1. Sustainability 2016, 3, x; doi:10.3390/ www.mdpi.com/journal/sustainability
Communication1
Sustainable development potentials and barriers of2
Indonesian palm oil3
Courtney Stoker 14
1 InternationalStudies andBiology Undergraduate at the University of Idaho; stok3463@vandals.uidaho.edu5
* Correspondence: stok3463@vandals.uidaho.edu; Tel.: +1-208-407-43656
Received: 13 March 20167
Abstract: Although currently causing Indonesia to become the third largest greenhouse gas (GHG)8
emitter globally, the palm oil industry has the potential to set a framework for sustainable9
development throughout rural Indonesia. The over one million Indonesian smallholders hold the10
key to sustainable palm oil production, particularly because of their yield increase potential which11
could greatly mitigate the deforestation effects of expansion. Oil palm naturally lends itself to a12
sustainable production network, but in order for this to come to fruition there are major barriers,13
particularly those faced by smallholders, that must be addressed. There is a great need for14
smallholder education of sustainable production practices in order to limit the waste stream15
contribution, and encourage a cradle to cradle (also known as cradle to grave) philosophies16
throughout the production network. By addressing these barriers to smallholder improvements17
and global demand for sustainable palm oil, this paper suggests ways in which Indonesia can18
improveits oil palm sector in terms of sustainableproduction.19
Keywords: Sustainable development; palm oil; cradle to grave; deforestation; waste stream20
reduction; land use; biofuel; education21
22
1. Indonesian Palm Oil23
In 2006, Indonesia overtook Malaysia as the top palm oil producing country in theworld and in24
2013 they produced 53% of the world palm oil supply [1]. Palm oil is an important export to25
Indonesia, accounting for more than 10% of its export revenue in 2014, and employing workers from26
many sectors of society [2]. Although plantations make up a large part of the industry, “globally,27
around 40% of the global palm oil production is from smallholdings” [2]. This amounts to over one28
million smallholders in the Indonesian sector alone. The expansion, however, has been29
predominantly at the cost of the rich forests that are characteristic of the Indonesian archipelago.30
Current international concerns about the close relationship between palm oil expansion and31
rampant deforestation in producing countries such as Indonesia pose a significant threat to all32
stakeholders involved in the industry.33
In 2005, 56% of the oil palm expansion in Indonesia “occurred at the expense of natural forest34
cover” [3]. This is partially due to the culture of consumerism that has very little feedback potential35
within a production system. The lack of accountability and transparency has allowed the continued36
expansion into High Conservation Value Forests (HCVF) and peatlands. Many of the forests in37
Indonesia are considered HCVF due to their high rates of biodiversity, and ecosystem role as a38
carbon sink. Peatland conversion into plantations is also troubling considering the current rate of39
climate change as peatlands are the largest near-surface carbon sink in the world [3]. With the40
combination of these two forces, Indonesia has become the third largest greenhouse gas emitter41
globally [1].42
Although the picture painted above may sound grim, the nature of oil palm as a crop lends43
itself nicely towards sustainable development. As a cash crop, oil palm can be lucrative with as small44
a field as 2 hectares (ha), which allows for the easy adoption by smallholders [3]. The oil palm can45

2. Sustainability 2016, 8, x 2 of7
provide a number of ecosystem services aside from just palm oil, and has the potential to encourage46
the adoption of a systematic cradle to cradle (also known as cradle to grave) philosophy. If the focus47
of the major producing countries (Indonesia and Malaysia together produce 80% of the world’s palm48
oil) shifted towards capacity building and higher yields, rather than expansion, palm oil has the49
potential to be a highly sustainable industry [4]. This paper primarily focuses on the sustainable50
development potentials and barriers of the Indonesian sector, as it is the newest, and most rapidly51
expanding.52
2. Potentials for Industry Sustainability53
Although palm oil currently has a very large footprint on the environment due to its rate of54
expansion, the industry has the potential to become a sustainable producer of food, fuel, durable,55
and non-durable goods. This potential can be seen in the emergence of many sustainable palm oil56
certification schemes, including an international voluntary standard, the Roundtable on Sustainable57
