90% of the palm oil that we trade and process is supplied by third parties. We invest significant resources to trace the source of our oil and to support our suppliers in adhering to our Sustainability Policy. We focus on positive engagement by delivering tailored solutions and technical assistance to build our suppliers’ capacity and enhance their (environmental) performance.
We group and identify our third-party suppliers through their parent company i.e. a supplier group of palm oil companies with related ownership. We adopt the traceability to plantation (TTP) approach to identify their ownership profile.
Our transformation efforts are most effective when they work ‘top-down’ through the parent companies. We first convince the Board or management of the supplier group to adopt a sustainability roadmap. We can then cascade these changes through the chain of command to the group’s network of plantations and mills throughout Indonesia.
We engage them via two target groups:
- Primary Suppliers – These are usually medium to large-sized companies which supply a significant volume of oil to us. We engage actively with these key suppliers to develop a sustainability roadmap. We work with them to ensure that it is implemented, by building compliance and monitoring matrix to measure their performance.
- Secondary Suppliers – These are usually small to medium-sized companies which supply a limited volume of oil to us. We monitor and review their sustainability commitments through self-assessment questionnaires and remote, satellite monitoring (of deforestation activities). When grievances were raised, we would engage the suppliers to resolve all pertinent issues.
Driving real change involves actively engaging with our suppliers and providing them with the appropriate support to commit to our Sustainability Policy. We have developed two levels of engagement: our primary supplier and secondary supplier.
Although the engagement plan for each supplier varies, the key steps and processes are:
- Development of supplier profile
- Supplier participates in our Self-Assessment Tool (SAT)
- Gap analysis: Evaluate compliance of the supplier profile and SAT results against our Sustainability Policy
- Tailored roadmap/Action plan to address gaps identified (for suppliers with no grievance)
- Controlled purchase protocol put in place for suppliers with grievances
- Socialize roadmap with supplier
- Ongoing (remote) monitoring, and site verifications (if necessary) and evaluation
- Evaluation to determine if trading relationship could be resumed (for suspended suppliers)
Our primary suppliers are identified based on total procurement volume and strategic commercial partnerships. A roadmap with implementation milestones serves as the basis of our engagement. This provides the framework for a timebound plan for demonstrating and monitoring compliance with our Policy. As each supplier is at a different stage of their sustainability journey, the entry point, action plan and associated timelines would vary.
We have established additional tools to aggregate information and measure the progress of our suppliers:
- Group-level supplier profiles – details company operations and potential sustainability risks to identify roadmap entry points.
- Independent or third-party site verifications, conducted on a sampling basis – ensures Policy compliance among third-party FFB and oil suppliers.
- Supplier self-assessment tool – facilitates identification of potential risks at mill level.
- Remote monitoring of supplier concessions – monitors deforestation activity.
- Due diligence on prospective suppliers – conducted prior to onboarding.
We are continuously engaging with our main suppliers on a group level, and prioritizing mills within particular, high-risk landscapes for these groups. We conducted verifications on at least one mill for every 10 supplier parent company groups. We will continue to conduct supplier workshops on Sustainability, make capacity-building tools and training available to suppliers to support them in fulfilling their roadmap.
For our secondary suppliers, we aim to address non-compliances against our Sustainability Policy. This includes:
- Risk assessments – evaluate geospatial landscapes for potential non-compliances. To date, assessments have been conducted in Riau, South Sumatra and Central Kalimantan, which are also our priority landscapes.
- Training – increase suppliers’ knowledge about sustainability-related risks and best practices. To date, we have conducted workshops for more than 200 companies.
- Remote monitoring – monitor suppliers’ concessions via satellite imagery for evidence of deforestation activity. We work closely with Aidenvironment which provides a bi-monthly update on deforestation cases.
- Grievance management – resolve supplier grievances through our Grievance Mechanism.
- Media monitoring – identify sustainability concerns raised in relation to our suppliers.
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