Smallholders – Inefficient and Wayward, or a Sustainable Complement: The Oil Palm Industry as a Case Study

However, when viewed from a sustainability and resilience standpoint, smallholders, by virtue of their diversity in size, placement in the landscape and varied ownership and management structures give them a measure of resilience not achievable by large plantation companies. In a small holding, multi-cropping practices result in multiple income streams, greater biodiversity and the flexibility of prioritizing or deprioritizing the palms in response to demand or price can result in better work-life balance and mental health. 

1. Inherent Ecological and Agronomic Advantages

Smallholdings may promote superior soil health and enhanced carbon sequestration through the use of agroforestry or multi-cropping systems. Such systems could have higher soil organic matter due to the constant leaf litter from diverse vegetation and the use of organic waste as mulch. Such practices improve soil structure, water retention, and nutrient cycling, in contrast to the, occasionally, heavily leached soils of some large plantations. These often diverse agroforestry systems, with their multiple canopy layers and permanent root structures may provide better carbon storage, sequestering more carbon in both biomass and soil than a monoculture palm stand. This makes smallholdings a potential net carbon sink, mitigating climate change.

Because smallholdings tend to occupy more heterogeneous localities, they may support enhanced water management and friendlier microclimates. The diverse ecosystem and vegetation acts like a sponge, improving water infiltration during heavy rains and slowly releasing it during dry periods, reducing drought stress and the risk of flooding and erosion downstream. Furthermore, the varied canopy creates a more moderate microclimate. It reduces soil temperature and evaporation, protects shade-loving species, and maintains higher humidity, which can be beneficial during periods of extreme heat and water stress.

Biodiversity is a natural form of insurance because it affords some degree of natural pest and disease regulation. The variety of plants hosts a wide range of beneficial insects, birds, and other organisms that act as natural predators for pests like bagworms and rats. This reduces the need for and cost of chemical pesticides, creating a more resilient system that is less prone to catastrophic pest outbreaks. 2. Economic and Social Resilience

Smallholders, especially those using traditional or semi-traditional methods, often rely less on expensive inputs such as synthetic fertilizers and pesticides. Their systems can be more closed-loop (e.g., using composted waste or manure from livestock). This makes them less vulnerable to global price shocks in fertilizer and agrochemicals, which are often tied to fossil fuel prices and can be disrupted by climate events or geopolitics. The lower capital intensity of smallholdings also means they have lower fixed costs. In a bad year, a large corporation still has massive debt servicing, machinery costs, and payroll. A smallholder's financial risk could be more localized and manageable.

Smallholders often possess deep localized knowledge of their immediate environment which might even be intergenerational in nature. They are adept at observing subtle changes in weather, soil, and pests. This allows for hyper-local adaptation, enabling them to select palm varieties or intercropped species that are proven to be well-suited to their specific micro-climate and soil conditions, which is a form of proven climate adaptation.

Being relatively small in size, smallholders can also undertake rapid experimentation, and can quickly test and adopt low-risk, low-cost adaptation techniques (e.g., different mulching materials, small-scale water harvesting) without needing corporate approval cycles.

Something often overlooked in the smallholder community is the stronger social capital and cooperative potential. Although initially challenging, once properly organised, successful smallholder cooperatives demonstrate immense resilience. Smallholder cooperatives allow the pooling of resources to invest in shared infrastructure (e.g., small-scale processing units, collection centers). At the same time, this collaboration promotes the sharing of knowledge and best practices for climate adaptation. Collectives are also able to negotiate better prices and gain access to premium markets (e.g., RSPO-certified), improving their economic sustainability, and finally, a well-organised cooperative could provide a community safety net during climate-induced hardships.

3. Landscape and Biodiversity Value

By functioning within a diverse and interactive mosaic of ecosystems, smallholders could serve as corridors to improve habitat connectivity. Smallholder plots, scattered throughout the landscape, can act as crucial biological corridors connecting fragmented forest patches. This allows for wildlife movement and genetic exchange, which is vital for ecosystem health and resilience in the face of a changing climate. A large plantation, by contrast, can sometimes be a "green desert" that creates an inhospitable and impermeable barrier to fauna. Border vegetation, ditches, and  reserves and easements may function as refugia for pollinators and beneficial Species. The diverse vegetation in these ecological niches provides a permanent home for pollinators and other beneficial species that might not survive in a monoculture. This service benefits not only the smallholder but also the surrounding agricultural landscape.

Important Caveats and the Way Forward

These observations are in no way intended to detract from the vast majority of large plantations that produce copious quantities of palm products of the highest quality, at high land-use efficiency, optimizing the use of water and other inputs, and in full accordance with the global RSPO and domestic MSPO standards and the full suite of corporate governance frameworks and best agricultural, environmental and social practices.  These commercial plantations typically produce between 18 and 30 tons of Fresh Fruit Bunches (FFB) per hectare per year, compared to the independent smallholder’s average yield of less than 14 tons per ha, in spite of the significant challenges associated with the difficulty in finding skilled labour, most notably, skilled harvesters.

It is, however, intended to call attention to the complementary role that both independent and organised smallholders play, in concert with large plantations, to increase the collective resilience of the entire industry. Each smallholder, essentially representing a livelihood which may be supporting an extended and often inter-generational family, also produces supplementary crops that may also be supporting the broader community by providing staples like sweet potatoes, tapioca, fruit and greens at locally affordable prices. It is also crucial to acknowledge that these advantages are often potential and not automatic. The "unorganized smallholder" sector, in particular, faces significant challenges, including lack of access to finance, knowledge, and high-quality seedlings. They also encounter difficulty achieving certification due to cost and complexity and face constant pressure to intensify and move away from multi-cropping for short-term gains.

The goal, therefore, shouldn't be to pit smallholders against corporations, but to create systems that unlock smallholders' innate resilience potential. This can be achieved through targeted support from governments and NGOs to improve yields sustainably within their diversified systems. Innovative, group certification schemes can help to lower the barrier to entry for sustainable markets. Finally, we need policies and financial incentives that reward the ecosystem services (carbon storage, biodiversity, water regulation) that smallholders provide, not just to their peers, but to neighboring large commercial plantations as well, improving the collective resilience of all stakeholders, while making their resilience economically viable.

In conclusion, beyond their flexibility, smallholders' potential for superior soil health, natural pest control, reduced input dependency, localized knowledge, and positive role in the landscape provides a fundamentally different and somewhat more resilient model for agricultural production, in an era of climate change, that serves as a complement to the role of large commercial plantations. The challenge is to support them in realizing this potential.