Speaking at RT2025, the Roundtable on Sustainable Palm Oil (RSPO)’s annual conference in Kuala Lumpur on Tuesday, the leaders called for fairer policies, better market access and stronger collaboration with international bodies to ensure smallholders are not left behind in the sustainability transition.
National Association of Smallholders Malaysia (NASH) president Adzmi Hassan said that while smallholders play a vital role in Malaysia’s palm oil sector, they continue to face structural challenges in gaining recognition and access to sustainability premiums.
“Smallholders in Malaysia have been around since the 1970s, and we have faced many challenges from the early days, from increasing production to improving export quality under strict government regulations,” he said. “So, we should not be seen as a problem, but as part of the solution.”
Adzmi noted that Malaysia’s smallholders, numbering about 500,000 and covering over 900,000 hectares, produce nearly 40 per cent of the country’s palm oil exports. However, many remain constrained by complex certification systems and new market requirements such as the the European Union Deforestation Regulation (EUDR), which demands verifiable proof that palm oil is not sourced from deforested land and requires detailed geolocation data for farm plots.
For smallholders, these requirements are difficult to meet due to limited digital literacy, lack of mapping tools and insufficient financial resources to comply with traceability systems.
Adzmi also highlighted the lack of pricing transparency within the supply chain, noting that smallholders often bear the brunt of market risks.
“Currently, there is a wide gap between upstream and downstream players,” he said. “When prices fluctuate, it is always the smallholders, those at the downstream end, who absorb the impact, while the benefits and margins remain concentrated upstream.”
The press conference followed the signing of a memorandum of understanding (MoU) between Asia School of Business, RSPO and NASH, aimed at strengthening the resilience of smallholders in Malaysia through training, digital readiness, and sustainable financing under a three-year collaboration.
Implementation activities are set to begin immediately, with engagement and socialisation efforts currently being scoped in coordination with local authorities and community leaders.
Under the agreement, capacity-building programmes for NASH members will be rolled out in phases, focusing on good agricultural practices, record-keeping and leadership development. It will also enhance data collection to improve traceability and promote sustainability-linked incentives designed to make responsible production both profitable and enduring.
During the signing ceremony, Adzmi said he hopes the collaboration will help smallholders gain greater recognition from both the market and global buyers for the risks they shoulder and the value they bring to sustainable production.
He also urged for closer alignment between the Malaysian Sustainable Palm Oil (MSPO) and RSPO certification schemes, noting that both could work hand in hand to help smallholders achieve genuine sustainability and expand their market reach.
“At the end of the day, the benefits, whether premiums or incentives offered by any market, should flow back to the smallholders,” he said.
Echoing similar sentiments, Djono Albar Burhan, head of international relations and people development from the Association of Indonesian Palm Oil Farmers (APKASINDO) highlighted the sector’s generational shift, where younger farmers are taking over family plantations with a renewed commitment to sustainability.
“We want to show the world that smallholders are not part of the problem but part of the solution,” said Djono. “We are the backbone of Indonesia’s palm oil economy, and we already have the mindset to become more sustainable.”
Indonesia has over 2.6 million smallholders and around 16 million workers relying on palm oil for their livelihoods, covering some 6.7 million hectares nationwide.
Djono also called for more inclusive global policies, particularly from the EU, warning that the EUDR risks becoming discriminatory if it fails to support smallholders.
“If the EU doesn’t support smallholders, it becomes discriminatory. We need inclusive regulations because we want to be sustainable,” he said.
Twin crisis faced by palm smallholders
Apart from Malaysia and Indonesia, smallholders in Thailand are also facing significant challenges in ensuring sustainability of the sector.
Kanokwan Saswattecha, project manager at Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, said smallholder farmers, who account for 80 per cent of Thailand’s palm oil production, face limited capacity and resources to meet global certification standards such as the RSPO, while also being more vulnerable to the accelerating impacts of climate change.
She highlighted that sustainable production is essential for market access and the long-term stability of these smallholders and mitigating climate change impact cannot wait any longer.
“This challenge is too large for the farmers themselves or a single actor or entity to tackle. Shared responsibility is very important for every actor in the value chain, from the smallest farmer to the largest consumer brand at the very end of the value chain,” she said.
Over the past decade, GIZ has implemented several projects in Thailand in close collaboration with public agencies and private sector partners. One of its key initiatives focuses on capacity building, where farmers are trained in low-carbon production practices, alongside a practical carbon footprint calculator to help them measure and manage emissions.
Kanokwan called for greater collaboration from the industry partners to scale such initiatives to ensure their profitability for small-scale farmers.
“Investing in smallholder capacity is not a cost. It is an investment in strengthening the resilience of your own supply chain. Supporting sustainable, low-carbon palm oil production will also enhance your corporate reputation in the market,” she added.
