We review and comment on the current status of the international debate over the sustainability of palm oil production. We discuss the effectiveness and insufficiencies of market-based incentives for palm oil actors to adopt sustainable management practices, the biases of the debate toward environmental outcomes rather than livelihood outcomes for growers, and the effectiveness of current certification schemes to moderate the industry and improve sustainability. Our synthesis points to the current status of small-scale oil palm farmers, many of whom have benefitted from growing oil palm, but are highly susceptible to price instability and the effects of consumer preferences, especially in developed country markets. The high up-front costs and the need for increasingly expensive fertilizers limit the suitability of oil palm as a poverty elimination measure for the bottom segment of rural households (Ismail et al. 2003, Rahman et al. 2008, McCarthy 2010; M. N. Mohd Noor, personal observation). At the same time, it is these small holdings that determine the tipping points of the ecological integrity of these highly fragmented oil palm landscapes (Fitzherbert et al. 2008, Dawson et al. 2013, Clough et al. 2016). We conclude that the benefits of certification are insufficient to affect the behavior of growers, so oil palm landscapes need direct investment in the development of social capital of rural households to facilitate the development of alternative and improved livelihood opportunities with concurrent improved biodiversity outcomes. The process recommended by the authors has been described as “insetting” (Tipper et al. 2009). Our conclusions are based on over 15 years of experience in the palm oil business in Malaysia and Indonesia, discussions with industry leaders in insetting, and a thorough review of the literature on smallholder oil palm growers.

Since the publication of Our Common Future (often known as the Brundlandt Report) by the World Commission on Environment and Development (Brundlandt and WCED 1987), the concept of what is “sustainable” is based on the anthropocentric value judgment that future generations must have the same range of options concerning the use of the world’s resources as the current generation (Izac and Swift 1994). It is based on a concept of inter- and intra-generational justice (Grunwald et al. 2001). Sustainable development (IUCN 1980), the term that was meant to bridge the ecological centric interpretation of the developed North and the social and economic needs of the developing South, is perhaps the most challenging policy concept ever developed (Omann and Spannenberg 2002). In a globalized world that is connected by trade, there is a huge disconnect between the value judgment of consumers living in largely saturated OECD (Organisation for Economic Co-operation and Development) markets and of producers in low and middle income countries (Dolan 2010). This is especially true for immediate, local sustainability needs of the approximately three million farming households that grow an estimated two fifths of the world’s oil palm (Balch 2013), but also for the needs of indigenous forest dwelling communities that depend on intact tropical forest ecosystems to maintain their cultures and livelihoods.

ABSTRACT

The debate about the production and consumption of palm oil typifies the ambiguity of the sustainable development concept. To its supporters, oil palm is the golden crop that catalyzes smallholders out of poverty and brings salvation to the global food and energy crisis (Basiron 2007, de Vries et al. 2010). For its critics it is the single biggest threat driving the wholesale destruction of peatlands and rainforests, as well as increasing greenhouse gas emissions (Fitzherbert et al. 2008, Island 2015, Clough et al. 2016, Linder and Palkovitz 2016). In addition, the expansion of oil palm plantations has had considerable impacts on indigenous communities, affecting their rights to land, territories, and natural resources, they have traditionally owned, occupied, or otherwise used (Colchester et al. 2011, Majid Cooke 2012). Ethically concerned consumers and activists have tried to remedy the situation through the introduction of regulations meant to encourage sustainable and socially equitable production (Auld et al. 2008, Balch 2013, Kell 2014). However, these regulations and accompanying certification schemes have had limited effectiveness (Laurance et al. 2010, Levin et al. 2012, Carlson et al. 2013, Butler 2015), especially because there are abundant options for palm oil to be sold into ). At the same time, more stringent market standards often shift the burden of compliance to the three million smallholders that depend on oil palm cultivation for their livelihood (Giovannucci and Purcell 2008, Dolan 2010, Blackman and Rivera 2011, Hidayat et al. 2015).

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