14 April 2014

Living sustainability: Tens of thousands of smallholders in the supply chain


In recent years, Neste Oil has significantly increased the amount of palm oil smallholders in its supply chain. The smallholders are organized as cooperatives that sell their production to producer companies. The number of smallholders in Neste Oil's supply chain rose from 9,000 to 54,000 in 2013 alone.

Palm oil offers a higher return and helps educate children

Palm oil is an important part of the economy in Indonesia and Malaysia, and enables many families to educate their children, for example. Many smallholders cultivating oil palms today used to grow rubber trees. By switching to oil palms, they have often been able to double their income.

Growing oil palms has increased the standard of living of two smallholders in Indonesia, Hery Setiawa and Suwelo Ard, for example. One of them has built a house with over 100 m2 of space for his family and sent his eldest son to study at Riau University. The biggest hope of both men is to provide an education for their children.

Cooperatives support smallholders and provide information

Smallholders cultivate their own two-hectare plots and belong to cooperatives that organize training, make joint decisions, and manage things like the safe storage of the chemicals needed on plantations.

The training and support provided by cooperatives help smallholders follow sustainable cultivation methods.

“Without our support people, we wouldn’t know as much about sustainable methods as we do now, and they give us a lot of information and help,” say Suwelo and Hery.

Certified palm oil commands a better price

Neste Oil requires all its suppliers to be certified to ensure that it knows the origin of the palm oil it buys and that it is produced sustainably. Certification is also a requirement for smallholders. They benefit, however, as certified palm oil commands a better price than non-certified palm oil. Neste Oil is currently negotiating with International Financial Corporation (IFC), which funds sustainable development projects, to organize a system that would enable Neste Oil to buy palm oil from independent smallholders in the future as well.