Institutional capacity-building for enhancing the

sustainability of the coconut supply chain in a distant

Indonesian region

Agus Wahyudi1*), I Ketut Ardana1, Asif Aunillah2, Budi Rianto3, Udhoro Kasih Anggoro4, Abdul Muis
Hasibuan5, Maesti Mardiharini1, Chandra Indrawanto1, Budi Wardono1, Sujianto6, Ermiati1, Bedy
Sudjarmoko1
1
Research Center for Cooperative, Corporation and People’s Economy, National Research and Innovation Agency,
Jakarta 12710, Indonesia
2
Research Center for Agroindustry, National Research and Innovation Agency, Jakarta, Indonesia
3
Hang Tuah University
4
Indonesia-Japan Business Network
5
Research Center for Behavioral and Circular Economics, National Research and Innovation Agency, Jakarta
12710, Indonesia
6
Research Center for Macroeconomics and Finance, National Research and Innovation Agency, Jakarta 12710,
Indonesia
*)
email: aguswahyudi211@gmail.com

Abstract. This study examines how to strengthen the institutional capacity for enhancing the sustainability of the
coconut supply chain (CSC) in Indragiri Hilir, a distant region in the Province of Riau, Indonesia. The study, which
will be carried out from March to December 2023, is aimed at developing a CSC map based on observations and
interviews with the actors involved. The study also assesses the sustainability of the current CSC by calculating the
sustainability index from the scores of indicator activities at each stage and aspect of the CSC. The scores reflect the
number and proportion of actors who perform the indicator activities. The higher the number, the higher the score.
The study identifies the low-scoring indicator activities as key factors for improving sustainability. The study
concludes that institutional capacity building requires collective actions among actors and organizations to improve
the governance, policies, and regulations that support the CSC. The study finds that the CSC has a moderate level of
sustainability overall, with the processing stage and the social aspect being the most sustainable.

1. Introduction
The institutional capacity building is a crucial factor for achieving agricultural sustainability, particularly
in distant regions. Institutional capacity building refers to the process of enhancing the abilities of individ
uals, organizations, and networks to perform their functions effectively and efficiently and to adapt to cha
nging circumstances and challenges (Spekkink, 2013. Agricultural sustainability development in distant r
egions faces many constraints, such as a lack of infrastructure, access to markets, information, technology,
credit, and extension services, as well as social, cultural, and political barriers (Awad et al., 2023). Hence,
institutional capacity building can help to overcome these obstacles by strengthening the human, organiz
ational, and institutional capital of the actors involved in the agricultural sector, such as farmers, cooperati
ves, NGOs, research institutes, government agencies, and the private sector. Institutional capacity buildin
g can also foster innovation, collaboration, and learning among these actors, and enable them to participat
e in policy-making and governance processes that affect their livelihoods and well-being
(Markow et al., 2023
).
Institutional capacity building can take various forms and levels, such as training, education, mentorin
g, coaching, networking, advocacy, policy dialogue, and institutional reform (Scaramuzzi et al., 2023). Th
e specific needs and priorities of each context and stakeholder group should be identified and addressed th
rough participatory and inclusive approaches. Institutional capacity building can have positive impacts on
agricultural productivity, income generation, food quality and safety, natural resource management, resili
ence to shocks and stresses, gender equality, and social inclusion (Turner et al., 2022). However, institutio
nal capacity building also faces many challenges and limitations, such as a lack of resources, coordination
 commitment, ownership, accountability, and sustainability. Therefore, institutional capacity building sho
uld be seen as a long-term and continuous process that requires strategic planning, monitoring and evaluat
ion, feedback and learning mechanisms, and adaptive management. In addition, by promoting collective a
ctions among different actors, such as participatory research, farmer cooperatives, and policy dialogues, i
nstitutional capacity building can also enhance the social capital, trust, and collaboration that are essential
for achieving the common goals of agricultural development (Hulke & Revilla Diez, 2020).
Agricultural sustainability is an important issue in agricultural development that refers to the ability to
produce food and other agricultural products in ways that are environmentally friendly, socially responsib
le, and economically viable (Qu et al., 2024). However, agricultural sustainability cannot be achieved in i
solation from the rest of the food system. Agricultural supply chain sustainability is the supporting system
of agricultural sustainability that refers to the management of environmental, social, and economic impact
s along the entire value chain of agricultural products, from farms to customers (Perdana et al., 2023). Agr
icultural supply chain sustainability development can enhance agricultural sustainability by reducing wast
e, improving efficiency, ensuring fair trade, promoting innovation, and fostering collaboration among stak
eholders (da Silveira et al., 2023).
The major issues that affect the agricultural sector in Indonesia is the inefficiency and vulnerability of
the supply chain, especially in distant areas. These areas often face difficulties in accessing markets, trans
portation, storage, and information, as well as coping with natural disasters, climate change, and price flu
ctuations (Fahmi & Mendrofa, 2023; Pandyaswargo et al., 2022). To address these challenges, it is e
ssential to strengthen the institutional capacity of the actors involved in the supply chain, such as farmers,
cooperatives, traders, processors, and government agencies. Institutional capacity building means improvi
ng the skills, knowledge, resources, and networks of these actors so that they can achieve their objectives
and solve their problems more effectively and sustainably. The enhanced institutional capacity of the agri
cultural supply chain can improve the productivity, competitiveness, resilience, and inclusiveness in the s
ector.
The coconut, also called the "tree of life," has amazing features that have attracted many countries to e
xpand its production and forecasts indicate that the value of coconut producers will rise in the future worl
dwide (Rajabi-Kafshgar et. al., 2023). The cultivation and processing of coconuts provide many jobs and
economic benefits, especially for the areas where they are grown. In addition it becomes a valuable sourc
e of income and development for the regions, particularly in the major producer countries such as in The
Philippines, Indonesia, India, Tanzania, Papua New Guinea, and Sri Lanka
(Nayar, 2017; Rodrigues et al., 2018a)
.
Indragiri Hilir is a distant region in the Riau Province, Indonesia and one of the promising sectors for a
gricultural development is the coconut industry. The region has vast coconut plantations that produce var
ious coconut products, and shown remarkable growth in the last three decades, in line with the increasing
demand for coconut products both domestically and internationally (Arifin, 2022). However, the growth o
f the industry has not been always accompanied by a proportional improvement in the living and working
conditions of the coconut farmers (Zainol et al., 2023). This is because the local coconut supply chain (CS
C) has limited and weak linkages with other actors, and the farmers become the price takers in the commo
dity market (Abeysekara & Waidyarathne, 2020; Sheng & Saide, 2021).
The local CSC in Indragiri Hilir is a complex network of actors who are involved in the farming, proce
ssing, and marketing of coconut products. The performance and sustainability of this supply chain affect t
he livelihoods of many rural households and the economic development of the region. To enhance the co
mpetitiveness and sustainability of the local supply chain in the national and global markets, it is essential
to improve the capacities and linkages of all the actors along the supply chain, from farmers to processors
to traders to consumers. This will enable the local coconut producers and processors to access wider mark
ets, benefit from economies of scale, learn from best practices, and adopt innovative technologies.
This study aimed to analyse the need of institutional capacity building for enhancing sustainability of
CSC based on the map CSC that include mapping of actors, activities and products in the CSC, assessmen
t of the current sustainability CSC in Indragiri Hilir, and identification the key factors for the improvemen
t of CSC. This study contributes to mapping the performance of the CSC based on activities and actors, as
well as sustainability leverage factors from economic, social and environmental dimensions. The results o
f this mapping are the basis for formulating institutional capacity building strategies and promoting collec
tive action in the CSC. Sustainable supply chains can be a driver of economic development for distant are
as that specifically have potential natural resources as a basis for regional economic development.

