Mapping the Origin of Our Palm Oil. Traceability report

Transcription

1 Mapping the Origin of Our Palm Oil Traceability report

2 Table of contents Traceability report July 2014-June 2015 Version December Progress Overview Mapping the IOI Loders Croklaan Supply Chain RSPO Certified Palm Oil Next Steps Internal and External Assurance LLoyd's Register Nederland B.V.-LRQA was commissioned to verify the traceability information in the report: ''Mapping the Origin of Our Palm Oil. Traceability report ". The complete assurance statement of LLoyd's Register Nederland B.V. is available at our website: 02

3 1. Progress Overview At IOI Loders Croklaan we take responsibility in building a traceable, transparent and sustainable palm oil supply chain. We contribute to the advancement of a sustainable palm oil industry as a whole through our role in several industry networks and initiatives. We realize that traceability does not equal sustainability, but knowing the origin of the oil sourced allows us to monitor and engage with our suppliers and transform our supply base into a sustainable supply base that adheres to the same values as listed in our Sustainable Palm Oil Policy. Traceability is step 1 in our 3-step approach towards a traceable, transparent and sustainable palm and palm kernel supply chain. 3-Step Approach Step 1 Step 2 Step 3 Know the origin of the oil Prioritize the mills Execution of on-site verification program 1.1 Step 1: Know the origin of the oil In 2012 we started mapping our entire palm oil supply chain and set a traceability baseline of 74% traced palm oil. For our financial year the overall traceability number increased to 82% (palm oil). We are proud to announce that for our financial year the global traceability number is 94% for all palm oil volumes sourced and 78% for all palm kernel volumes sourced. Direct and indirect sourcing During FY we decided to split our reporting into direct and indirect sourcing to better understand which part of our supply chain is meeting our targets and to help focus our efforts in selecting mills for on-site assessments. We are in direct dialogue with our third party suppliers to further improve the traceability numbers of the indirectly sourced material. 94% of our Palm Oil sourced is traced to mill level 100% traced!! FY 14-15, Global results directly sourced indirectly sourced 38% SG-RSPO certified, traceable to plantation 65% 35% 84% traced Direct sourcing: IOI mills and third party mills sourced via IOI Group Indirect sourcing: Third party mills sourced via third party suppliers (other shippers, processors & traders) 03

4 78% of our Palm Kernel Oil sourced is traced to mill level 85% traced!! FY 14-15, Global results 82% indirectly sourced 17% SG-RSPO certified, traceable to plantation directly sourced 18% 42% traced Direct sourcing: IOI mills and third party mills sourced via IOI Group Indirect sourcing: Third party mills sourced via third party suppliers (other shippers, processors & traders) It should be noted that directly and indirectly sourced oil can be mixed during transportation and processing. However, SG RSPO certified palm oil and palm kernel oil is available upon request. List of mills available on website IOI Loders Croklaan publishes the list of supplying mills on its website ( For each refinery a separate list is published. Our sustainable palm oil sourcing policy is focused on traceable and certified sustainable palm oil. Traceability will guarantee that we know the source of the palm oil for this report to mill level unless specified differently 1. Sourced volumes will qualify as traced volumes if following information is available: 1. Mill name 2. GPS coordinates of the mill 3. Name parent company of the mill 1. Mill level indicates that IOI Loders Croklaan can trace the palm oil and palm kernel oil loads to a set of mills available on our website 04

5 SG-RSPO certified palm oil Significant amounts of SG RSPO palm oil (38%) and SG RSPO palm kernel oil (17%) have been sourced during the reported time-frame. Most of the SG RSPO palm oil (95%) and palm kernel oil (89%) comes from IOI Group owned and managed plantations and is traceable to plantation level. Percentage of total volume imported during FY IOI Loders Croklaan Global SG RSPO certified MB RSPO certified Palm Oil 38% 0% Palm Kernel Oil 17% 5% 1.2 Step 2: Prioritize the mills Over 800 mills have been notified as potential suppliers (direct and indirect) palm oil and palm kernel oil to IOI Loders Croklaan during FY To prioritize our supplying mills for further on-site verification, we have conducted a desktop risk analysis (remote sensing) on our suppliers to see whether they are operating in a high or low sensitive area. Based on the analysis, 30 mills have been classified as higher risk and therefore highest priority for further scrutiny. A classification of higher risk signifies Many of the mills that supplied palm kernel oil to IOI Loders Croklaan also supplied palm oil during FY At the moment we are running a second desktop analysis to prioritize the 800 plus mills that supplied IOI Loders Croklaan during FY the respective mill operates in a highly sensitive area in terms of potential impacts. 12 mills, IOI Group owned and managed, accounted for nearly 38% of all palm oil volumes sourced during FY14-15: these volumes were RSPO certified and sourced via the SG model. 05

