07 Apr 2025

Project

Rokan Hulu Landscape and Livelihoods Initiative, Indonesia

Indonesia leads global palm oil production, supplying 60% of the market with 16.8 million hectares of plantations. Despite suboptimal practices, optimised land use offers growth potential. The sector is vital to the economy, supporting 16 million jobs and significant exports, with 42–43% of production reliant on smallholders. However, these farmers face several challenges in productivity, resilience, and meeting evolving market demands. Rokan Hulu in Riau Province, home to 530,000 independent smallholders, plays a crucial role in oil palm cultivation; however, its reliance on oil palm monoculture leaves it vulnerable to industry-wide challenges.

Ferrero and Musim Mas aim to establish a sustainable and traceable palm oil supply chain that meets both regulatory and voluntary standards, including those of the Roundtable on Sustainable Palm Oil (RSPO) and Indonesian Sustainable Palm Oil (ISPO). Smallholder compliance is crucial for stability, particularly as the EU Deforestation Regulation (EUDR) becomes more stringent. Their joint project supports regenerative farming, improved yields, and climate resilience while strengthening farmer organisations, promoting certifications, and diversifying incomes. Lessons will inform Musim Mas’ Independent Smallholder Programme (MMISP), while broader collaboration will drive ecosystem restoration and sustainability compliance.

The project is led by Preferred by Nature, in collaboration with Ferrero, Musim Mas, SAN (including Indonesian SAN members Kaleka and Setara Jambi), and Agriterra. The consortium combines extensive expertise in regenerative agriculture, farmer organisation development, sustainability standards, and landscape-level interventions. By leveraging the strengths of each partner, the project ensures efficient implementation, capacity building, and alignment with both business and development priorities.

Challenges

Indonesia’s palm oil production has stagnated due to ageing trees and slow replanting, with 360,000 hectares versus a goal of 180,000 hectares per year. Financial constraints and a 3-3.5-year yield gap add to the challenge. With demand rising 7.6% annually since 2019 and the increased use of biofuel and palm oil, output could drop from 50 million to 44 million by 2045. Sustainable intensification is the key to boosting productivity without deforestation. Smallholder farmers in Rokan Hulu face numerous related issues that compromise their long-term sustainability.

Heavy reliance on synthetic: Fertilisers and pesticides have degraded soil health, leading to declining yields over time, pollution, and increased production costs. Despite mounting costs, many farmers continue to use conventional farming techniques due to limited access to alternative methods, knowledge, and resources.

Oil palm’s long maturity cycle adds another layer of risk: Farmers harvest Fresh Fruit Bunches (FFBs) about three years after planting, with trees remaining productive for around 25 years. However, during rejuvenation, they face a 3-3.5 years income gap, worsening financial vulnerability without alternative income sources.

Non-compliance with Voluntary Sustainability Standards (VSS): VSS, like the RSPO, restricts market access, particularly in the EU, which imports 47% of Indonesia’s palm oil annually. In Rokan Hulu, deforestation, biodiversity loss, and ecosystem degradation pose significant threats to agricultural productivity, compliance with international sustainability standards, and market viability. Moreover, women and youth face exclusion in the sector. Women are often excluded from decision-making and training, and youth are excluded from opportunities, leading to disengagement and a shrinking workforce.

Beneficiaries

The intervention will enable 5,400 smallholders to adopt regenerative agricultural practices that improve yields, reduce synthetic inputs by 30%, and enhance climate resilience.
Two farmer organisations will be strengthened, expanding RSPO/ISPO certification to 2,500 farmers while increasing market access and supporting diversified income opportunities for 2,000 community members, 60% of whom are women.
At the landscape level, 1,000 hectares of degraded land will be restored to safeguard biodiversity and ecosystem services, while a multi-stakeholder alliance will address deforestation risks and promote EUDR compliance.

Objectives

The project’s overall objective is to make oil palm production more inclusive, resilient, and profitable for smallholders and buyers in Rokan Hulu, Indonesia, while contributing positively to landscape integrity. By addressing challenges to sustainable growth, enhancing smallholders’ livelihoods, and advancing environmental objectives, the project establishes a model for sustainable palm oil production that is replicable and meets global market demands.