Palm oil smallholders in Malaysia face several productivity and efficiency challenges due to environmental factors such as soil type, land type, rainfall, temperature, and flooding. These challenges can significantly impact their ability to maintain sustainable and efficient production practices. Many smallholders operate on marginal lands with low soil fertility, which affects the growth and yield of oil palms. These soils often require substantial fertilization and soil management efforts to maintain productivity, increasing the cost and complexity of cultivation. The terrain in some regions can be hilly or uneven, making it difficult to implement mechanized farming practices. Irregular rainfall patterns can lead to periods of drought or excessive rain, both of which negatively impact palm oil yields. Drought conditions stress the palms, reducing their productivity, while excessive rain can lead to waterlogging and root diseases. Effective irrigation and drainage systems are often lacking among smallholders, leading to poor water management. Extreme temperatures, whether too high or too low, can stress the palms and reduce their productivity. Flooding is a significant risk in many parts of Malaysia, particularly during the monsoon season. Floodwaters can damage oil palm roots, reduce soil fertility, and increase the spread of diseases. Floods also disrupt harvesting and transportation, further impacting productivity and efficiency. By including the environmental factors in anlayzing production efficiency of palm oil, it is expected to address the issues and improved practices so that the productivity and efficiency of palm oil production among smallholders in Malaysia can be significantly enhanced. In fact, study on production efficiency on Malaysian palm oil plantation is very few. In this study, we will extend the existing stochastic production framework by including variables representing environmental production conditions in addition to physical inputs to explain production efficiency. Using both primary and secondary data, the environmental variation model using this stochastic production frontier will be developed and be used to investigate the factors affecting the efficiency of palm oil plantation among palm oil independent smallholders. The primary data will be collected from survey on independent smallholders at the states of Johor, Perak, and Pahang and the secondary data (required for environmental variables in the model) will be collected from Malaysian Meteorological Department, Ministry of Natural Resources and Environmental Sustainability. The results are expected to show significant environmental variation to the efficiency of palm oil production and better policies could be recommended to assist independent smallholders to improve their efficiency in production as outlined in the 2024 Budget, which among all, focuses on enhancing sustainability and increasing productivity. Independent smallholder success could hold the key to a stronger and more sustainable palm oil agricultural economy for Malaysia.