The Evolution of Supporting Smallholders for a More Inclusive Future

Over three million smallholders, including those in Indonesia, depend on the palm oil sector for their livelihoods. They produce around 40% of global palm oil. However, land legality issues and limited market access often prevent them from adopting more sustainable practices.

As a solution, Inovasi Digital (ID), with our implementation partner, Earthqualizer (EQ), launched the Inclusive Smallholders Program (ISH). This program aims to enhance smallholders’ inclusion in a sustainable palm oil supply chain, while promoting a fairer and more transparent business model. 

Addressing Challenges and Seizing Opportunities

One of the biggest challenges for smallholders in Indonesia is land legality. According to EQ/ID’s research, until 2022, only 48% of the total 7.9 million hectares of smallholder land has been officially registered. Meanwhile, approximately 3.3 million hectares are located within forest areas, conflicting with the No Deforestation, No Peat, No Exploitation (NDPE) policy.

However, opportunities remain open. The PPTPKH (Forest Area Release for Community Plantation Crops) program enables smallholders to obtain land ownership security and transparency, enabling them to better integrate into a sustainable palm oil supply chain.

Inclusive Smallholders Program Initiatives

1. Promoting Land Legality

Objectives:

• Assist smallholders in obtaining land legality as an initial step toward RSPO certification.
• Ensure that smallholders are not involved in deforestation practices.

Challenges:

• Many smallholders lack official land ownership documents.
• Limited understanding of land ownership rights and restricted access to legal assistance.

Approach:
EQ/ID supports land legalisation through spatial analysis and facilitates programs such as TORA (Agrarian Reform Land Object Program), which aims to provide ownership certificates for smallholders.

The Inclusive Smallholders Program focuses on promoting land legality as a foundational step toward RSPO certification and sustainable palm oil production. One of its key objectives is to help smallholders obtain legal documentation for their land, which is essential for formal recognition and participation in certified supply chains. Ensuring land legality also helps reduce the risk of smallholders being involved in deforestation activities, supporting broader environmental goals.

Despite its importance, many smallholders face significant obstacles in securing land rights. These include the absence of official land ownership documents, limited knowledge of land tenure systems, and inadequate access to legal support. To overcome these challenges, EQ/ID provides spatial analysis to support land legalisation and facilitates participation in government initiatives such as the TORA (Agrarian Reform Land Object) programme, which aims to issue land ownership certificates to smallholders.

2. Palm Oil Dealer (POD) Survey for Market Transparency

Most smallholders rely on Palm Oil Dealers (PODs) to sell their Fresh Fruit Bunches (FFB), yet the critical role PODs play in the palm oil supply chain is often overlooked.

PODs not only influence the price received by smallholders but also affect grading standards and delivery logistics. However, due to the informal nature of these relationships, smallholders often lack bargaining power or transparency over how their produce is valued.

Objectives:

• Enhance supply chain transparency by understanding the role of PODs.
• Promote a better traceability system for smallholders.

EQ/ID supports the POD survey to improve the traceability of palm oil products sourced from independent smallholders. Smallholders can connect more fairly with global markets with a more transparent system.

Most smallholders depend on Palm Oil Dealers (PODs) to sell their Fresh Fruit Bunches (FFB), yet the critical role PODs play in the palm oil supply chain is often overlooked. To enhance transparency and improve traceability within the supply chain, EQ/ID supports surveys that examine the role of PODs. By gaining a clearer understanding of how PODs operate, the initiative aims to strengthen traceability systems for independent smallholders. A more transparent supply chain not only boosts accountability but also helps smallholders engage more fairly with global markets.

3. Stakeholder Engagement

Field verification indicates that most smallholders are not part of cooperatives or operate through inactive cooperatives. As a result, they prefer to sell their harvests directly to PODs.

Field verification reveals that most smallholders are not part of cooperatives or are linked to inactive ones, leading them to sell their Fresh Fruit Bunches (FFB) directly to Palm Oil Dealers (PODs). To improve their inclusion in the supply chain and enhance access to global markets, the initiative seeks to connect smallholders with active cooperatives, local governments, and palm oil mills, fostering stronger integration and support for sustainable practices.