Palm Oil (RSPO). As an oil crop, oil palm produces 4 times the amount of oil per hectare than58
rapeseed, and over 10 times the amount of soy, and produces over 3 times the amount of energy59
output per hectare as a fuel source [3, 5]. Given these numbers, if oil palm expansion halted today,60
and resources were devoted to higher yields and better practices instead, the oil palm industry could61
still compete globally as a food and fuel source [4]. The palm oil industry could improve sustainable62
industry development in the following areas:63
2.1. Waste stream and agro-chemical reduction64
At the current state of production, the palm oil industry of Indonesia is taking an economic65
value system approach to production, working to maximize profits at the expense of the66
environment [6]. In order for the palm oil industry to achieve sustainable production, work must be67
done at all stages of production to lower the waste stream contribution. This can be done primarily68
by encouraging stronger cradle to cradlephilosophies such as:69
2.1.1. Fertilizer Recovery70
Palm oil mill effluent (POME) is one of the largest waste products currently being produced by71
palm oil processing, with 1.38 million tons produced in 2004 alone, and only a 35% reclamation rate72
[7]. POME is a nutrient rich liquid/sludge that is the main byproduct from oil production. The73
majority of POME is left to flow into the land and nearby water systems; significantly contributing to74
the industries footprint seeing as POME is also a significant methane producer [7]. POME is packed75
full of unused nutrients, and can be utilized as an organic fertilizer, as well as a source of biogas76
harvesting. When combined with Empty Fruit Bunches (EFB) and kernel residues, POME can be77
made into an organic fertilizer that can reduce agro-chemical use by 50% in immaturestands [3].78
2.1.2. Biogas Harvesting79
Biogas recovery from POME is also a viable option, “electricity generation from palm oil mill80
effluent (POME) would provide grid-tied renewable electricity to nearby villages that currently81
depend on expensive diesel generation” [8]. Due to the short life of harvested fresh fruit bunches82
(FFB), mills are often located within close proximity to the site of production, meaning the harvested83
methane would be accessible to the very communities producing the oil palm. Assuming the84
smallholder has been educated on sustainable principles through the education programs proposed85
in section 3.1 below, biogas harvesting is also an efficient option for smallholders. The anaerobic86
digestion of the compost pile of empty fruit bunches (EFB), POME, and palm cake waste puts off a87
significant source of methane that is suitable for harvesting [8,3]. This gas can be used for cooking,88
and other farm needs, while a hose can be run through the compost pile to provide warm water for89
showers and various other household needs.90
2.1.3. Stem Utilization91

3. Sustainability 2016, 8, x 3 of7
Another main area of waste production in the industry is the oil palm stems that are left after a92
field is no longer productive. Oil palms typically produce fruit for 25-30 years before the need for93
replanting arises [9]. Although not suitable for the timber industry, there are many uses for the stems94
of oil palm trees, such as animal feed and paper production [9]. Oil palm contains high levels of95
starch and sugar, making it a suitable candidate for animal feeds as it provides nutrients and96
necessary dietary roughage. The palm tree fibers can also be sold to paper mills for the conversion97
into paper products.98
2.2. Land reclamation99
Similar to cheat grass issues in North America, Indonesia is suffering from the spread of100
Imperata cylindrica, a highly invasive grass that inhibits the re-establishment of forest ecosystems [10].101
Degraded land such as this is typically seen from an economic perspective as a lost cause, but oil102
palm provides another option. “With appropriate management, plantations can be productive on a103
wide range of soils, including ‘problem soils’ such as acidic sulphate soils, deep peat and acidic high104
aluminum soils, where few other crops are successful” [3]. It has even been found recently that, if oil105
palm is planted in areas with a high I. cylindrica coverage, high yields could be possible without the106
addition of agrochemicals [4].107
Special care still needs to be taken in the classification of degraded lands as many indigenous108
communities have been pushed onto ‘degraded lands’ due to deforestation. However, as long as109
degraded lands are legitimately in a state of degradation and in need of restoration, oil palm proves110
to be a successful candidate.111
