Malaysia: Palm oil smallholders risk being left out of sustainability drive

Malaysia has made notable progress in advancing sustainable palm oil, but independent smallholders remain the most vulnerable in meeting certification standards, according to PNB Research Institute’s (PNBRI) latest study.

The report, Realities and Prospects of Sustainability Among Oil Palm Smallholders in Malaysia, said smallholders risk being excluded from the global sustainable supply chain despite the country’s achievements.

Nearly 90 per cent of Malaysia’s oil palm planted area is certified under the Malaysian Sustainable Palm Oil (MSPO) standards, while more than a quarter has attained Roundtable on Sustainable Palm Oil (RSPO) certification.

PNBRI lead researcher Farhana Roslan said some 208,000 independent smallholders manage over 808,000 hectares, accounting for 27 per cent of the nation’s plantation area.

She cautioned that their exclusion could undermine Malaysia’s competitiveness and expose rural communities to greater economic vulnerability.

“Smallholders remain trapped in a cycle of low income and limited resources, which restricts their ability to adopt good agricultural practices or invest in sustainability,” she said.

About 60 per cent of those surveyed relied on secondary income to sustain their farms, as volatile market prices and rising input costs continued to squeeze livelihoods.

Farhana said smallholders often depend heavily on private collection centres, leaving them with limited bargaining power and access to higher-paying buyers.

Knowledge transfer on good agricultural practices was largely informal, with 61 per cent of smallholders learning from peers rather than through structured training.

Despite these challenges, Farhana noted that more than four in five respondents had already obtained MSPO certification.

“However, many expressed frustration over the lack of tangible financial benefits and the difficulties in meeting requirements related to land legality, social responsibility and environmental conservation,” she said.

The report recommended steps such as introducing agricultural technical and vocational education and training for the next generation of smallholders, facilitating bulk purchasing of farm inputs, and strengthening financial literacy.

Other measures include regulating collection centres, enhancing training modules and mandating clearer disclosure of smallholder operations during licensing.

“Independent smallholders are crucial to Malaysia’s socio-economic fabric, but without stronger support and integration, they risk being left behind in the sustainable palm oil agenda,” Farhana said.

Tags: Malaysia, palm oil, certification, smallholders, sustainable