Smallholder participation in zero-deforestation supply chain initiatives in the Indonesian palm oil sector: Challenges, opportunities, and limitations

Abstract

As actors in tropical agricultural commodity supply chains implement commitments to end deforestation, they risk exacerbating social inequities by excluding smallholder farmers, who are important producers of many tropical commodity crops. Here, we explore the potential for independent oil palm smallholders in Indonesia to participate in zero-deforestation supply chains. We find that these smallholders are underrepresented in the share of zero-deforestation compliant oil palm production. We then synthesize perspectives from key actors in the oil palm industry including smallholders and their representatives, palm oil producing and consulting companies, nongovernmental organizations, and academic researchers. Based on these perspectives, we find that challenges to smallholder supply chain participation include limitations in knowledge (e.g., smallholders may not know the location of protected forests), institutional issues (e.g., absence of trust between oil palm growing companies and smallholder farmers), and financial constraints (e.g., the opportunity cost of not clearing forest). To address these shortcomings, we encourage oil palm growing and milling companies to take the lead on incentivizing, supporting, and facilitating smallholder participation in zero-deforestation initiatives. Specifically, these companies could build and use their technical and political resources to identify and map all forests in their entire supply shed and ensure small producers have land rights that enable participation in zero-deforestation supply chains. These policy levers would need to be combined with economic incentives such as access to improved inputs or price premia for their products. However, we caution that smallholder integration into existing zero-deforestation supply chains alone is unlikely to result in significant additional forest conservation at scale in Indonesia due to selection bias, leakage, and existing land tenure norms. Community-led and jurisdictional or landscape-scale supply chain initiatives that acknowledge multi-commodity production are more likely to provide equitable and just avenues for Indonesian smallholder farmers to steward forest resources.