- SIPEF
- Sustainability
- Working with smallholders
Sustainability
Working with smallholders
Smallholders play a critical role in the palm oil industry in Indonesia. Indonesian smallholder farmers account for more than 40% of the total oil palm planted area and are present across all of Indonesia’s palm oil producing provinces.
As of 2024, Tolan Tiga Indonesia partners with a total of 1 894 oil palm smallholders within its supply chain in Indonesia, collectively managing over 6 000 hectares of planted area. These partnerships are shaped by local context and formalised through mutually beneficial, legally binding agreements underpinned by the principles of Free, Prior, and Informed Consent (FPIC). These arrangements fall into two categories: scheme smallholders, whose operations are managed by SIPEF, and independent smallholders, who manage their own land and supply SIPEF upon meeting agreed sustainability commitments.
Smallholder programmes in Tolan Tiga Indonesia
| Smallholder cooperatives (Koperasi) | Under this plasma programme, Tolan Tiga Indonesia works with smallholder cooperatives, managing the production areas on behalf of cooperative members who entrust their land to the company for cultivation. The company develops and plants the land and carries out all operational inputs and management up to and including harvesting and crop recovery. A purchase agreement for fresh fruit bunches (FFB) is established at market prices, providing cooperative members with a steady income over a 25-year period. During the immature phase, members receive an advance monthly payment which, together with development costs, is later recovered through the purchase agreement. The managed areas are subdivided into individual land titles of around two hectares each, with landowners collectively represented through a cooperative that enters into a formal agreement with Tolan Tiga Indonesia. |
| Village smallholders (Kebun Masyarakat Desa) | Under this plasma programme, Tolan Tiga Indonesia works with surrounding villages to develop small oil palm blocks that are fully managed by the company. Similar to the Koperasi model, Tolan Tiga Indonesia is entrusted with land management, developing and operating the production areas on behalf of the communities. Each village is represented by an association that enters into a formal contract with the company. Payments are calculated based on production, market rates, and a service fee, and are made to the association for communal development projects. These payments are transparently published in the local newspaper. The plots are typically located close to the communities and managed as contiguous blocks, usually covering less than 100 hectares. The programme generates significant revenue for village cooperatives and supports a range of local social initiatives. |
| Independent smallholders | These smallholders manage their own land and have the option to sell to Tolan Tiga Indonesia, depending on their commitment and progress towards Roundtable on Sustainable Palm Oil (RSPO) certification. These smallholders operate under a memorandum of understanding (MoU), committing to comply with SIPEF’s sustainability requirements. In turn, Tolan Tiga Indonesia purchases their FFB at competitive market rates, provides technical support to ensure ongoing compliance, and covers the cost of external audits. |
Risk management and RSPO certification
Tolan Tiga Indonesia is actively advancing its smallholder programmes, aiming to fully integrate all engaged smallholders into its supply chain. This includes providing support to help smallholders achieve RSPO certification where possible. To ensure focused attention, a dedicated smallholder department at the Medan Head Office oversees and supports the implementation these programmes. In parallel, Tolan Tiga Indonesia implements its Responsible Purchasing Policy to safeguard its Identity Preserved (IP) supply bases. The policy provides the framework for a stepwise approach towards achieving 100% RSPO-certified crop by 2030.
More information on the implementation of the Responsible Purchasing Policy and how it supports SIPEF's growing smallholder programmes, can be found in the smallholders engagement framework.