The Determinant of Sustainable Certification Adoption in Indonesia Palm Oil Industry

Abstract

The palm oil industry operational causes several debate, especially in environmental and social problems. Roundtable on Sustainable Palm Oil (RSPO) is presented as the institution that oversees sustainable development through the sustainable certification issued. The motivation of the adoption recently from the public pressure for palm oil companies to adopted this certification. However, this pressure is only the external factor to driven the sustainable development in palm oil companies. The internal factor from palm oil industry have not observed as the adoption of sustainable certification. Therefore, the purpose of this study is to examine the factors that affected the adoption of sustainable certification in oil palm companies by using binary logistic regression. We examined 14 financial reports of the Indonesia palm oil companies that go-public from 2014 until 2019. The results show that Return on Assets (ROA), Current Ratio, Firm Size, and Oil Extraction Rate (OER) not affect the adoption of RSPO. However, the Return on Equity (ROE), Debt to Equity Ratio (DER), and Export significantly influence the RSPO adoption by Indonesian palm oil companies. The internal factor, specifically in financial aspects be the main driver for adopting the sustainable certification. Therefore, the promotion of sustainable certification must lead on the growth of finance performance to maintain this adoption. The limitation of this research is only focused to listed palm oil companies in Indonesia.