Oct 26, 2016 - Upstream (Gabon). ⢠Awala plantation and mill in Gabon achieve RSPO certification in August 2016 and pa
Interim Progress Report on Olam Palm Sustainable Supply Chain and Traceability: October 2016 Contents: 1. Highlights since the launch of our targets stated in our Palm Policy (June 2015) 2. Progress report on sustainable upstream development 3. Progress report on third party sourcing: road map for achieving end-to-end sustainable supply chains in palm by 2020
1. Highlights since the launch of our targets stated in our Palm Policy (June 2015) Upstream (Gabon)
Awala plantation and mill in Gabon achieve RSPO certification in August 2016 and palm kernel crushing mill achieves RSPO supply chain certification in July 2016 Two High Conservation Value assessments independently assessed and peer-reviewed in line with HCV Resource Network’s Quality Control Procedures Sotrader – the JV with the Republic of Gabon to develop co-operative smallholder farming – joins RSPO and completes ESIA, HCV (see bullet 2) and FPIC procedures. Public consultation for the RSPO New Plantings Procedure will be completed by 26th October 2016
Third party trading and processing
100% of Olam third party suppliers have signed the Olam Supplier Code or have robust traceability Codes in line with our principles. 90% are RSPO members Since our time bound commitment to move towards fully sustainable supply chain for 3rd party trading commenced, our supplier base has been reduced from 48 in 2014 to a total of only 11 in 2016 as the suppliers who were unable to show compliance to our Supplier Code (or demonstrate they had a similar Code for ensuring traceability and sustainable supply) were removed from the supply chain. On track for 2016 traceability target for Crude Palm Oil and Palm Kernel Oil Partnership with World Resources Institute underway in 2016 to independently assess and rank mills based on environmental risk factors to inform sustainable sourcing and prioritise supplier engagement – 800 mills already identified from 3 suppliers for UK processing facility Updated our Sustainable Palm Oil Policy to make our commitment to ‘no fire’ and ‘no paraquat’ more explicit.
2. Progress Report on Sustainable Upstream Development All of Olam’s upstream developments are in Gabon, Central Africa, where a well-managed and wellplanned plantation sector is a critical foundation for national development, as part of a diversified economy, and will also contribute effectively to long-term biodiversity and forest conservation. In 2010, Olam entered into a joint venture with the Republic of Gabon to develop sustainable palm plantations (Initially at 70:30, Olam:Republic of Gabon and subsequently reduced to 60:40). Olam Palm Gabon (OPG) is now managing a total area of 111,419 hectares (ha), setting aside more than 50% of the land to protect HCV areas, riparian buffers and wetlands. Upon reaching full production, yields of up to 24 metric tonnes of fresh fruit bunches (FFB) per hectare and 5.2 metric tonnes of oil per hectare can be expected. As of September 2016, OPG has planted nearly 37,749 ha of high-yielding palm varieties (i.e. 16,000 ha since our previous Palm Policy update in June 2015), provided jobs for over 6,000 people in rural areas, and built schools, teacher housing, hydraulic pumps, dispensaries, and access roads
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for local villagers. It contributes directly 1.80 M USD per month in wages, transforming the local economy where there were previously almost no jobs. In August 2016 OPG bought palm oil assets from SIAT Gabon (palm plantation, mill, refinery and associated infrastructure near Makouke, Gabon) and has put a team in place to bring the entire operation into RSPO certification by 2019. Additionally, in 2014 Olam entered a second joint venture with the Government (49:51 ownership by Olam/RoG respectively) to develop co-operative smallholder farming and revitalise village agriculture in Gabon. The new company, Sotrader, is developing co-operative palm plantations under a nucleus/outgrower model and has completed the due diligence process for 30,000 planted ha of palm in a predominantly savanna landscape in Ngounié Province, S. Gabon, close to the Olam Mouila plantations. Sotrader is also contributing to food security by creating village-based cooperative staple crop farming, with more than 15,000 cooperative members enrolled and 134 cooperative land titles issued to members. Progress against our upstream targets:
We remain committed to 100% RSPO-certified Palm from our own joint venture plantations in Gabon (Olam Palm Gabon by 2018 and Gabon GRAINE outgrower programme by 2020). Our first certification milestone was announced in October 2016 for the Awala Plantation and a palm kernel crushing mill.