6 1.3 Step 3: Execution of on-site verification program Proforest and in-house verification team To further verify that our suppliers comply with our Sustainable Palm Oil Policy, in February 2015, IOI Loders Croklaan has partnered with Proforest to engage with selected suppliers to verify compliance with our Sustainable Palm Oil Policy. This partnership will include field verification of selected mills and their supply base. Furthermore, IOI Loders Croklaan agreed to form an in-house mill verification team. The team will be made up of three experienced supplier assessors operating out of Europe and Malaysia. Thus far the combined efforts of Proforest and our in-house verification the team has resulted in the assessment of another 5 mills. Round table sessions To increase the interest of our suppliers in our on-site verification program, Proforest and IOI Loders Croklaan will organize round table sessions with supplying mills. The first session was held in September It is important to explain that the objective of the on-site assessments is to help our suppliers to adopt sustainable production practices and become compliant with our Sustainable Palm Oil Policy. Focus on high priority mills The focus of our on-site verification program is on the high priority mills from which we source directly and supply large volumes. This will enable us to better use our commercial leverage. For mills that are indirectly sourced by IOI Loders Croklaan, we will request updates from our third party suppliers to assess if their supply base is covered by a similar program as ours and progress is made. From time-to-time we will select indirectly sourced third party mills for on-site verification, especially from those suppliers that have policies and/or programs that are not fully aligned with ours. Time-bound plan Our time-bound plan can be found at and includes targets for the implementation of our 3-step approach. 06

7 2. Mapping the IOI Loders Croklaan Supply Chain 2.1 IOI Group The palm oil and palm kernel oil supply chain for IOI Loders Croklaan starts with a defined list of mills. These mills are either owned and operated by IOI Group or owned and operated by third parties. IOI Group operates twelve RSPO certified mills in Peninsular Malaysia and Sabah, with a supply base of many IOI Group owned and operated plantations, all operating according to the RSPO P&C. The map illustrates the location of the IOI Group plantations and mills. In late 2013 IOI acquired Unico-Desa Plantations, including two mills. IOI Group will follow the process of RSPO certification for these mills and it is expected that these 2 mills will be RSPO certified by end

8 Direct sourcing There is close cooperation between the parent company IOI Group and IOI Loders Croklaan with regard to the sourcing of palm oil. The IOI Group organizes both the sourcing of palm oil produced by IOI owned mills and plantations, as well as the direct sourcing of palm oil and palm kernel oil volumes from third-party suppliers. The number of directly sourced mills is a stable list of mills in terms of mills and number of mills. Indirect sourcing Palm oil volumes can be sourced by IOI Loders Croklaan from third-party suppliers. These third party suppliers (shippers, processors and traders) source from third party mills. The number of third party suppliers is limited (approx. 10) and most of these suppliers share the same values or have policies in place that are equivalent to our Sustainable Palm Oil Policy. It should be noted that the majority of the mills on our mill list is linked to indirect supplied volumes. This list in fact is still growing. To address the issue of untraced palm and palm kernel oil trade, the MVO (Dutch board for Margarine Fats and Oils), together with various processors/traders including IOI Loders Croklaan, started an initiative to ensure full traceability of the volumes traded in Rotterdam (The Netherlands). As anticipated, during our financial year ( ) more traceable volumes were traded in Rotterdam. 2.2 IOI Loders Croklaan: global IOI Loders Croklaan operates five manufacturing sites divided over three regions: IOI Loders Croklaan Asia (IOI LC Asia) operates the site in Pasir Gudang IOI Loders Croklaan Europe (IOI LC Europe) operates two sites in The Netherlands; one in Rotterdam and one in Wormerveer IOI Loders Croklaan Americas (IOI LC Americas) operates two sites, one in Channahon Illinois (USA) and one in Rexdale Ontario (Canada) The product flow diagram below visualizes the streams of crude PO and rbdpo products within IOI Loders Croklaan. A total of over 800 unique mills were identified as potential suppliers in the IOI Loders Croklaan supply base. Mill details, including GPS coordinates, if identified and registered in the database, areavailable at 08

9 Product Flow Diagram of the Palm Supply Chain IOI LC Europe IOI LC Americas IOIEO Sandakan IOI LC Asia IOI Supply / Third Party Suppliers Crude PO rbd PO products Crude PO + rbd PO products In March 2014 IOI Loders Croklaan updated its Sustainable Palm Oil Policy. The policy includes a set of criteria that IOI Loders Croklaan expects its suppliers to comply with. The policy includes our commitment to no deforestation and the protection of peat land. Palm oil The majority of the palm oil sourced (65%) was directly soured and supplied by a stable number of mills (152). A much larger group of mills (727 mills) was responsible for supplying the remaining 35% of indirectly sourced palm oil volumes (FY ). Development of % traced volumes IOI Loders Croklaan Global 100% 50% 0% 74% 94% 82% Palm Oil Target June 2015 Directly sourced PO June % 100% 09

