In a rural village in Indonesia, smallholder producers tend to their palm oil crops, a source of livelihood for their families and communities. This scene could be replicated across thousands of communities in Indonesia, where palm oil has become a lifeline for millions. First introduced to these regions by colonial powers in the 19th century (Gapki, 2020, Dialogue Earth, 2021), palm oil quickly grew into a powerful economic force. It now contributes between 9 and 17 percent of Indonesia’s GDP and employs 8 million people — 3.5 percent of the country’s workforce (G20, n.d.).
However, while it brings prosperity to many, it also fuels heated debates. For producers, palm oil means food, education for their children, and a path out of poverty, having lifted 2.6 million Indonesians and benefited 4 million smallholder households (G20, n.d.). But for environmentalists and human rights activists, this same crop symbolizes deforestation and habitat destruction.
As we navigate the complexities of palm oil’s role in the global market, the question remains: How can we reconcile the benefits of palm oil with the urgent need for ethical and sustainable practices?
A Look into Palm Oil
The oil palm plant (Elaeis guineensis), originally from West Africa, has been used since Ancient Egypt. In the late 19th century, its economic potential was recognized by Western businessmen, who expanded its cultivation to South America and Southeast Asia. Initially brought to Indonesia as an ornamental plant for botanical gardens, oil palm's commercial value became evident by the early 20th century, leading to large-scale agricultural cultivation, particularly on Sumatra and Borneo. While Malaysia was once the world’s leading producer, Indonesia surpassed it in 2006 and remains the largest producer today (Michigan State University, n.d.).
As palm oil production surged, so did its diverse applications in various industries, making it an indispensable part of modern life. Palm oil is a versatile commodity used widely in our daily lives. Reports show that 68% is used in food products like margarine, chocolate, and cooking oils, 27% in industrial goods like soaps and cosmetics, and 5% in bioenergy for transport and electricity (Our World in Data, 2021).
The Controversy Surrounding Palm Oil
From Deforestation to Child Labor: The Flaws in Sustainable Palm Oil
Palm oil is one of the most controversial commodities globally due to its significant role in deforestation, particularly in Indonesia which are home to some of the planet’s most biodiverse ecosystems. The rapid expansion of palm oil plantations has led to widespread forest clearing, resulting in not only habitat destruction but also substantial releases of carbon stored in forest biomass and soil. Forests act as vital carbon sinks, and their destruction releases substantial amounts of stored carbon dioxide, intensifying global warming. According to Earth, palm oil trees have a 28-30 year life cycle, after which they grow too tall for efficient harvesting and are replaced, perpetuating this cycle of environmental degradation. It's estimated that up to 300 football fields' worth of forest are cleared every hour to make room for palm plantations (Earth, 2023).
Additionally, peatlands—rich in carbon—are often drained and burned for plantations, emitting millions of tonnes of greenhouse gases and accelerating climate change (Earth, 2023). Study shows that the transformation of peat swamps into palm oil plantations in Southeast Asia accounts for up to 0.8% of global greenhouse gas emissions, which is nearly equivalent to half of the emissions produced by the aviation industry (ZSL, n.d.)
This further poses significant challenges to the agricultural practices surrounding oil palm cultivation. One of the most pressing issues is the rising temperatures driven by climate change, which directly threatens oil palm yields. Research suggests that even moderate increases in temperature can lead to noticeable declines in crop productivity. For regions like Indonesia, where current conditions are ideal for cultivating oil palms, this decline is especially alarming. Reduced yields could not only impact global supply but also have severe economic consequences for communities that depend on this industry for their livelihoods (BMC, 2021 & NCBI, 2017).
In addition to rising temperatures, shifting rainfall patterns caused by climate change are expected to create unpredictable weather conditions. Droughts and excessive rainfall—both extremes—can stress oil palm trees, affecting their growth and fruit production. During periods of reduced rainfall, water scarcity becomes a significant issue, impairing the trees’ ability to produce fruit. Conversely, excessive rainfall can lead to flooding, damaging crops and disrupting the production cycle. This increased unpredictability in weather patterns threatens the long-term sustainability of oil palm farming, creating instability for producers (BMC, 2021 & NCBI, 2017).
