Governing sustainable palm oil supply: Disconnects, complementarities, and antagonisms between state regulations and private standards

Abstract The global palm oil value chain has grown in complexity; stakeholder relationships and linkages are increasingly shaped by new public and private standards that aim to ameliorate social and environmental costs while harnessing economic gains. Regulatory initiatives in the emerging policy regime complex struggle to resolve sector-wide structural performance issues: pervasive land conflicts, yield differences between companies and smallholders, and carbon emissions arising from deforestation and peatland conversion. Identifying opportunities for more effective governance of the palm oil value chain and supply landscapes, this paper explores disconnects, complementarities, and antagonisms between public regulations and private standards, looking at the global, national, and subnational policy domains shaping chain actors’ conduct. Greater complementarities have emerged among transnational instruments, but state regulation disconnects persist and antagonisms prevail between national state regulations and transnational private standards. Emerging experimental approaches, particularly at subnational level, aim to improve coordination to both enhance complementarities and resolve disconnects.


Introduction
Effectively regulating oil palm expansion to mitigate negative environmental impacts while reducing the yield and return differences between large-scale plantations and smallholder oil palm growers has become one of the tropics' most pressing sustainability challenges (Sayer et al. 2012;Rival & Levang 2014). This is a particular problem in Malaysia and Indonesia, the global market's primary suppliers of palm oil (Food and Agriculture Organization of the United Nations [FAO] 2016). Improving sector regulation involves overcoming a critical governance dilemma: palm oil development results in contradictory outcomes. The sector contributes fiscal and foreign exchange earnings to producer countries, employs large numbers of rural workers, and supports the livelihoods of a growing number of smallholders, who increasingly embrace this crop as their main income source (Edwards 2015;Pacheco et al. 2017a). In contrast, oil palm expansion generates significant carbon emissions, particularly when planted in peatlands (Miettinen et al. 2013), and contributes to biodiversity loss when production involves the conversion of primary forests (Koh & Wilcove 2008;Savilaakso et al. 2014;Vijay et al. 2016), thereby undermining national commitments to biodiversity protection and climate change mitigation. There is increasing global demand for palm oil because of its fungibility. It is widely used in the food, chemical, pharmaceutical, and cosmetic industries. Its superior productivity in terms of oil yield per hectare means that it has long been the most cost-competitive oil seed on the global market (Rival & Levang 2014). Because global demand and prominent Northern consumer goods manufacturers have fueled the palm oil sector's expansion, it has become an easy target for consumer and civil society activism. As a result of weak regulatory enforcement capacity in producer countries, such pressures have resulted in international state and non-state regulatory initiatives seeking to address environmental concerns through other avenues, from multistakeholder certification initiatives and private sustainability commitments, to consumer country sustainability incentives (Cramb & McCarthy 2016). As regulatory instruments are rarely developed in unison, the result is regime complexity, characterized by "parallel, overlapping and competing initiatives [that] are not combined into a single hierarchical system" (Overdevest & Zeitlin 2012:2).
In the palm oil sector, the state regulations and private standards that constitute this policy regime complex ultimately aim to address three of the sector's major unresolved performance gaps: (i) conflicts over land and benefit flows, linked to industrial plantation expansion; (ii) the large yield gap between smallholders and company plantations; and (iii) detrimental environmental impacts (Cramb & McCarthy 2016;Pacheco et al. 2017a). Conflicting public and private sector perspectives and approaches to address these gapsreflecting equally divergent development and sustainability prioritieshave frustrated efforts to develop a coherent governance system.
Bridging these performance gaps in ways that resonate with all stakeholders and contribute to regulatory cohesion is key. Three interrelated pathways to reversing sector performance issues have been put forward by industry stakeholders and experts: (i) harmonizing public and private standards in a more targeted, regulatory manner (Lambin et al. 2014;Pacheco et al. 2018); (ii) improving business models to enhance social inclusion (Smit 2014;Jelsma et al. 2017); and (iii) orchestrating synergies by undertaking a jurisdictional approach Wolosin 2016). These approaches, which share attributes characteristic of experimentalism as defined by Overdevest and Zeitlin (2012) and Zeitlin (2015), show the potential to foster complementarities and reduce tensions between actors, yet their effectiveness is still to be proven at scale. This paper is guided by three research questions: (i) What are the elements that characterize the policy regime complex governing the palm oil sector?; (ii) What are the main interactionsin terms of disconnects, complementarities, and antagonisms between public regulations and private standardsthat affect the performance of the palm oil sector?; and (iii) What is the potential of the three pathways identified to bridge sector performance gaps and enhance regulatory cohesion and legitimacy? To answer these questions, we critically examine the interactions between global regulatory initiatives and public regulations that shape the global palm oil value chain, while focusing on the specific case of Indonesia, the world's largest oil palm producer, where a comparatively dynamic context of policy innovation has emerged. This paper has an exploratory objective and draws on different methods and sources of information. It is embedded in a wider research initiative implemented by the Center for International Forestry Research (CIFOR), which aims to better understand emerging governance arrangements in the palm oil sector and their socioenvironmental implications. First, this paper draws on a review of the large body of existing literature analyzing palm oil sector performance and the evolving governance arrangements that aim to regulate that performance. Second, it is informed by a review of the most relevant recent laws and regulations pertinent to the Indonesian palm oil sector (see Appendix I), as well as the private standards and initiatives that influence behavior in the sector (see Appendix II). Third, our analysis draws on insights from semi-structured interviews carried out with 25 key informants between 2016 and early 2017, which help us to understand politico-institutional dynamics within the Indonesian palm oil sector. These key informants were affiliated to government agencies (such as the Ministry of Agriculture, the coordinating Ministry of Economic Affairs, the National Land Agency, the Ministry of Environment and Forestry, and the Ministry of Finance), oil palm associations (such as GAPKI, the Indonesian Palm Oil Association), individual companies, sustainable standard bodies, and non-governmental organizations (NGOs). The interviews were complemented with findings from a study conducted at subnational level in the provinces of Central Kalimantan, West Kalimantan, and South Sumatra to understand public and private initiatives (and their interactions) to support sustainable palm oil (Luttrell et al. 2018). Finally, this paper draws on the authors' knowledge, based on their participation in sustainable palm oil dialogs at national and international levels over the last four years. It emphasizes the road map process for sustainable palm oil in the context of the Indonesian Palm Oil Platform (InPOP), the strengthening of Indonesian Sustainable Palm Oil (ISPO) standards, and European Union (EU) debates on sustainable palm oil. Guided by our analytical framework, this paper pulls together these different sources of information and perspectives to answer our three overarching research questions.
