Promoting the Sustainable Production of Palm Oil Through Dealer Engagement
Musim Mas’ efforts for the sustainable production of palm oil extends not just to its supply base but also beyond. The group aims to engage all its stakeholders in the supply chain. The group has begun extending its efforts to third-party FFB (Fresh Fruit Bunches) dealers, who typically source from independent smallholders and smaller plantations. Musim Mas believes training FFB dealers on compliance with the sustainability principles of “No Deforestation, No Peat, and No Exploitation (NDPE) will create exponential value for the sustainable production of palm oil as the dealers can, in turn, train the smallholders they source from.
From Smallholder Farmers to Downstream Refineries: The Long Palm Oil Supply Chain
The palm oil supply chain is long and complex. Its production, milling, and refining involve many stakeholders and multiple layers of intermediaries. Approximately half of the primary growers are smallholder farmers who cultivate the crop and harvest the Fresh Fruit Bunches (FFBs). FFBs then move through sub-agents, dealers, and more prominent supplier traders before reaching larger companies for further processing. After processing, the crude palm oil is transported to refineries, where it is processed into derivatives that can range for emulsifiers for beverages to fatty alcohols for cleaning agents and many others.
Ensuring traceability and sustainable practices along the supply chain is challenging. Hence, promoting NDPE principles to all stakeholders across the supply chain is vital in applying sustainable principles robustly and consistently.
Helping Smaller Dealers Get on the Sustainable Production Journey
Recognizing the significance of having an NDPE-compliant palm oil supply chain, Musim Mas has started training dealers, who are the intermediaries between the smallholder farmers and companies down the supply chain who mill and refine palm oil. The training aims to ensure that NDPE principles are adopted across the supply chain and that there is robust implementation.
Dealers source from hundreds of sub-agents and smallholders, forming an extensive network of connected stakeholders. By empowering these dealers with NDPE knowledge, they, in turn, can educate and encourage their suppliers to adhere to sustainability practices, extending the impact far beyond one company’s immediate reach.
Workshop for Dealers
Beginning in 2020, Musim Mas, along with other palm oil companies in Malaysia, contracted consultants at Proforest to engage palm oil dealers for an exercise to increase Traceability-to-Plantation. The group used methods such as mapping, establishing sourcing relations, gathering baseline data for dealers to understand their needs, promoting NDPE principles and implementation in their FFB supply, and encouraging certification uptake.
As of June 2023, mapping of the supply base and sourcing relationships have been established, and the needs of dealers for sustainable and efficient production have been established.
The program was followed by a training workshop and discussion conducted in Muar, Malaysia, in June 2023 by Proforest. This was in partnership with palm oil producers with operations in Malaysia.
Malaysia accounts for 6% of the group’s procurement needs, with 93% of the group’s CPO sourced from Indonesia. Musim Mas has implemented similar programs in Indonesia, and the group is now embarking on its program for its Malaysia supply.
The voluntary participation by palm oil dealers is encouraging, and Musim Mas hopes to extend its training efforts to other regions in the future. Musim Mas and its peers are committed to collective efforts to drive meaningful change throughout the palm oil sector.