Sustainable food production is a critical driver in the transition towards a healthier future for the people and the planet. In the food sector, where climate change is a material risk, companies must address the inefficiencies in their supply chain to reduce the carbon impact of production and consumption. Businesses that fail to put climate-smart strategies as part of their decision-making process are bound to face serious consequences, from reputational damage to long-term supply chain insecurity.
A recent panel discussion on “Supply chain and agricultural emissions” – as part of the Food Navigator Digital Summit 2022 – Climate Smart Food – addressed the links between nutrition, health, biodiversity, and climate and how innovators can respond with new and inventive ways to make food systems less carbon-intensive. The discussion emphasised challenges like deforestation and our need for collective and collaborative action. Six-panel experts from across organisations/institutions (like GAR, Tony’s Chocolonely, and the University of Cambridge) and NGOs (like Rainforest Alliance, Food Navigator, and AidEnvironment) addressed the inefficiencies in the food value chain. They explored innovative options for food production that prove less carbon-intensive.
Traceability and transparency along the supply chain
Traceability is an essential first step in ensuring a deforestation-free supply chain. Our Director of Sustainability and Strategic Projects, Dr Götz Martin, highlighted the importance of transparency in our sustainability journey. He shared that the palm oil supply chain is unique in its way. “It’s interesting if you see the structure of the palm oil industry – it’s fragmented in the upstream (in the plantation), but relatively concentrated (in the processing) in the downstream,” he explained. This varying characteristic, specific to the palm oil business, makes transparency and traceability even more critical to ensure sustainability across its supply chain.
While our mills have been 100 percent traceable since 2017, we are collaborating with our third-party supplier mills, which buy from other smallholders and agents, to trace back and identify the source of our raw materials. The process ensures greater Traceability to Plantation (TTP) and allows us to identify and engage with independent smallholders and upskill and improve their agricultural practices. As of the end of 2021, we have achieved 95 percent TTP for our entire palm supply chain.
We work closely with our suppliers to ensure the implementation of our TTP practices. Our recent supplier support programme, Ksatria Sawit, pairs our supplier mills with ag-tech company Koltiva to help us achieve our 100 percent TTP across our entire palm supply chain. These efforts have been in line with our GAR Social and Environmental Policy (GSEP) since 2016.
As a responsible palm producer, we take a proactive and preventive approach to ensure forest and peatland conservation:
- We were the first palm oil producer to have a Forest Conservation Policy in 2011.
- We reserve 79,900 hectares of conservation area, consisting of High Conservation Value (HCV) areas and High Carbon Stock (HCS) forests.
- We have revegetated more than 1,100 hectares as part of our peat ecosystem rehabilitation project.
- We work closely with the local community in Participatory Mapping (PM) and Participatory Conservation Planning (PCP) to help villages map out critical areas and address local communities’ concerns, needs, and aspirations.
Ultimately, ensuring a traceable palm oil supply chain is an ongoing journey that requires committed collaborative actions from key players in the industry. Having a comprehensive view of our suppliers and the linkages between them allows the company to invest in a more efficient yet resilient supply chain.
Policies and certifications for businesses to implement
Rachael Garrett, Professor of Conservation and Development at the University of Cambridge, said, “The main driver (of deforestation) is the increasing demand for vegetable oils.” She further explained how every case of deforestation differed from the other and required a specialised approach through the right public policy depending on the various degrees of deforestation. Identifying the proper procedures to reduce deforestation requires all actors to acknowledge these structural drivers of deforestation.
In Indonesia, the government has initiated various policies that prohibit forest clearing. It has issued moratoriums on new palm oil plantation licenses, forest fire mitigation practices, land mitigation strategies, ongoing social forestry programmes, and increased action against environmental violations.
“The Indonesian government acted by developing multiple moratoriums to help tackle this cause. At the same time, private sectors have collaborated with civil societies and communities to develop a multi-stakeholder approach and toolkit. We are quite proud that Indonesia has had five consecutive years of decreasing deforestation. In 2020, the country recorded its lowest annual deforestation rate since 1990 – an assuring 75 percent drop since 2019,” said Götz.
Fabian Calvo Romero, Biodiversity Manager, Rainforest Alliance, spoke of the role certifications play in measuring and acting against deforestation. He explained, “Certification is a powerful and scalable tool to transform the supply chain. It can be a mechanism that helps companies and stakeholders identify the risks and measure impact.”
We participate in relevant certification schemes, including the Roundtable on Sustainable Palm Oil (RSPO), International Sustainability & Carbon Certification (ISCC), and Indonesia Sustainable Palm Oil (ISPO). From our supply chain mapping, we know that in 2021, 54 percent of our supplying mills or 58 percent of supply by volume, are RSPO and/or ISPO certified. We use an additional methodology – the No Deforestation, No Expansion on Peat and No Exploitation Implementation Reporting Framework (NDPE IRF) – to track our supply chain’s performance on NDPE and communicate this progress to our stakeholders.
While Indonesia seems to be moving in the right direction to achieve its goals as per its Nationally Determined Contribution (NDCs), this is only the beginning.
Ongoing support to smallholders and suppliers
Smallholders in the palm oil industry are critical players who require the most due diligence, regulation and support. To successfully include smallholders while simultaneously maintaining a high level of traceability and combat deforestation, businesses need to take a context-specific approach specific to the requirement.
“We encourage smallholder farmers to grow subsistence crops for consumption, support food security and generate more income. We see our smallholders as our business partners,” explained Götz.
Through our Integrated Ecological Farming Programme (earlier known as the Alternative Livelihood Programme), introduced in 2016, we teach smallholders and communities sustainable agriculture practices and encourages them to grow their own and more varied subsistence crops to increase food security and self-sufficiency and generate additional income.
Our investment in community economic empowerment and conservation partnerships considers the needs and aspirations of local communities.
We have collaborated with partners like Neste, Earthworm Foundation, and Nestlé to help our smallholders adopt responsible practices, comply with our no deforestation commitments, boost independent smallholders’ sustainability certification, and improve their livelihoods.
While addressing smallholders’ challenges in implementing sustainable agriculture practices, there is no one-fits-all solution. Götz shared a few solutions for tackling these challenges. He mentioned the need to diversify from palm, create more resilient set-ups and raise multiple income sources. We must collaborate with other businesses and the community and develop a multi-stakeholder approach and toolkit that addresses the different challenges in this area.
Götz concluded the panel discussion by saying that our fight against deforestation must be a shared responsibility where everybody has a role. It’s essential to create a more resilient world and to make that happen, we need to care more about each other.
While at the global level, over 1,000 companies from across industries have pledged to take immediate action to halve global emissions, and more than 100 world leaders have promised to combat and reverse deforestation by 2030, it will all have to start from our thinking responsibly and collectively.
We plays an active role in ensuring the sustainable transformation of the palm oil supply chain. Learn more here.
If you want to learn more about our commitment to sustainability, read here.