2. Review of literature
2.1. Sustainability of coconut supply chain
Improving sustainability of supply chain is a key challenge for many businesses in the 21st century. Susta
inability refers to the concept of balancing the demands of the current population with the preservation of
the natural and social resources that will be required by future generations
(Coffay & Bocken, 2023; Larbi-Siaw et al., 2023)
. It is a holistic approach that considers the environmental, economic and social im
pacts of human activities, and aims to ensure that they do not exceed the carrying capacity of the planet or
undermine the well-being of its inhabitants. A sustainable supply chain is one that minimizes the environ
mental, social and economic impacts of its activities, while maximizing the value for its stakeholders. To
address the complex and interrelated challenges of a sustainable supply chain, it is required framework ai
ms to provide a coherent and consistent set of principles, indicators and tools that can guide decision-mak
ing and action at different levels and sectors, from local to global, and from public to private. The framew
ork also seeks to foster collaboration and learning among diverse stakeholders, as well as to monitor and e
valuate the progress and impacts of sustainability initiatives (Slätmo et al., 2017). It also needs to collabor
ate with their suppliers, customers and other stakeholders to align their goals and actions, and to share bes
t practices and information. Furthermore, they need to measure and monitor their performance and impact
s, and to communicate them transparently and effectively. Some of the benefits of improving sustainabilit
y of supply chain (Petruzzelli et al., 2023; Romano et al., 2023; Tseng et al., 2019) include
1. Reducing costs and increasing efficiency by eliminating waste, optimizing resource use and enhancin
g productivity.
2. Enhancing reputation and customer loyalty by demonstrating social responsibility and environmental
stewardship.
3. Mitigating risks and ensuring compliance by adhering to relevant regulations and standards, as well a
s anticipating and addressing potential issues.
4. Innovating and creating new opportunities by developing new products, services and markets that me
et the changing needs and expectations of customers and society.
CSC is the term that encompasses all the processes and actors involved in transforming coconuts into
various products and services, that can be divided into farming, processing, and marketing stages
(Arulandoo et al., 2017; Kumar & Kapoor, 2010)
. Farming refers to the cultivation, harvesting, and transport
ation of coconuts from the fields to the processing facilities. Processing involves the extraction, refining,
and packaging of coconut oil, milk, water, fiber, and other by-products. Marketing covers the distribution,
promotion, and sale of coconut products to consumers and businesses. All of the stages of CSC
(Riccaboni et al., 2021)
involves multiple stakeholders, such as farmers, processors, distributors, retailers, customer
s, and regulators, who have different roles and interests in the supply chain.
Sustainable supply chain is the process of coordinating and optimizing the flows of materials, money, i
nformation, and resources in the supply chain, with the aim of achieving both economic and social objecti
ves, as well as minimizing the negative impacts on the environment (Nematollahi & Tajbakhsh, 2020).
A successful sustainable CSC depends on finding a harmonious equilibrium among three key factors: the
economic prosperity, the environmental conservation, and the social progress. These factors are interrelat
ed and mutually reinforcing, and they require careful planning and management to ensure that the CSC ca
n meet the present and future needs of its stakeholders without compromising the quality of life or the nat
ural resources (De Fazio, 2016; Kamble et al., 2020).
To assess the sustainability of the CSC, it is needed to consider the different activities that take place a
t each stage of the chain as indicators, as well as the impacts they have on the environment, society and ec
onomy. The environmental aspects cover the use of natural resources, such as land, water and energy, and
the emissions of greenhouse gases and pollutants (Rodrigues et al., 2018b). The social aspects include the
working conditions, health and safety, and human rights of the workers and communities involved in the
chain. The economic aspects refer to the costs, revenues and profits of the actors in the chain, as well as th
e market dynamics and competitiveness of coconut products.

