This week’s post is about independent smallholders and the RSPO. A number of smallholder groups has been certified since 2011. For example, in 2012, a first group of 412 independent smallholders was RSPO certified in Thailand. A group of 349 farmers followed in Indonesia in 2013. In Malaysia, a group of 34 smallholders was certified last week. The issue of certifying smallholders is definitely on the RSPO agenda, as is shown by the fact that 10% of the sales revenues from certified palm oil, plus 50% of the RSPO surpluses after tax deduction, are set aside for the support and certification of smallholders. But getting independent smallholders certified is a difficult, lengthy process. Not many organisations have the capacity to certify smallholders and not many smallholder cooperatives have the capacity to certify themselves. So that’s a problem.
Let me explain some more about oil palm smallholders in Indonesia and Malaysia. Broadly speaking, there are three types of smallholder-company relationships: shareholder, scheme smallholder, and independent smallholders (see: Vermeulen and Goad, 2006). Shareholders are actually not really smallholder farmers, because they don’t own and manage a farm. They are local farmers who have handed over their land to a plantation company, and get a yearly share of the profit in return. They have no say in the management of the plantation. Sometimes the company will hire the shareholders as labourers, but this does not always happen. If a company with shareholders wants to get RSPO certified, it can simply introduce the RSPO practices in its plantation, and no specific smallholder-related actions are required. However, the relation between the locals and the company does matter. Shareholders often have no land left to grow other crops as they are surrounded by oil palm. If the shareholders somehow feel that they have been treated wrongly and that the land arrangements are unfair, then this conflict can interfere with the RSPO certification process until it has been fully resolved.
Scheme smallholders are attached to one specific company and must deliver their bunches to the company mill. Although the exact arrangements differ, generally the planting of scheme smallholder plantations is arranged by the company. The company also manages the plantations during the first three years, when the palms are not yet productive. After this period the plantations are handed back to the farmers, who must deliver the bunches to the mill belonging to the company. The scheme farmers usually have to take a loan with the company for the planting and the management in the first three years. Once the plantation is given back to the farmers, they have to pay off this loan, which usually takes eight to fifteen years. Generally around 30% of the bunch price is automatically deducted by the company upon delivery of the bunches to the factory, to pay off the debt. Once the entire loan has been paid off, an ownership certificate is handed over to the farmer, and he or she then becomes the formal owner of the land and the plantation. If a plantation company with scheme smallholders wants to get RSPO certified, it is the company’s responsibility to make sure that the smallholders also implement the RSPO practices. A company cannot decide to certify its own plantations except from its scheme smallholders. The costs for the certification are carried by the company, and the RSPO does not provide support for scheme smallholder certification.
Independent smallholders are those smallholders who are not bound to any company, and who can sell their bunches to whatever factory they like. They are fully responsible for all aspects of the plantation management, and also for the land clearing and planting. For independent smallholders, RSPO certification is a whole different kind of story as they have no company to support them. The RSPO does not certify single smallholders, only smallholder groups. The formation of a cooperative is therefore the first step that independent smallholders must take if they wish to be RSPO certified.
Why are the independent smallholders so important? I would say it is because they are a central part of society and a motor of rural development. We know by now that ‘trickle-down’ often just isn’t a very effective way to distribute wealth. Putting most of the palm oil revenues in the hands of large-scale plantation companies and then hoping that the people (= the labourers and locals) will also benefit is not the most effective strategy for economic development. It is much more effective to put the wealth in the hands of the people right away, wherever possible. Indonesia alone has one million or so oil palm farmers, of course with families, so there are plenty of people who could potentially benefit.
It is quite clear that the large palm oil companies can really fuel local development and have an important role to play, for example in planting of oil palms, processing bunches, and breeding. Plasma smallholders often have a better income than independent smallholders because of the company support. But I think this is just an extra reason why we should focus much more on supporting and empowering the independent smallholders.
Any farmer can become an independent oil palm smallholder, as long as he or she owns some land and has access to a factory. Independent farmers often have problems with accessing finance, but on the other hand they are usually not subject to stringent loan repayment schemes and are therefore more free to integrate oil palm cultivation into their livelihood strategies as suits them best. It seems obvious to me that it should be a primary goal of all sustainability advocates to include independent smallholders in the palm oil supply chain. Unfortunately, apart from inclusion in the supply chain, RSPO certification currently appears to offer few advantages to independent smallholders. It actually costs money, but often doesn’t improve the price of the fresh fruit bunches as much of the RSPO certified oil is sold without a premium. But there are possibilities to improve this situation. If training and implementation of Good Agricultural Practices (or Better Management Practices, which are both the same thing) are put on the agenda as a core goal of smallholder certification, then the benefits to the farmers would become much more obvious. But for that to work out, projects would need to be longer (four years at least) and the focus would need to shift from environment to agronomy, at least in the first two to three years. In my opinion, only when the farmers are confident and capable to manage their plantations well does it make sense to implement complicated certification schemes.
I know of a number of ongoing or planned projects which focus on achieving independent smallholder RSPO certification, showing that the issue of independent smallholder inclusion is getting more and more attention. Although it may be a tough and long-term challenge, surely it’s worth it.
Cheers from Jambi!
More information about RSPO certification for independent smallholders can be found here.