The message from Cargill’s customers is clear: they expect to be able to trace the provenance and sustainability of the palm oil they buy right to the top of the supply chain. Customers see traceability to the mill as an important, but intermediary objective,” the US-based food processor and giant said in its 2015 palm oil progress update. “They expect traceability to the plantation level.”

Cargill has committed to achieve 100% palm oil traceability to the mill level by the end of 2015, and 100% traceability to sustainable plantations by 2020. But with a supply chain consisting in part of thousands of smallholder farmers, the challenges are formidable.

"Smallholder farmers account for close to 40% of our supply of palm oil. They are integral to our supply chain, but there are substantial challenges in terms of education around sustainable production and building their capacity to meet our sustainability requirements and those of our customers."

John Hartmann, chief executive officer of Cargill’s oil palm plantation business, Cargill Tropical Palm.

These challenges include significant costs of compliance and certification, which end-customers are often unwilling to cover. The challenge extends to local dealers as well, who act as an intermediary between the smallholder farmers and Cargill, and are at times difficult to engage.

However, the company’s PT Hindoli plantation, in South Sumatra in Indonesia, has provided a test-bed for the types of programs that can deliver the sustainability outcomes increasingly expected by buyers.

The plantation, which Cargill acquired in 1996, consists over 9,600 smallholder farmers who are certified by the Roundtable for Sustainable Palm Oil (RSPO) and International Sustainability Carbon Certification. Cargill’s smallholder program at the plantation assists them in developing sustainable land use and agronomic practices.

The Hindoli smallholder farmers were among the first in the world to be certified under the RSPO Smallholder Principles & Criteria. Achieving this certification has enabled the Hindoli farmers to earn substantially higher incomes, both because they have increased the productivity of their land and because sustainable fresh fruit bunches (FFB) command a premium price.

Cargill also offers smallholders direct benefits, such as guaranteeing to buy their FFB ahead of Cargill’s company crop, helping them to develop fallow land into income-generating estates, and working with smallholder cooperatives to build their monetary reserves to support smallholders when they incur a loss of income for 48 months while waiting for new trees to bear fruit.

Cargill’s actions are as much in the company’s interests as they are in those of its smallholders. By working with smallholders, the company is building the capacity of its supply chain to meet the demand for sustainable palm oil from customers. The challenge for the company is scaling up these programs to cover all the smallholders throughout its supply chain.

To this end, it is working with, among others, Malaysian-based social enterprise Wild Asia and the international non-governmental organization, Solidaridad. The three partners have launched an independent smallholder sustainability support program in Malaysia to provide technical assistance, training and capacity building to more than 2,500 independent oil palm smallholders.

It is vital that all the smallholders in our supply chain are able to reap the added value that comes with being a responsible stakeholder in the supply chain. Our work with them aims to do just that.

John Hartmann, chief executive officer of Cargill’s oil palm plantation business, Cargill Tropical Palm.