2.2. Institutional capacity building

Capacity building is a concept that refers to the process of developing and enhancing the abilities of indivi
duals, groups, organizations and communities to achieve their goals and objectives
(Roopnarine et al., 2021)
. It is often used in the context of development policy, where it aims to support socio-economic develo
pment at national and international levels and can involve various sectors, markets and social contexts, de
pending on the needs and challenges of each situation. In addition, capacity building is a continuous proce
ss that requires constant learning, innovation and adaptation beside significant investments in terms of co
ncept and financial resources (Israel et al., 2010). However, these investments can be lost if the capacities
that are developed are not able to cope with the changes and competition in the environment. Therefore, c
apacity building should also focus on ensuring that the improved capacities can sustainable over time.
Institutional capacity refers to the ability of an organizations and communities or a system to effectivel
y perform its functions and achieve its objectives (Branca et al., 2022). It encompasses various aspects su
ch as human resources, financial resources, infrastructure, governance, leadership, culture, and learning. I
nstitutional capacity is essential for delivering quality services, ensuring accountability, fostering innovati
on, and adapting to changing contexts (Watkins et al., 2015). The institutional capacity building framewor
k to improve coconut supply chain sustainability is a comprehensive approach that specifically aims to en
hance the technical, managerial, and organizational skills of the actors involved in the production, process
ing, and marketing of coconut products. The framework consists of four main components
(Krishnan et al., 2021)
:
1. assessment of the current sustainability of CSC from environmental, social and economic aspects and i
dentification of the needs of improvement;
2. design and implementation of tailored training programs and extension services for farmers, processor
s, traders, and other stakeholders;
3. establishment and strengthening of cooperatives, associations, and networks to facilitate collective acti
on, information sharing, and market access; and
4. monitoring and evaluation of the outcomes and impacts of the capacity building interventions. The fra
mework is expected to contribute to the improvement of the productivity, quality, profitability, and res
ilience of the coconut supply chain, as well as to the social and environmental benefits for the commun
ities involved.
Institutional capacity-building can be achieved through various strategies, such as training, mentoring,
coaching, technical assistance, organizational development, change management, and knowledge manage
ment. The comprehensive and integrated framework for institutional capacity building to address activitie
s with the low sustainability in the farming, processing, and marketing of coconut products is the followin
g elements (Amblard & Mann, 2021; Han & Niles, 2023). Some of the benefits of institutional capaci
ty-building include improved performance, sustainability, and resilience of the organization
(Vélez-Ramírez et al., 2022)
.

3. Methodology
The CSC research involved three main steps: first, mapping the CSC to identify the actors, activities, and
flows involved in the farming, processing and marketing of coconut products; second, assessing the sustai
nability of the CSC using a multi-criteria approach that considered environmental, social and economic as
pects; and third, developing strategies to improve the sustainability of the CSC by addressing the identifie
d indicators that have low performance but have high contribution to the sustainability in the previous ste
ps.
3.1. Mapping of the CSC
The key step for effective strategic supply chain improvement is to map the supply chain. Supply chain m
apping is a tool that helps to align the supply chain strategy and to identify opportunities for improving su
pply chain performance and redesigning the network (Hines & Rich, 1997; MacCarthy et al., 2022). T
he supply chain is a complex system that converts raw materials into various value-added products and se
rvices for different markets that has several stages, each with its own activities, actors and products
(Walker & Jones, 2012)
. The CSC involves a complex network of processes and actors that transform the co
conut as raw material into various end products. The network can be broadly categorized into three main s
tages: farming, processing and marketing (Herczeg et al., 2018; Lin, 2021). At the farming stage, coconut
farmers cultivate and harvest the fruits, and may also perform some primary processing such as husking a
nd splitting. At the processing stage, intermediate processors extract the oil, milk, water, fiber, and other c
omponents from the coconuts, and produce intermediate or final products such as copra, desiccated cocon
ut, activated carbon, and coconut oil. At the marketing stage, processors, traders, wholesalers, and retailer
s pack, distribute, and sell the products to consumers or other industries.
The data used for mapping the CSC was obtained by conducting in-depth interviews and direct observ
ations of the activities performed by the actors. The farming activities observed included fertilization, lan
d clearing, harvesting, husking, transportation, and coconut buying and selling transactions involving 2 gr
oups of farmers in 2 locations. The coconut processing activities observed involved the separation of coco
nuts into coconut meat, water, and shell, drying and processing of these parts into various value-added pro
ducts such as white copra, desiccated coconut, coconut oil, coconut milk, nata de coco, and various other
processed coconut products at 4 small business locations. The marketing activities observed encompassed
packaging, transporting, distributing, and exporting coconut products at 1 exporting company.

3.2. Assessment of the sustainability of the CSC

After the CSC has been mapped, the key step to enhance the sustainability of the CSC is to conduct an ass
essment that can identify the activities that have low sustainability performance and need urgent improve
ment (Hosseini et al., 2019). The assessment involves various parties who have a good understanding of t
he CSC, such as farmers, processors, traders, academicians, government officials, and other stakeholders.
They can provide valuable insights and feedback on the sustainability of the CSC and suggest possible sol
utions. The assessment cover the environmental, social, and economic aspects of the CSC and use approp
riate indicators and methods to measure and evaluate them (Parrot et al., 2022). The assessment results ca
n then be used to prioritize the activities that need improvement and to design and implement effective su
stainability strategies for the CSC.
To evaluate the sustainability of the CSC, we measure how strongly the actors at different stages (farm
ing, processing, and marketing) perform activities that can enhance the environmental, social, and econo
mic aspects of sustainability. The stronger the performance of these activities, the greater the potential im
pact on sustainability. The performance of these activities can be indicated by the number of actors who p
articipate in them. The more actors who join, the stronger the performance of these activities and the great
er the potential impact on the CSC's sustainability.
In conducting sustainability assessment of CSC some practitioners may prefer to use assessors, the far
mers, processors, traders, academicians, government officials, and other stakeholders who has good under
standing (experts) about the current situation of the activities in CSC (Dingkuhn et al., 2020). Using asses
sors can have several advantages, such as simplifying the process, reducing the resources needed and ensu
ring the quality and validity of the results. However, relying solely on assessors without complementing t
heir work with other tools can also have some drawbacks. For example, assessors may miss some importa
nt aspects or perspectives that could be revealed by surveys, interviews or observations. They may also fa
ce some challenges or biases in collecting and analysing data, such as access, reliability and representativ
eness. Therefore, it is advisable to use a combination of tools and techniques to conduct a comprehensive
and robust sustainability assessment.
 The assessment is based on a set of activity indicators that can reflect the supply chain sustainability
(Nadaraja et al., 2021)
. The activity indicators for the environmental aspects aim to reduce the negative i
mpacts of the activities on greenhouse gas emissions, water and land use, biodiversity, and pollution
(Das et al., 2022)
. The activity indicators for the social aspects aim to improve the working conditions, human,
rights, and livelihoods of the coconut farmers and workers (Harder et al., 2022). The activity indicators fo
r the economic aspects aim to increase the profitability, market access, and value addition of the coconut
products (Sangwan et al., 2021). In addition, the activity indicators were customized to reflect the specific
characteristics of the CSC, drawing from the findings of the CSC mapping survey conducted and literatur
e reviews.
The sustainability of the CSC is measured using the sustainability index (SI), which assigns a numeric
al value from 1 to 100 to all stages of the supply chain
(Hardjomidjojo et al., 2016; Kavanagh & Pitcher, 2004)
, based on environmental, social or economic aspects The higher the SI value, the more sustaina
ble the supply chain is which at can be determined as follows
1. The sustainability index (SI) is the percentage of sustainability score (SS) from its maximum sustain
ability score (Max SS) (Equation 1).
SS
SI = (100) (1)
Max SS
2. The sustainability score (SS) is a measure of how sustainable the CSC is, based on the scoring of sel
ected activity indicators (Table 1).