The paper consists of eight sections, including this introduction. Section 2 outlines the conceptual underpinnings that frame the paper's main analysis and arguments. Section 3 provides a background to palm oil sector characteristics and performance gaps, with emphasis on Malaysia and Indonesia. Section 4 describes the evolving transnational palm oil governance regime. Section 5 analyzes disconnects, complementarities, and antagonisms between state policies and regulations and private standards, with emphasis on Indonesia. Section 6 introduces actions undertaken to tackle governance disconnects and institutional antagonisms, in order to enhance the sector's sustainability. Section 7 discusses these approaches, in the context of a more integrated governance perspective. Finally, Section 8 concludes with a reflection on findings.

Analytical framework
The transnational regime complex concept provides a foundation for our analytical framework, guiding our analysis on public and private policies and regulations, and the interactions among them, from global to subnational level. In this analysis, we emphasize issues pertinent to upstream production processes, where much of the chain's sustainability impacts are concentrated. Likewise, performance issues and vertical interactions among other nodes in the chain are considered where relevant. The transnational regime complex concept is grounded in diverse disciplinary perspectives, including multi-level and transnational governance (Eberlein et al. 2014), interactive governance (Torfing et al. 2012), and ensemble regulation (Perez 2011). Transnational regime complexes are also increasingly viewed in the context of experimentalist governance (Sabel & Zeitlin 2011).
Perspectives on multi-level governance stress how rules and institutions originate at multiple levels and are shaped by complex interactions between state, private, and civil society actors. In the context of globalization and privatization of public regulation this increasingly results in lower tier state actors becoming directly connected to, and embedded in, global networks and processes (Mwangi & Wardell 2012). These perspectives often focus on the legitimacy of multi-level regulatory processes and power dynamics among different tiers of government, with respect to resolving diverse societal and environmental challenges (Adger et al. 2005;Ravikumar et al. 2015). Interactive governance, in turn, emphasizes the interactions between state and non-state actors in decisionmaking, and the influence different types of actors wield in shaping regulatory dynamics horizontally, vertically, and diagonally (Torfing et al. 2012).
When examining regulatory processes at a global level, the primacy of transnational processes, especially with respect to the dissemination of rules promulgated by commodity-specific sustainability standards, is typically the focus of analysis (Schmitz-Hoffmann et al. 2014). This has shown the leverage of non-state actors vis-à-vis states, and how they engender innovative solutions around the management of negative social and environmental impacts, in the context of production linked to transboundary trade and global markets (Perez 2013). However, such literature points to weak uptake of multistakeholder regulatory instruments and the comparatively weak legitimacy of international private standards vis-à-vis national standards in producing countries (Hospes 2014;Wijaya & Glasbergen 2016). The latter emerged because of a perceived lack of legitimacy where global standards were concerned; for example, in the context of their limited respect for national regulatory sovereignty and weak alignment with national development priorities (Schouten & Bitzer 2015), or moral arguments linked to the exclusion of smallholder farmers without the capacity to comply (Brandi 2017).
Private sector actors, in their attempts to regulate the sustainability of supply, establish different interactions with state regulations and initiatives, as well as civil society organizations. These interactions can result in competing policy processes between market-oriented transnational standards (which typically reflect Western social and environmental norms) and national mandatory regulations (which respond to territorial realities and interests in specific national or subnational jurisdictions) (Hospes 2014). Conversely, these same interactions can yield productive new partnerships between public, private, and civil society actors to formulate negotiated sustainability targets, and result in upward convergence of diverse public and private regulatory instruments (Lemos & Agrawal 2006). Such interactions and partnerships can take place across multiple levels and are increasingly embedded in complex global networks where stakeholders can exert power in different ways; not only through their position in the value chain, but also through their embeddedness in horizontal networks that transcend the value chain (Oosterveer 2015). Lambin et al. (2014) argue that public and private rules and regulations can be complementary to one another, but can also result in substitution or antagonism. They are complementary when their operational mechanisms reinforce each other and antagonistic when they undermine each other. Likewise, private regulations can substitute state regulations when similar objectives are pursued through different mechanisms. This can result in disconnects; for example, when regulations pursue common objectives but fail to establish productive interactions.
In short, literature pertinent to international regime complexity highlights how regulatory systems can involve rules and institutions that emerge and play out across different scales, but also across different domains (e.g. between state and non-state actors, such as private sector and civil society organizations). This ensemble of overlapping and non-hierarchical rules and institutions constitutes a regime complex, which is increasingly transnational in its nature, scope, and response to international public good problems (Alter & Meunier 2009;Keohane & Victor 2011;Orsini et al. 2013).
Regime complexity can have both positive and negative effects: it results in strategic inconsistency when the proliferation of rules enables some to be undermined; yet equally, it fosters competition among private and public regulatory actors, which may encourage experimentation, learning, and improved accountability (Alter & Meunier 2009). Productive interactions among regulatory initiatives and institutions in regime complexes are responsive to orchestration (Abbott & Snidal 2009;Overdevest & Zeitlin 2012), but only if negative and positive interactions, and their outcomes, are fully understood. The concept of ensemble regulatory structures, in which legitimacy is intimately linked to effectiveness, as posited by Perez (2011), is especially relevant in this respect. Such structures can emerge in transnational regime complexes when regulatory disconnects are addressed, complementarities are effectively exploited, and antagonisms are resolved.
Yet to be effective, the transnational regime complex requires the capacity to address obstacles to strong sustainability performance in the palm oil sector. These performance issues, as mentioned in the introduction, include: (i) conflicts over land and benefit flows, linked to industrial plantation expansion; (ii) yield gaps between smallholders and industrial plantations; and (iii) environmental impacts, mainly with respect to Greenhouse Gas (GHG) emissions. Thus, the dynamics within this transnational regime complex mirror the competing interests and divergent perspectives of the different stakeholders in the palm oil sector at different levels. As such, any improvement in the transnational regime complex will likely translate into positive change when dealing with social conflict, closing yields gaps, and reducing negative environmental impacts.
