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Supply Chain
Don’t Leave Smallholders Out of the Palm Oil Debate

The public debate on palm oil centers on large corporate entities driving the industry, while ignoring smallholders that make up 40 percent of planted hectares, according to a new whitepaper by CSR Asia.

In emerging palm-growing markets, such as Thailand, smallholders make up almost 80 percent of production area, the paper says.

The new paper looks at the experience of smallholders in the case of palm oil – primarily through the work of the Roundtable on Sustainable Palm Oil (RSPO) set up in 2003 to define and implement standards for sustainable palm oil. The paper examines the certification process and the opportunities that this can provide for smallholders.

Palm oil has seen no shortage of criticism for negative environmental and social impacts in recent years. Environmental issues include extensive deforestation, habitat loss for threatened and endangered species, poor air quality from burning forests and peatlands, as well as greenhouse gas emissions deriving from land use change. The greatest social concerns focus on land rights of communities, as well as labor conditions in plantations and the potential exploitation and exclusion of smallholders from the value chain.

How socially responsible procurement can - and can't - create regenerative livelihoods and ecosystems

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In addition to the important current role of smallholders in oil palm, the report explores the lessons from palm oil, and opportunities for large palm oil producers to expand the model of smallholder inclusion. This is seen as key to the local license to operate, and often is one of the critical negotiation cards held by the large companies when acquiring land.

Key findings of the report include:

  • Robust land governance is a prerequisite for sustained success of smallholder and community programs and avoidance of conflict. RSPO social tools have proven useful to address these challenges, but more robust implementation is still needed.
  • Private-sector companies are best placed to drive inclusive business opportunities for smallholders and enhance productivity, but may need support for funding and capacity-building.
  • The most important role of government is to provide clarity on legal land titles and enable civil resolution of conflict without interference. In addition, government can supply funding and capacity to companies wishing to engage smallholders in marginal locations.
  • Intergovernmental and Non-Governmental Organisations play critical roles as watchdogs, facilitators and advocates for communities and smallholders.
  • Multi-stakeholder initiatives have the potential to create sector-wide, systemic change, focusing on joint solutions, resulting in better informed, better supported and more sustainable policy and practice changes.
  • As pressures on companies to reduce carbon emissions and protect forests are mounting, specific consideration and participatory frameworks must be developed to ensure that land set-asides does not prevent communities from access to development and basic needs.
  • Women’s economic empowerment has received little attention within the RSPO framework, but robust free prior and consent approaches can be adjusted and improved to strengthen opportunities for women.
  • Reliance on retailers and brand support is unlikely to drive inclusive agriculture models, as there is scant willingness to pay a premium. Instead focus on traceable and low-risk supply chains can be leveraged as a strategic advantage.

Using the example of the RSPO, the paper argues that multi-stakeholder initiatives (MSIs) are seen as potentially powerful institutions filling the governance gap that exists around complex sustainability issues. Voluntary initiatives across an entire sector can change policies and practices, and attitudes and beliefs of companies. MSIs have the potential to create sector-wide, systemic change, focusing on joint solutions, resulting in better informed, better supported and more sustainable policy and practice changes. Inclusive business interventions associated with a MSI can help to address the interests of underrepresented, marginalized and vulnerable groups.

In March, UCS released a scorecard grading the palm oil sourcing commitments of 30 top companies in the packaged food, fast food and personal care sectors, which showed 24 of these household brands have inadequate commitments or lack commitments altogether. However, the scorecard gave high marks to companies such as Unilever, which is apparently making good on its commitment to have 100 percent traceable palm oil by the end of this year.


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