Transforming Lives & Livelihoods: Smallholder Development

In Malaysia, our goal is to include our smallholders into the sustainably certified circle. That is why, SD Guthrie has welcomed the Malaysian government's mandatory Malaysian Sustainable Palm Oil (MSPO) Certification Scheme. The MSPO is targeted at oil palm plantations, independent and organised smallholdings, and palm oil processing facilities.
 

Our supply chain in Indonesia comprises Kredit Koperasi Primer Anggota (KKPA) smallholders and Plasma Scheme smallholders. Through this scheme, the KKPA land holdings are managed by SD Guthrie while the smallholders are allocated share certificates for oil palm cultivation in their concessions. In exchange for the share certificates, the smallholders receive an income from the profits generated while the local communities enjoy additional work opportunities.

Plasma smallholders, on the other hand, are those who took part in the Plasma Transmigration Program (Perkebunan Inti Rakyat, also known as PIR-Trans), set up by the Indonesian government in 1987. Plasma schemes are managed by the community farmers who sell their FFB to SD Guthrie.

We received our first Roundtable on Sustainable Palm Oil (RSPO) smallholder certification for KKPA smallholders in Indonesia in 2014. The total operational area under the smallholder certification was 16,639 hectares with a total production capacity of 347,749 metric tonnes of fresh fruit bunches. As a result of this first smallholder certification, three mills achieved segregated status under the RSPO Supply Chain Certification System (SCCS).

We continue to support over 22,000 smallholders, including both scheme and independent smallholders, to help them adhere to our Responsible Sourcing Guidelines and work towards achieving RSPO certification. Although the number of certified smallholders has decreased due to operational divestments, our dedicated local teams remain focused on assisting them in improving market access and enhancing their livelihoods. We remain committed to increasing the number of certified smallholders within our supply chain and are actively supporting those currently undergoing the certification process.

Our most successful smallholder stories are in Papua New Guinea (PNG). All our smallholders in PNG have been certified to the RSPO since 2013, and they receive a significant sustainability premium. As SD Guthrie is able to sell their oil as segregated (sustainable palm oil from different certified sources that is separated from the ordinary palm oil), we calculate premiums for smallholders based on both the published RSPO premiums and our own premiums received on the sale of Certified Sustainable Palm Oil (CSPO) converted to FFB equivalents. The premium is paid to each smallholder based on their production with no administrative charges or other deductions. We cover all smallholder certification costs which are not charged back to the growers. Smallholders earn a premium, with the premium calculated based on their production, with no administrative fees or other deductions applied.

To understand how we can bring additional smallholders into our supply chain in PNG and Solomon Islands (SI), we carried out assessments for smallholders interested in developing their land and guided their implementation of the RSPO's New Planting Procedure. We also actively share best practices to help farmers obtain the skills and knowledge they need to manage their oil palm blocks. SD Guthrie uses visual aids and provides simplified learning tools to increase smallholders' knowledge on topics including FFB quality, planting cover crops, applying fertilisers, as well as the costing and pricing of their products. We conduct these activities during field days, block demos, and through our financial literacy training sessions.

Supporting smallholders through financial literacy
Aside from certification, our PNG and SI operations carry out programmes with local communities on land use planning, gender empowerment, and sharing best practices to help farmers obtain the skills and knowledge they need to manage their oil palm blocks and improve their livelihoods. One such programme provides financial literacy support to smallholders and landowner groups through a train-the-trainer model that covers topics such as budgeting, financial planning, sound financial practices, and banking. We also facilitate the opening of personal bank accounts for interested members.

Improving the socioeconomic status of smallholders
Low productivity caused by social and economic factors is the main challenge facing oil palm smallholders. NBPOL is collaborating with the PNG Oil Palm Research Association’s (PNGOPRA) Smallholder and Socioeconomic Research Division to conduct extensive research and provide technical advisory services to smallholders. This includes conducting research on fertiliser programmes that best maximise yields for smallholders, understanding the effectiveness of smallholder training on best management practices provided by SD Guthrie, and understanding smallholders’ income and expenditure patterns. Through this research, we aim to better understand these social and economic factors and improve our programmes to address smallholder productivity and strengthen the country’s economic, environmental, and social well-being.

