Non-State Market Driven Certification Schemes in the Indonesian Palm Oil Sector: The effectiveness of certifications in addressing key sustainability issues
Summary
Non-state Market Driven (NSMD) certification schemes have begun appearing as a form of multi-national governance in the last few decades in an effort to control environmental and socio-economic impacts of various industries. Within the palm oil industry, a number of NSMD certifications are working within the sector. In this research, three of these certification schemes, the Roundtable on Sustainable Palm Oil (RSPO), the Rainforest Alliance Sustainable Agriculture Network (RA-SAN), and the International Sustainability and Carbon Certification (ISCC) were compared in order to provide insight as to how they can be more effective in reducing the environmental impact of palm oil and aiding in the socio-economic development of smallholders. Based on theories for successful standard creation and implementation and legitimacy, the effectiveness of the certifications was measured. It was found that the RSPO has the most relevant criteria for palm oil, but has issues with implementation and auditing. Smallholders struggle in achieving certification due to high costs and a small price premium. This is exacerbated by the fact that smallholders are poorly represented in all of the certifications’ governance structure. Uptake of certified palm oil is low due to low consumer demand, especially in high-consuming countries with low sustainability initiatives like India and China. To help combat these issues, it is recommended that the certifications work together to improve the industry and help in the development of smallholders by improving smallholder representation, improving the auditing process, and increasing awareness campaigns and media coverage of the issues to help increase demand for sustainable palm oil.