A Structural Equation Model to Assess the Impact of the Economic and Environmental Benefits to the Indonesian Sustainable Palm Oil (ISPO) Adoption

Indonesian Sustainable Palm Oil (ISPO) was established initially to protect the national interest. However, the implementation level of ISPO still needs to be improved, mainly by smallholders. The low interest of smallholders is closely related to rational reasons such as economic and environmental benefits. Therefore, this study fills the gap by analyzing the economic and environmental benefits of adopting ISPO certifications using 300 respondents (150 ISPO and 150 non-ISPO) from four regencies (Batanghari, Muaro Jambi, Tebo, and Tanjung Jabung Barat) in Jambi Province, Indonesia. The study employed a closed-ended questionnaire to collect the farmers’ perspective data and utilized the Structural Equation Model (SEM) to address the research question. SEM can capture the perceptions of respondents and describe the impact of economic and environmental benefits to the ISPO adoption. The results found that the intention to adopt ISPO directly impacted the adoption rate. The intention to adopt by smallholders can be influenced by two variables, namely economic benefits and controlling behavior. The impact of the environmental advantages on the adoption intention was found to be insignificant. In addition, economic benefits have a dominant influence on all latent variables that compose intentions to adopt, such as subjective norms, attitudes toward sustainable management, and perceived control behavior. The study recommends that stakeholders pursue measures to disseminate the economic benefits of ISPO implementation to smallholders through various channels, including governmental and private extension. The government should also carry out a policy to create a supporting ecosystem to boost farmers' participation in adopting ISPO certification.