Approximately 95% of the overall palm oil production in Thailand comes from smallholders. Most palm oil mills in Thailand are independently owned and lack the resources necessary to implement sustainability and certification programmes. As we work further down the supply chain, it becomes increasingly challenging to reach smallholders and work with them. Due to the significant contribution of smallholders in Thailand, we understand that strong collaborations with other stakeholders in the supply chain is integral to move everyone on the sustainability journey.
Our refinery in Thailand, Morakot Industries, has established a smallholder programme in collaboration with local mill partners, to help smallholders achieve certification, and to secure a steady and reliable supply of CSPO into its supply chain.

The smallholder certification programme was established in 2018 and identified 6,000 smallholders with a production capacity of over 300,000 metric tonnes of FFB per year. These smallholders are divided into 10 groups based on their location – that is, whether they are located within 50 km radius of an identified mill. We then run a series of engagement sessions to raise smallholder awareness about certification processes and to better understand the needs and challenges faced by the smallholders in Thailand. Over 2,015 smallholders have been trained as of 2024, with many achieving RSPO certification.

We are committed to expanding our current supply of CSPO Mass Balance to Identity Preserved (IP) / Segregated (SG). This means we ensure sustainable palm oil from a single identifiable certified source and different certified sources are kept separately from other palm oil throughout the supply chain.

All smallholders must adhere to the same Responsible Sourcing Guidelines criteria we impose on all FFB suppliers. However, we recognise that many smallholders may have difficulty meeting these criteria despite making commitments because they lack capacity, know-how, and access to financial resources. Given the significant volumes produced by smallholders, supporting their transition to sustainable practices is crucial to transforming the industry and ensuring that SD Guthrie achieves our NDPE ambitions.

Our goal is to focus on enhancing supply chain traceability to ensure that sourced supply, including from smallholders, is NDPE-compliant by 2025.

Therefore, we have developed programmes across our upstream operations to support scheme and independent smallholder certification as a gateway to sustainable production. These programmes build capacity and train smallholders to improve production efficiency and secure higher yields. They also reduce barriers to market access and provide support to meet certification requirements.

Our community programmes also focus on proper land use planning, management committee responsibilities and community needs assessments. Training programmes are designed to equip smallholders to plan their finances effectively, and we provide interest-free credit to help towards quality farm inputs like tools and fertilisers.

Addressing Climate change is a key component of smallholder programmes
A major component of our programmes is helping farmers understand how climate change can impact their livelihoods and adopt climate-smart agriculture approaches. Our programme modules include responsible land use and conservation planning, adopting good agricultural practices on fertiliser application and moisture retention, and maintaining riparian buffer zones as part of flood mitigation. Smallholders in our supply chain can also potentially access planting materials that are more climate-resilient. Transitioning smallholders to climate-smart agricultural practices is critical to SD Guthrie’s Just Transition strategy and intricately linked to meeting our NDPE requirements.

SD Guthrie launched a 3-year Smallholders Inclusion Project in collaboration with Solidaridad Network and Colgate-Palmolive. The project aims to promote the adoption of Good Agricultural Practices (GAP) to enhance farmers' resilience against climate change, increase transparency and traceability, and ultimately improve their livelihoods and sustainability standards. A key focus of the project is responsible fertiliser application and chemical use, aimed at minimising land use changes and reducing greenhouse gas (GHG) emissions. The Smallholders Inclusion Project targets smallholder palm oil suppliers in Perak, the state with the second-largest number of smallholders in Malaysia, accounting for over 37,000 farmers, according to the Malaysian Palm Oil Board (MPOB). This made Perak an ideal location for the implementation of the project to have a substantial impact.

The GAP training covers essential practices such as water use, fertiliser application, pest control, and waste management. It also equips farmers with the knowledge to comply with regulations on worker rights, safe work conditions, and fair treatment. As of February 2024, the project has trained more than 700 oil palm smallholders. For more information, click HERE.

As of December 2024, 41% of the smallholders supplying us are RSPO certified.

Whilst smallholders in Indonesia, PNG, and SI focus exclusively on obtaining RSPO certification, smallholders in Malaysia aim to comply with their country's mandatory national certification standard first by achieving Malaysian Sustainable Palm Oil (MSPO) certification. In Malaysia, 37% of smallholders’ plantation lots are MSPO certified, independently or through programmes supported by SD Guthrie. Additionally, smallholders in Indonesia are also aiming to be Indonesian Sustainable Palm Oil (ISPO) compliant.

NOTE: Updated table data: