The Oil Palm

The Partnership Between Smallholders and Large Companies

The UK think-tank Innovation Forum has published a thought-provoking piece on the significance of smallholders in the supply chains of major food companies, such as Nestle.

The article highlights the significance of smallholders on the supply side of the commodities market, implying that they have for the most part been forgotten by major companies, when examining their supply chains.

In the global palm oil market this is certainly the case. Whereas smallholders have been a prominent part of the sustainability debate for commodities such as coffee and cocoa, they are barely recognized when it comes to palm oil.

They have, rather, been something of an afterthought when it comes to sustainability policy. This also tallies with the standing United Nations definition of sustainable development – which is that it must address economic and social factors, as well as environmental. Too often, Western companies forget this, and their sustainability policies in relation to palm oil do not benefit smallholders – and in some cases actively harm them.

However, the Innovation Forum’s post appears to address this to a degree. It refers to a new report from the United Nations Commission on Trade and Development (UNCTAD).

In relation to large companies and palm oil, UNCTAD states:

“The experience seems to be positive as the companies provide quality seeds and introduce better planting techniques that increase smallholders’ productivity … Participating smallholders appear to be better off in terms of income than those who do not participate in contract farming. Other studies also suggest that productivity, quality and income gains can accrue to smallholders engaged in contract farming.”

Often large-scale agriculture is described as being in opposition to smallholder agriculture. But they can often work together. The Western purchasers of commodities such as palm oil would do well to work more closely with smallholders too.