This study analyzes the dynamics of cacao Value Chain Governance (VCG) in North Luwu, South Sulawesi, to understand how governance structures influence the integration of sustainability measures. While Indonesia remains a vital global producer, national productivity has fallen below the global average due to pests, disease, and climate change, leading to an increased reliance on imports to meet domestic processing demands. Utilizing a framework that identifies five governance types—market, modular, relational, captive, and hierarchy—the research examines how transactions are codified and how power is distributed among stakeholders. Findings reveal that major buyers like Mars, Inc. employ "captive" governance through strict certification contracts, while others like Cargill and Olam maintain more "modular" or "relational" structures that offer varying degrees of flexibility for farmers and local traders.
The evaluation highlights a significant power asymmetry where lead firms largely dictate pricing and quality standards, leaving smallholder farmers with limited bargaining power. Although farmers demonstrate proficiency in meeting technical quality requirements, their understanding of traceability remains limited, posing a challenge to long-term sustainability goals. To enhance the value chain, the study recommends empowering farmers through strengthened cooperatives, increasing awareness of certification and climate-smart agriculture, and investing in digital tools to drive social inclusion. These strategic interventions aim to foster more equitable relationships and ensure the environmental and economic resilience of Indonesia’s cacao industry. |
