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Tackling deforestation

Smallholder farmer success at PT Hindoli plantation

December 10, 2015

According to CDP, 7 in 10 companies have commitments to address deforestation but few are taking meaningful action. The global nonprofit, which works with corporations to disclose environmental data to investors, announced these findings at the Global Landscapes Forum in Paris this week where it also released its latest global forests report, “Realizing zero-deforestation: Transforming supply chains for the future.”

“To succeed on forests we need to profoundly transform commodity supply chains. Momentum is building for this transformation, and partnerships are critical to accelerate the momentum and drive it to implementation and impact,” said Marco Albani, Director of the Tropical Forest Alliance 2020, in the report’s introduction.

Among its success stories, the report features a case study of Cargill’s work at our PT Hindoli palm oil plantation in Indonesia, where we are helping enable smallholder farmers to reap the benefits of sustainable land use and agronomic practices. The story is one example of how we are working to be the most trusted source of sustainable products and services.

Case study: Cargill

Collaborating with smallholders to achieve win-wins
The message from Cargill’s customers is clear: they expect to be able to trace the provenance and sustainability of the palm oil they buy right to the top of the supply chain.

Cargill has committed to achieve 100% palm oil traceability to the mill level by the end of 2015, and 100% traceability to sustainable plantations by 2020. But with a supply chain consisting in part of thousands of smallholder farmers, the challenges are formidable.

“Smallholder farmers account for close to 40% of our supply of palm oil,” says John Hartmann, chief executive officer of Cargill’s oil palm plantation business, Cargill Tropical Palm. “They are integral to our supply chain, but there are substantial challenges in terms of education around sustainable production and building their capacity to meet our sustainability requirements and those of our customers.”

These challenges include significant costs of compliance and certification, which end-customers are often unwilling to cover. The challenge extends to local dealers as well, who act as an intermediary between the smallholder farmers and Cargill, and are at times difficult to engage.

However, the company’s PT Hindoli plantation, in South Sumatra in Indonesia, has provided a testbed for the types of programs that can deliver the sustainability outcomes increasingly expected by buyers.

The plantation, which Cargill acquired in 1996, consists over 9,600 smallholder farmers who are certified by the Roundtable for Sustainable Palm Oil (RSPO) and International Sustainability Carbon Certification. Cargill’s smallholder program at the plantation assists them in developing sustainable land use and agronomic practices.

The Hindoli smallholder farmers were among the first in the world to be certified under the RSPO Smallholder Principles & Criteria. Achieving this certification has enabled the Hindoli farmers to earn substantially higher incomes, both because they have increased the productivity of their land and because sustainable fresh fruit bunches (FFB) command a premium price.

Cargill also offers smallholders direct benefits, such as guaranteeing to buy their FFB ahead of Cargill’s company crop, helping them to develop fallow land into income-generating estates, and working with smallholder cooperatives to build their monetary reserves to support smallholders when they incur a loss of income for 48 months while waiting for new trees to bear fruit.

Cargill’s actions are as much in the company’s interests as they are in those of its smallholders. By working with smallholders, the company is building the capacity of its supply chain to meet the demand for sustainable palm oil from customers. The challenge for the company is scaling up these programs to cover all the smallholders throughout its supply chain.

To this end, it is working with, among others, Malaysian-based social enterprise Wild Asia and the international non-governmental organization, Solidaridad. The three partners have launched an independent smallholder sustainability support program in Malaysia to provide technical assistance, training and capacity building to more than 2,500 independent oil palm smallholders.

“It is vital that all the smallholders in our supply chain are able to reap the added value that comes with being a responsible stakeholder in the supply chain,” Hartmann says. “Our work with them aims to do just that.”