The good oil? Helping palm plantations contribute to global biodiversity targets

Indonesia reported a sharp rise in crude palm oil exports in the first half of 2025, shipping $11.4 billion in value compared to $9.2 billion the year before. Malaysia’s exports slowed slightly, yet its crude palm oil output still increased.

At first glance these figures suggest good news. Palm oil remains one of Southeast Asia’s most profitable exports and years of government support appear to be paying off.

Yet behind the economic success lies a more troubling story. Palm oil has been linked to deforestation, the draining of peatlands, and the destruction of habitats that shelter orangutans, Sumatran tigers, and pygmy elephants.

For decades palm oil has carried the reputation of being one of the world’s most destructive crops. Supporters often argue that soy or rapeseed drive deforestation too, but comparisons do little to solve the problem. Instead, Southeast Asia has an opportunity to lead by example. If Indonesia and Malaysia can demonstrate that palm oil production can align with biodiversity goals, they can shift the global narrative from palm oil as a symbol of destruction to palm oil as a model of sustainable agriculture.

Indonesia and Malaysia together produce more than 80% of the world’s palm oil supply, so the decisions made in these two countries will not only shape the future of the industry but also influence the success of global biodiversity goals such as the Kunming Montreal Global Biodiversity Framework (KMGBF). That framework calls for protecting 30% of the world’s land and sea by 2030. If palm oil is to be part of the solution, the industry must shift from destroying ecosystems to actively supporting conservation.

The path toward change begins with smarter land planning. Choosing where palm oil should and should not be grown is fundamental. Current practices often involve clearing forests and draining peatlands, yet alternatives are emerging. Spatial planning can ensure that valuable ecosystems remain intact while farmland is used more efficiently. Many plantations sit beside primary forests or peatlands that house rare, threatened, and endangered species. Preserving these areas safeguards biodiversity and maintains ecological balance. Connecting fragmented landscapes through wildlife corridors for instance allows animals to move freely, maintain genetic diversity, and adapt to change.

Restoring land that has already been damaged is another piece of the puzzle. Replanting trees, reviving wetlands, and improving soil health can bring back wildlife and capture carbon. Linking these projects to carbon markets, where companies pay for carbon savings, can transform conservation into a profitable venture. Protecting ecosystems could become just as attractive financially as cutting them down.

None of this will succeed without accountability. Large companies and investors must track their impact on biodiversity and report it openly. New technologies make this possible. Satellites and digital platforms can trace palm oil back to the plantation where it was grown, offering transparency to consumers and investors who want proof that sustainability promises are genuine.

Finance also plays a powerful role. Today some subsidies still encourage harmful practices such as clearing peatlands. These incentives need to be removed and replaced with positive financial rewards for conservation. Governments and banks can encourage the protection of forests, wetlands, and riverbanks by ensuring that ecosystem services are recognised and compensated. When growers see conservation as part of their business model, they are more likely to protect nature.

Smallholders are central to this story. They produce about 40% of the world’s palm oil but often lack the resources to meet sustainability standards. If reforms only target large companies, millions of smallholders could be left behind. Training, access to credit, and digital tools can help them join certified supply chains while also improving their livelihoods. A just transition must include these communities, since their participation is essential to lasting change.

Responsibility for change does not rest on producers alone. Governments, international donors, companies, and civil society all have a role to play. Policymakers can support these initiatives with subsidies and carbon credits. Donors can back community-led projects. Consumer goods companies and investors must look beyond compliance and form long-term partnerships with the regions where palm oil is produced.

Certification systems such as the Roundtable on Sustainable Palm Oil (RSPO), Indonesian Sustainable Palm Oil (ISPO), and Malaysian Sustainable Palm Oil (MSPO) support these practices by requiring protection of forests, soil, and ecosystem services while offering producers access to global markets. They provide accountability through audits and give consumers some assurance that products are deforestation-free.

Palm oil will continue to dominate the global edible oils market. Its efficiency guarantees it a place in the global economy. The real issue is not whether production will grow but whether it will grow responsibly. Indonesia’s export boom and Malaysia’s steady production highlight the industry’s economic importance, yet economic success alone is no longer enough. What matters now is whether commitments to biodiversity are matched with genuine action.

If the industry embraces reform, palm oil could move from being a symbol of deforestation to a cornerstone of sustainable development. It could prove that growth and conservation do not have to be opposites but can thrive together.