The evolving institutional context and need to overcome performance gaps have created scope for some experimentalist governance approaches to emerge. Experimentalist governance refers to initiatives that embrace more flexible problem-solving arrangements framed in an open-ended way, the outcomes of which often cannot be defined ex ante (Sabel & Zeitlin 2011). The solutions are often as diverse as the situations (Zeitlin 2015) and are subject to periodic revision, in light of the knowledge and learning generated by involved stakeholders (De Búrca et al. 2014). Recently emerging initiatives, involving public and private actors backing sustainable palm oil supply at subnational level, explicitly address negative social and environmental production effects by supporting the uptake and upscaling of more sustainable production standards. We argue that such approaches constitute a form of experimentalist governance.

Rapid growth in the palm oil sector, but with unresolved performance issues
Oil palm is one of the most profitable tree crops. In recent decades, it has experienced a high rate of expansion in the humid tropics, in terms of both output and area. However, the social and environmental impacts of this expansion make palm oil one of the most controversial commodities traded globally; lands suitable for oil palm development tend to overlap with the worlds' most biodiverse and carbon-rich forests (Pirker & Mosnier 2015). Oil palm plantations cover approximately 20.2 million hectares worldwide, with an estimated total production of 64.5 million tons in 2016 (IndexMundi 2016). Approximately 65 percent of the total planted area is located in Malaysia and Indonesia. This area accounts for 83 percent of total global palm oil production (FAO 2016). With increasing demand for sustainability (particularly from the European market) and with rapid demand for growth in emerging markets with fewer sustainability requirements (such as India, Pakistan, and China), the sector faces a risk of bifurcating into "green" and "brown" supply chains Nepstad et al. 2017).
A handful of corporate groups control processing and the crude palm oil trade (i.e. Wilmar, Musim Mas, Golden Agri-Resources, Cargill, and Asian Agri in Indonesia; and Sime Darby and Felda in Malaysia). These seven palm oil groups control 60 percent of the two countries' total supply of fresh fruit bunches, but their market share in processing and trade is estimated at almost 90 percent (AgroIndonesia 2015). The groups also own refineries in China, Europe, and India (Wilmar 2016). They supply large consumer goods manufacturers and retailers, producing and marketing food products, chemicals, pharmaceuticals, and cosmetics. Crude palm oil (CPO) is also increasingly sold to biodiesel refineries; much CPO and kernel oil processing takes place in Indonesia, Malaysia, and Singapore. Secondary and tertiary manufacturing occurs in Europe, the United States (US), India, and China, from where consumer goods containing palm oil derivatives are shipped to global consumers. Large oil palm companies rarely rely on their plantations alone, thus also source from external parties. These include contracted outgrowers, who typically have exclusive offtake arrangements with companies in return for input and technical support, and third parties, such as independent farmers not under formal contract (Suharno et al. 2016). Most external parties are smallholders. There are different definitions of smallholders, although the Roundtable for Sustainable Palm Oil (RSPO) definition is commonly accepted and includes those farmers who typically grow oil palm alongside subsistence crops, rely on family labor, and have an area of planted oil palm of less than 50 hectares (see Jelsma et al. 2017). According to official estimates, smallholders account for approximately 41 percent of total production in Indonesia in 2014, and 13 percent in Malaysia in 2015 (Directorate General of Estates 2014; Malaysian Palm Oil Board [MPOB] 2015); these figures have increased steadily since the early 2000 (Pacheco et al. 2017a). Studies have shown that smallholders are a highly heterogeneous population. Their diversity is reflected in differences in landholdings, livelihood strategies, productivity and sustainability, and legality challenges (Jelsma & Schoneveld 2016). In most situations, smallholders develop their plantations in the interstices between larger oil palm concessions, often encroaching onto state forestlands, meaning that they cannot formalize their tenure rights . While analysis of smallholder attributes is outside the scope of this study and has been addressed elsewhere (see Baudoin et al. 2015;Glenday & Paoli 2015;Jelsma et al. 2017), such attributes demand particular attention in the context of regime complexity. Oil palm smallholders increasingly face different (and sometimes conflicting) regulatory requirements that many are unable to meet, as a result of resource, capacity, and/or legality constraints (Brandi et al. 2015;Schoneveld et al. 2017). Because smallholders experience different barriers to compliance, more actor-disaggregated approaches to smallholder compliance challenges are needed .
As previously mentioned, the sector faces three major performance issues that threaten to undermine longterm sustainability. The first pertains to persistent land conflicts between companies and indigenous, often politically marginalized populations that typically lack secure tenure rights (Colchester & Chao 2013;Abram et al. 2017). As more independent smallholders (who are rarely autochthonous and often rely on informal land transactions and illegal encroachment) enter the sector, land conflicts are increasingly spreading to the informal oil palm sector (Potter 2008(Potter , 2012. The second issue relates to the yield difference between smallholders and industrial plantations. Smallholder yields are between 6 and 40 percent lower than best practice reference yields, with commercial operations typically exceeding smallholder yields by 46-116 percent (Molenaar et al. 2013). This can largely be ascribed to smallholders' failure to adopt best management practices and the widespread use of substandard planting material (Molenaar et al. 2013;Jelsma et al. 2017). Increasing smallholder yields will not only contribute to sector competitiveness, it will also reduce land pressure and enhance rural incomes (Jelsma & Schoneveld 2016). The third issue relates to the large carbon debt resulting from oil palm expansion into forestlands and peatlands. Carbon debts are especially high on converted peatlands, because of peat oxidation and land subsidence (Khasanah et al. 2012). Paradoxically, many companies prefer to establish their oil palm plantations in peatlands and forestland because of the reduced likelihood of land conflicts and the potential to cover plantation establishment costs by initial timber extraction (Goldstein 2016). One associated environmental impact of oil palm expansion into peatlands has been that of prolific fires, as a result of the 2015 El Niño effect and accompanying haze, which led to an environmental crisis (World Bank 2015; Tacconi 2016; Purnomo et al. 2018).
