Are smallholder farmers truly included in sustainable palm oil mill markets? Lessons from Indonesia

Smallholders, defined as farmers with less than 50 hectares of oil palm (RSPO, 2020), produce up to 30% of the world’s crude palm oil (Chain Action Research, 2021) and manage 27–40% of global oil palm area (Descals et al., 2021; RSPO, 2022). They are generally divided into two groups: contract smallholders and independent smallholders. Contract smallholders have exclusive agreements with companies that holds at least partial decision-making power over their land and production, and who are required to sell to, and be purchased by, the company. In contrast, independent smallholders operate without contracts with companies and retain full control over their land.

Despite their central role in the food system, many smallholders risk exclusion as downstream supply chain actors adopt sustainability initiatives, including voluntary certification, zero deforestation pledges, and government-mandated due diligence. These initiatives require proof of compliance with criteria such as land legality, traceability, and sustainable production practices. Many smallholders struggle to meet these new, stringent standards because they lack formal land titles or other necessary documentation.

Figure 1. Sampled RSPO certified palm oil mills in Indonesia (n=87), distributed across Sumatra (64%) and Kalimantan (36%).

Our new study, published in Communications Earth & Environment investigates how and why implementation of supply chain governance initiatives adopted by corporate actors influences smallholder market participation. We focused on palm oil mills in Indonesia certified by the Roundtable on Sustainable Palm Oil (RSPO), the leading certification system in the industry. In Indonesia, the world’s leading palm oil producer, independent smallholders manage a larger share of oil palm area (33–41% of the total) in 2019 (Gaveau et al., 2022)  compared to contract smallholders (4–6%) circa 2016 (Jelsma et al., 2017). The RSPO certification standard emphasizes support for smallholder inclusion within its supply chains (RSPO, 2018, 2024), including in certified mills. While many studies have investigated the barriers faced by independent smallholders in obtaining certification, little has been known about the broader inclusion of all smallholders, including those who remain uncertified, within certified mill markets.

By analyzing geospatial data on oil palm plantations, mill locations, and mill fresh fruit bunch (FFB) sourcing records, we found evidence for “passive exclusion” of independent smallholders at RSPO-certified mills. Compared to non-certified mills, certified mills were surrounded by relatively less independent smallholder oil palm as a proportion of total oil palm area. Furthermore, most certified mills never purchased from independent smallholders after certification. Certified mills sourced just 7% of their FFB from independent smallholders, even though these smallholders produced around 34% of FFB in Indonesia in 2020. Conversely, certified mills purchased more FFB from contract smallholders (15%) than expected.

Independent smallholders already face far greater limitations than contract smallholders. In Indonesia, these challenges include lower yields, limited access to credit, and difficulties with land legality. As mills adopt increasingly stringent standards as part of the RSPO and other supply chain governance efforts, independent smallholders’ participation in certified mill markets may decline and limit their access to benefits such as price transparency and stable market opportunities.

New regulations like the European Union’s Regulation on Deforestation-free Products (EUDR), risk deepening existing disparities (de Vos et al., 2023). If companies apply stricter RSPO supply chain models (i.e, shifting from mass balance which accommodates noncertified supply to identity preserved/segregated which require fully certified supply) to comply with EUDR, independent smallholders may be excluded altogether. This is particularly concerning given that many smallholders already produce without deforestation but remain outside RSPO certification.

Sustainable supply chain initiatives like RSPO, in partnership with national governments, can support jurisdictional certification approaches and collaborate with private sector, civil society, and policymakers. Similarly, buyer policies that actively engage independent smallholders could help ensure that these farmers are not left behind in the transition toward sustainable palm oil supply chains.

University of Hawai’i news article: https://www.hawaii.edu/news/2025/09/11/palm-oil/

About the authors:

Andini (Sita) Ekaputri is a PhD candidate at National Research and Innovation Agency (BRIN), Indonesia, and University of Hawai’i.
Kimberly Carlson is an Associate Professor at New York University.

References

Chain Action Research. (2021, June 15). FMCGs, Retail Earn 66% of Gross Profits in Palm Oil Value Chain. Chain Reaction Research. https://chainreactionresearch.com/report/palm-oil-value-chain-deforestation/

de Vos, R. E., Suwarno, A., Slingerland, M., van der Meer, P. J., & Lucey, J. M. (2023). Pre-certification conditions of independent oil palm smallholders in Indonesia. Assessing prospects for RSPO certification. Land Use Policy, 130, 106660. https://doi.org/10.1016/j.landusepol.2023.106660

Descals, A., Wich, S., Meijaard, E., Gaveau, D. L. A., Peedell, S., & Szantoi, Z. (2021). High-resolution global map of smallholder and industrial closed-canopy oil palm plantations. Earth System Science Data, 13(3), 1211–1231. https://doi.org/10.5194/essd-13-1211-2021

Gaveau, D. L. A., Locatelli, B., Salim, M. A., Husnayaen, Manurung, T., Descals, A., Angelsen, A., Meijaard, E., & Sheil, D. (2022). Slowing deforestation in Indonesia follows declining oil palm expansion and lower oil prices. PLOS ONE, 17(3), e0266178. https://doi.org/10.1371/journal.pone.0266178

Jelsma, I., Schoneveld, G. C., Zoomers, A., & van Westen, A. C. M. (2017). Unpacking Indonesia’s independent oil palm smallholders: An actor-disaggregated approach to identifying environmental and social performance challenges. Land Use Policy, 69, 281–297. https://doi.org/10.1016/j.landusepol.2017.08.012

RSPO. (2018). 2018 RSPO Principles & Criteria for the Production of Sustainable Palm Oil. RSPO. https://rspo.org/principles-and-criteria-review

RSPO. (2020). RSPO Membership Rules 2020. https://rspo.org/wp-content/uploads/RSPO_Membership_Rules_20202.pdf

RSPO. (2022). RSPO Smallholders. https://rspo.org/smallholders

RSPO. (2024). 2024 RSPO Principles and Criteria for Sustainable Cultivation of Oil Palms and Production of Sustainable Palm Oil and Oil Palm Products. https://rspo.org/wp-content/uploads/1_PC-2024-Final-Draft.pdf