To date (October 2016), we fully comply with the RSPO New Plantings Procedure (inclusive of full ESIAs, HCV assessments and Free, Prior and Informed Consent activities) for all our new upstream operations and are on course to meet our 100% RSPO certified target for Olam Palm Gabon.
In the last year, Sotrader joined the RSPO, and we completed the ESIA, HCV and FPIC procedures for Sotrader Palm and will complete the RSPO New Plantings Procedure by 26th October 2016. We are therefore on track for 100% compliance with RSPO for Sotrader.
Our upstream operations in Gabon are fully compliant with our Commitment to Forest Conservation, as expressed in our Sustainable Palm Policy. In line with our continuous improvement policy, the following steps have being taken:
As of January 2015, we committed to having all our High Conservation Value (HCV) assessments carried out in compliance with the HCV Resource Network’s quality control process, i.e. conducted by independent assessors and peer reviewed as required per the HCV Assessor Licensing Scheme (ALS). We have since had 2 full assessments OPG “Lot 3” and Sotrader “Ndende” approved by the HCV ALS.
In January 2015, Olam invited the international High Carbon Stock Study Group to work together with us and the Government of Gabon to initiate a High Carbon Stock (HCS) process that is suitable for a forest rich nation with a nascent agricultural economy. They published their findings in December 2015 and we can proudly report that the HCS team found the Mouila Plantations to be climate- and carbon-positive, taking into account the balance of carbon emitted in land preparation and carbon stored in our plantations and regenerating forests in our HCV areas. Olam’s Mouila plantations should fix >1.3M tC (4.8 M tCO 2 eq) from the atmosphere over 25 years: it is the only palm development globally that is significantly climate-positive as assessed by an independent third party. Our data and their findings contributed to the development of a national carbon strategy, under the leadership of the Gabonese Government’s Climate Council.
We have also transparently provided our data to the HCS Approach Steering Group in order to contribute to a convergence of views on the definition and measurement of High Carbon Stock forests.
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LiDAR mapping was conducted to identify vegetation cover prior to all development and determine sustainable land use; advance technology including DRONE is applied to monitor land cover within concessions.
3. Progress report on third party sourcing: road map for achieving end-to-end sustainable supply chains in palm by 2020 Understanding the third party supply chain context for traceability and improving practices Traceability is the first step towards sustainable supply chains. Olam sources the majority of its third party supplies of palm oil from Indonesia: in 2016 we physically procured and processed 250,000 tonnes from a total global production of 62 million tonnes. Indonesia produced about 32.5 million tonnes of crude palm oil in 20151, which is produced by about 50% large-scale plantations and 40% managed by 2 million smallholders, and the remaining area owned by State. Smallholders sell their Fresh Fruit Bunches (FFB) to a mill and there are also a large number of independent growers and mills which are located far from ports. There are about 4.5 million people directly employed by this sector and another 15 million households derive benefits indirectly by having an interface at various points along the chain. Creating the infrastructure where all of these participants can be linked directly to exports through a fully segregated supply chain is a huge challenge and cannot be accomplished overnight. We also understand that if mills are required to discriminate against smallholders’ FFB (due to their limited capacity to demonstrate compliance to sustainability criteria), adverse social impacts can be expected. Olam has taken a similar approach to ensure end-to-end sustainable supply chains. Olam’s third party sourcing Today, Olam has a total of 14 suppliers from Indonesia and Malaysia for all of our processing and trading business, 11 of whom have signed the Olam Supplier Code, while the remaining 3 have robust traceability Codes in line with our principles. This means that they commit to supplying palm oil that does not negatively impact on human rights or the environment. However, to truly ensure that our supply chains are sustainable, we know that we have to verify them ourselves. Olam has been engaging with suppliers by sharing best practices with them in terms of the Olam Supplier Code and we are partnering with the World Resources Institute (WRI) to identify environmental risk associated to our suppliers’ mill, and their supply base, within a 50km radius. Given that through our mapping exercise with the WRI just 3 suppliers have a sourcing network of 800 mills this is an immense task, hence our year-on-year targets which are listed in the table (Summary table: Progress of specific targets in road map) on page 4. Progress against specific targets in Road Map Traceability of our supply chains follows three key phases: i) ii) iii)
