Barriers and bottlenecks: How to bring innovative management practices to scale in Indonesian palm oil

Oil palm fruits. East Kalimantan, Indonesia. Photo by Moses Ceaser, Center for International Forestry Research (CIFOR)

Oil palm fruits. East Kalimantan, Indonesia. Photo by Moses Ceaser, Center for International Forestry Research (CIFOR)

This article was originally published in Indonesian on

Bogor, 25 April 2014 – The Indonesian palm oil industry is undergoing a fundamental transformation in business practices towards viewing sustainability as a source of innovation and brand value rather than additional cost. Accelerating the pace and extent of this shift requires certain barriers and bottlenecks to be overcome.

National and international campaigns have created unprecedented demand for upstream producers to mitigate social and environmental impacts that often create conflict between companies, communities and the public. Producers are responding, with growing numbers treating impact mitigation as core to their investment strategy and operational planning. Some of these innovations were highlighted in a recent study by Daemeter Consulting entitled Best Management Practices in the Indonesian Palm Oil Industry: Case Studies.

Still, there are major barriers to overcome in scaling up these practices throughout the industry.

The first are barriers to information flow concerning innovative practices in the sector, which has created a wide knowledge gap between those with resources to innovate and their peers. Competitiveness between companies and corporate reluctance to advertise success for fear of becoming a target of other stakeholders are some reasons behind this barrier. Structured learning networks are urgently needed to bridge this gap by accelerating knowledge transfer between industry players at all levels.

A related challenge is the lack of human resources to implement new practices throughout operations as companies struggle to attract and retain skilled employees. Concerted effort is required to retrain staff and educate new entrants to the labor force in social engagement and environmental management skills. Sustainability training centers, such as Cargill Tropical Palm Learning Academy in West Kalimantan, are currently being developed and must be expanded with support from all stakeholders.

Another barrier is that in Indonesia, oil palm companies have a wide latitude to define and pursue their own vision of sustainability. This can be a challenge when top management treats only legal compliance as their sustainability target, but it also creates opportunity to shape policies of large companies by influencing a small number of powerful people. Convincing decision-makers that meeting stakeholder demands sometimes requires going beyond legal compliance opens the door to nurture far-reaching, ambitious sustainability goals. Concerned stakeholders must develop effective outreach programs to embolden more corporate leaders to adopt sustainability as a core principle and make the operational changes required to achieve it.

A third barrier relates to challenges faced by local government in balancing their role as regulators of industry on the one hand and promoters of development and tax revenues on the other. Under these conditions, bad actors may be tolerated because they deliver investment, while responsible actors face difficulties meeting sustainability commitments seen to undermine development goals, such as setting aside forests for conservation instead of plantation.

These local governance challenges must be addressed before innovative conservation policies can be brought to scale. Emerging ‘jurisdictional approaches’ to engage administrative regions instead of individual companies holds potential to address this problem, but only if local authorities are given the right incentives to support sustainability.

A final, critical barrier to industry wide transformation is conflicting regulations and spatial plans that severely limit development of degraded and deforested land for oil palm. Such low-carbon land is widespread in Indonesia, but much of it is off-limits to oil palm due to spatial planning. Current rules also make it very difficult for companies to retain authority to manage unplanted areas within their plantations, even when they are set aside specifically for reducing deforestation and protecting key habitats. These policies are widely recognized, even within government, as significant impediments to low impact oil palm and should be top priorities for reform.

By Gary Paoli, Director of Research and Project Development, Daemaeter Consulting.

Editors note: Gary is moderating the session Improving private sector and small-holder participation and performance in sustainable palm oil development at the Forests Asia Summit.

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