Two out of the three main performance issues are domestic in nature (social conflicts around land access and development, and yield differences with effects on benefit sharing), while the third (carbon emissions) is more transnational because of the global impact on climate change. Regardless of whether impacts are domestic or global, these three issues now increasingly feature on the transnational sustainability agenda. International stakeholders are concerned not only by the climate-related environmental impacts of production, but also local tenure rights, smallholder inclusion, and decent labor conditions (Thorlakson et al. 2018). Emerging perspectives suggest that these performance issues should involve global responsibility, as they relate not only to producer countries, but also constitute externalities from consumers and/or investors driving the expansion of commodities in production landscapes (Sachs et al. 2017).

An evolving transnational governance regime for palm oil supply
Regime complexity is typically manifested by: wide-ranging policies and regulations, developed and implemented by state and non-state actors (or a combination of both); differences in scalar focus (from global to the lowest jurisdictional level); and differences in the types of environmental, social, or economic issues prioritized (Gluck 2010;Margulis 2013). Figure 1, building on the different dimensions of our analytical framework, offers a stylized depiction of the transnational regime complex governing the global palm oil sector. This involves a combination of state regulations, emanating from diverse policy domains (i.e. finance, trade, fiscal, production, and land), and private standards, such as third-party and second-party certification, codes of conduct, and self-regulatory initiatives. Appendix I describes regulations in Indonesia, and Appendix II lists sustainability initiatives driven by the private sector.
This regime complex involves regulations and initiatives at multiple scales, from transnational to subnational. Our analysis on transnational governance does not include value chain governance interventions put in place by companies (e.g. optimization processes, risk management, traceability, and monitoring); thus, when Figure 1 refers to the value chain and chain stakeholders, this is primarily a descriptive device to represent actors, their functions, and the way in which they are affected by state regulations and private standards. The landscape configuration at the bottom of Figure 1 refers to a meso-scale, equivalent to a subnational jurisdictional level.
The left side of Figure 1 depicts the different policies and regulations that shape oil palm development. These range from finance, trade, and fiscal policies, to production and land-related policies, such as peatland restoration, land allocation, tenure, and spatial planning. A detailed assessment of these regulations can be found elsewhere (Caroko et al. 2011;McCarthy et al. 2012;Aurora et al. 2015). The right side of the diagram depicts the different private standards developed to govern the palm oil sector, including certification systems, guidelines and codes of conduct, and self-regulatory initiatives. The latter have grown in importance since the early 2000s to become a prominent constituent of the palm oil regime complex (van Noordwijk et al. 2017;Pacheco et al. 2017aPacheco et al. , 2018. Arguably the most important public regulation governing Indonesian production activities is the mandatory public standard for sustainable oil palm, the ISPO system, which the Government of Indonesia launched in 2011. ISPO essentially bundled the existing public regulations on palm oil production into one instrument (Suharto et al. 2015). Despite enhancing clarity on public regulatory requirements, it has yet to achieve sector-wide compliance because of unresolved issues related to tenure rights and the conservation of high-carbon forest within concessions (Hidayat et al. 2018 exploring options to extend membership to include major regional palm oil producers. Other domestic initiatives include the CPO Fund in Indonesia, where CPO export levies are used to subsidize biofuel production and support replanting oil palm on smallholder lands in order to reduce the yield gap (USDA 2015). Different types of taxes are levied in Indonesia, yet 64 percent of oil palm tax revenues originate from CPO export levies, with both income tax (individual and corporate) and land and buildings tax each contributing only 15 percent. Most taxes are collected centrally, with only 11-14 percent flowing back to oil palm producing provinces in 2012/2013 (Falconer et al. 2015).
Such fiscal and production policies are complemented by regulations on land allocation and spatial planning. The latter policies have tended to accommodate rather than obstruct private sector interests by facilitating access to state-held lands classified as conversion forest or those with forest concessions; this neglects customary land rights in both Malaysia and Indonesia, with deleterious effects (Brad et al. 2015). While spatial planning policies offer mechanisms for harmonizing land zoning and allocation at national, provincial, and district levels, these are rarely employed in practice because of competing interests, and bureaucratic and technical complexities. More recently, in Indonesia, concerted efforts have been made to protect forests and peatlands to reduce carbon emissions in the context of national climate change commitments (Brockhaus et al. 2012). While this heralded a moratorium on primary forest and peatland conversion in 2011, as forests within existing concessions were exempt, the effect on curbing deforestation has been limited (Busch et al. 2015;Suwarno et al. 2018). In 2016, peatlands were explicitly incorporated into policy: new concessions on peatlands were halted and mechanisms were created for restoring peatlands affected by forest fires. This was largely motivated by bad publicity, pursuant diplomatic conflict, and public outcry over the health effects (Tacconi 2016).
Over the past decade, private sector initiated self-regulation and co-regulation have gained prominence, partly in response to the increasingly stringent procurement standards of consumer goods manufacturers. These private regulations, most notably the international voluntary certification systems, are increasingly filling the regulatory vacuum. The RSPO, established in 2004, involves third-party compliance monitoring of adherence to the RSPO standard, which primarily addresses aforementioned land and environment performance issues. Although it is currently the most widely adopted private standard, it is yet to be adopted industry-wide (Morley 2015), with just 21 percent of total global CPO supply RSPO certified in 2015 (Roundtable on Sustainable Palm Oil [RSPO] 2016). Adoption has been most prevalent among large, well-resourced corporate groups, with smaller producers facing financial, technical, and legal barriers to compliance (Brandi et al. 2015). Many corporate groups have also begun to formulate and adopt their own codes of conduct, to further institutionalize social and environmental performance targets, and lower financial and reputational risk ). Another certification system increasingly being adopted is the International Sustainability and Carbon Certification (ISCC), established in 2010 to certify CPO sold to the EU biodiesel market. To secure market access, CPO sold to EU biodiesel markets must be certified under a European Commission (EC) accredited certification scheme, to count toward the European Union Renewable Energy Directive (EU-RED) biofuel blending targets (International Sustainability and Carbon Certification [ISCC] 2017).
