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

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.