2.3. Biofuel112
Currently the main oil crops being used globally for biofuel production are rapeseed and113
soybeans. As previously mentioned, however, oil palm both produces more oil per hectare and114
produces more energy output per hectare than either rapeseed or soybean [5]. Comparing the115
energy output/input ratios of the three crops powerfully illustrate the efficiency gain of oil palm116
biofuels: Oil palm 9.6 (GJ/ha), rapeseed 3.0 (GJ/ha), soybean 2.5 (GJ/ha) [5]. If Indonesia were to117
invest in a biofuel industry,this would greatly reduce their dependence on fossil fuels and imported118
energy sources.119
Although these numbers look good for oil palm entering the biofuel industry, the current120
globalized economy must be taken into consideration when discussing an agro-industry shift of this121
magnitude. In 2008, 77% of oil palm was used for food [3]. If oil palm starting going toward energy122
production rather than food production a significant gap would be left in the supply of food oils.123
This would encourage more planting of either oil palm, at the detriment to HCVF, or more rapeseed,124
which requires an overall higher land input than oil palm [4]. This is to say that sustainable practices125
must be a norm in oil palm production before a serious oil palm biofuel initiative should be126
considered.127
2.4. Social develoment and smallholder empowerment128
Millions of Indonesians work in the palm oil industry, one million of them holding less than 5129
ha of land [2]. The industry is able to employ people from all aspects of society, and reach into even130
the most rural areas of Indonesia. Because of this, the oil palm industry has the ability to aid131
sustainable rural development, and improve the livelihoods of small farmers throughout the132
archipelago. There are two classes of smallholders, a scheme smallholder who is under the direction133
of a plantation company, and independent smallholders, who operate independently through every134
aspect of production [2]. If utilized correctly, this independent smallholder-mill/scheme135
smallholder-plantation structure allows for a somewhat consistent contact between the farmers and136
the value added step of processing. This system can be exploited to transmit useful knowledge and137
information to smallholders, particularly of interest for this paper is the potential for sustainable138

4. Sustainability 2016, 8, x 4 of7
production practices to be taught through mill extension and education programs. A more in-depth139
discussion of these programs and how to empower smallholders is in the section to follow.140
3. Barriers to Sustainable Development Potentials141
Even though the base for sustainable production of palm oil exists biologically, many barriers142
still exist to see this come to fruition in the markets. This section addresses some of these barriers,143
and provides a few suggestions for constructivesteps toward sustainablepalm oil.144
3.1. Education145
The most often cited barrier to sustainable palm oil production (other than labeling and146
certification issues – see section 3.3 below), is the lack of technical capacity and knowledge of high147
yield practices on behalf of smallholders. Education is important and wanted by smallholders, but a148
2015 study “found that only 12% of the farmers questioned had received considerable training,” but,149
there is also “a high demand for (more) training (89%, n=181) and that many (71%, n=116) arewilling150
to pay for it, as the price is reasonable” [2]. This high demand for education, however, has not been151
adequately met by any of the stakeholders in the production network, significantly reducing the152
potential for high yields and sustainableproduction.153
Mills and processing plants tend to have the most contact with independent smallholders as the154
farmers must sell their fruit bunches within the 24-36 hour window of FFB. However, mills also have155
the most direct contact with international consumers who have been the predominant driving force156
for sustainable palm oil [11]. By utilizing these relationships and the mills vested interests in both157
high yields, and products that have an edge in international markets (a sustainability standard),158
accessible education programs could be possible. If Indonesia were to make policy giving tax breaks159
to mills that invest in the education of their smallholders, mills would have the capacity to develop160
such programs. Mills must be fairly large, as small ones are not economically viable, and they must161
be located near production as FFB have a 24-36 hour lifespan before starting to degrade [3]. This162
combination of characteristics allows mills to have the capacity for outreach to rural farmers, as well163