Table 1. Metrics of activities used use as indicator the of sustainability of CSC

Aspects
Stages
Environment Social Economy
1. Land resource conservation
1. Accessing to basic agricult
2. Water resource conservation
ural rights (land, capital an
3. Eco-friendly weeding applic
d technology)
ation
2. Involving of local labours 1. Price risk management
4. Balanced utilization of fertili
in coconut farming activiti 2. Managing cost effectiveness
zers
Farming es 3. Diversifying sources of inc
5. Eco-friendly pest manageme
3. Concerning social workin ome
nt
g for developing infrastruc 4. Participating in cooperatives
6. Biodiversity preservation
ture
7. Waste management
4. Fulfilling of coconuts for l
8. Replanting commitment
ocal community needs
9. Harvesting management
1. Managing cost effectivenes
s in processing
1. Water utilization efficiency i
1. Prioritizing raw materials 2. Improving product quality t
n processing
from local community o meet consumers' require
2. Moderation of air pollution e
2. Involving of local labours ment
Processing mission
in processing activities 3. Diversifying of processed c
3. Waste management
3. Providing a decent wages oconut products to reduce r
4. Renewable energy utilizatio
4. Involved in partnership isk
n
4. Accessing outer capital to i
nvest in processing
Marketing 1. Promoting processed coconu 1. Applying society's standar 1. Generating added value by
t products as green (natural) d of marketing applying marketing strateg
products 2. Contributing values benefi y
2. Eco-friendly packaging for p ting local communities 2. Developing products to pen
rocessed coconut products 3. Generating job opportuniti etrate market
3. Eco-energy utilization in col es benefitting customers, c 3. Use branding as strategy in
lecting and distributing of co ommunity and society at l marketing
 arge
4. Digital marketing transfor
conut and products 4. Developing partnership par
mation of coconut products
ticularly with farmers

3. The scoring of an activity indicator based on the number of actors performed the activity that can be
assigned with the following criteria:
a. score 4 indicates that the activity is performed by almost all actors (around >75-100% of them)
b. score 3 indicates that the activity is performed by most actors (around >50-75% of them)
c. score 2 indicates that the activity is performed by a few actors (around >25-50% of them)
d. score 1 indicates that the activity is performed by very few actors (around 0-25% of them)
4. Sustainability score (SS) of the CSC is average of sustainability score of all activities (SSA) weighted
with the contribution of those activities to reach the sustainability (Equation 2).
n

∑ CSk SSA k
k=1
SS = n (2)
∑ CSk
k=1
where SSAk is the sustainability score of the k-activity indicator; CSk is the contribution score of the k-i
ndicator activity, n is the number of activity indicators in the CSC.
5. To find the most common or typical value of the sustainability scores of activities, it was applied the m
ode as a measure of central tendency. The mode is the value that occurs most frequently in a data set. I
t can be useful for describing categorical or discrete data, such as activity levels. By finding the mode
of the activity scores, we can identify the most prevalent level of activity among the informants.
6. The activity indicator's contribution score (CSk) reflects how well it supports the sustainability of coco
nut supply. The score ranges from 1 to 4, with higher values indicating higher contributions. The score
is assigned based on the following criteria:
a. score 4 indicates that the activity indicator contributes very highly to sustainability
b. score 3 indicates that the activity indicator contributes highly to sustainability
c. score 2 indicates that the activity indicator contributes lowly to sustainability
d. score 1 indicates that the activity indicator contributes very lowly to sustainability
7. The activities chosen as indicators were those that had a significant impact on the sustainability. These
activities had either a very high (score 4) or a high (score 3) contribution rating.
8. The data collection process involved conducting interviews with various informants as assessors who
were chosen based on the snowball sampling method (Nurdiani, 2014). This method allowed the resea
rchers to identify and recruit potential informants through referrals from other informants. The informa
nts who participated in the interviews were actors of the coconut business, such as farmers, processors,
and traders, as well as academics and officials from relevant official offices and there were 14 informa
nts selected and interviewed. The interviews were guided by a structured questionnaire that was design
ed to measure the sustainability indicators that were previously defined.