Since 2013, many large chain actors have made ambitious pledges to fully eliminate deforestation from their supply chains, most by 2020. Although diverse chain actors have made such pledges, the zero deforestation movement is chiefly driven by large consumer goods manufacturers who have pressured their suppliers further upstream to comply with the pledges (Climate and Land Use Alliance 2014; Bregman 2015). Many European governments, through the 2015 Amsterdam Declaration, are also committed to ensuring that all palm oil traded within their markets is certified by 2020, with industry platforms established for that purpose in Belgium, Denmark, France, Germany, Italy, Norway, the Netherlands, Sweden, and the United Kingdom (UK). In 2015, the Dutch Oils and Fats Industry (MVO) along with the Sustainable Trade Initiative (IDH) established the European Sustainable Palm Oil (ESPO) project to support 100 percent sustainable palm oil sourcing (European Sustainable Palm Oil [ESPO] 2017). In 2016, Norway became the first country to apply zero deforestation commitments to all public procurement activities (Gaworecki 2016). Likewise, the European Parliament issued a non-binding resolution in April 2017, attempting to impose more stringent conditions on palm oil imported by European markets, including the phasing out of palm oil as a component of biofuels, preferably by 2020 (European Parliament 2017).
Financial service providers play an important role in financing plantation expansion, processing, and refining capacity. Most major international financial institutions (IFIs) provide financial services to palm oil actors (Chain Reaction Research 2017). Lending to the sector is increasingly subject to adherence to the Equator Principles and, for certain banks, sector-specific Environment, Social and Governance (ESG) criteria. With IFIs increasingly being held to account for their clients' social and environmental misconduct, risk mitigation strategies strongly underpin the recent momentum behind more explicit ESG integrations (Stampe & McCarron 2015). Common standards are also beginning to emerge, with finance platform the Banking Environment Initiative (BEI) developing the Soft Commodities Compact, whose responsible lending guidelines now incorporate numerous RSPO criteria (University of Cambridge 2018). These changing norms and practices have prompted the Indonesian Financial Service Authority (OJK) to formulate the "Sustainable Financial Roadmap," which establishes a pathway for integrating responsible lending practices into the operations of eight of Indonesia's largest commercial banks (Pramudya et al. 2017) and recently, to issue a regulation that provides the legal basis for requesting sustainability plans from Indonesia's financial services providers.
Private sector initiatives, as well as the European Parliament's resolutions on palm oil, have not been well received by the Indonesian and Malaysian governments, particularly zero deforestation commitments and attempts to ban palm oil imports. The establishment of CPOPC has been regarded as a political strategy to improve the governments' capacity to dictate governance dynamics within the palm oil sector and undermine the ongoing privatization of sector regulation. The Indonesian government's stance on these processes is reflected in their accusation of six corporate groupsattempting to coordinate the operationalization of their zero deforestation commitments through the Indonesian Palm Oil Pledge (IPOP)of cartel practices. Subsequent threats by the national anti-monopoly agency to subject them to investigation forced IPOP's disbandment in mid-2016 (Vit 2016). This was viewed as a government strategy to undermine the legitimacy of private sector commitments and platforms, and re-establish the primacy of public regulations and state enforcement authority. Subsequently, the corporate groups made explicit that they would continue to pursue their commitments individually (Vit 2016). Despite this, multistakeholder efforts to develop a common set of zero deforestation definitions and principles are ongoing through the High Carbon Stock Approach initiative, which has successfully harmonized two different approaches. To improve the legitimacy of national standards, the Indonesian government was forced to initiate a process to strengthen ISPO, including a third-party monitoring mechanism. This is an ongoing process, and its legitimacy is still in question (Hidayat et al. 2018).

Governance challenges: Disconnects, complementarities, and antagonisms
The myriad state regulations and private initiatives constitute a regime complex, characterized by disconnects, complementarities, and antagonisms, related to palm oil sustainability objectives and strategies. By systematically unpacking these interactions, we identify opportunities for enhancing coherence across, and capitalizing on potential synergies between, the different regulatory initiatives. Table 1 provides a synthesis of disconnects, complementarities, and antagonisms across different policy realms. It draws on the information provided in Appendices I and II.
As Table 1 illustrates, the palm oil regime complex suffers from major internal disconnects. In the finance realm, communication is lacking between OJK, international banks, and CPO Fund efforts to support responsible lending and smallholder access to finance. In the trade realm, import policies adopted by consumer countries (EU-RED and ESPO) do not align with producer country developed standards (ISPO and MSPO), but rather with international standards (RSPO and ISCC). The third disconnect relates to fiscal policy. National revenues from palm oil-related land, income taxes, and export levies are not used to support major producing districts to take up more sustainable practices. The fourth disconnect highlights the lack of harmony between procurement requirements under private standards ("sustainable supply" under RSPO and ISCC certification, and "clean supply" under corporate zero deforestation policies) and those under public standards (i.e. "legal supply" under ISPO and MSPO). This creates confusion among chain actors about supply segregation rules, and increases disputes between public and private sector actors around implementation (Pirard et al. 2015). The fifth disconnect manifests itself in a lack of coherence between national and subnational sustainability policies. National government has opposed the use of High Conservation Values (HCV), a method developed under the RSPO to set aside conservation areas, yet subnational governments still attempt to incorporate it into their provincial regulations.
Despite these disconnects, complementarities between regulations and initiatives are also emerging. The first complementarity relates to finance. Many IFIs are adopting responsible lending policies, which has encouraged a number of major commercial banks in Malaysia and Indonesia to do the same. As part of due diligence requirements, these lending policies demand the adoption of public and private standards by major corporate actors receiving financial services from these banks (Pramudya et al. 2017), encouraging more widespread adoption of such standards. The second complementarity, related to trade, is the increasing use of voluntary standards (i.e. RSPO, ISCC) by consumer countries to verify that their national imports originate from sustainable sources (e.g. national initiatives under ESPO, EU-RED). The third is explicit inclusion in the CPO Fund of targets to support smallholder adoption of improved production practices; this is also discussed under the RSPO and endorsed by major corporations. The fourth is related to private sector efforts to develop and adopt industry-level codes of conduct and sustainability policies to enhance coherence and transparency in corporate policy. These industry initiatives draw heavily on RSPO and evolving zero deforestation norms, which could augment adoption rates. The final complementarity relates to land-use criteria in recent regulations, in which only unproductive lands can be converted into plantations. Government efforts to legalize essential ecosystem areas outside existing conservation and protected areas (which match the internationally recognized HCVs), complement the endeavors of major oil palm companies to set aside conservation areas. The integration of higher standards in the revised ISPO criteria and indicators, along with third-party monitoring, will further improve these standards, increasing their convergence with those of private standard systems.