ISH Program Achievements 2019-2024

To measure the program’s impact, EQ/ID has recorded several key achievements up to 2024:

1. 1. Land Legality
      
      
      
   2. Stakeholder Capacity Building
      Number of Beneficiaries: 890 individuals (including extension workers, local government officials, cooperative managers, etc.)
      Provinces: West Kalimantan and Aceh
      Intervention Programs:
      • Training on sustainable agricultural practices based on Good Agricultural Practices (GAP) and NDPE
      • Accelerating Indonesian Sustainable Palm Oil (ISPO) and RSPO certification competencies
      • Training on spatial data analysis

   3. Stakeholder Engagement
      
      • MoU with Local Government: Collaboration with district governments to implement the Smallholder Landscape Program in Aceh Singkil and Sambas Regencies.
      • MoU with Palm Oil Mills: Supporting mills in reporting Traceability to Plantation.

       

Lessons Learned

• Land Legalization Process: The critical bottleneck in land legality is the lack of knowledge and access to legal support for smallholders. EQ/ID’s spatial analysis and engagement process h collaboration with TORA has proven effective in simplifying the process, but there’s still a need for better access to legal guidance at the grassroots level.
• Market Transparency: Lack of transparency in the supply chain can result in unfair pricing for smallholders. The POD survey has highlighted the need for more structured relationships between smallholders and PODs, pushing for better traceability and pricing standards.
• Cooperative Strengthening: Engaging smallholders in cooperatives is key to improving their bargaining power. The challenges faced in building strong cooperatives have revealed the need for tailored approaches to meet the specific needs of different regions.

Carbon Neutral: The Future of Smallholders in the Palm Oil Industry

Independent smallholders are essential players in the palm oil sector, contributing a significant share of global production and serving as stewards of vast landscapes across Indonesia. Yet, their potential to contribute to climate goals and sustainable supply chains remains largely untapped, often due to limited access to premium markets, complex land legality issues, and the absence of financial mechanisms that reward their conservation efforts. 

To address this gap, EQ/ID is currently developing a concept designed to recognise and incentivise smallholders who actively protect forests and adopt regenerative agricultural practices by linking their sustainable production of Fresh Fruit Bunches (FFB) to premium pricing opportunities in global markets.

This initiative aims to create a carbon-neutral product sourced directly from independent smallholders who manage or reside near community-managed village forests. While many of these forests are actively protected by local communities, including smallholders, participation in global carbon markets remains challenging due to complex international audit and certification requirements.

This concept offers an alternative pathway—connecting conservation outcomes directly to palm oil supply chains and generating value through fairer, more transparent trade systems.

As the global demand for sustainable commodities intensifies, the palm oil sector is undergoing a critical transformation. At the heart of this shift lies the urgent need for traceability, transparency, and credible deforestation- and conversion-free (DCF) claims.

InovasiDigital is leading this transformation—providing robust digital infrastructure and intelligence to trace palm oil from plantation to product, ensuring compliance with the EU Deforestation Regulation (EUDR), and upholding NDPE (No Deforestation, No Peat, No Exploitation) commitments.

Why This Matters: Supporting Global Sustainability Commitments

Our traceability platform provides the foundation for:

Empowering Inclusive Sustainability

Importantly, our system also brings smallholders into the fold. By integrating cooperative groups, FFB agents, and local processors, we help ensure that sustainability is inclusive, equitable, and impactful at every level of the value chain.

 Partner with InovasiDigital

At InovasiDigital, we believe that data is the new currency of sustainability. By transforming complex supply chains into transparent ecosystems, we empower stakeholders—from producers to brands—to act confidently, communicate credibly, and contribute meaningfully to a deforestation-free future.

Let’s build the future of sustainable palm oil—together.

Over the past two decades, the palm oil industry has become one of the most crucial global sectors for domestic consumption and a major export commodity. However, behind its success lies a significant challenge—non-compliance in cultivation practices contradicting sustainability principles. This has led to deforestation and expanding peatland plantations, which are vital for climate mitigation.

This article is based on the Earthqualizer report, which exposes alarming trends in palm oil plantation development. It highlights a critical concern: the high rate of non-compliance and the industry’s failure to hold actors accountable.

