Musim Mas’ program helps Indonesian Oil Palm Farmers Receive USD 767K
Musim Mas’ Independent Smallholders program opens access for smallholders to global markets through RSPO Certification
Jakarta, 21 September 2022 – Today, Musim Mas, one of the world’s largest fully integrated palm oil corporations, announced that the current batch of independent farmers from its smallholders’ extension program has successfully sold their RSPO-certified sustainable palm oil to international buyers through the RSPO’s trading platform.
2,295 independent smallholders from farmers’ associations in North Sumatra Province (Rantauprapat) and Riau Province (Pelalawan, Rokan Hilir, and Rokan Hulu) have received almost IDR 11 billion, or USD 767K from the transaction. Combined with similar sales in 2020 and 2021, these four associations have earned close to USD 1.3 million.
The associations are part of Musim Mas’ independent smallholders’ training and RSPO certification program that started more than five years ago as part of the Indonesian Palm Oil Development Scheme for Smallholders (IPODS). Musim Mas developed the original IPODS program with the International Finance Corporation (IFC) as a way to encourage and enable independent oil palm farmers to obtain certification by the globally-recognized Roundtable for Sustainable Palm Oil (RSPO).
“It is a significant achievement for smallholders to be certified because it opens more doors for them to sell their palm oil volume to global buyers seeking sustainable palm oil,” said Rudman Simanjuntak, Musim Mas’ Manager of Independent Smallholders.
Integrating independent smallholders into a sustainable palm oil supply chain
Smallholders manage a substantial 41% of Indonesia’s total oil palm plantation. They play a key role in producing oil palm for domestic and international markets and are the key to increasing the amount of palm oil that meets sustainability standards (RSPO and ISPO). However, independent smallholders struggle due to a lack of technical knowledge, limited access to quality planting materials, and financing. They rely on friends and neighbors, who often have little formal training.
Musim Mas engages with independent smallholders directly and provides them with agronomic training, access to financial support and global markets, and education on legal requirements. This training uses a comprehensive curriculum that mirrors the RSPO’s Principles & Criteria (P&C) to help smallholders close the gap between their old farming practices and those required for RSPO certification. RSPO-certified smallholders have access to global sustainable palm oil supply chains and premium markets.
“Trying to transform an industry is a process — the RSPO Credits supply chain model is an important entry point for smallholder members to become certified sustainable,” says Guntur Cahyo Prabowo, RSPO’s Acting Head of Smallholder Program. “In the long term, their efforts will help to transform the market into a more socially just and environmentally sustainable industry. The premium received is not only a viable business opportunity but also a reward for contributing to market transformation.”
Musim Mas, a 100% RSPO-certified oil palm major, believes in investing in smallholders. This training program is part of Musim Mas’ commitment to improving the livelihoods of palm oil farmers in remote areas of Indonesia by helping them enhance their incomes. The program assists the smallholders with access to financing, allowing them to replace aging palms, plant higher-yielding seedlings, and manage their oil palms while meeting certification standards.
Most smallholders farm relatively small plots of land; the average size is about two hectares. Many were not familiar with modern, science-based methods prior to joining the program. “One important lesson we learned in the program is focusing on increasing yields, not deforesting new areas,” said Kateni, Chairman of the Rokan Hilir Association of Independent Oil Palm Smallholders in Riau. “This training taught our members better and more sustainable methods of growing oil palm.”
The training program includes modules on financial management and health and nutrition. “Joining the program and then becoming RSPO certified brought significant improvements to our quality of life, and we are thankful for that,” said Joko Prasetyo, Chairman of Pelalawan Siak Association of Independent Oil Palm Smallholders in Riau. “Our members are very proud to be recognized as sustainable and responsible farmers.”
RSPO certification unlocks new markets
By obtaining RSPO certification, the independent smallholders can then qualify to join RSPO’s PalmTrace trading platform. Selling on the platform allows smallholders to earn a premium on their certified oil palm products. Because the traded on PalmTrace are certified as sustainable, major international buyers use the RSPO platform to source sustainable supply. This most recent sales by the four associations saw Unilever, Nestlé, ACT Commodities, and Waitrose Ltd as buyers.
“The purchase of the RSPO credits is essential to encourage the production of certified sustainable palm oil and a sustainable supply chain,” said Rudman Simanjuntak, Musim Mas’ Manager of Independent Smallholders. “As our smallholders’ program scales up, we hope to see more smallholders get benefits from the certification.”
As smallholders depend on environmental services for their livelihood, it is essential to promote sustainable oil palm production to ensure resilience and long-term economic growth.
Ikhsan Gunawan, Chairman of the Rokan Hulu Group of Independent Oil Palm Farms in Riau, said, “We used to grow oil palm in the old-fashioned way. We would never have imagined we could do business with international companies. The RSPO certification made it possible.”
“Empowering independent smallholder farmers is fundamental to Unilever’s approach to sustainable sourcing,” states Rauf Prasodjo, Senior Manager of Sustainable Sourcing at Unilever. “Smallholders are critical to the success of any sustainable supply chain, and we know that investing in certifying independent smallholders through the RSPO and purchasing the associated credits can drive positive change.”
Mégane Chesné, Global Sustainable Sourcing Leader, Palm Oil at Nestlé, said, “Supporting smallholder farmers to produce sustainably is integral to our ambition to advance regenerative food systems at scale. We will continue to work with our direct suppliers like Musim Mas to help improve the resilience and livelihoods of palm oil smallholders. This includes buying RSPO credits from independent smallholders to support their journey towards sustainable palm oil production.”
Musim Mas contact details
For additional information, please contact:
Reza Rinaldi Mardja, Corporate Communications
About Musim Mas
Musim Mas is one of the largest, integrated palm oil corporations with an operational presence in 13 countries across Asia-Pacific, Europe, and the Americas. Our main operations are in Indonesia, spanning from cultivation to refining and manufacturing. Our global workforce pursues innovative and sustainable developments, ensuring product quality, safety and efficiency as the industry evolves.
As one of the most prominent players in the industry, it aspires to be a responsible leader in the evolution of the industry, driving a new era of sustainability with innovation. To that end, we take active steps to go beyond industry-recognized sustainability standards and will continue to step up in response to critical industry issues in our quest to contribute to a more sustainable industry and equitable world.
About the Training for Smallholders program
Musim Mas together with the International Finance Corporation (IFC), a member of the World Bank, developed the Indonesian Palm Oil Development Scheme for Smallholders (IPODS) in 2015 following a diagnostic study on smallholders by the IFC in 2013. IPODS was piloted in four of Musim Mas’ mills in North Sumatra (Rantauprapat) and Riau (Pelalawan, Rokan Hilir, and Rokan Hulu), Indonesia.
These mills, which source mainly from independent smallholders, still continue to engage with these smallholders but the training program has now been replicated and expanded to cover 36,000 smallholders farming 76,800 hectares in Sumatra (Aceh, North Sumatra, Riau, South Sumatra), West Kalimantan and Central Kalimantan.
The Training for Smallholders program seeks to improve the livelihoods of smallholders by integrating them into sustainable palm oil supply chains. The integration would bring about not only financial value but also sustainable value, where their surrounding environment and community benefits.