Improving Sustainable Development within Indonesian Palm Oil: The Importance of the Reward System

Abstract

AbstractNowadays, standards play a central role in the governance of international business relations; palm oil is no exception. The focal issue of palm oil is sustainable processes of production and sourcing, thus multi‐stakeholder initiatives such as the Roundtable on Sustainable Palm Oil (RSPO) set out the sustainability principles and standards, and manage the certification system (CSPO). Empirical evidence based on in‐depth interview with various stakeholders in the Indonesian palm oil industry indicates that the development of the RSPO sustainability standards is perceived to be in favor of a particular interest group due to the asymmetrical power and unbalanced control structure of the stakeholders. Thus the powerful stakeholders are able to exercise imperative power over other stakeholders, to the extent that it actually contradicts the others’ interests. This paper puts forward the notion that a more equitable governance system should be developed through the introduction of the reward system on the CSPO transaction. The reward system can demonstrate the original motivation of the RSPO toward consensus among all stakeholders to equally contribute in the implementation of sustainability Principles and Criteria (P&C) and standards. Copyright © 2018 John Wiley & Sons, Ltd and ERP Environment