Sustainability strategy of Indonesian and Malaysian palm oil industry: a qualitative analysis

Abstract

PurposeGlobal palm oil production is growing rapidly, especially in Southeast Asia, with Indonesia and Malaysia as the biggest producers. Despite significant contributions to these countries’ economies, environmental and social aspects continue to be debated within this industry. The sustainability strategy is very important for the palm oil industry. This study aims to explore the sustainability strategy using six elements, namely, stakeholder engagement, governance and leadership, sustainability view and the economic, environmental and social strategies of Indonesian and Malaysian palm oil companies.Design/methodology/approachThis study observes 21 Indonesian palm oil companies and 44 Malaysian palm oil companies from 2014 to 2018 with a total observation of 280 firm years. The methodology used in this study is a qualitative content analysis of six themes based on the sustainability strategy elements, which was further developed into 40 indicators. Content analysis is carried out on information published in annual reports and sustainability reports.FindingsThe study results indicate that stakeholder engagement, governance and leadership and strategic view of the palm oil companies in Indonesia and Malaysia are still likely to be weak. Palm oil companies have not demonstrated their focus on implementing economic, environmental and social strategies. Although the results indicate that there is a greater emphasis on environmental and social strategies than on economic issues, attention to both issues is still very low.Practical implicationsPalm oil companies need to integrate sustainability strategies in their business models and communicate them well to stakeholders to increase their competitive advantage in the palm oil industry. The government also needs to issue stricter rules and incentives to encourage companies to implement sustainability strategies.Social implicationsThe study results provide implications for the communities around palm oil plantations to provide better social control so that companies can implement sustainability strategies in their business processes.Originality/valueThis study highlights the importance of sustainability practices integrated into palm oil companies’ business models, which have not been well implemented in the palm oil industry in the world’s largest producing countries.