be difficult.

A recent IPB study of small farmers in the three provinces of Jambi, Riau and Central Kalimantan highlighted just how ill-prepared they were to meet the standard. For a start, Arya said, most of these farmers lacked land certificates.

Under 2013 government guidelines for plantation licensing, small farmers are required to apply for a plantation registration certificate known as an STD-B, while large-scale producers (those cultivating more than 25 hectares) have to obtain a plantation business license called an IUP-B.

The former is a simple land certificate with no requirement to carry out an environmental impact assessment (EIA), while the latter involves more complex procedures and regulatory requirements, including an EIA. In practice, however, STD-B certificates are rarely issued, Arya found during the study of small farmers in Jambi.

“We thought it’d be easy [for these farmers to obtain ISPO certificates] because they’re located in [designated plantation] areas, but it’s not,” he said. They don’t have any papers, he added, and manage their land without formal borders, relying instead on mutual understanding with their neighbors.

“As a result, only 1 percent of them have STD-B certificates,” he said.

A second obstacle to certification is the farmers’ lack of access to ISPO-compliant fertilizers and seeds. The study found 89 percent of small farmers used lower-cost seedlings that provided smaller yields. Another challenge is the difficulty small farmers face in forming groups in order to have a firmer legal basis from which to operate.

These problems all mean no small farmers are truly ready, Arya said, even in regions like Jambi, where they face fewer legal woes because they manage plantations in non-forest areas. In Jambi, he said, small farmers are only about “55 percent ready” to comply with the ISPO.

Farmers in other regions are even less prepared, the study suggested. In Riau, Arya found that many farmers were managing plantations inside forest areas — a situation that would make it even harder for them to get the requisite paperwork for the land.

“If that’s the case, then it’ll be difficult for these farmers to obtain ISPO certificates,” he said. “The ISPO will surely claim victims in the form of farmers whose plantations are in forest areas.”

Elephant, orangutan, and tiger habitat cleared in the Leuser ecosystem for oil palm. Photo by Rhett A. Butler
Elephant, orangutan, and tiger habitat cleared in the Leuser ecosystem for oil palm. Photo by Rhett A. Butler

Plantation to prison

The government has acknowledged the uphill task it faces ensuring all oil palm growers are certified by 2020.

“If we make certification mandatory for all 450,000 households [working as oil palm planters], then maybe our prisons will be full,” said Dedi Junaedi, plantation product director at the Ministry of Agriculture, which is managing the ISPO compliance program.

Under the regulation mandating ISPO certification for all farmers, failure to comply is punishable by between three and 10 years in prison, and fines of up to 10 billion rupiah ($700,000).

“That’s why we have to be careful,” Dedi said. “Just look at [the study] — the readiness [of small farmers] is still 50 percent.”

An Orangutan (Pongo abelii). Orangutans in Indonesia and Malaysia have been highly impacted by oil palm production, bringing a strong organized response from international conservation NGOs and local wildlife activists. Photo by Rhett A. Butler

Acceptability and productivity

The ISPO was introduced by the government in 2011 as a mandatory certification scheme for all oil palm growers in the country, after several big buyers, including Unilever, Nestlé and Burger King, stopped buying palm oil from Indonesia over deforestation concerns.

Compared against other certification schemes, primarily the RSPO, the ISPO is largely considered the weakest, as it adheres only to Indonesian laws and regulations, which in some cases are not specific enough and fall short of providing detailed guidance for best practices.

A recent report commissioned by Friends of the Earth Europe detailed some of the ISPO’s weaknesses, such as lack of traceability, lack of protection for the rights of workers — it doesn’t clearly prohibit the use of force or of child labor — and failure to recognize key instruments on community rights, making it a poor tool for safeguarding the rights of indigenous communities.

The government, led by the Coordinating Ministry for the Economy, is drafting a presidential regulation to undergird the new ISPO scheme, with new provisions, such as traceability, to address the highlighted weaknesses.

Part of these efforts to improve the ISPO is to make it mandatory for smallholders by 2020, so that large corporate consumers that previously claimed ignorance about their suppliers can no longer fall back on that excuse.

Ultimately, the idea behind the ISPO is to make Indonesian palm oil and its associated products acceptable on the global market. It also aims to boost the productivity of smallholders, currently a third of that of big growers, by providing small farmers with certification-compliant fertilizers and seeds.

“It’s such a shame our farmers lose such a huge potential,” said Musdhalifah Machmud, the coordinating economic minister’s deputy for food and agriculture.

The revision of ISPO also dovetails with the government’s replanting program, in which small growers will receive financial aid and technical assistance to shift from less-productive crops to with newer variants with better-quality seeds and fertilizers. The government aims to replant 1,850 square kilometers (714 square miles) of smallholder plantations this year.

“If we don’t do that now, our farmers will lose their potential of high productivity in the next 10 years,” Musdhalifah said.

The government is concerned that if smallholder productivity remains low, the farmers will expand their plantations to boost output, raising the risk of forest clearing to make way for new land.

“Currently, our farmers feel their productivity is low, so they think they need to increase the size of their plantations,” Musdhalifah said.

The government expects to finish the revision of the ISPO this year, said Wilistra Danny, Musdalifah’s assistant for plantations.

“Starting from a few weeks ago, we’ve started discussing the legal draft,” he said. “We’re hoping that the presidential regulation [on the new ISPO] can be issued this year at the latest. But the process is still long. We still have to discuss it with the Ministry of Justice and Human Rights, and there’s going to be a harmonization process as well. All these will take quite a long time.”

Banner image: A Lubuk Beringin villager, Rahimah, 70, harvests palm nuts for palm oil on her agroforestry farm at Lubuk Beringin village in Jambi province, Indonesia. Photo by: Tri Saputro/CIFOR/Flickr


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