Towards a More Sustainable and Efficient Palm Oil Supply Chain

The report finds that Berau can meet its palm oil production needs and fulfill mill capacities by 2021-2023 by improving agricultural practices and reaching 90% optimum productivity, eliminating the need for further land expansion. While company plantations operate efficiently, independent smallholders face significant barriers, including lack of land certificates, limited access to finance, and inefficient transport routes to mills. The region lacks CPO refineries, resulting in most crude palm oil being exported to other provinces or Malaysia. The authors recommend strengthening smallholder cooperatives, improving bankability, and analyzing the business case for local refineries to increase regional value addition.

• Berau can meet its palm oil production targets and fulfill the total processing capacity of its mills without further land expansion by focusing on productivity improvements. At 90% optimum productivity, the district could produce over 2.8 million tons of Fresh Fruit Bunches (FFB) per year by 2021.
• The palm oil industry in Berau is dominated by four main holding companies—Indofood, Triputra, Kuala Lumpur Kepong, and Teladan Prima—which operated 74% of the total planted area and produced 88% of FFB in 2016.
• Current mill utilization in Berau is low, with a combined processing capacity of 2.8 million tons of FFB per year operating at only 44% capacity as of 2016.
• There is a significant productivity gap between smallholders and large-scale plantation companies, with the difference varying between 3 and 9 tons per hectare over a five-year period.
• Independent smallholders face severe operational inefficiencies, including transporting FFB to distant mills because they cannot meet the standards of closer mills or lack agreements through cooperatives.
• Financial constraints hinder smallholders' ability to improve yields; only 28% of independent smallholders possess land ownership certificates (SHM), which limits their access to formal credit for quality seedlings and equipment.
• Berau lacks crude palm oil (CPO) refineries, meaning most of its CPO is exported to other regions of Indonesia (such as North Sulawesi and East Java) or to Sabah, Malaysia, rather than being refined within East Kalimantan.
• RSPO certification of mills may inadvertently alienate local smallholders if they are not provided with the technical assistance needed to meet more stringent quality and sourcing standards.

APA

Mafira, T., Rakhmadi, R., & Novianti, C. (2018). Towards a More Sustainable and Efficient Palm Oil Supply Chain. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/07/Towards-a-more-sustainable-and-efficient-palm-oil-supply-chain-in-Berau-East-Kalimantan-Full-publication.pdf

Chicago

Mafira, Tiza, Randy Rakhmadi, and Cherika Novianti. Towards a More Sustainable and Efficient Palm Oil Supply Chain. Climate Policy Initiative, 2018. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/07/Towards-a-more-sustainable-and-efficient-palm-oil-supply-chain-in-Berau-East-Kalimantan-Full-publication.pdf.

Wikipedia

{{cite report |last1=Mafira |first1=Tiza |last2=Rakhmadi |first2=Randy |last3=Novianti |first3=Cherika |title=Towards a More Sustainable and Efficient Palm Oil Supply Chain |publisher=Climate Policy Initiative |date=July 2018 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2018/07/Towards-a-more-sustainable-and-efficient-palm-oil-supply-chain-in-Berau-East-Kalimantan-Full-publication.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mafira2018towards, author = {Mafira, Tiza and Rakhmadi, Randy and Novianti, Cherika}, title = {{Towards a More Sustainable and Efficient Palm Oil Supply Chain}}, institution = {Climate Policy Initiative}, year = {2018}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2018/07/Towards-a-more-sustainable-and-efficient-palm-oil-supply-chain-in-Berau-East-Kalimantan-Full-publication.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }