IMPACT OF CERTIFICATION ON PALM OIL SMALLHOLDERS´ LIVELIHOOD

Nia Kurniawati Hidayat with Prof. Pieter Glasbergen, Prof. Bustanul Arifin and Dr. Ron Corvers

Paper 1: on the capacity of certification to improve smallholder's livelihood Nia Kurniawati Hidayat

Palm oil is the most demanded, productive and efficient vegetable oil worldwide. Both palm oil demand and expansion of oil palm plantations have increased sharply. The expansion of oil palm plantations is highly debated in terms of economic, social and environmental effects. Certification is expected to be a solution to make the production more sustainable. However, the impacts of certification are still debatable - particularly regarding the impacts on smallholders.

In her first paper Nia questions: What is the capacity of sustainable palm oil certification to improve the livelihood of smallholders, how does this capacity manifest itself, and what are the determining factors of this capacity?

To answer this question, Nia developed an amended livelihood framework which she applied to an exploratory study of Indonesian smallholders who participate in the Roundtable of Sustainable Palm Oil (RSPO). Although access to markets and vulnerability are not improved through certification, indirect effects through organizational changes increase productivity. If certification schemes are weakly institutionalized, farmers will easily shift to a more profitable way of production. Further analysis is needed to discover the balance between the ethical aspects of certification while improving economic profitability for participating smallholders.

Hidayat, N., Glasbergen, P., Offermans, A. (2015) Sustainability Certification and Palm Oil Smallholders’ Livelihood: A Comparison between Scheme Smallholders and Independent Smallholders in Indonesia. International Food and Agribusiness Management Review (IFAMA). 18:3:25-48

Paper 2: on the profitability of palm oil certification for smallholders 

Nia defined two research questions for her second paper: (1) to what extent and in what way is sustainability certification profitable for Indonesian palm oil smallholders? (2) Following from the fact that certification costs are currently paid by the affiliated miller companies or the other donors we question: Is certification still profitable for Indonesian palm oil smallholders if they had to pay all certification costs themselves? If not, how much premium fee would then be necessary to make certification profitable for the smallholders?

Nia analyzes the profitability of palm oil certification through the use of a Cost-Benefit Analysis (CBA) and the assessment of Net Present Value (NPV) and comparing these values among certified, non-certified, and prospective palm oil smallholders. 

The results indicate that certification is currently profitable for different types of Indonesian palm oil smallholders. The extent to which certification is profitable depends on the smallholder’s pre-conditions. In the self-funded scenario, certification is not profitable for scheme smallholders and only remains profitable for independent smallholders when they continue to receive premium prices. If premium prices are however removed the independent smallholders may need unrealistically high premium fees for certification to remain profitable in this scenario. Next to certification, we found that the organization of farmers around miller companies contributes positively to profit, even before certification takes place.

Hidayat, N., Offermans, A., Glasbergen, P. (2016) On The Profitability of Sustainability Certification: An Analysis among Indonesian Palm Oil Smallholders. Journal of Economics and Sustainable Development. Vol.7, No.18, 45-62

 click on the attached file for full screen view Nia Kurniawati Hidayat Paper 3: Governance capacity of ISPO (Indonesia's standard for sustainable palm oil)

Using the governance capacity concept, Nia  analyzes the potential of ISPO to bring about changes in palm oil production. This paper aims to search for avenues for improvements that can be used to better achieve ISPO’s objectives and to contribute to solving palm oil related sustainability problems, such as deforestation, the emission of greenhouse gasses, biodiversity losses, social conflicts and challenges in competitiveness.We expect this article to be published in 2017.

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