Balancing economic and ecological functions in smallholder and industrial oil palm plantations

Abstract

The expansion of the oil palm industry in Indonesia has improved livelihoods in rural communities, but comes at the cost of biodiversity and ecosystem degradation. Here, we investigated ways to balance ecological and economic outcomes of oil palm cultivation. We compared a wide range of production systems, including smallholder plantations, industrialized company estates, estates with improved agronomic management, and estates with native tree enrichment. Across all management types, we assessed multiple indicators of biodiversity, ecosystem functions, management, and landscape structure to identify factors that facilitate economic-ecological win-wins, using palm yields as measure of economic performance. Although, we found that yields in industrialized estates were, on average, twice as high as those in smallholder plantations, ecological indicators displayed substantial variability across systems, regardless of yield variations, highlighting potential for economic-ecological win-wins. Reducing management intensity (e.g., mechanical weeding instead of herbicide application) did not lower yields but improved ecological outcomes at moderate costs, making it a potential measure for balancing economic and ecological demands. Additionally, maintaining forest cover in the landscape generally enhanced local biodiversity and ecosystem functioning within plantations. Enriching plantations with native trees is also a promising strategy to increase ecological value without reducing productivity. Overall, we recommend closing yield gaps in smallholder cultivation through careful intensification, whereas conventional plantations could reduce management intensity without sacrificing yield. Our study highlights various pathways to reconcile the economics and ecology of palm oil production and identifies management practices for a more sustainable future of oil palm cultivation.