3.3. Developing strategies for institutional capacity building

The basic strategy used in improving the sustainability of the CSC was the institutional capacity building
strategies in the farming, processing, and marketing of coconut products. This could entail strengthening t
he organizational and technical skills of farmers, cooperatives, processors and traders, as well as enhancin
g their access to information, finance, markets and technologies. Such a strategy would require a participa
tory and collaborative approach that involves all the stakeholders in the CSC, as well as the support of rel
evant government agencies, research institutions, civil society organizations and development partners.
The strategy was developed based on the activity indicators in the stages that had the low sustainabilit
y but affect the CSC's resilience. The stage with the lowest sustainability index and the indicators within i
t were the priority areas for improvement or the key factors for the institutional capacity development. Th
e following steps was used to identify the key factors:
1. The stages were sorted from the lowest sustainability index (SI) and so the activity indicators within
2. The sustainability index of an activity is calculated with Equation 3.
SSA ijk CSA ijk
SIAijk = (100) (3)
Max SSA ijk Max SCA ijk
where SIAijk is the sustainability index of k-activity in stage-i and aspect-j, SSAijk is the sustainability sc
ore of k-activity in stage-i and from aspect-j, CSAijk is the contribution score of k-activity in stage-i and
from aspect-j on sustainability.
3. The strategy focused on strengthening the key factors that were essential for institutional capacity buil
ding, especially the training and supporting program. These key factors served as a foundation for desi
gning and implementing programs and activities that suited the needs and preferences of the target aud
ience, as well as the available resources and infrastructure. Based on this foundation, an institutional c
apacity building program could be developed that would enhance the CSC for particularly for small, m
edium, and micro enterprises (SMMEs) (Arko-Achemfuor & Cheng, 2019) .
4. Results and discussions
4.1. The map of the CSC
The coconut supply chain in Indragiri Hilir involves three main stages, as shown in Table 2. The first stag
e is farming, where farmers cultivate coconut trees in appropriate climatic and soil conditions, and monito
r their growth and health. The farmers also harvest the coconuts at the right maturity level, which affects t
he quality and quantity of the products that can be derived from them. The second stage is processing, wh
ich can be divided into primary and secondary processing.
In primary processing, the coconuts are de-husked and cracked to separate their main components: me
at (copra), shell, water and husks. The meat is then dried to reduce its moisture content and prevent spoila
ge. In secondary processing, the coconut components are further processed into various value-added prod
ucts. For example, the meat can be extracted to produce oil, milk, or desiccated coconut; the shell can be c
arbonized to make charcoal; and the husk can be spun into coir (a type of fiber). The third stage is marketi
ng where the products are packed into different sizes and types of containers, labelled with information su
ch as brand name, ingredients, and expiry date, and prepared for transportation and distribution. The mark
eting activities also involve advertising, promotion, and pricing to attract customers and increase sales.

Table 3. The map of CSC in Indragiri Hilir

Stages
Elements Processing
Farming Marketing
Primary Secondary
Replanting, fertilizing,
intercropping, weedin Separating comp Refining, packaging, pr
Further processing int
Activities g, harvesting, husking, onents of coconu omotion, branding and
o end products
transporting and sellin ts and drying distribution
g
Small, medium and la Medium and large-scale
Processors and c
Actors Farmers rge-scale processors a processors and collector
ollectors
nd collectors s
Coconut meat, co Coconut oil, desiccate Refined, advance proce
pra d coconut, coconut m ssed and packaged prod
ilk, coconut powder ucts
Main products
Nuts Shell charcoal, activat
Coconut shell Packaged products
ed carbon
Nata de coco, coco Advance processed and
Coconut water
beverages packaged products
Husks Coco fiber, coco peat Packaged products
 Furniture, housing ma Furniture, housing mate
Wood board, blo
Other products Wood trees terials (doors, windo rials (doors, windows, p
ck
ws, pillar) illar).

One of the factors that influences the level of coconut farming activities is the price expectation of the
farmers. This means that the farmers will invest more time, effort and resources into their coconut plantati
ons when they anticipate a high price for their products in the market. Conversely, when the price expecta
tion is low, the farmers will reduce their cultivation activities and focus on other sources of income. This i
s what the farmers have experienced in the last five years, as the coconut prices have been declining and a
ffecting their livelihoods. As a result, the farmers have neglected their coconut plantations and have not c
arried out regular operational activities such as fertilizing and weeding. Moreover, they have also stopped
investing in new plantings or replanting, except for those who participate in the government's replanting p
rogram. This situation has implications for the productivity and sustainability of the coconut sector in the
long run (Ollivier et al., 2001) .
The farmers who grow coconuts have different options for selling their produce, depending on the qual
ity, size and type of coconuts they harvest. The main buyers of coconuts from farmers are collectors and p
rocessors, who can be classified into small, medium and large categories based on their capacity, market o
rientation and product range.
Small collectors usually buy coconuts from farmers in small quantities and sell them to the local mark
et as fresh coconuts for household consumption. These coconuts are typically of unsorted quality and hav
e a shorter shelf life. Medium and large collectors have more capital and infrastructure to buy coconuts in
bulk and transport them to domestic inter-island or export markets. These coconuts are usually of sorted q
uality. They are also subject to more stringent standards and regulations from the buyers.
Processors are the actors who transform coconuts into various products, such as copra, white copra, ch
arcoal, desiccated coconut, coconut milk, coconut cream, nata de coco and others. Small processors mainl
y process off-grade coconuts that are rejected by medium and large processors due to their low quality or
small size. These coconuts are often used to make copra, white copra and charcoal, which are lower-value
products. Some small processors also utilize the coconut water to make nata de coco, which is a fermente
d product made from bacterial cellulose. Medium and large processors have more advanced technology a
nd equipment to process coconuts into higher-value products, such as desiccated coconut, coconut powder,
coconut milk, coconut cream and coconut beverage. These products are mostly marketed as commodities
to other industries, such as food, beverage, cosmetic and pharmaceutical industries. However, some medi
um and large processors also produce branded end products for retail consumers.
The size of the coconuts also affects their distribution and processing. Smaller hybrid coconuts (9-10 c
m meat diameter) are generally channelled to small processors who can make use of their thin meat to ma
ke edible white copra and charcoal. The coconut water from these coconuts is also suitable for nata de coc
o production. Larger native coconuts (11-12 cm meat diameter) are preferred by medium processors who
can extract more meat and milk from them. These coconuts are also more attractive for domestic and exp
ort markets as fresh coconuts.
Coconut coir is a product that has many advantages as an industrial raw material, such as being biodeg
radable, renewable, and versatile. However, in Indragiri Hilir, this product has not been fully utilized and
developed. Some small processors have tried to make coco fiber and coco peat from coconut coir, but the
y have faced difficulties in marketing their products to the domestic and international markets. They lack
access to information, technology, capital, and distribution channels. In addition, the use of coconut wood
is still limited to use for building materials and local furniture, despite its high quality and durability. Coc
onut wood from Indragiri Hilir is better quality than coconut wood from other regions that injure coconut
trunks as climbing sites, which reduces the strength and lifespan of the wood. However, the availability of
coconut wood is not continuous because it depends on replanting of old coconut trees, which takes time a
nd resources. Therefore, there is a need to increase the awareness and demand for coconut coir and cocon
ut wood products from Indragiri Hilir, as well as to improve the capacity and competitiveness of the small
processors.
4.2. Assessment of sustainability of the CSC
The CSC in Indragiri Hilir Regency has moderate prospects for long-term sustainability. This is largely d
ue to the processing and farming stages of activities, which have a relatively higher level of development
(Table 3). The processing activities enhance the value and quality of the coconut products from the farms,
and thus improve the income and welfare of the farmers. However, the CSC also faces some major proble
ms, especially in the marketing stage, which has low sustainability. The environmental and social aspects
of the CSC are moderately sustainable, but the economic aspect is the most vulnerable and critical. Moreo
ver, the economic aspect of farming is also low in sustainability. Based on these findings, the priority area
s for improving sustainability are the economic and environmental aspects of marketing, as well as the ec
onomic aspect of farming.