The challenges don’t stop there. The warmer temperatures and changing climates also create more favorable conditions for pests and diseases to thrive. This increased prevalence of pests not only affects the health of the oil palm trees but also drives producers to use more pesticides, which complicates sustainability efforts. The heightened use of chemicals adds to production costs and risks further environmental harm, perpetuating a cycle of ecological degradation that threatens the future of the industry (BMC, 2021 & NCBI, 2017).
The negative impacts of palm oil production do not stop environmental degradation; they also extend to severe social issues that affect the most vulnerable workers. In many plantations, labor exploitation is rampant, with workers, particularly women, forced to endure extremely low wages, long hours, and insecure employment without access to pensions or health insurance. Children, some as young as eight, are often pulled into hazardous labor, sacrificing their education and well-being to help their families. The unsafe use of toxic chemicals and lack of proper safety equipment further endanger the health of these workers, highlighting the deeply rooted human rights violations that persist alongside the industry's environmental harm (Amnesty,n.d).
Is stopping palm oil production necessary to achieve sustainability?
However, the reality is more complex. Palm oil is among the most efficient oil-producing crops, yielding more oil per hectare than any other vegetable oil. It is also a vital economic lifeline for millions of people, especially in Southeast Asia. In Indonesia alone, data shows that the palm oil industry supports over 21 million workers, including smallholder producers who rely on palm oil cultivation for their livelihoods. This makes palm oil not just a commodity, but a critical means of income and survival for entire communities. The industry provides employment across the supply chain—from planting and harvesting to processing and exporting—giving it immense socio-economic importance.
Stopping palm oil production or scaling it back drastically would have significant economic repercussions, particularly for rural populations that are heavily dependent on it. It could lead to widespread unemployment, economic instability, and increased poverty in these regions. This complex reality highlights the need for a balanced approach. Rather than halting palm oil production altogether, the focus should be on making it more sustainable, improving labor conditions, and minimizing its environmental impact.
The challenge is not simply stopping production, but rather transforming it into a more responsible and sustainable practice that mitigates its negative effects while still preserving the economic benefits for the communities that rely on it. By adopting sustainable approaches, industry can reduce environmental harm while ensuring that the livelihoods of millions who depend on palm oil are protected.
Finding Sustainable Palm Oil
One of them is the adoption of certification programs that enforce sustainable standards across the industry. These programs aim to ensure that palm oil is produced in a way that protects ecosystems, respects human rights, and supports the livelihoods of smallholder producers, creating a more balanced and ethical supply chain.
Certifications
Palm oil certification plays a critical role in ensuring that sustainable practices are followed throughout palm oil production. Various certification schemes have been established to regulate and promote responsible practices in the industry. Some of the most prominent certifications include:
RSPO (Roundtable on Sustainable Palm Oil)
A global initiative that promotes the production of sustainable palm oil by ensuring compliance with environmental and social standards. Certification encourages practices like soil and water conservation, reduced herbicide use, and proper waste management, which help mitigate deforestation. Studies also suggest that RSPO certification can improve productivity for independent smallholders. However, the effectiveness of RSPO in practice faces challenges. A major barrier is the technical knowledge gap among smallholders, who often lack the expertise to fully comply with RSPO standards. Additionally, the costs and complexity of certification can deter wider adoption, particularly for smaller producers.
