Integrating smallholders into the biofuel supply chain is a core commitment of many voluntary purchasing policies adopted by downstream companies in the food, cosmetics, and biofuel industries. This commitment aligns with broader ethical considerations, as buyers typically aim to avoid any association with the displacement of small farmers over deforestation, which has largely been driven by corporate practices.
Companies in EU member states, required to comply with the Renewable Energy Directive (RED) as well as the newly adopted Due Diligence and Corporate Social Responsibility Directives, must implement robust traceability mechanisms. For palm oil sourced from integrated corporate mills and plantations (including “tied” smallholders), this process is relatively straightforward. However, ensuring traceability becomes more complex when dealing with independent smallholders and mills.
The market presence of these independent entities is significant. Verified data from PT Inovasi Digital and Earthqualizer Foundation indicate that in Indonesia alone, an estimated 8,161,797 hectares of planted area are managed by independent smallholders, and approximately 366 crude palm oil (CPO) mills operate independently, without associated plantation land. These independent mills, which often procure substantial volumes of Fresh Fruit Bunches from smallholders—frequently through intermediaries or “Palm Oil Dealers”—highlight the near-unavoidable presence of independent smallholders in any palm oil supply chain.
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