Nowadays, Indonesian palm oil faces agrarian, environmental, and social issues and has been subject to sharp criticism from the international community for many years. To answer this problem, the Indonesian government implemented a strategy through certification which ensured the achievement of sustainability standards, especially on the upstream side of the palm oil supply chain. The implementation of Indonesian Sustainable Palm Oil (ISPO) was an ultimate instrument that applied in particular to smallholders oriented towards managing land legal issues, plantation business licenses, plant seeds, and environmental management and to farmer organizations at the local level. However, this process faced quite complex challenges in the form of structural barriers that are very constraining. This study revealed the occurrence of the phenomenon of hollow governance when regulations are absent or collide with each other. The study also revealed institutional power and multi-level governance that made the governance process ineffective or counterproductive. With a qualitative approach to research conducted in three important palm oil provinces of Indonesia, this article aims to look at the issues of oil palm governance a bit more comprehensively. The study conceptualized what was referred to as low-functioning governance to describe how weak the institutions, organizations, actors, and resources are that support ISPO implementation, especially at the regional and local levels. This paper suggests improving and strengthening the ISPO oil palm governance if Indonesian palm oil companies and smallholders want to gain better credibility on sustainability abroad.

The expansion of oil palm plantation has caused adverse impacts on the ecosystem. It has been associated with deforestation, biodiversity loss, disturbances to environmental services and livelihood change. The government of Indonesia has made an effort to control the negative effects by issuing relevant policies. One of the policies is Indonesian Sustainable Palm Oil (ISPO)’s sustainability standards to which large-scale plantations and smallholders are obliged to adhere. This study assesses the readiness of two types of smallholders, namely, the nucleus–plasma scheme and independent smallholders to adopt ISPO standards. Using a case study research approach in two oil palm plantation villages in East Kalimantan, the study found out a number of ISPO implementation challenges, grouped into structural and socio-cultural challenges, which make smallholders less ready to adhere to this mandatory policy. Coping with these challenges, this study proposed that land and business legality programs be expedited to strengthen property rights, and that training and education programs be intensified to enhance awareness, knowledge and capacity of smallholders to enable them to comply with sustainability standards.

Us sebagai kewajiban perusahaan perkebunan. Undang-undang No. 39 Tahun 2014 tentang Perkebunan memberikan amanat bahwa Perusahaan Perkebunan yang memiliki izin Usaha Perkebunan (IUP) atau izin Usaha Perkebunan untuk budi daya (IUP-B) wajib memfasilitasi pembangunan kebun masyarakat sekitar paling rendah seluas 20% (dua puluh perseratus) dari total luas areal kebun yang diusahakan. Debat mutakhir yang mengemuka hingga kini adalah belum adanya aturan yang mengatur secara detail hingga bisa dioperasionalkan di tingkat tapak. Padahal Undang-undang No. 39 Tahun 2014 tentang Perkebunan tersebut (lihat Pasal 59) lebih lanjut menjelaskan bahwa ketentuan lebih lanjut tentang fasilitasi pembangunan kebun masyarakat perlu diatur dalam Peraturan Pemerintah (PP). Namun hampir empat tahun berjalan hingga kini PP tersebut tak kunjung terbit. Hingga saat ini capian pembangunan kebun untuk masyarakat sangat rendah. Dampaknya konflik antara masyarakat dan perusahaan pemegang ijin dan hak guna usaha perkebunan terus terjadi dan makin meruncing. Kajian ini menghasilkan rumusan pokok untuk menjadi pertimbangan dalam menyusun kebijakan selanjutnya.