Table 3. The sustainability indices* of CSC

Aspect
Stage All aspects
Environment Social Economy
Farming 52 73 50 56
Processing 63 79 56 65
Marketing 42 75 40 49
All stages 57 75 54 61
*More than 75-100: high sustainability
More than 50-75 : moderate sustainability
More than 25-50. : low sustainability
From 25 or less : very low sustainability

The most common challenges faced by the industrial sector, especially the SMMEs, is how to market t
heir products effectively and efficiently. Although their products have been produced with good quality a
nd have met the market demand, they are often sold as generic commodities without any differentiation or
branding like SMMEs of coconut industry in Indragiri Hilir. This results in low and uncertain added value
and profit margin for the producers. Moreover, the relationship between the producers and the upstream a
nd downstream actors, such as farmers and distributors, is weak and short-lived. There is no long-term col
laboration or contract that can ensure mutual benefit and sustainability. Therefore, it is important for the i
ndustrial sector to implement marketing strategies that can enhance the value proposition and competitive
advantage of their products, as well as to establish strong and lasting partnerships with other stakeholders
in the supply chain.

4.3. Institutional capacity building strategies

According to the sustainability assessment of the CSC, marketing activities had the lowest sustainability i
ndex among all the activities, followed by farming and processing activities. These activities also perform
ed poorly in the economic aspect of sustainability. Hence, to improve the sustainability of the CSC, marke
ting activities should be prioritized for improvement, along with farming and processing activities. Institut
ional capacity building was proposed as strategies to support the improvement of sustainability of the CS
C.

4.3.1 Institutional capacity building strategy in marketing

The marketing of coconut products faces various problems particularly in terms of economic and environ
mental factors. The sustainability of coconut marketing from economic aspect is the most vital issue (Tabl
e 4), as the current branded final products is dominantly manufactured by large-scale industries, in contras
t, the products of SMMEs, mostly consist of semi-finished goods, which are still confined to commodity
market. This situation implies that SMMEs must deal with the high uncertainties, which in turn effect on i
nstability of the demand and supply of coconut raw materials from the farmers. Therefore, it is essential t
o improve and elaborate the marketing strategies and policies for coconut products, especially those produ
ced by SMMEs, to enhance their competitiveness and profitability in the global market.
Considering the current scenario, it's imperative to craft a marketing strategy that adeptly addresses t
he volatility of pricing. This can be achieved by leveraging a multifaceted approach that includes strength
ening brand identity, harnessing the power of digital marketing channels, positioning coconut products as
eco-friendly alternatives, and fostering robust relationships with key industry players. By focusing on bra
nd development, companies can create a resilient image that withstands market fluctuations and resonates
with consumers' evolving preferences. Digital marketing efforts should be intensified to reach a broader a
udience efficiently and cost-effectively, utilizing analytics to tailor campaigns for maximum impact. Pro
moting coconut products as sustainable choices taps into the growing consumer consciousness about envir
onmental stewardship, potentially expanding market share. In addition, establishing strategic alliances wit
h stakeholders ensures a collaborative effort towards stabilizing prices and securing supply chains, ultimat
ely benefiting all parties involved.
Refer to the sustainability indices (Table 4), almost all indicators of marketing from economic aspect b
ecome key factors in improving the sustainability of CSC. These indicate that almost all-important market
ing activities from economic aspects have not been widely carried out by SMEs, particularly developing
marketing strategy, branding, digital marketing, and partnerships with stakeholders. In addition, marketin
g activities from the environmental perspective have not been widely implemented by SMMEs, even thou
gh these activities can open up opportunities to increase added value, such as promoting coconut products
as green products that are produced using renewable fuels dan eco-friendly packaging. With these key fac
tors, an institutional capacity building initiatives can be developed by developing a digital marketing strat
egy supported by partnerships among processors with farmers and distributors by promoting coconut prod
ucts as green products. To address the low sustainability of the key factors, it is needed initiatives in colle
ctive actions and institutional capacity building.

