Fixing Pati Sari's supply chain

January 2015
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It is rare for PT Pati Sari (Pati Sari) to show its legal documents and details of its internal process to outsiders.  But in a meeting held on 12 November 2014 between Pati Sari and Musim Mas, the executives of Pati Sari did not hesitate to be transparent and frank even though they  were fully aware that the meeting would most likely change the way their company has been running its business since 1997.

Pati Sari was at the center of a controversy due to its alleged sourcing of Fresh Fruit Bunches (FFB) from the fragile Leuser Ecosystem.

In a November 2014 report, the US-based NGO , Rainforest Action Network (RAN), stated that Crude Palm Oil (CPO) produced from FFB originating in the Leuser Ecosystem has been supplied to major buyers including Musim Mas, Wilmar and Golden Agri-Resources. Pati Sari was one of the Palm Oil mills reported to be sourcing FFB from a Plantation company, PT Mestika Prima Lestari (Mestika), located inside the ecosystem.

In response, the Musim Mas Group announced on 13 November 2014 that it would conduct an investigation into the supply chain of Pati Sari and would temporary halt buying from them. There was an added urgency to this investigation as the Group has long been a supporter and sponsor of the restoration of Leuser National Park through its cooperation with the Indonesian NGO Orangutan Information Centre (OIC) and its international NGO partner Sumatran Orangutan Society (SOS), and certainly would not want to see that effort being jeopardised.

A Musim Mas audit team was immediately sent to the Palm Oil mill of Pati Sari to go through its supplier records in order to understand its supply base in detail. From the investigation, it was found that 3.87% of Pati Sari's FFB was sourced from Mestika and 30% from Smallholders . The senior management of Pati Sari demonstrated a genuine willingness to be transparent and cooperative in the investigation. It has also decided to stop the purchase of FFB from Mestika.


Meanwhile, the Acehnese Government has also requested that buyers exercise special care when imposing bans on the purchase of the produce from Palm Oil mills in the relevant area so that the livelihoods of Smallholders would not be adversely affected. With the guarantee from Pati Sari that they would continue their efforts to exclude all FFB produced illegally from Leuser Ecosystem, Musim Mas has cautiously agreed to reopen sourcing of CPO from them. The investigation on the source of the remaining 60% FFB would still continue.

The problems associated with the supply chain of Pati Sari represents the challenge in balancing the needs of environmental protection with the social obligation owing to Smallholders . Many Palm Oil mills across Indonesia would face similar problems to Pati Sari in pinpointing 100% traceability of supply, which may include environmental offenders, as well as genuine Smallholders . While an easy solution will be to stop purchasing from these mills, Musim Mas feels that it has a social responsibility to help Smallholders rather than destroy their livelihoods. It will study each similar case in the future to try to find a solution to minimise  the impact on both Smallholders and the environment.
 

Workshop with Pati Sari

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