Short-Term Profits Versus Long-Term Sustainability: Mapping Palm Oil Production

In June, a diverse international group of students from the Harris School of Public Policy finished as runners-up at the prestigious 2022 Map the System competition hosted by the University of Oxford. The Harris Public Policy team was among 45 finalists from around the globe at the event, which explores various global challenges in hopes of fostering new perspectives on social and environmental issues. Their subject? “Roadblocks to Sustainable Palm Oil Production in Indonesia.”

While most of us have never given a second thought to the subject of Indonesian palm oil, Bonar Simeon Bintang, MPP’23, one of the group’s members, obsessed over it: What does its production mean for the environment? How does it affect the world’s economy? How does it contribute to food insecurity, deforestation, and human rights abuses? The questions are endless, and so was his curiosity.

Yet Bintang, a junior official at the Indonesian central government, found himself puzzled by the reporting on the issue. “There is news showing the good and bad of the palm oil industry, which makes it confusing,” says Bintang, a native of Sumatra, the heart of the palm oil industry. “You can’t find a position. So I thought: Why not try to learn the details behind it?”

To map out the issue, Bintang and his Harris team, Ria Zapanta (from the Philippines), Nicole Martinez (from Puerto Rico), Yurina Lee (from South Korea), and Kevin Samsi (from Indonesia), interviewed Indonesian politicians, farmers, businesspeople, and other stakeholders in the industry. What they found was a complicated tapestry rife with conflicts of interest and exploitation. 

While extraction and production of palm oil has encouraged economic development in rural areas of Indonesia, providing economic support for small farmers desperately in need of it, they found that the industry’s expansion has produced negative societal and environmental impacts, not just in Indonesia, but all over the planet. And by focusing on short-term profits rather than long-term sustainability, the system cannot survive. “It’s not the palm oil itself that is unsustainable,” says Bintang. “It's the management behind it that makes it not sustainable.” 

Indonesia produces 44.5 million metric tons of palm oil, or roughly 59 percent of the world’s supply. It’s in so many everyday products around the world—shampoo, deodorant, cereal, dishwashing detergent—that much of the world could scarcely function without it. Yet the massive industry is still lacking in many basic regulations. The high-yield nature of palm oil, which yields almost ten times as much product per hectare as soybean oil, makes it a lucrative prospect for corporations. And its expected market growth could nearly double to £87 billion (over $105 billion in US dollars) by 2026—what Bintang’s team calls “an agricultural gold rush.”

By focusing on four sectors (economic, governmental, social, and environmental), the Harris team discovered that the different divisions had formed a cycle of dependency on one another, each susceptible to incentives that lowered their willingness to apply sustainable practices that would cut deforestation rates. More than half of Indonesian palm oil plantations are owned and operated by the private sector, which earned the top ten companies $6.4 billion of revenue in 2020. 

With this relentless pursuit of profit, corporations have incentives to influence the media and the power to successfully lobby the government for their benefits—especially around election time. In 2019, two presidential candidates campaigned to increase palm oil production while never acknowledging the downsides of this action. At the same time, three big companies sit on the advisory committee of the Palm Oil Plantation Fund Management Agency (BPDPKS). “Politicians cling deeply with business stakeholders and form a symbiotic mutualism with political funding being less regulated,” the Harris team wrote in its Oxford presentation. 

In the meantime, these profits rarely trickle down to the people doing the manual labor. Every year, between 5,000 to 6,000 people are newly employed in the palm oil industry, which now includes 4.2 million farmers. Bintang saw this firsthand in Sumatra: Underpaid laborers painstakingly harvesting fields of palm trees by hand to produce palm oil, for a salary far below Indonesia’s living wage. Human rights abuses abound, such as forced labor, child labor, gender discrimination, and exploitative and dangerous working practices that include workers toiling for hours waist-deep in water tainted by chemical runoff.  Then there are the environmental and biodiversity ramifications. In 2020 Indonesia lost more than 115,000 hectares of forest, an area the size of Los Angeles; further deforestation has resulted in climate change, excessive greenhouse gas emission, and the death of half the ecosystem’s birds and insects. 

The Indonesian government’s attempts to address sustainability issues, the team reports, have been ineffectual. Adopting a slogan of “No Deforestation, No Peat, No Exploitation” sounds like a step in the right direction, as does the government’s issuance of the Indonesian Sustainable Palm Oil (ISPO) certificate to 755 companies as of June 2021. But the added costs of obtaining the ISPO are rarely feasible for individual farmers, and the certification does not define “biodiversity” based on High Conservation Value—the standard by which international communities  consider global conditions.

Harris, says Bintang, gave his group the tools to grasp and synthesize the complex issue from all these disparate angles. “We had a course on ethical politics, which helped us understand the incentive for government and political leaders to bring about this issue during elections,” Bintang says. “And a class on microeconomics made us understand the Indonesian government and economic incentives better.” 

Each member of the team brought specific skills to the project. Samsi’s experience as a government consultant in Indonesia proved useful in devising strategy; Martinez’s research on Indonesian deforestation and the economic sector made her the group’s economics expert and liaison with UChicago’s heavy-hitting economics professors. Zapanta, who specializes in social issues in developing countries, was tasked with the social sector portion of the research; Lee handled the environmental sector. Bintang used his knowledge of law and policy in Indonesia. And the whole team worked together on the most complicated aspect of the issue: mapping it.  

“This is one of the most unique teams I’ve ever had the pleasure to work with,” says Ronald Gibbs, Program Director of Policy Entrepreneurship and Competitions at Harris. “Geographically they hadn’t had people focus on that part of the world. They were very well received at Oxford. It was very well presented. They managed to discuss the issue without getting inflammatory, and the judges liked it. They’re looking to continue to work on the idea.” 

Under the guidance of Gibbs, many teams of Harris students have successfully brought their ideas to the global stage and launched new ventures through various internationally recognized social entrepreneurship competitions, including the Social New Venture Challenge hosted by the Booth School of Business, Clinton Global Initiative University, and the Oxford Challenge, taking in well over $150,000 in cash prizes over the past several years.

While the goal of the Oxford Challenge is to identify systems rather than offer solutions, Bintang’s team naturally has some opinions on the future of Indonesian palm oil. They theorize that positive change can begin only if Indonesians understand that private firms and government—and the conflicts of interest between them—are at the root of palm oil issues. “There are so many stakeholders, especially the business sectors and state-owned enterprises that benefit from this current approach to production,” Bintang says. “It’s hard to create sustainable palm oil until we support low-income communities as much as we support the private sector. And changing the behavior and preference of the whole Indonesian population of 275 million people is a fairly difficult task.