The Hidden Footprint of Non-Compliance

The report notes that from the total impact of deforestation and peatland conversion between 2016 and 2024—covering an area of 471,238 hectares of deforestation and 115,587 hectares of peatland degradation—125,092 hectares remain unidentified in terms of market and supply chain integration. The report refers to these as hidden cases, where market players and the palm oil supply chain have yet to be held accountable for their environmental impact, and the responsible plantation entities cannot be clearly linked.

The lack of transparency in supply chain information prevents many parties from being identified, thereby obscuring advocacy efforts and the necessary resolution. Statistics reveal that 125,092 hectares of non-compliance cases originate from 30 concessions, each affecting over 1,000 hectares, representing 81.64% of the total detected deforestation.

Furthermore, the report indicates that 87,224 hectares of the impact come from plantation concessions that lack processing facilities, while 37,872 hectares originate from concessions that do have mills but still fail to comply with sustainability policies, mainly No Deforestation, No Peat, and No Exploitation (NDPE) commitments. A significant challenge in advocating for these cases lies in the limited availability of transaction data within their palm oil supply chains.

A deeper analysis suggests that the root cause of non-compliance lies in the industry’s inherent complexity. The lack of transparency in the supply chain remains a central issue, exacerbated by the fact that companies and supply chains are not well-structured to ensure clarity and accountability regarding raw material sources.

Persistent Non-Compliance

Large plantation groups and global brands that have adopted NDPE policies and joined forums such as the Consumer Goods Forum (CGF) play a critical role in driving change. They are expected to be more responsible and transparent regarding their palm oil sourcing and to enforce stricter monitoring systems. However, reliance on spatial analysis and publicly available data for monitoring still leaves loopholes for violations. Many entities continue to operate non-transparently, withholding market administration documents and unpublished audit reports, making non-compliance even more challenging.

The impact of non-compliance is far-reaching, affecting both the environment and local communities who depend on healthy ecosystems. Deforestation negatively impacts climate change mitigation efforts and threatens wildlife habitats, while indigenous communities often lose their lands without fair compensation.

“Nothing is perfect,” but in the context of sustainability, there is an urgent need for improvement. The consistent implementation of NDPE policies and strengthened zero-deforestation and anti-exploitation advocacy must be reinforced through initiatives and collaborations among stakeholders. Government support, corporate responsibility, and civil society monitoring are essential to establishing a system that values sustainability while aligning with economic growth.

Where Do We Go from Here?

Non-compliance in the palm oil supply chain is an issue that demands immediate attention. By improving transparency, strengthening regulations, and advancing monitoring technology, we can hope to reduce deforestation rates and pave the way for a more sustainable palm oil industry. As consumers and members of society, it is our responsibility to choose and promote sustainable production practices and ethical products—because sustainability is not just an option, but a necessity for the future of our planet.

Reference: – Earthqualizer. (2016-2024). “Orphan Case Report”.

The EU Deforestation Regulation (EUDR) has been a prominent issue facing many operators across several key commodities who seek to trade them into and out of the European Union (EU). Palm oil is one such commodity, and the EUDR aims to stop deforestation-related commodities from entering supply chains linked to operators in the EU.

What are the basic requirements and demands of the EUDR?

To establish importers of the key commodities requirements, Article-3 of the EUDR gives the essence of that law. In its most basic form, the EUDR demands that imports into (and exports from) into the European Union:

1. Are deforestation-free;
2. Can demonstrating legal compliance to national laws; and,
3. Are able to provide a Due Diligence Statement with geolocations and risk mitigation.

Based on these basic requirements the main challenges facing operators are broad. They can be organized into 5 major categories or requirement / compliance streams.

