The palm oil industry has come a long way from the introduction of the plant to the country as an ornamental crop to a complex global powerhouse, contributing significantly to Malaysia’s gross domestic product and the creation of job opportunities. While this pursuit of economic prosperity remains essential, a growing awareness of the industry’s far-reaching social and environmental implications has ignited a shift towards sustainable and responsible practices. Today, the palm oil sector operates within a complex and dynamic environment shaped by converging pressures. Escalating consumer expectations for ethical and sustainable products, coupled with increasingly stringent government regulations and rapid technological advancements, have transformed the industry landscape. With 5.65 million hectares across the country dedicated to the cultivation of the crop, the sector’s impact on local communities, small-scale farmers, indigenous groups and workers is profound and far-reaching.

Many oil palm smallholders, have achieved substantial economic progress, primarily thanks to increased income from the cultivation of oil palm. Central to this advancement are the Federal Land Development Authority (FELDA) and the Federal Land Consolidation and Rehabilitation Authority (FELCRA), whose concerted efforts have been instrumental in reducing poverty among smallholders.

One of the most significant ways FELDA has achieved this is through land resettlement programmes. By relocating rural populations to newly developed plantation areas, and providing them with land, housing and essential training, these agencies have transformed the lives of hundreds of thousands of families. Today, FELDA settlers live in settlements that have infrastructure such as roads, schools, mosques, clinics, hospitals, and other facilities.

Beyond land resettlement, FELDA provides education and home renovation loans, and financial assistance for various needs. The agency also runs, among others, homestay programmes which offer the settlers an opportunity to earn extra income and develop business acumen. Likewise, FELCRA transforms the lives of its settlers through a number of entrepreneurship development and social welfare initiatives. It is also committed to helping shed agriculture’s reputation as a “3D” (dirty, dangerous, difficult) industry. By leveraging Industrial Revolution 4.0 (IR4.0), it aims to attract younger agropreneurs with its focus on training, and modern and efficient farming practices.

The economic impact of these efforts is evident in the increased income levels of settlers, leading to improved overall well-being.

To ensure mutual prosperity, responsible palm oil companies prioritise engagement and collaboration with local communities. This involves supporting the development of sustainable livelihood options, such as ecotourism initiatives and alternative agricultural practices. They may assist in the development of community infrastructure by building schools, clinics and roads in plantation areas. Others provide vocational training programmes to equip locals with skills that will make them employable within the industry. Still others work closely with indigenous communities to document traditional ecological knowledge and identify high conservation value and conservation set-aside areas.

The palm oil industry also plays a pivotal role in the creation of jobs. With the advent of automation and mechanisation, higher paying opportunities in the traditionally low skilled, labour-intensive and male-dominated field are opening up to both women and skilled workers who are required to manoeuvre drones and precision agriculture equipment. As technology becomes more advanced, there will be more job openings related to data management and analysis. These employees will be analysing weather, soil and yield data to improve output, and identifying potential problems and optimising resource allocation via satellite imagery.

The sector also provides support to Malaysia’s over 450,000 smallholders by actively assisting farmers in obtaining Malaysian Sustainable Palm Oil (MSPO) certification through training, financial assistance and access to their certification systems. Several companies offer training programmes on good agricultural practices, crop management, and technical and business skills.

As a result, local smallholders who take part in such programmes are able to produce high-quality and high-yielding crops in a sustainable manner, potentially reaching about 16 tonnes of fresh fruit bunch per hectare per year. Additionally, by helping these farmers improve their livelihoods and grow their businesses, palm oil companies are also helping to support a range of local businesses, from transport firms to equipment suppliers.

Ultimately, the integration of social responsibility into the planters’ business models contributes to rural development and helps alleviate poverty. Balancing a triple bottom line of people, planet and profit, however, is not an easy task. Palm oil players need to address diverse demands of investors, consumers, employees, communities and governments without compromising business operations while also keeping track of their suppliers, and potential environmental and labour issues in the supply chain.

These companies also operate in a complex global regulatory environment. For instance, the European Union Deforestation Regulation (EUDR) mandates that all imported commodities must be deforestation-free. Importers are required to verify the origin of the products by collecting precise geographic coordinates of the production site.

Malaysian Palm Oil Council (MPOC) CEO Belvinder Sron highlighted that Malaysian palm oil exporters have invested “significantly” in financial and technical resources to comply with the EUDR, but “many small farmers within the palm oil supply chain are encountering difficulties and are at risk of being excluded”. While challenges remain, the progress made in balancing profitability with social responsibility is encouraging. However, it is essential to acknowledge that this transition requires a collective effort from farmers, palm oil companies, governments and consumers. By listening to and engaging with stakeholders, adopting best practices and reporting transparently on the companies’ social performance, it is possible to create a sustainable and equitable palm oil agricultural system.