Neste’s collaboration with smallholders helps reduce deforestation risk

Smallholders are a part Neste’s palm oil supply chain. Nowadays, some 40,000 smallholders provide palm oil for Neste’s renewable products. These volumes of palm oil are ISCC-certified and traceable to the oil palm plantations as, for example, EU Renewable Energy Directive requires. 

According to Roundtable on Sustainable Palm Oil (RSPO), smallholders account for about 40% of total global palm oil production, making smallholders significant contributors towards a sustainability of the palm oil industry. Smallholders are smaller-scale farmers growing oil palm. Farming provides the main income for the family which, in turn, provides the majority of the labor at the farm. 

According to World Resources Industry, smallholders may, however, lack sufficient knowledge or resources to produce palm oil sustainably. For example, illegal clearing of forests for cultivation purposes by slashing and burning vegetation continues being linked to non-certified smallholder farmers even though such practices are are known to be risky and thus considered unacceptable from the perspective of palm oil certification.

Independent smallholders, who make up the biggest group of smallholders in Indonesia, for example, are usually not linked to any particular company or mill, and thus, do not receive training, supervision or support from companies. This combined with limited information about good agricultural practices has led to lower productivity and a lower concern for sustainability than the industry average.

Neste active in developing smallholders’ sustainability awareness and expertise

We are committed to support smallholders to develop their sustainability awareness and expertise. For several years, we have been involved in projects with non-governmental agencies to encourage and enable the smallholders to adopt sustainable practices and get certified. Sustainable practices enable smallholders, for example, to improve their palm oil yields without expanding cultivation to new areas. This is key to reducing deforestation risk. Certification, such as International Sustainability and Carbon Certification (ISCC), provides the smallholders with access to higher-value markets and more selective customers, such as Neste and other biofuels producers, which in turn provides an incentive for smallholders to commit to sustainable practices for good. 

Collaboration towards improved sustainability in Malaysia

Since 2017, we have participated in a project coordinated by the Malaysian non-governmental organization Wild Asia involving smallholders producing palm oil in Malaysia. The third project partner is Kuala Lumpur Kepong Berhard (KLK), a Malaysian palm oil and rubber producer and chemicals manufacturer. 

The goal of the project is to improve sustainability of the smallholders in the Sabah region in the northern part of Borneo, Malaysia, and more specifically, to increase the volume of traceable and sustainable palm oil produced by small producers in the Kinabatangan Region. The Kinabatangan is Sabah’s longest and most important river, 560 km long with a catchment area of 16,800 km2, and provides the main water source for the major populated areas of the surrounding districts and the urban areas of Sandakan.

The program supports the education of growers to understand legal requirements and processes regarding sustainability. It distributes best practices and enables peer sharing and demonstration projects. We are working with our project partners to help these smallholders to achieve an international sustainability certification.

The target of the project is to enable smallholders to produce 50 000 tons of fresh fruit bunches (FFB, i.e. oil palm fruit bunches from which oil is extracted) by the end of 2020. By the end of October 2018, the project had achieved 32% of its target with almost 16 000 tons of RSPO-certified fruit bunches. About 80% of the certified volumes flow through RSPO Certified Palm Oil Mills, and the rest to collection centers.

The results of the continuous efforts to provide trainings for the smallholders, RSPO audits, and smallholder engagements have been good in 2018, which has attracted more partners to join the project. 

In 2019, the project expects to reach even more smallholders and put them in the path for certification. The project hopes that this can be replicated to other regions within Sabah, Malaysia. 

Smallholder engagement in Indonesia

We have engaged in a similar cooperation with smallholders in Indonesia through a project coordinated by Golden Agri Resources (GAR), Indonesian Palm Smallholders Union (Serikat Petani Kelapa Sawit, SPKS), and World Resources Institute (WRI). 

By the end of 2018, the project had mapped altogether 510 hectares of land in Siak, Indonesia, and profiled smallholders in nine out of the 17 villages initially targeted in the project. The project helped train eight farmer groups and 158 farmers. 

Discussions are ongoing to map smallholders also in other villages, and efforts to conduct certification gap assessment, verification and audit within these will continue in 2019. Such mapping of smallholders will enable the project to organize targeted trainings to prepare the smallholders towards becoming certified (Indonesian Sustainable Palm Oil, ISPO; the International Sustainability and Carbon Certification, ISCC; and Roundtable on Sustainable Palm Oil, RSPO). In 2019, we are looking into how the more advanced smallholders can get certified.

A project with a landscape approach to achieve large-scale impacts in Indonesia

By the end of 2018, the smallholder project in Indonesia was integrated into a larger, regional project in the Siak region. This more comprehensive project takes on a holistic approach and links a variety of buyers and local actors to improving sustainability in the area. The project takes on a landscape approach: instead of focusing on one commodity, the project aims at sustainability improvements in the production of multiple commodities, such as palm oil, pineapple, and rubber among others. 

The goal of the project is to convert large parts of the Siak and Pelalawan districts of the Riau province in Indonesia to sustainable landscapes which produce deforestation and exploitation-free palm oil, and maintain or enhance key conservation areas by building upon existing local efforts and multi-stakeholder platforms. The regional government will issue regulations to support transformation towards a sustainable “green district”, and all the actors will in turn support the government to meet their sustainable green district targets. In this integrated effort, the smallholders will be engaged directly through programs designed together by the various actors in the project to ensure they are mapped and trained and have a timeline towards certification.

Specifically, the program will:

  • develop scalable solutions for common problems
  • pilot multi-stakeholder approaches to sustainable supply sheds
  • support and empower local organizations
  • develop scalable tools and approaches to improve smallholder livelihoods
  • coordinate and share lessons learned with other landscape initiatives.

The aim is to complete the design phase of the program by the end of April 2019. The implementation phase is scheduled to start in the second quarter of 2019.

Neste wants to ensure that the renewable products we produce for our customers are contributing to a more sustainable future and that any negative impacts of production are thoroughly mitigated. Projects such as the ones described above, help us in this work.