RA (Rainforest Alliance)
This certification ensures that palm oil production protects ecosystems and the rights of workers. It focuses on biodiversity conservation, preventing deforestation, maintaining wildlife corridors, and protecting endangered species, all of which help preserve ecosystems and reduce environmental degradation. RA certification also mandates fair treatment of workers, including adherence to child labor laws, safe working conditions, and promoting gender equality, significantly improving the livelihoods of rural communities. However, barriers to wider adoption remain. The cost of certification can be prohibitive for small-scale producers, particularly in remote areas lacking financial resources. Additionally, implementing RA’s rigorous standards requires specialized knowledge and infrastructure, which may not be readily accessible, limiting the certification’s reach among smallholders.
ISCC (International Sustainability and Carbon Certification)
The International Sustainability and Carbon Certification (ISCC) verifies sustainable and climate-friendly palm oil production, with a strong focus on reducing greenhouse gas emissions. The certification promotes sustainable feedstock production, biodiversity protection, effective water management, and the reduction of greenhouse gas emissions. It also safeguards labor rights and supports deforestation-free supply chains, contributing to improved livelihoods for producers. By emphasizing these sustainable practices, ISCC helps create more resilient and environmentally friendly agricultural systems. However, similar to other certifications, adhering to ISCC’s stringent environmental and social standards requires specialized knowledge and infrastructure. This can pose challenges for less-equipped producers, especially smallholders, and limit the broader adoption of certification in regions lacking resources and technical support.
ISPO (Indonesian Sustainable Palm Oil
The Indonesian Sustainable Palm Oil (ISPO) certification, mandatory for palm oil producers in Indonesia, aims to enhance sustainability in the sector by ensuring compliance with national regulations. ISPO requires producers to follow strict environmental, social, and economic standards, such as responsible land use, biodiversity conservation, and worker protection. This comprehensive approach is designed to mitigate the environmental and social impacts of palm oil production. A key focus of ISPO is the empowerment of smallholder producers through training in sustainable practices and improved market access. This support helps distribute the benefits of palm oil production more equitably across stakeholders, especially those who traditionally face barriers in the industry. However, despite being mandatory, ISPO has seen low adoption rates among smallholders. Challenges such as the high costs of certification and the complexity of compliance have made it difficult for smaller producers to meet the required standards. Limited resources and technical expertise further hinder their ability to fully integrate into the certification system.
EUDR
The European Union Deforestation Regulation (EUDR) is designed to prevent the import of commodities linked to deforestation, including palm oil, soy, coffee, cocoa, and others, into the EU market. The regulation targets products that contribute to forest degradation, requiring companies to demonstrate that their supply chains are deforestation-free. Certifications like RSPO and ISCC, which focus on sustainable production practices and traceability, offer valuable tools to support compliance by verifying that palm oil is produced without deforestation. However, these certifications alone do not fulfill EUDR requirements.
Under the EUDR, companies must go beyond certification by performing thorough due diligence. This process involves collecting geolocation data, conducting deforestation risk assessments, and ensuring compliance with the relevant legislation in the country of production. Companies must provide proof that their products are legally produced and traceable to deforestation-free areas, backed by a due diligence statement. By enforcing this regulation, the EU aims to reduce its contribution to global deforestation while encouraging more sustainable agricultural practices in producing countries.
However, this regulation has also raised concerns about excluding smallholder producers, who may lack the resources or infrastructure to meet these stringent requirements. Smallholders, who play a vital role in the palm oil industry, could face difficulties in navigating complex compliance processes, making them vulnerable to being left out of global markets. To ensure sustainability efforts are inclusive, it is crucial to develop solutions that support smallholder producers in adhering to sustainability standards while ensuring their livelihoods are not compromised. This includes providing access to digital tools, financial support, and capacity-building initiatives that enable smallholders to meet both certification and EUDR requirements.
How we help?
We provide solutions to help businesses and smallholders overcome challenges in meeting sustainability requirements. Our digital traceability platform ensures supply chains are transparent and compliant with certifications like RSPO, ISPO, and EUDR.
Through KoltiTrace MIS, we offer end-to-end visibility, with Field Agents using the KoltiTrace MIS Mobile app to collect and verify data in the field. Processors and manufacturers manage data and ensure compliance via the KoltiTrace MIS web platform. This system simplifies the certification process, bridging the technical knowledge gap and reducing costs, making sustainable practices more accessible.