Table 4. Priority of marketing activities to accomplish sustainable CSC

Sustainability Sustainability ind

Aspects Activity indicators Priority
index ex
1. Promoting processed coconut products as
25 1
green (natural) products
2. Eco-friendly packaging for processed coco
Environment 43 50 2
nut products
3. Eco-energy utilization in collecting and di
50 2
stributing of coconut and products
1. Educating coconut product values to the so
75 -
ciety
2. Contributing added values benefiting loca
Social 75 75 -
l communities
3. Generating job opportunities benefitting c
75 -
ustomers, community and society at large
a. Generating added value and profit by appl
50 2
ying marketing strategy
b. Developing products to penetrate market 75 -
Economy 40 c. Use branding as strategy in marketing 50 2
d. Digital marketing transformation of cocon
25 1
ut products
e. Developing partnership particularly with f
25 1
armers and distributors
 To foster collective action and enhance the institutional capacity of the coconut marketing, it is essenti
al to implement policies and interventions that leverage the potential of digital technologies. A comprehen
sive digital marketing strategy can help to increase the visibility, accessibility and competitiveness of coc
onut products in domestic and international markets, as well as to improve the communication, coordinati
on and collaboration among different actors in the value chain. Some of the key elements of a digital mar
keting strategy for the coconut sector are:
1. creating and maintaining a user-friendly and informative website that showcases the diversity, quality
and benefits of coconut products
2. developing and implementing a social media plan that engages with customers, partners and stakehol
ders through relevant and attractive content,
3. using online platforms and tools to facilitate e-commerce, traceability, quality assurance and customer
feedback, and
4. providing training and support to coconut producers and marketers on how to use digital technologies
effectively and efficiently
The successful capacity building in digital marketing that includes branding, which can create added
value and increase profits in a more stable manner. The marketing strategy for processed coconut product
s should also leverage digital marketing tools and platforms, which can expand their access to domestic a
nd global markets, and help them reach more potential customers and partners. Digital marketing adoptio
n can also reduce their operational costs, improve their customer service, and enhance their brand awaren
ess and reputation.

4.3.2. Institutional capacity building in farming

According to the assessment, the economic aspect of coconut farming in Indragiri Hilir was the weakest a
spect in terms of sustainability. This aspect had the lowest score among the environmental and social aspe
cts that were evaluated (Table 5).
In the economic aspect the farmers lacked effective price risk management practices. The price of coc
onut was determined by the spot market, which made the farmers vulnerable to fluctuations and uncertain
ties. The farmers often had to sell their coconuts at unfavourable prices particularly due to the urgency of
their needs, such as paying debts or meeting household expenses. Moreover, the farmers faced constraints
in managing costs, as they had to reduce the intensity of maintenance to save money. This, however, coul
d lead to lower productivity and quality of coconuts, which in turn could affect their income and profitabil
ity. The lack of price management is a problem that requires farmers to cooperate and coordinate their act
ions. However, there is no effective institution that can support and enable such collective action among f
armers. To address these issues, there is a need for policies and interventions that can foster collective acti
on among coconut farmers and other stakeholders. Collective action can enhance the institutional capacity
of the coconut farming by improving access to information, technology, credit, and markets. It can also fa
cilitate coordination and collaboration among different actors to ensure quality standards, value addition,
and fair trade. By strengthening the institutional capacity of the coconut farming, policies and interventio
ns can help increase the profitability of coconut farming by stabilizing the coconut price and enhancing its
competitiveness in the global market.
The environmental sustainability of coconut farming in Indragiri Hilir Regency has low to moderate d
ue to several reasons. First, most farmers intercrop coconut palms with other crops, such as areca nut pal
ms. This practice creates a diverse and balanced farming system that benefits the soil, the plants and the a
nimals. It also increases income and food security for the farmers. Second, most farmers avoid burning cr
op residues, so it can improve the soil fertility, moisture retention and carbon sequestration. Third, most f
armers conserve water resources by maintaining efficient irrigation systems. These systems not only provi
de adequate water for coconut palms and other crops, but also serve as a means of transporting coconut to
processing and selling points. One of the key issues that needs to be addressed in the development of the
coconut industry is the renewal (replanting) of aging coconut plantations, which have low productivity an
d quality. Many farmers have neglected this aspect of coconut cultivation, either due to lack of awareness,
resources, or incentives. Therefore, it is essential to raise the awareness of farmers about the benefits of re
planting old coconut trees with improved varieties that can produce more and better coconuts. Moreover, i
t is necessary to provide adequate technical and financial support to farmers who are willing to undertake
this process, as well as to create a conducive market environment that can reward their efforts.

Table 5. Priority of farming activities to accomplish sustainable CSC

Sustainability Sustainability Priority

Aspects Activity indicators
index index
1. Land resource conservation 75 -
2. Water resource conservation 75 -
3. Eco-friendly weeding application 25 1
4. Balanced utilization of fertilizers 50 2
Environment 52 5. Eco-friendly pest management 75 -
6. Biodiversity preservation 50 2
7. Waste management 50 2
8. Replanting commitment 25 1
9. Harvesting management 50 2
1. Accessing to basic agricultural rights (la
50 2
nd, capital and technology)
2. Involving of local labours in coconut far
100 -
Social 73 ming activities
3. Participating in social working 75 -
4. Fulfilling of coconuts for local communi
75 -
ty needs
1. Price risk management 25 1
2. Managing cost effectiveness 75 -
Economy 50
3. Diversifying sources of income 75 -
4. Participating in cooperatives 25 1

The social sustainability of coconut farming in Indragiri Hilir is moderate. However, there is lack of ac
cessibility to agricultural rights such as land, capital and technology, particularly the lack of adequate gov
ernment support, such as access to financial services, subsidies, extension services, and other protections.
To address these issues, it is crucial to involve the community in decision-making processes and encourag
ing their participation. This collective action can strengthen the community engagement that can help brid
ge the gap between farmers and government support. While farmers may have limited access to financial
services, subsidies, and extension services, a supportive community can provide alternative solutions and
resources. This collaborative approach not only empowers farmers but also promotes knowledge sharing
and innovation within the community. In addition, community engagement fosters unity and a shared pur
pose, which contributes to the long-term sustainability of coconut farming.
The policies and intervention to improve the sustainability of coconut farming by the collective actions
include:
1. Providing adequate and accessible extension services that deliver relevant and timely information, trai
ning and technical assistance to farmers on topics such as crop management, pest control, soil health, c
limate change adaptation, market access and value addition.
2. Promoting participatory and inclusive approaches that involve farmers and their representatives in the
design, implementation and evaluation of policies and programs that affect their livelihoods, such as la
nd tenure, water management, input subsidies, credit schemes and insurance mechanisms.
3. Supporting the formation and strengthening of farmer organizations, cooperatives and networks that en
able collective action, knowledge sharing, bargaining power and advocacy among farmers and with ot
her actors in the value chain.
4. Enhancing the governance and accountability of public institutions and private actors that regulate and
influence the agricultural sector, such as ministries, agencies, research institutes, universities, NGOs, a
gribusinesses and donors. This can be achieved by ensuring transparency, participation, responsivenes
s, rule of law and anti-corruption measures.
5. Investing in human capital development and innovation that foster the skills, knowledge and creativity
of farmers and other stakeholders to cope with emerging opportunities and challenges in the sector. Th
is can be done by supporting formal and informal education, vocational training, research and develop
ment, extension and innovation platforms.