However, several antagonisms between regulatory initiatives are also apparent. Within finance, the key antagonism relates to the emergence of a formal banking sector process to upscale ESG integration. This conflicts with domestic bank and informal lender strategies that target a less sustainable client base. A disproportionately large amount of CPO funding goes to subsidize biofuels, while only a small proportion has been disbursed to finance smallholders' replanting efforts and promote environmentally friendly practices. This appears to contradict the original idea of the CPO policy. The second antagonism, in the trade realm, relates to transnational consumer goods manufacturers' deforestation-free sourcing policies. Such policies conflict with the sector expansion goals of both governments and companies in producer countries. The third antagonism, in the fiscal realm, relates to the informal capture of economic rents by local governments. Formal taxes collected at national level rarely reach the production zone departments that often bear enforcement responsibilities and are thus best placed to promote upgrading on the ground. The absence of a fiscal mechanism to incentivize those adopting and promoting sustainable practices represents another critical gap. The fourth, in the production realm, is associated with private standard compliance requirements that involve setting aside conservation areas within oil palm concessions, using HCV or High Carbon Stock (HCS) approaches. Because statutory law does not recognize such land-use classifications, privately conserved lands within concession areas risk reversion back to state control and reallocation to producers that lack similar sustainability ambitions (Aurora et al. 2015). Another major source of antagonism emerges from the clash between the oil palm economy's formal and informal segments. Because most transactions involving smallholders are informal and outside the purview of the state, the government is unable to effectively regulate smallholder production practices. This often results in forest land being freely traded to smallholders, production inputs such as planting material and fertilizers being of substandard quality, and fresh fruit bunch trade being highly opaque. For companies wishing to clean their supply chain while remaining inclusive of smallholders, this type of informality raises a number of challenges, mainly how to implement more rigorous traceability systems and enhance productivity. In addition, the vast majority of independent smallholders lack formal claims to land, therefore cannot access public funding and incentives, and cannot comply with the requirements of sustainability standards (Rietberg & Slingerland 2016). This threatens to further alienate smallholders from the formal (sustainable) economy and undermines the effectiveness of initiatives that aim to promote the upgrading of smallholder production systems.

Emerging actions to foster transitions to sustainability
Various actors at different levels are beginning to address disconnects and antagonisms, while further exploiting existing complementarities, based on experimentalist approaches. These actions have three broad objectives: (i) to refine and harmonize sustainability regulations, standards, and tools, while learning from applicability across a range of companies; (ii) to implement business models that increase productivity, while overcoming the challenges of involving smallholders (often implemented by development organizations and NGOs); and (iii) to reconcile value chain interventions with landscape-based ones, by adopting jurisdictional approaches. These approaches are increasingly orchestrated by provincial level governors and facilitated by NGOs, which tend to operate as intermediaries.

Refining and harmonizing sustainability regulations and standards
The deforestation-free supply chain commitments of consumer goods manufacturers led to The Forest Trust, Golden Agri-Resources (GAR), and Greenpeace developing the High Carbon Stock Approach (HCSA) to identify restricted areas for plantation development (Greenpeace 2013). This move resulted in a concrete implementation approach for zero deforestation based on objective and verifiable criteria (Greenpeace 2014). In 2014, a separate group of major palm oil producers, known as the Manifesto group, announced a voluntary moratorium on the clearance of HCS areas, based on empirically valid thresholds of carbon stocks under the HCS+ approach, which deviated from the Greenpeace-initiated HCSA. In 2015, a process was created to harmonize HCSA and HCS+, and, in late 2016, the different stakeholders agreed upon a single set of principles (High Carbon Stock Approach [HCSA] 2016). In 2017, a HCSA toolkit that merged the two approaches was finalized; its implementation is now being piloted by all major corporate stakeholders. Two additional initiatives to augment sustainability standards are in place; one related to the RSPO, and one to ISPO. The RSPO has developed RSPO Next, which includes advanced add-on criteria for palm oil growers seeking to comply with "no deforestation, no fire, no planting on peat, reduction of GHGs, respect for human rights and transparency" (RSPO 2017). This is partly a response to criticism from consumer goods manufacturers that RSPO principles and criteria were not sufficiently comprehensive. In regards to ISPO, the Indonesian government, through the coordinating Ministry of Economic Affairs, initiated "Strengthening ISPO," replicating timber sector experience associated with the EU's initiative on Forest Law Enforcement, Governance and Trade (FLEGT), which engaged Indonesian public and private authorities in a multistakeholder process to develop and implement a jointly agreed timber standard and legality assurance system (Obidzinski et al. 2014). "Strengthening ISPO" is a participatory process involving stakeholder groups, such as state agencies and environmental NGOs, to improve existing Indonesian standards. Issues the group is trying to resolve include the development of criteria to evaluate land availability for plantation development, community consultation mechanisms, and legal conflicts associated with HCV protection. To improve credibility, efforts are being made to establish an accreditation body, a third-party auditing process, and an independent monitoring system through government regulation. The Ministry of Environment and Forestry's efforts to legalize and protect essential ecosystem areas within concessions, like HCVs, will further strengthen the standards. Yet with the development of further oil palm plantations, only low-carbon areas will be converted, ensuring only "unproductive lands for plantation"as already included in the regulationare adopted during the land allocation process. The outcomes of these efforts are uncertain because of the vested and conflicting political interests involved in the process. Despite this, the increasing proliferation of sustainability initiatives illustrates that they have potential to stimulate an upward convergence of standards, although not without conflict.

Enhancing business models for enlarging productivity and smallholder inclusion
Major corporate groups are increasing their efforts to link enhanced traceability systems to better monitor and verify performance over commitments to zero deforestation. They are also linking them to improved business models. Such models provide services to help overcome the resource, capacity, and legality constraints preventing (certain) smallholders from achieving their productivity potential, fully complying with regulatory requirements, and accessing global palm oil markets on equitable terms. Recognizing the need for smallholders' requirements to be more explicitly addressed through actor-disaggregated approaches, companies and NGOs are collaborating on innovative new business models and value chain strategies to prevent smallholder disarticulation from global standards-driven markets. These actors include development organizations, such as IDH and the Dutch Development Organization (SNV), multilateral banks, such as the International Finance Corporation (IFC), and corporate sector-driven initiatives, such as the Partnership for Indonesia Sustainable Agriculture (PIS-Agro) and the PT SMART Working Group. Most initiatives share the common goal of enhancing the transparency and traceability of upstream activities in the value chain, by facilitating smallholder access to finance, typically through aggregation. This is primarily geared toward supporting smallholders to replace substandard oil palm varieties with improved varieties to increase yields and to overcome financial barriers to compliance (Bronkhorst et al. 2017). In addition, the national government is seeking to overcome the legality challenges preventing smallholders from formalizing their operations, through enactments such as Presidential Regulation No. 88/2017. This regulation aims to resolve conflicts over plantations on state forestlands by enabling smallholders to obtain land titles if lands have been occupied for over 20 years. However, few smallholders on state forestlands are likely to be able to benefit from this regulation Schoneveld et al. 2017).