as the economic incentive to see it through. The Indonesian government would need to invest in the164
startup costs of such programs, as well as work them into existing certification schemes to ensure165
success and adequate information transfer. Given the massive potential for yield improvement of166
smallholders, this would be a very lucrative investment for the government, and should be worked167
into their Palm Oil Development Plan.168
3.2. Areas of Education to Promote Sustinability169
Many areas of education have been highlighted throughout the sustainable oil palm literature,170
including; appropriate pesticide use, biogas harvesting and permaculture practices, how to survive171
transition periods,high quality seeds, and land ownership:172
3.2.1. AppropriatePesticide Practices173
A 2105 study by Brandi et. al. found that many smallholders used pesticide practices that174
endangered both the environment, and their health. “For example, 20% of respondents that use175
chemicals (n=146) stated that they stored these chemicals in their house without a separate storage176
room” [2]. Brandi et. al. found that, in addition to improper storage, smallholders largely did not use177
appropriate protection when applying the chemicals, used unselective spraying methods, threw178
empty chemical containers in nearby rivers, and sprayed too close to palms thereby reducing their179
yield [2]. Mill education programs should, therefore, create a course addressing appropriate180
pesticide use. This should include advising smallholders to take back empty containers to the181
supplier to get refilled at a reduced price, and going over appropriateusetechniques.182
3.2.2. Biogas Harvestingand Permaculture183

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Although the main targets of biogas harvesting in the palm oil industry are larger mills and184
processing plants, it is thought to be an important aspect of empowerment for smallholders as well185
[8]. Biogas is able to power medium sized smallholder farm operations, including cooking and186
household activities [3]. As previously mentioned, simple things such as running a hose through187
compost piles can provide enough hot water for a small family. Hot water for showers can be a188
significant form of social capital that allows smallholders a bit of empowerment and prestige among189
peers.190
3.2.3 How to Succeed Through Transition Periods191
Palm oil production has many transition periods, especially with the current pressure to192
become a certified sustainable palm oil producer through schemes like the Roundtable on193
Sustainable Palm Oil (RSPO), Indonesian Sustainable Palm Oil (ISPO), and the United Nations194
Development Programme’s (UNEP) Sustainable Palm Oil Initiative (SPOI). Although these various195
certification schemes have been vying for international credibility [1], even the most popular RSPO196
is virtually unheard of among Indonesian smallholders; “74% of respondents (n=191) had never197
heard of the RSPO, despite living and working in the target area of RSPO pilot projects” [2].198
However contentious they may be on the international academic level, it is important that199
smallholders know of their existence. The mills, having an interest in producing certified palm oil,200
should educate the smallholders about the benefits of becoming certified. Currently, even if201
smallholders know about the certification process, they often opt out because of high transition202
costs, and limited knowledge of their standards or how to achieve them [12]. The RSPO, however,203
recently created a Smallholder Support Fund that provides funding support to smallholders who are204
looking to gain certification [13]. The mill program should focus on knowledge transfers about205
various certification options,as well as subsequent funding possibilities for each.206
207
3.2.4. High Quality Seed208
A significant barrier to high yields for smallholders is the quality of seed used [14]. Research209
and development efforts toward palm oil have been under way since the Suharto regime of the 90’s,210
meaning the seeds smallholders are using are drastically less productive than current seeds being211
produced and used by plantations. Many smallholders acquire their seeds from salesmen, friends212
and neighbors, or informal nurseries, even though high quality seeds are readily available from213
plantations, and typically come with a certificate of origin [2]. Mills can both start providing seeds214
(as they typically have close relations with nearby plantations as well as smallholders [11]), and215
create a course about the need for high quality seeds. The education component is important for the216
continued use of high quality seeds, as many lose yield with even one generation of reproduction.217