Advanced Features for Verified Supply Chains
These features promote transparency, reduce complexity, and help businesses and smallholders alike navigate compliance.
Deforestation Mapping & GHG Emissions Features
One key challenge is the need for accurate monitoring of environmental impacts, especially regarding deforestation and emissions. Our platform tracks historic land use change (LUC) emissions globally, providing data on carbon emissions (CO2, N2O, CH4) from deforestation to perennial crops. By calculating emissions in terms of ton carbon dioxide equivalent (tCO2e), businesses can ensure compliance with sustainability certifications like RSPO and ISCC, addressing the technical knowledge gap around emissions tracking.
Geo Location & Mapping Features
The complexity of overseeing farm operations and ensuring traceability can be daunting for businesses, especially smallholders. Our management information system provides real-time geo-mapping, enabling data-driven decisions that optimize costs, improve yields, and ensure traceability across the supply chain. This feature simplifies the complexity of compliance by making farm operations more transparent and manageable, even for smaller producers.
Producer Supply Chain Management
Verifying traceability across the entire supply chain—from producers to retailers—can be particularly challenging for businesses. We ensure full traceability through a tailored KPI dashboard, which complies with data-sharing agreements and privacy policies. By simplifying traceability and offering clear data visibility, we help businesses navigate compliance complexity and support smallholders in meeting these requirements
Sourcing Origin GHG Management
Monitoring GHG emissions and carbon removals at each step of the value chain is crucial for sustainability compliance. Our platform cross-references key global data like agricultural practices, climate conditions, and soil health, helping businesses and smallholders reduce their carbon footprint. This feature addresses both the technical knowledge gap and the costs associated with meeting certification standards by providing clear, actionable insights on GHG management.
Traceability from Seed to Table
Ensuring transparency throughout the entire production process is a core challenge for businesses striving to meet certification standards. Our platform offers complete traceability, with verified data on farming practices, producer profiles, and digital transactions from seed to table. This level of traceability helps businesses and smallholders meet sustainability requirements, building consumer trust and ensuring compliance with global standards.
In addition to KoltiTrace MIS, KoltiSkills supports smallholders in the palm oil industry to meet certification and EUDR requirements through four key services:
Supply Chain Mapping & Verification
We map product origins and verify farm practices to ensure compliance with evolving sustainability regulations like EUDR.
Training & Coaching
We provide group training and personalized coaching to help smallholders adopt sustainable practices and meet compliance standards.
Business Support
We strengthen smallholder businesses through capacity building, connecting them with cooperatives, financial services, and local supply chain actors.
Certification Preparation
We guide smallholders through the process of achieving global certifications, such as RSPO and Rainforest Alliance, ensuring compliance with sustainability benchmarks.
With our platform, businesses can confidently showcase their commitment to sustainability, meet the latest regulatory demands, and secure their place in the global market. Now is the time to take control of your supply chain, ensure compliance with sustainability standards, and make a lasting impact on the future of the palm oil industry. Don’t wait—take action today! Contact us to lead the way in responsible palm oil production and ensure your business stays ahead in an ever-evolving industry.
