Indonesia is the world’s largest producer of palm oil, responsible for 60 percent of global production. Almost 70 percent of Indonesian palm oil is exported, representing up to USD18 billion or 10 percent of the country’s total exports. The commodity has contributed to economic growth in Indonesia, but also presents high environmental and social costs. The expansion of oil palm drives deforestation and was responsible for 23 percent of forest loss between 2001 and 2016. The clearing and, in many cases, burning of forests and peatlands have also led to a substantial loss in biodiversity and have exacerbated greenhouse gas emissions, while smoke and haze hazards affect not only Indonesia but also neighboring countries.
Smallholder producers are playing an essential role in the sector, especially in Sumatra. Indonesian smallholders currently supply 38 percent of palm oil production, while covering nearly half (45 percent) of the country’s area of oil palm cultivation. The area cultivated by smallholders has seen a massive expansion in the last two decades, from less than 1.6 to 5.8 million hectares between 2001-18, reflecting an annual growth rate of almost 8 percent. If this growth rate continues, the area under smallholder production will double in less than 9 years.
A large and rapidly growing group of palm oil smallholders in Indonesia are small-scale independent farmers (in the following referred to as “independent smallholders”), who mostly remain outside sustainability initiatives in the sector. Engaging with this group of independent smallholders is a crucial part of efforts to build a sustainable palm oil sector.
This briefing paper explores the challenges and opportunities to address deforestation among palm oil smallholders in Indonesia, with a particular focus on independent smallholders.