Palm Oil Business Partnership Sustainability through the Role of Social Capital and Local Wisdom: Evidence from Palm Oil Plantations in Indonesia

Abstract

Sustainable development can only be achieved when jointly considering social, economic, and environmental dimensions. Social capital and local wisdom offer important contributions to the development process and the capabilities of individuals and groups as development actors. This study analyzes the role of social capital and local wisdom in managing business partnerships between farmers and palm oil plantation companies in North Konawe, Indonesia. This research was conducted in a palm oil plantation area by involving landowner farmers, palm oil companies, and other stakeholders such as the local government, NGOs, and academics. Data were collected through in-depth interviews, field observations, and focus group discussions (FGDs), totaling 320 respondents, and analyzed descriptively and qualitatively. The selection of informants for the in-depth interviews was determined by considering their involvement in and understanding of the partnership between farmers and companies in oil palm plantations; field observations were carried out to determine the field conditions of these plantations, while FGDs were held to obtain stakeholder information regarding problems and solutions in implementing farmer and company partnerships with the aim of having a positive impact on economic, social, and environmental welfare. The results underscore the importance of social capital and local wisdom in organizing institutional programs for strengthening palm oil business partnerships. Trust, social networks, and participation negatively affected the sustainability of these partnerships, whilst local wisdom and social solidarity positively influenced institutional strengthening. Company inconsistency and lack of openness can lead to a trust crisis that can threaten the sustainable operations of palm oil companies, while building good cooperative commitment and maintaining collaboration play key roles in enhancing community welfare and increasing company profits. The social capital and local wisdom of farmer institutions in villages are expected to significantly contribute to the establishment of sustainable palm oil business partnerships.