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Costs and benefits of certification of independent oil palm smallholders in Indonesia

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  • Hutabarat, Sakti
  • Slingerland, Maja
  • Rietberg, Petra
  • Dries, Liesbeth

Abstract

Sustainable certification schemes have surged in recent years. The introduction of these schemes poses serious challenges to smallholders. One such certification scheme is the Roundtable on Sustainable Palm Oil (RSPO), which uses certification to increase equitable and sustainable production of palm oil. This study calculates upfront and recurrent costs and monetary benefits of RSPO certification for the Amanah Independent Oil Palm Smallholders Association in Ukui District, Indonesia. Survey and interview data was collected between 2013 and 2015. Results show that upfront costs of certification were 86 euro per hectare. Furthermore, despite generating up to 21% higher revenues from sales, certification created up to an 8% loss of net income per hectare on average per smallholder in the first year after certification, compared to the situation prior to certification. To motivate smallholders for RSPO certification, the economic performance of certified oil palm smallholders should be improved. This can result from further yield increases, a guaranteed premium price or the sales of GreenPalm certificates to provide additional income.

Suggested Citation

  • Hutabarat, Sakti & Slingerland, Maja & Rietberg, Petra & Dries, Liesbeth, 2018. "Costs and benefits of certification of independent oil palm smallholders in Indonesia," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 21(6), July.
    • Handle: RePEc:ags:ifaamr:274984
    DOI: 10.22004/ag.econ.274984
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    References listed on IDEAS

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    Cited by:

    1. Ogahara, Zoë & Jespersen, Kristjan & Theilade, Ida & Nielsen, Martin Reinhard, 2022. "Review of smallholder palm oil sustainability reveals limited positive impacts and identifies key implementation and knowledge gaps," Land Use Policy, Elsevier, vol. 120(C).
    2. Apriani, Ernawati & Kim, Yeon-Su & Fisher, Larry A. & Baral, Himlal, 2020. "Non-state certification of smallholders for sustainable palm oil in Sumatra, Indonesia," Land Use Policy, Elsevier, vol. 99(C).
    3. Eusebius Pantja Pramudya & Lukas Rumboko Wibowo & Fitri Nurfatriani & Iman Kasiman Nawireja & Dewi Ratna Kurniasari & Sakti Hutabarat & Yohanes Berenika Kadarusman & Ananda Oemi Iswardhani & Rukaiyah , 2022. "Incentives for Palm Oil Smallholders in Mandatory Certification in Indonesia," Land, MDPI, vol. 11(4), pages 1-28, April.
    4. Gallemore, Caleb & Jespersen, Kristjan & Olmsted, Paige, 2022. "Harnessing relational values for global value chain sustainability: Reframing the roundtable on sustainable palm oil's offset mechanism to support smallholders," Ecological Economics, Elsevier, vol. 193(C).
    5. de Vos, Rosanne E. & Suwarno, Aritta & Slingerland, Maja & van der Meer, Peter J. & Lucey, Jennifer M., 2023. "Pre-certification conditions of independent oil palm smallholders in Indonesia. Assessing prospects for RSPO certification," Land Use Policy, Elsevier, vol. 130(C).
    6. Norhana Abdul Majid & Zaimah Ramli & Sarmila Md Sum & Abd Hair Awang, 2021. "Sustainable Palm Oil Certification Scheme Frameworks and Impacts: A Systematic Literature Review," Sustainability, MDPI, vol. 13(6), pages 1-10, March.
    7. Nurul Fathiah Aziz & Norshamliza Chamhuri & Peter J. Batt, 2021. "Barriers and Benefits Arising from the Adoption of Sustainable Certification for Smallholder Oil Palm Producers in Malaysia: A Systematic Review of Literature," Sustainability, MDPI, vol. 13(18), pages 1-11, September.
    8. Purnomo, Herry & Okarda, Beni & Puspitaloka, Dyah & Ristiana, Nurindah & Sanjaya, Made & Komarudin, Heru & Dermawan, Ahmad & Andrianto, Agus & Kusumadewi, Sonya D. & Brady, Michael A., 2023. "Public and private sector zero-deforestation commitments and their impacts: A case study from South Sumatra Province, Indonesia," Land Use Policy, Elsevier, vol. 134(C).
    9. Ahmed Zainul Abideen & Veera Pandiyan Kaliani Sundram & Shahryar Sorooshian, 2023. "Scope for Sustainable Development of Small Holder Farmers in the Palm Oil Supply Chain—A Systematic Literature Review and Thematic Scientific Mapping," Logistics, MDPI, vol. 7(1), pages 1-24, January.
    10. Watts, John D. & Pasaribu, Katryn & Irawan, Silvia & Tacconi, Luca & Martanila, Heni & Wiratama, Cokorda Gde Wisnu & Musthofa, Fauzan Kemal & Sugiarto, Bernadinus Steni & Manvi, Utami Putri, 2021. "Challenges faced by smallholders in achieving sustainable palm oil certification in Indonesia," World Development, Elsevier, vol. 146(C).

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