Reconciling value chain and landscape-based interventions by adopting jurisdictional approaches
The private sector and NGOs increasingly acknowledge that progress will be piecemeal if underlying structural issues affecting the sector are not comprehensively addressed. This necessitates more effective exploitation of the complementarities between public and private sector interventions (Wolosin 2016). Private-public partnerships are widely viewed as critical, especially around issues of sector competitiveness and formality, and improving the demarcation of production and protection areas. Private sector actors, NGOs, donors, and development organizations are supporting efforts in specific jurisdictions to identify and register smallholder lands and promote district-level monitoring, reporting, and verification of land-use change (Watts & Irawan 2016). This is part of a broader attempt to link deforestation-free supply chain initiatives with jurisdictional approaches to reducing deforestation and forest degradation (REDD) (Meyer & Miller 2015). Provincial regulations are emerging in support of private standards for sustainability: South Sumatra's Governor committed to transforming South Sumatra into a sustainable province; the Governor of Central Kalimantan acknowledged the importance of aligning regulations with HCV principles by allowing palm oil companies to retain and protect areas within their concessions; and, in 2015, Sabah state issued a 10-year plan detailing a process to ensure all CPO produced within its jurisdiction was RSPO certified. Many of these subnational state initiatives seek to attract investors by aligning with private standards (thus reducing company risk and monitoring costs), benefiting from offtake markets that, in turn, become more accessible (Pacheco et al. 2017b). Such approaches were championed by Unilever and Marks & Spencer, who in late 2015 launched the "Produce and Protect" approach, through which they commit to prioritizing commodity procurement from areas implementing jurisdictional forest and climate initiatives (Consumer Goods Forum 2015).

Discussion
Rapid palm oil sector expansion has contributed to rural economic development and reduced poverty rates in Southeast Asia, notably in Malaysia and Indonesia. However, this comes at the expense of the environment through carbon emissions, deforestation, and biodiversity loss. It has also given rise to new developmental challenges. Smallholders face constraints that prevent improved practices and yields, access to formal oil palm economy benefits, and secure tenure rights. With the value chain's growing complexity, regulations and initiatives governing palm oil have become more complex, producing a transnational regime complex that mixes state regulations and private standards, such as certification, codes of conduct, and self-regulatory initiatives.
This transnational regime complex is maturing and taking on increasingly challenging issues: improving the terms of smallholder participation; reducing land conflicts; addressing substandard labor conditions; halting crop expansion on biodiverse and high carbon stock forests and peatlands; and reducing fires and haze. As the sector becomes more environmentally conscious, new challenges are emerging. With unabated growth in the global demand for palm oil, issues arising from expansion and increasing pressure on land outside forest and peatlands will need to be addressed (Pirker et al. 2016). This will include the recovery of degraded lands and the integration, rather than displacement, of smallholders occupying low-carbon stock croplands, without undermining food supply and local livelihoods. Ongoing efforts to build more coherent governance architecture should reduce current performance issues and enhance sector capacity, with reduced social and environmental impacts (Austin et al. 2015).
The unresolved disconnects and antagonisms, particularly between producer country state regulations and international standards, have frustrated efforts to build international synergies among private corporate policies and codes of conduct and transnational initiatives in consumer countries, particularly in the EU. While processes of upward convergence are evident between different private standards, weak alignment of these private standards with producer country state interests has undermined improved governance. This hinders the development of more effective coordination mechanisms and the implementation of incentives to resolve the negative social and environmental tradeoffs arising from market and production conditions beyond the duty and capacity of individual companies. It also challenges governments' enforcement capacity.
We identified several areas where synergies could be established between public and private initiatives. The areas with the greatest potential include: coordination in the supply of responsible finance under agreed criteria, complementarities in the provision of incentives to improve smallholder performance, and rules to set aside high-carbon forest while safeguarding the rights of local populations. These require improved coordination across different levels of governance, as well as across public and private realms of decisionmaking.
The three main goals to improve the effectiveness and legitimacy of the transnational palm oil regime complex are: (i) to strengthen accountability and transparency in the value chain and political systems; (ii) increase smallholder empowerment, and production and environmental performance; and (iii) introduce new incentives to increase the uptake of sustainability practices, in ways that level the playing field for independent smallholders. These three goals should be pursued simultaneously.
Initiatives are emerging, particularly in Indonesia that have the potential to improve complementarities between state regulations and private standards, suggesting that greater harmonization of policies and regulatory frameworks across public and private sectors and between different levels of government is possible. Yet antagonisms persist as a result of strong vested interests and patronage systems reinforcing private actors' privileges, while protecting the power position of key state actors benefiting from business-as-usual situations. Emerging initiatives are largely adopting experimentalist approaches. These may be more effective in mobilizing public and private action related to regulatory harmonization, business models, and jurisdictional approaches, in which government actors, corporate players, and NGOs attempt to establish different institutional arrangements.
Regarding accountability and transparency, important steps have been taken, with major corporate groups establishing and taking up third-party certification, notably the RSPO. This has become an accepted mechanism for compliance with the import regulations of major consumer countries, as well as with the procurement policies of major consumer goods manufacturers; however, it will take time before they are accepted by other major consumer countries (e.g. China and India). While demand-side compliance pressures have, despite limitations, contributed to increasing private standard adoption rates, supply-side pressures remain comparatively weak.