1. Mapping supplier information that is pertinent to the EUDR is critical. According to the EUDR, this must include the geolocation of each individual supplier, expressed as a polygon. In palm oil, certification schemes provide some data but much information is kept within national land registrations that are not always accessible.
2. Forest maps, boundaries, definitions, and risk assessments must be clarified as “deforestation free”. Without a universally adopted map, there will be challenges from conflicting definitions of forest, base-maps and boundaries.
3. Legal compliance to national laws includes a broad range of legislative and regulatory requirements. There may be overlapping laws, interpretations and outdated legality statuses of suppliers.
4. The conduct of a risk assessment, especially for moderate to high-risk supply-chains demands operators to provide key information into the specific risks including deforestation and legality risks. Access to reliable data to support risk assessment and mitigation work will be a significant challenge for operators.
5. The EUDR requires operators to have a risk mitigation approach for suppliers at-risk of breaching the regulations. It requires operators to address risks in their supply chain through having policies, procedures and action plans. Shared risk mitigation becomes necessary or a common approach to pool smaller resources. Smallholders are a significant at-risk group linked to deforestation and illegality.

What are the Processes, Methodologies and Approaches to meet EUDR requirements?

To meet these demands, Inovasi Digital analyzed the regulations in detail and consulted with various bodies and stakeholders to gain a clear picture. The approaches required to meet the challenges include:

1. Utilizing mill supply-base information, including Traceability to Plantation (TTP) datasets through an integrated traceability system, like Inovasi Agriplot to identify gaps.
2. Establish deforestation and forest boundary data through incorporating human expertise and on-the-ground knowledge– going beyond satellite imagery to field verification, as well as consulting key stakeholders.
3. Cross-referencing national land maps and other official sources to align them as well as field boundary delineation.
4. Risk assessments are relevant jurisdictions to verify risks across various parameters and criteria, including deforestation, legality, social issues, traceability and supply chain complexity.
5. Risk mitigation includes filling traceability gaps, risk mitigation policies and procedures; and smallholders related activities.

What are the critical baseline categories to meet EUDR needs?

Inovasi Digital has analysed the legislative requirements of the EUDR and organized the demands of the legislation into 3 major data baseline categories.

1. Supply-base and traceability baselines.
   This includes key types of data in 2 major categories: Supplier information, trade and production data, and, Geolocation data. Supplier information relevant to EUDR requirements are not centralized and access can be restricted, including official data or supplier and operator traceability information. Geolocation data challenges include inconsistent or incomplete land plot data as well as restrictions due to privacy or legal reasons.
2. Forest-related baselines.
   Forest data baselines cover forest definitions and distortion or ambiguity without a universally referenced forest base map. Different definitions create different baseline maps and interpretations of forest data. Existing global maps are not authoritative or dependable, meaning more verification requirements for forest conditions.
   
   
3. Legal-compliance related baselines.
   Legal compliance baselines include broad sub-categories of data to complete legality verification of suppliers. This can include compliance to laws, regulatory requirements, permits, taxation and other legal instruments, while the source of information is also diverse and dispersed.

What are the information categories and baseline datasets in Inovasi Agriplot’s inventory and Agriplot’s readiness to support EUDR Compliance for partners?

Inovasi Agriplot is built from the experience and knowledge of Earthqualizer Foundation’s leadership in the field of geospatial monitoring for deforestation policy compliance – supporting the most important operators in the palm oil sector implement, monitor and accurately detect deforestation in the supply chain for over a decade.

Inovasi Agriplot is not established on just satellite imagery and datasets of non-spatial information inventories. It incorporates on-the-ground knowledge through our extensive field staff and continued updating of the databases. The way Inovasi Agriplot truly delivers for partners facing EUDR is our accurate, verified and critical disclosure of operators’ key supply-chain situation, its risk profile, and partnering to identify risk mitigation solutions.

Inovasi Agriplot draws upon detailed and specific verifiable information across various sources, and in-house data-sets including spatial data, legal documentation, trade data and field verified information. This provides Inovasi Agriplot with an existing database of verified and reliable information covering over 28 million Ha, over 8,000 facilities, over 2,300 mills in 35 countries and 10,000 + FFB dealers. Our TTP data covers over 1,700 mills.

