This article first appeared in The Edge Malaysia Weekly on November 18, 2024 - November 24, 2024

Palm oil farmers who are independent smallholders (ISHs) have a lot to worry about. From monkeys and elephants that intrude into their farms and destroy their crops to weather conditions that are unfavourable, these farmers have their hands full.

ISHs have another thing to worry about as the European Union (EU) calls for sustainable palm oil through its directives and regulations to encourage transparency and sustainable sourcing.

This is as palm oil faces criticism due to concerns about deforestation, loss of biodiversity, human rights violations and environmental degradation.

“While there is no direct ban yet on palm oil in food and cosmetics, we know that the EU has implemented measures that are trying to indirectly reduce the use [of palm oil] in the food and cosmetics sectors. This is done in a lot of ways [such as] sustainability requirements, regulations, No Deforestation, Peat and Exploitation (NPDE) policies and others,” says Lee Kim Huat, general manager of Wild Asia, a not-for-profit organisation that promotes sustainable management of key biodiversity issues that apply to plantation development.

“Overall, these directives from the EU play a very crucial role in terms of promoting sustainable palm oil production. Because they are going to set the standards, they will be able to encourage certification and foster this into the market.”

Although ISHs contribute a substantial portion of the country’s production of palm oil, these farmers often face challenges in accessing certification and adopting sustainable practices, says John Howes, the director and technical director of Wild Asia.

There is also difficulty in convincing ISHs to adopt sustainable practices due to a lack of access to training, financial resources and market for their products.

Certifications such as the Roundtable for Sustainable Palm Oil (RSPO) and Malaysia Sustainable Palm Oil (MSPO) are a way to demonstrate compliance with the European Union Deforestation Regulation (EUDR). It is also the key to opening doors for ISHs, says Howes. These certifications provide a pathway to market access and premium prices.

There are some challenges for farmers to receive their MSPO and RSPO certification, notes Hassan Abdul, regional support unit lead of Sabah at Wild Asia. This is because it is a time-consuming process, as collecting and submitting the necessary data is a challenge for these farmers.

Furthermore, some farmers may question the need for MSPO and RSPO certification, he adds.

Farmers need to understand that while MSPO certification is mandatory, RSPO comes with benefits such as the RSPO premium. Obtaining the MSPO certification is also easier once a farmer is RSPO certified, according to Wild Asia.

Wild Asia Group Scheme (WAGS) is a group certification programme that helps ISHs to meet RSPO standards. This makes it easier for the farmers to meet MSPO standards that are mandatory and makes it possible to sell their crop to RSPO certified mills.

Mills are able to sell RSPO certified sustainable palm oil through RSPO credits. This provides the company with a way to earn premiums for the mill’s efforts in making palm oil more sustainable.

Wild Asia encourages mills to adopt smallholder inclusion by rewarding them via direct premiums. This is because palm oil purchases can be used to directly support smallholders. Through the Wild Asia Spiral Partnerships, the organisation supports the ISHs by connecting them to mills that are directly connected to global brands that want to support smallholders.

“When RSPO first came in, it was really focusing on the bigger players, plantations and the big companies. It didn’t really take care of the [smallholders]. So we thought, ‘How can we get these [farmers] certified and involved in this process?’” says Howes.

The EUDR regulation could have a significant impact on the palm oil industry, says Peter Chang, director and advisor of Wild Asia. While the implications of the regulation are unclear, it is likely to increase scrutiny on palm oil supply chains and put pressure on producers to comply with sustainability standards.

The EUDR was to come into effect in December 2024 but has been recently delayed by a year.

While a ban on palm oil production will affect the global palm oil markets, smallholder farmers who rely on these plantations as a living are direly affected. Staying updated on the changing regulations and standards is difficult for smallholders to keep up with, says Hassan. The price of palm oil is also volatile.

How are the farmers dealing with increased pressure from the west?

Muharram Sompo, an ISH with a farm area of 1.21ha in Sabah, says by adhering to the stricter standards that the certification demands, he was able to differentiate his products and demand premium prices for his palm oil crops.

He adds that after witnessing the positive impact certification has had on livelihood, other farmers in the area have considered pursuing the same goal.

But the threat of bans weighs on him despite efforts to produce sustainable palm oil. He observes that the price of palm oil he sells has fluctuated, which creates uncertainty for his livelihood.

Jumali Limpisan, another ISH in Sabah, says the MSPO certification provides a framework for sustainable practices and can open up new markets for the farmers. He says sharing knowledge and experiences with other farmers in the area can further accelerate the adoption of sustainable practices.

While certifications are necessary, Howes says regenerative agriculture is key to long-term sustainability. By improving soil health, biodiversity and the well-being of farmers, regenerative agriculture can create a more resilient and productive agricultural system.

For instance, by improving soil health, farmers can achieve higher productivity and reduce reliance on chemical inputs. Healthy soil is able to absorb and retain water, which reduces the risk of erosion and flooding. Additionally, regenerative agriculture helps sequester carbon in the soil, which contributes to climate mitigation efforts.

“The idea for regenerative agriculture actually comes from when we look into the forest system. Forests, without human interaction and people going in and fertilising or applying any chemicals, just survive and live on their own. They just regenerate every year. Whatever that should happen, happens,” says Lok Yen Chi, a WAGS member lead.

“Fundamentally, it all goes back to the soil. All the microbes and fungi are actually working together to break down organic materials, helping that feed back to the roots and therefore ensuring the survival of plants, trees and eventually the larger organisms within the forest ecosystem. What we try to get from whatever we are doing is this living soil.”

ISHs play a crucial role in landscape restoration by adopting regenerative practices, says Howes. These farmers can contribute to the connectivity of natural habitats and promote the restoration of natural ecosystems by creating biodiverse farms.

For Muharram, unorganised farming practices and improper use of pesticides limited his productivity and income. Through Wild Asia training programmes, he was able to learn about organic practices and biodiversity conservation.

“Within RSPO there is a very strong principle called continuous improvement. For plantations, it’s about modifying chemical use, reducing [harmful] things and being environmentally friendly. How we open the door for [smallholders] over time comes down to regenerative agriculture. We see regenerative agriculture as the way to improve what they do as a group but also to open more doors for them and [provide] value to what they do,” says Howes.

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