Resources:
GAPKI. (2020). The recent development of the Indonesian palm oil industry. GAPKI. Retrieved from https://gapki.id/en/news/2020/04/23/the-recent-development-of-the-indonesian-palm-oil-industry/
Dialogue Earth. (n.d.). Illustrated history of industrial palm oil. Dialogue Earth. Retrieved from https://dialogue.earth/en/forests/illustrated-history-of-industrial-palm-oil/
Indonesia Palm Oil Facts. (n.d.). Palm oil facts for G20. Indonesia Palm Oil Facts. Retrieved from https://www.indonesiapalmoilfacts.com/g20/?__cf_chl_tk=gb4E_voUTN1adLgBieZZyxSncZGApTiDWogqZmrwFnQ-1729062126-1.0.1.1-Fmx2ojJrXn0YU57MUWaRLEyTTPm5Vz4JYA3lCmf2ZEY
Earth.org. (n.d.). How palm oil contributes to environmental destruction. Earth.org. Retrieved from https://earth.org/how-palm-oil-contributes-to-environmental-destruction/
Zoological Society of London (ZSL). (2023). Palm oil and climate change. ZSL. Retrieved from https://www.zsl.org/news-and-events/news/palm-oil-and-climate-change
CABI Agriculture and Bioscience. (2021). Palm oil sustainability: Environmental, social, and economic implications. CABI Agriculture and Bioscience. Retrieved from https://cabiagbio.biomedcentral.com/articles/10.1186/s43170-021-00058-3
National Center for Biotechnology Information (NCBI). (2018). Palm oil and health impacts: A review. NCBI. Retrieved from https://pmc.ncbi.nlm.nih.gov/articles/PMC5756879/
Amnesty International. (2016). Global brands profiting from child and forced labor in palm oil. Amnesty International. Retrieved from https://www.amnesty.org/en/latest/news/2016/11/palm-oil-global-brands-profiting-from-child-and-forced-labour/
Koltiva. (2023). Ensuring sustainability and transparency in Indonesia’s palm oil supply chain. Koltiva. Retrieved from https://www.koltiva.com/post/ensuring-sustainability-and-transparency-in-indonesia-s-palm-oil-supply-chain
World Wildlife Fund (WWF). (2024). Measuring implication of RSPO certification implementation. WWF. Retrieved from https://www.wwf.id/sites/default/files/2024-02/2023_Measuring%20Implication%20of%20RSPO%20Certification%20Implementation_English%20Final_0.pdf
World Wildlife Fund (WWF). (2023). Measuring implications of implementing RSPO certification: A learning process for independent oil palm. WWF. Retrieved fromhttps://www.wwf.id/en/blog/measuring-implications-implementing-rspo-certification-learning-process-independent-oil-palm
Rainforest Alliance. (n.d.). How Rainforest Alliance certification benefits your farm. Rainforest Alliance. Retrieved from https://www.rainforest-alliance.org/business/certification/how-rainforest-alliance-certification-benefits-your-farm/
Preferred by Nature. (n.d.). Rainforest Alliance certification. Preferred by Nature. Retrieved from https://www.preferredbynature.org/certification/ra-farm
International Sustainability and Carbon Certification (ISCC). (n.d.). ISCC impact report. ISCC System. Retrieved from https://www.iscc-system.org/about/impact-2/impact-report/
Qualitas Sertifikasi. (n.d.). ISCC certification: What you need to know. Qualitas Sertifikasi. Retrieved from https://www.qualitasertifikasi.com/iscc
Sucofindo. (n.d.). The importance of ISPO certification in the palm oil industry. Sucofindo. Retrieved from https://www.sucofindo.co.id/en/articles/the-importance-of-ispo-certification-in-the-palm-oil-industry/
European Forest Institute. (n.d.). Overview of ISPO certification for smallholders. European Forest Institute. Retrieved from https://efi.int/sites/default/files/files/flegtredd/Terpercaya/Briefings/Overview_ISPO_Certification_smallholders_EN.pdf
Writer: Kumara Anggita, Content Writer
Editor: Boby Hermawan Arifin, Head of Digital Marketing
About Writer:
Kumara Anggita, serving as Koltiva's dedicated Content Writer, brings a wealth of experience from her six-year tenure in journalism in the fields of humanities and lifestyle, as well as her role as a writer in the tech industry. Her deep-rooted passion for gender equality and sustainability spurred her to enhance her reporting and storytelling skills through the EmPower Media Bootcamp by UN Women. Now, Kumara utilizes her platform to advocate for sustainable practices and gender equality through her compelling writing.
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