Engagement of all suppliers through commitment to upholding the Olam Supplier Code (OSC) Identification of mill origin and risk assessment Site verification based on identified risks
Our targets are embedded into all of our palm processing and trading business including our facilities located in UK (Olam Food Ingredients processor), Mozambique (Beira and Maputo refinery) and 1
Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture
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Singapore (trading). For processing units located in Gabon (Awala POM, Awala KCP and OPG refinery), we are sourcing from our own plantations, all of which is fully traceable and progressing towards full RSPO certification. Summary table: Progress of specific targets in road map Road Map
Summary of progress
All Palm Oil suppliers to Olam will have signed the Olam Supplier Code by the end of 2015
Completed
Palm Oil supplies will be traced back to the sourcing mill of production through information verified from our suppliers
Commenced in 2015 – see specific targets below
We will complete the work we started in 2014 on full traceability of our sources of Crude Palm Oil and Palm Kernel Oil (CPO and PKO) by the end of 2018. This will be based on verified targets for the following years: 2016 – 30%; 2017– 50% and 2018 – 100%
Our physical volumes this year are expected to be 250k MT for 2016 and we are on track to achieve 30% target for traceability. At the time of reporting, our Mozambique facilities have not met 30% traceability target that is due by 31 December 2016.
Traceability of Palm Oil derivative products will be completed by the end of 2020. This will be based on the following verified targets: 2017 – 30%; 2018 – 50% and 2020 – 100%
Mill origin for UK processing facility is 100% mapped.
We will progressively work with our suppliers to eliminate uncontrolled and unsustainable sources by the end of 2020.
See progress report below.
Traceability back to plantations and site verification is underway.
In the chart below you can see an overview of the progress made across the three phases of our traceability approach. Most progress has been made on identifying the mills from which our suppliers are procuring the oil they sell to us. Progress on site verification will begin in 2017.
UK Site Verification Singapore
Mill Identification OSC
Mozambique
0
20
40
60
80
100
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In 2016, Olam partnered with the World Resources Institute (WRI) to independently assess and rank the identified mills based on environmental risk factors to inform sustainable sourcing and prioritise supplier engagement. The result identifies past and future deforestation impacts on primary forest, peatland, protected area, high carbon density forest and area with fire incidents associated with a mill sourcing area within a 50 km radius. Out of an initial 800 mills, we have prioritised our next verification step with mills that could possibly cause high environmental risks such as encroachment into protected areas or converting high carbon density area. Olam will continue to engage directly with suppliers who are willing to work towards policy compliance; however uncontrolled and unsustainable sources from suppliers, including sources from potential future peatland conversion and fire risks, are not acceptable so where risks are identified engagement of suppliers will take place to put corrective action plans in place to be adhered to within an agreed timeframe. Those who do not cooperate or make satisfactory progress will be eliminated from the supply chain. It should be noted that the risk assessment results do not identify social issues such as land rights, Free Prior Informed Consent (FPIC) and labour practices stated in Olam’s Palm Policy. Site verification will commence in Q1 2017 to reflect the actual supply base of a priority mill and establish traceability from a mill to plantations/ farms. What do we mean by uncontrolled and unsustainable sources? Olam’s Suppliers Code outlines six key principles, i.e. Commit to corporate governance Guarantee quality of goods and services Uphold labour standard and human rights Respect natural environment Honour local community Ensure compliance For palm products, Olam’s Sustainability Policy further illustrates our specific requirements for our sources. These products shall Commit to forest conservation and reduction of GHG emissions, including no deforestation of HCV, HCS and peatland. Commit to sustainable palm plantations development Commit to implement sustainable supply chain Commit to respect rights of all workers and improving the livelihood of rural communities Commit to transparency
We will publish our next progress report in 6 months’ time in line with the publication of our next Olam Corporate Responsibility and Sustainability Report.
In the meantime, if you have any questions, please do not hesitate to contact us at mailto:
[email protected]
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