Although the CPOPC and a strengthened ISPO have the potential to develop a system built on principles and criteria similar to those adopted by the RSPO, a more transparent monitoring system needs to be developed for such standards to be perceived as legitimate by major importer countries and consumer goods manufacturers. Greater collaboration around the design of such a system is therefore warranted. Reducing the compliance gap could help to reduce production costs and enhance sector-wide capacity to adopt and adhere to standards. Improved land-use planning, monitoring of illegal land occupation, and land tenure regularization could reduce the prevalence of producers ineligible for certification. While common rules for doing so need to be established nationally, subnational governments require support to implement those rules. As such, sectoral fiscal earnings and CPO Fund finance should be invested in subnational level capacity building, albeit with improved checks and balances that ensure more effective outcomes.
Constantly changing sustainability norms threaten to alienate smallholders by increasing barriers to compliance. While cited interventions could contribute to overcoming barriers, reducing the yield gap, and enhancing smallholder competitiveness in global markets, targeted smallholder support is required. Improved public extension services and oversight in input and offtake markets (and funding to subnational governments to support this) are key to integrating smallholders into the formal, standard-driven palm oil market. However as companies and the internal and external private standards shaping their practicesare partly accountable for the emerging pressure on smallholders to upgrade, equity considerations should feature more prominently in corporate strategy. New business models that better link independent smallholders to inter alia input markets, finance, and technical support are being implemented by development projects and NGOs acting as intermediaries, often with support from companies. Yet the upscaling of successful schemes is still a major barrier that may require more active involvement of financial institutions, civil society organizations, and local government institutions.
Because private standards, at least in the oil palm sector, typically lack mechanisms to encourage companies to further invest in smallholder integration, targeted national-level (fiscal) incentives may be necessary. In addition to the promotion of better business models, incentives could be introduced to further encourage jurisdictions to pursue sustainability and productivity objectives more actively, to align associated interventions with corporate procurement policies, and to stimulate sectoral agencies to better enforce regulations in support of ISPO and MSPO. To enhance the legitimacy of those efforts, closer collaboration between stakeholders is needed to develop a uniform monitoring, reporting, and verification system. Exploiting complementarities between company-level RSPO auditing and landscape-level monitoring systems is desirable.
The emergence of jurisdictional approaches is a step in that direction. However, they are thus far limited to a select number of provinces and lack an overarching national framework. Jurisdictional approaches will require strong alignment between public policies and private initiatives, as well as alignment across levels of government. Advancing sustainability at the jurisdictional level may not only attract companies interested in sourcing from clean suppliers, it could also serve to orient public investments to overcome performance issues and upgrade value chains. They may also stimulate increased collaboration among stakeholders in specific jurisdictions, to advance territorial planning for land use and infrastructure development, conservation of threatened ecosystems, safeguarding of local populations' rights and cultural values, provision of services, and technological knowhow for smallholders, as well as the monitoring of jurisdictional performance over time. Adopting experimentalist approaches to solve disconnects, overcome antagonisms, and strengthen complementarities in the palm oil regime complex may offer the potential to address the three major issues affecting the palm oil sector's social, economic, and environmental performance, but specific actions are needed.
One specific mechanism through which experimentalist governance approaches could help to resolve the coordination problems identified is that of public comparison or "benchmarking of equivalence" as a way of reconciling and promoting convergence among competing standards (see Overdevest & Zeitlin 2012). Another is the establishment of joint committees, comprising national and transnational actors, to review the implementation of agreed sustainability principles or standards. Such committees can recommend corrective actions on the ground and, where necessary, revisions of the standards and procedures themselves, as has been the case with FLEGT implementation (see Overdevest & Zeitlin 2018). Experimentalist approaches can also benefit from comparative assessments, resulting from companies self-reporting, with NGO support, on the outcomes (e.g. in sustainable production, standards uptake, farmers benefits) of their different experiences in diverse geographical contexts, as part of debates on existing platforms (e.g. Innovation Forum, Responsible Business Forum).

Conclusions
The global palm oil value chain has increased in complexity over time, as has the governance system for the sector. The latter has evolved into a transnational regime complex involving state policies and regulations, marketbased mechanisms, and self-regulatory initiatives that interact on and within different scales, from the global to the subnational. In our conceptualization of the palm oil regime complex, we have highlighted the diversity of interactions among state and non-state actors and regulatory instruments, both vertically and horizontally, by unpacking emerging disconnects, complementarities, and antagonisms. This offers insights into the complexity of the system governing the global palm oil value chain. We have emphasized three major performance issues that challenge the effectiveness of this regime complex: land conflicts, yield gaps, and carbon emissions. Despite progress, these issues have proven to be intractable, and continue to undermine the sustainability and inclusivity of the sector.
While important complementarities between state regulations and private sector-driven initiatives are increasingly being explored at international level, several disconnects and antagonisms have emerged nationally and subnationally. These reveal unresolved disputes over power and authority both within government, and between government, the private sector, and major consumer countries. Addressing these disputes is critical to advance sectoral sustainability and inclusivity goals. Complementarities have been built primarily around transnational companies and NGO initiatives, largely a result of pressure from consumer goods manufacturers, and increasingly, retailers and banks. Such complementarities are yet to contribute meaningfully to the reversal of the sector's structural performance issues because of challenges in resolving disconnects and antagonisms. Additionally, the legitimacy of Malaysian and Indonesian efforts to set up their own globally recognized standards, in ways that are acceptable for end-users and governments, is still in doubt if they fail to build in a multistakeholder process.
It is difficult to foresee how the palm oil regime complex will evolve. Our conceptualization, however, offers important insights to help overcome institutional barriers and build greater synergies between institutions and regulations at value chain and territorial level. Our analysis examines how public and private regulations impact the performance of the sector, yet it does not interrogate the role of specific interventions adopted by individual companies or their impacts. For example, supply chain and risk management interventions could influence chain governance dynamics, which in turn bears on regulatory processes within transnational regime complexes. Questions that warrant further critical enquiry analysis thus include: How is the regime complex shaped by the way in which leading companies govern the palm oil value chain?; What type of coordination mechanisms do leading companies adopt, with respect to their suppliers and buyers?; Which actors are best positioned to drive improvements in global value chain governance?; and How do sustainability considerations play into these dynamics? Linking analyses on regime complexity to global value chain dynamics could serve to better represent the interface between commercial and public interests, in the context of sustainability governance.

Main government regulations influencing the palm oil sector in Indonesia
Policy realm in order to verify that supply originates from sustainable sources.