4.3.3. Institutional capacity building in processing

According to the processing stage assessment, the economic aspect has the lowest sustainability index, ho
wever some weak activities are also indicated in all aspects. Therefore, we need to take actions to enhance
sustainability (Table 6).
To enhance economic sustainability, it is essential to improve the quality and diversify of products, as
well as to increase access to capital for conducting both activities. Improving product quality, diversificati
on, and value added requires a higher capacity of knowledge (Alaerts, 2009), skills (Santos et al., 2021), a
nd entrepreneurship
(Agri et al., 2018; okalo et al., 2020; Emenike et al., 2022; Ogamba, 2019; Orser et al., 2019)
, so that consumer preferences can be taken into account in product development. Moreover, pr
oduct development entails additional capital, which can be obtained from various sources such as loans, g
rants, or partnerships.
Reducing air pollution and implementing waste management can be done to reduce environmental imp
acts (Hajam et al., 2023; Perkumien et al., 2023) that can improve processing sustainability. The impleme
ntation of these activities requires collective action to make the impact is more significant, so there must b
e institutions that can encourage and raise awareness to reduce pollution as a Joint Movement.
To enhance the sustainability of processing activities is to minimize the environmental impacts caused
by air pollution and waste generation. These impacts can affect the quality of natural resources, human he
alth, and climate change. Therefore, reducing air pollution and implementing waste management are esse
ntial steps to preserve the environment and ensure the long-term viability of processing. However, these st
eps cannot be achieved by individual efforts alone. They require collective action from various stakeholde
rs, such as governments, businesses, communities, and consumers. To facilitate collective action, there is
a need for institutions that can promote and coordinate environmental initiatives, such as policies, regulati
ons, incentives, education, and campaigns. These institutions can foster a culture of environmental respon
sibility and create a joint movement to reduce pollution and waste.
Table 6. Priority of processing activities to accomplish sustainable CSC

Sustainability i Sustainability i
Aspects Activity indicators Priority
ndex ndex
1. Water utilization efficiency in proc
75 -
essing
2. Moderation of air pollution emissio
Environment 63 50 2
n
3. Waste management 50 2
4. Renewable energy utilization 75 -
 1. Prioritizing raw materials from local
100 -
community
2. Involving of local labours in processi
Social 79 100 -
ng activities
3. Providing a proper wage 50 2
4. Involving in partnership 50 2
1. Managing cost effectiveness in proce
75 -
ssing
2. Improving product quality to meet co
nsumers' requirement with the best p 50 2
Economy 56 ractices
3. Diversifying of processed coconut pr
50 2
oducts to reduce risk
4. Accessing outer capital to invest in p
50 2
rocessing
In improving sustainability of the social aspect of processing involves the well-being and empowerme
nt of the workers and the community. A key factor in this regard is ensuring that the workers receive fair
and adequate compensation that meets or exceeds the minimum wage standards established by the local a
uthorities. This would not only improve the living conditions of the workers, but also enhance their motiv
ation and loyalty to the company. Another factor is developing strong and mutually beneficial partnership
s with the coconut farmers who supply the raw materials for the production process. This would help to se
cure a steady and reliable source of high-quality coconuts, as well as provide an alternative market for the
farmers to sell their produce at a reasonable price. Furthermore, such partnerships would foster a sense of
collaboration and trust between the company and the local community, as well as promote the conservatio
n and management of the natural resources.
To enhance the sustainability of CSC from the processing stage, several measures are required to addr
ess the economic, environmental and social challenges that affect the coconut sector. These measures incl
ude:
1. Collective action among coconut farmers, processors, traders and other stakeholders to improve their
bargaining power, access to markets, quality standards and innovation. Collective action can also fost
er social cohesion, trust and empowerment among the coconut community.
2. Institutional capacity building to strengthen the governance, policies and regulations that support the
coconut processing. This involves enhancing the coordination, collaboration and communication amo
ng different actors and institutions, as well as promoting transparency, accountability and participatio
n in decision-making processes.
3. Adoption of best practices and technologies that reduce the environmental impact of coconut processi
ng, such as minimizing waste, water and energy consumption, recycling by-products and using renew
able energy sources. These practices can also improve the efficiency, productivity and profitability of
the coconut sector.

5. Conclusion
1. Institutional capacity building is crucial factor in enhancing sustainability of the CSC (the coconut su
pply chain) in Indragiri Hilir. The collective actions among actors and organizations is needed in the i
nstitutional capacity building to strengthen the governance, policies and regulations that support the C
SC, particularly to enhance the adoption of the best practices in order to improve sustainability of CS
C by investing in human capital development and innovation that foster the skills, knowledge and cre
ativity of farmers and other stakeholders to cope with emerging opportunities. This can be done by su
pporting formal and informal education, vocational training, research and development, extension and
innovation platforms.
2. The CSC consists of three main stages: farming, processing and marketing. Each stage has different i
mpacts and implications for the sustainability of the CSC, which can be measured by environmental,
 social and economic criteria. The CSC achieves a moderate level of sustainability overall, with the pr
ocessing stage and the social aspect being the most sustainable components. The marketing stage, on t
he other hand, is the weakest link in the CSC's sustainability, as it faces challenges in terms of econo
mic viability and environmental responsibility. Furthermore, there are some activities in each stage th
at pose risks or opportunities for enhancing the CSC's sustainability.

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