The palm oil sector has built a substantial framework for sustainability over the past two decades through certification, corporate commitments, national standards, and, more recently, mandatory due diligence regulations. These efforts have contributed to improvements in traceability, verification, and deforestation monitoring across the global supply chain. At the same time, many of the barriers that continue to limit progress remain unresolved, particularly around smallholder inclusion, traceability, legality, financing, and long-term resilience.
This report examines how changing market dynamics, sustainability requirements, and the conditions needed for smallholder inclusion, traceability, and resilience are reshaping the palm oil sector. It asks two questions. What is preventing the sector from achieving deforestation-free, independent smallholder-inclusive palm oil from resilient landscapes at scale? And which pathways are most likely to overcome those constraints?
Two important factors are highlighted in the Outlook. One, demand is shifting away from the markets that drove sustainability. Indonesia’s consumption grew ~39% between 2019/20 and 2024/25, while the EU fell ~44% and China ~31%. Growth is concentrated in markets with weaker demand: certified palm oil accounts for just ~5% of consumption in India and ~12% in China, weakening the commercial signal for sustainability and risking a split into separate regulated and conventional markets.
Two, smallholder farmers face passive exclusion from compliant supply chains. Smallholders produce 35–40% of global palm oil but only ~8% of the RSPO-certified supply. Lacking land documentation, geolocation data, and direct mill links, they are passively shut out as sourcing consolidates around traceable supply, an inclusion problem, and a supply risk, since mills draw 20–60% of their fresh fruit bunches from independent smallholders.