3.2.5. Land Titles and Ownership218
Land tenure in Indonesia is complex and incredibly corrupt, making the land ownership aspect219
of RSPO certification difficult for many smallholders [15]. Although “the Indonesian constitution220
recognizes the rights of indigenous communities to their customary lands, livelihoods, and systems221
of law and government,”“The Indonesian government still claims that all Indonesians are222
indigenous and that therefore there are no indigenous people in Indonesia” [16]. This glaring223
contradiction allows the Indonesian government to systematically put plantation rights above those224
of communities who have been existing there for centuries. A mill education program should be225
devised to educate rural smallholders about their right to apply for land ownership, as w ell as the226
steps on how to go about getting the legal rights to their familial land. An integral aspect of this227
education program should be highlightingthe RSPO rules on land ownership. While they dorequire228
the producers to be able to prove their right to the land, the RSPO recognizes legal titles from the229
head of sub-districts of government, and, more importantly, from the head of the village [2]. These230

6. Sustainability 2016, 8, x 6 of7
can be incredibly important pieces of information for smallholders to become certified, and have the231
added motivation toadopt sustainablepractices on their land.232
3.3. Certification Issues233
The three major certification schemes mentioned above (RSPO, ISPO, UNDP SPOI), provide a234
comprehensive guide for sustainable production of palm oil. However, each has their own235
problems, and they are just beginning to work together, but that is beyond the scope of this article.236
The most recent UNDP SPOI focuses on strengthening the ability of smallholders to integrate into237
the “international supply chains in an equitable and sustainable manner” [17]. This is the first238
comprehensive effort to integrate smallholders into the sustainable certification process. Although239
the RSPO has some provisions for smallholders, they have mostly been developed within the last240
couple of years, and are still inaccessible to the majority of smallholders. Although the mill241
education programs proposed in section 3.2 should mitigate some of the certification barriers for242
smallholders, the Indonesian government must work with the production netw ork to help support243
smallholders through the inevitableperiods of transition.244
Certification schemes can be very successful when coupled with high consumer demand, as245
was the case with fair trade coffee and cocoa. Oil palm, however, is not quite as simple due to the246
vast number of products at the end of the supply chain. The politics of labeling in industrialized247
countries adds a layer of difficulty to acceptance that is impeding the success of the RSPO. However,248
increasing concerns over the mass forest fires in Indonesia that are threatening protected Orangutan249
populations has skyrocketed international concern for palm oil [1]. Now is the prime time to attempt250
to integrate smallholders into sustainable production practices because of the increase in demand for251
certified sustainablepalm oil (CSPO).252
5. Conclusions253
Although currently greatly contributing to the Indonesian emission footprint, palm oil has the254
potential to set a framework for the sustainable production of cash crops in developing countries. If255
the above education programs are implemented and smallholders have the knowledge and capacity256
to implement sustainable production techniques, the improved yield of the 1 millions Indonesian257
smallholders has the potential to keep up with increasing demands while halting HCVF conversion.258
The potential ecosystem services such as land reclamation have the potential to transform259
previously unproductive areas, into socioeconomic gains through smallholder cooptation and260
education.261
Abbreviations262
The following abbreviations are usedin this manuscript:263
264
CSPO: CertifiedSustainable Palm Oil265
EFB: Empty Fruit Bunches266
FFB: Fresh Fruit Bunches267
GHG: Greenhouse Gas268
HCVF: High Conservation Value Forests269
ISPO: Indonesian Sustainable Palm Oil270
POME: Palm Oil Mill Effluent271
RSPO: Roundtable on Sustainable Palm Oil272
SPOI: Sustainable Palm OilInitiative273
UNDP: United Nations Development Programme274
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© 2016 by the authors; licensee MDPI, Basel, Switzerland. This article is an open access313
article distributed under the terms and conditions of the Creative Commons by314
Attribution (CC-BY) license (http://creativecommons.org/licenses/by/4.0/).315