Oil palm smallholders and the road to certification: Insights from Indonesia

Smallholder-managed oil palm plantations are a major driver of economic welfare and rural development. However, compared to industrial producers, smallholders are associated with lower farm productivity and disproportionately higher rates of illegal land clearing. Therefore, a balance must be struck between mitigating adverse externalities and strengthening favorable outcomes to ensure smallholders' sustainable integration into the palm oil industry. Certification schemes are proven instruments for achieving this goal by introducing best agronomic practices and standards. Yet, despite the availability of certification, adoption rates among smallholders remain low. Using Indonesia as a case study, we extend existing research by investigating how altering identified barriers to smallholder certification affects their acceptance. Through a discrete choice experiment conducted with 251 Indonesian oil palm smallholders, the results of our mixed logit models indicate smallholders' positive attitude towards certification schemes and their general willingness to adopt one. While 62% of respondents acknowledge the direct environmental impact of oil palm cultivation, 84% recognize the potential of certification schemes to contribute to environmental protection. Our results further show that smallholders are more likely to adopt a certificate with increasing amounts of farm management trainings and cash premiums. Moreover, we highlight the pivotal influence of farmers' risk attitudes and locus of control in shaping adoption decisions. Our novel findings are relevant to researchers and industry stakeholders as they provide valuable insights into pathways for the design of certification schemes, which catalyzes smallholders' economic integration as well as environmental wellbeing.