Forest and deforestation information is a core expertise of Inovasi Digital, respected and acknowledged through the stable of partners EQ and ID advises on deforestation monitoring. EQ is the leader in deforestation monitoring. Inovasi Agriplot will deploy various databases:

• EQ’s inhouse high-resolution forest cover base-map
• EQ’s bi-weekly deforestation monitoring database, since 2016
• Field verifications information
• Stakeholder advise 
• Credible NGO/community grievances

This extensive experience allows Inovasi Digital to provide unsurpassed accurate forest and deforestation alerts or risk profiling. Our system is backed by the following database coverage:

• Forest cover (including peat forest) area inside oil palm licensed area: 2,3 million ha 
• Historical deforestation cases from 31 Dec 2020: 214 cases (50K+ha) in 8 countries

An equally comprehensive and in-depth coverage of legal issues has been assembled through past deforestation monitoring work, demonstrating an appreciation of the legal component in effective deforestation monitoring. The scope of legality datasets includes:

• Alignment of National Land Registration (e.g., ATR-BPN, Jupem, e-lasis) with Planted Area Patterns
• National Land Use Plans and Allocations (e.g., KLKH, Jupem)
• Registration of Indigenous Peoples’ (IP) Land
• Official Court Records
• Credible NGO and Media Reports
• Certification Schemes assessment disclosure information
• Company Disclosures through stock market, voluntary or public access modes

This extensive, detailed and referenced information provides a legality database for Inovasi Digital that already encompasses the following datasets:

Supplier legal plot boundary

• Corporate:  396,059 plot
• Outgrower:  6,689 plot
• Scheme smallholder:  941 plot
• Independent Smallholder:  2,604,313 plot
• Social grievance cases from 2020: 698 cases (26 countries)

In addition, with many of the EUDR commodities being supplied by smallholders and informal chains-of-custody or opaque status of production, Inovasi Digital’s partners will benefit from the database, and extensive understanding of the socio-legal context smallholders operate to profile the risk associated with smallholders. Inovasi Agriplot will allow for greater risk assessment and mitigation measures because of the datasets on the following:

• Administrative boundary up to village levels
• Corporate profiles information: Notarial act, company disclosures, 

Inovasi Agriplot provides industry leading datasets and clarity on smallholders’ status with experience in interpreting the existing legal status of smallholders for appraising their risk profile.

• Adminitrative boundary up to village levels
• Corporate profiles information:  1,386 group company, 

Inovasi Agriplot’s Mill Assessment and Risk Approach.

Inovasi Agriplot categorizes mills and supply-chains according to their risk-probability segments. To meet EUDR Due Diligence Statement and risk assessment needs, the system will categorize the supply-base and mill that is supplying the EU according to 4 distinct risk profiled segments.

Figure 1: Inovasi Agriplot process flowchart

Based on the availability and reliability of TTP information from a participating mill, the TTP data is either processed through a risk layer assessment and compliance attribution test, or, where the availability of TTP data is low or unavailable, a precautionary approach is applied – using a conservative estimate of 50km radius from the mill to the potential supply-base and processing these potential suppliers against the risk layer assessment and compliance attribution test.

After the assessment and test, the mill will be assigned to one of the 4 risk-profile types as shown in the flowchart. Mills identified without non-compliance are ready to provide data for Due Diligence Statements (DDS). However, where risks are identified further risk assessments are needed to verify the exact risk types and profiles of suppliers for further action. The risk status is further refined using a linkage within supply-base or association criteria into risk sub-categories of; mills to links with non-compliance within 50km radius; mills linked to 3rd party suppliers with non-compliance; and, mills linked to managed plantations with non-compliance. Each sub-category will suggest the potential mitigation approaches to address the identified or potential risks.

In addition to understanding the types of risks – deforestation, legality or other risks – attention will be needed to address the situation of smallholders in the supply-chain, as they are present in all the commodities affected by the EUDR. Additionally, they are often associated with deforestation, illegality and other potential EUDR non-compliance.

Moving forward with an accurate, verifiable and dependable system – Inovasi Agriplot 

Through the Inovasi Agriplot approach, the risks and requirements of the EUDR have been revealed so operators can make informed decisions on the best approaches to comply with the EUDR. The Inovasi Agriplot approach, system and experience shows a deep appreciation of the challenge, built upon the expertise and knowledge as the leader in deforestation monitoring and spatial analysis in Southeast Asia. Positioned with a unique combination of spatial data, big-data processing, and on-the-ground knowledge, Inovasi Agriplot is the most accurate platform for tackling any operator’s EUDR needs, from understanding their supply-base to completing DDS requirements to risk assessments and effective mitigation approaches.