Social Sustainability of Oil Palm Plantation

The growth of oil palm plantations in 190 districts has far-reaching impacts on rural development, poverty eradication, inclusive employment, so that it becomes socially sustainable

Sustainability has three dimensions: economic sustainability, social sustainability and environmental sustainability. These three dimensions have a balanced proportion in contributing to the quality of sustainability.

As World Bank (2013) stated in its publication entitled: Inclusive Green Growth: The Pathway to Sustainable Development, it revealed that sustainability is not only about growing “greens”, but it must also be inclusive. Therefore, to measure sustainability, it requires an indicator of inclusiveness. In measuring social sustainability, for example, it is not only about the micro (exclusive) indicators, which are only at the corporate level, but also (even more importantly) inclusive indicators of benefits that can be enjoyed by the surrounding community due to the presence of a company.

The commonly used inclusive indicators for measuring social sustainability is their impact on rural development and poverty eradication. These two inclusive social indicators are particularly important in developing countries, such as Indonesia.

The two exclusive social indicators in oil palm plantations are: (1) How much labor absorption and welfare are created in oil palm plantation companies, and (2) How much the oil palm farmers’ welfare develop due to the development of oil palm plantation companies in the form of partnerships (core-plasma), as well as form of coordination partnership (certainty of product marketing, access to technology, and business management).

For both indicators have been proved by so many empirical studies. Labor intensive oil palm plantation technology (labor intensive) certainly absorbs a lot of manpower with various background skills. The PASPI study (2015) found that the amount of labor absorbed in oil palm plantation companies reached approximately 3.3 million workers with about 67 percent of them are junior high-educated workers or lower level of education, and the rest are high school graduates and above. In general, the income received by employees (cash and non-cash) has been above the regional minimum wage, even above the provincial average income of similar business employees, working hour, and level of education.

The number of farmer-owned oil palm plantations keep growing and it reached around 2.3 million palm oil plantations with an area of ​​about 4.5 million hectares (about 43 percent of the national palm oil area) and it employs about 4.6 million workers. The average income of oil palm farmers is much higher than those of non-palm farmers in the region (World Growth, 2011, PASPI, 2014). For inclusive social indicators, studies have also shown that the multiplier impact of oil palm plantation growth is also significant for rural development and poverty eradication. The number of suppliers of goods and services required for oil palm plantations has grown in line with the growth of oil palm plantations. Similarly, the growth of oil palm plantation also triggered the growth of food production business (food crops, livestock, fishery) in its surrounding area. Hence the multiplier effect (from output, value added, income, employment) of oil palm plantations growth (especially income and employment) also attracts so many rural development sectors.

 The total effect of oil palm plantation growth in each region accelerated the growth of rural development progress (World Growth, 2011). Economic growth of oil palm plantation area faster than the ones that are non-oil palm area. Growth of oil palm plantation or CPO production significantly reduces rural poverty. The growth of new economic development centers in rural areas, that were previously isolated areas, in 190 districts was driven by the growth of oil palm plantations (PASPI, 2014, 2015).

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