10 Over the last 3 years the percentage of traced volumes have increased from 74% back in 2012 (baseline) to 94% for FY (July 2014 June 2015). In fact, palm oil sourced directly via IOI was 100% traceable to mill level. All of the directly sourced palm oil volumes were produced in Malaysia. The indirectly sourced palm oil was mainly produced in Indonesia and Latin America. Palm Oil traceability (mill level) per origin, FY IOI Loders Croklaan Global Origin Peninsular Sabah Sarawak Indonesia Latin America Thailand PNG Unknown Grand total Direct sourcing - 65% of total volume sourced Volume % 48% 52% % % Traced 99% 100% % % Not traced 1% 0% % - - 0% Indirect sourcing - 35% of total volume sourced Volume % 1% 4% 5% 50% 37% - 2% 1% 100% Traced 67% 75% 93% 74% 97% - 100% 0% 84% Not traced 33% 25% 7% 26% 3% - 0% 100% 16% Total (direct and indirect combined) Volume % 32% 35% 2% 17% 13% 0% 1% 0% 100% Traced 99% 99% 93% 74% 97% 100% 100% 0% 94% Not traced 1% 1% 7% 26% 3% 0% 0% 100% 6% Palm kernel oil The majority of the palm kernel oil sourced (82%) was directly sourced and supplied by a stable number of mills (133). Another 184 mills were responsible for supplying the remaining 18% of indirectly sourced palm kernel oil volumes (FY ). Over the last 12 months we have been able to trace palm kernel oil back to mill level whereas previously we only reported back to the level of crusher. As of today, at group level, 78% of the palm kernel oil sourced can be traced to mill level. Many of the mills supplying palm kernel oil are already on our list of palm oil supplying mills. Again we differentiated between direct and indirect sourcing. The directly sourced palm kernel oil originated from Malaysia and was for 85% traceable to mill level. Indirectly sourced palm kernel oil originated predominantly from Indonesia and Latin America. 10

11 Palm Kernel Oil traceability (mill level) per origin, FY IOI Loders Croklaan Global Origin Peninsular Sabah Sarawak Indonesia Latin America Thailand PNG Unknown Grand total Direct sourcing - 82% of total volume sourced Volume % 55% 45% % Traced 75% 99% % Not traced 25% 1% % Indirect sourcing - 18% of total volume sourced Volume % 5% 5% 5% 56% 21% - 7% 1% 100% Traced 0% 100% 95% 46% 0% - 100% 0% 42% Not traced 100% 0% 5% 54% 100% - 0% 100% 58% Total (direct and indirect combined) Volume % 46% 38% 1% 10% 4% - 1% 0% 100% Traced 73% 98% 95% 46% 0% - 100% 0% 78% Not traced 27% 2% 5% 54% 100% - 0% 100% 22% For the indirect supplies of palm oil and palm kernel oil sourced we have approached our third party suppliers requesting them to update their databases and provide mill names, GPS coordinates and parent company names of the supplying mills. Most third party suppliers are well on their way to submit the requested data. Vice versa IOI Loders Croklaan will share and submit the relevant data of the supplying mills to buyers of palm oil and palm kernel oil. 11

12 2.3 IOI Loders Croklaan: by region Palm oil All regions have traceability numbers above 90% for all palm oil volumes sourced (direct and indirect). Directly sourced palm oil volumes are highly traceable to mill level: 98% for Asia, 99% for the Americas and 100% for Europe. In Europe, IOI Loders Croklaan is operating 2 refineries. The refinery in Wormerveer receives 100% traced palm oil volumes (mill level). All palm oil used in products supplied for our Wormerveer refinery is traceable to mill level Traceability % Palm Oil 100% 80% 60% 40% 20% 0% 100% 94% 98% 98% 94% 100% 99% 92% 84% 84% 86% 55% Group Asia Europe Americas Indirect sourcing Total (direct & indirect combined) Direct sourcing IOI Loders Croklaan is working with approximately 10 third party suppliers. Per region, different suppliers can be used resulting in higher or lower traceability numbers for indirectly sourced palm oil. Origin of total volume sourced IOI LC Asia P. Malaysia 100% IOI LC Europe 1 IOI LC Americas Sabah P. Malaysia Indonesia Latin America Sarawak PNG Thailand Sabah Indonesia P. Malaysia Unknown Europe 32% 24% 21% 18% 2% 1% 0% 69% 15% 14% 2% 0% 1. The overall % for the total volume sourced for IOI Loders Croklaan Europe is 98%, due to culmination on 1 decimal. 12

13 Palm kernel oil All regions have traceability numbers above 70% for all palm kernel oil volumes sourced (direct and indirect). IOI Loders Croklaan Americas achieved the target set of 90% by June Directly sourced palm kernel oil volumes are highly traceable to mill level: 75% for Asia, 97% for the Americas and 98% for Europe. Traceability % Palm Kernel Oil 100% 80% 60% 40% 20% 0% 98% 97% 90% 85% 84% 78% 75% 75% 74% 64% 42% 35% Group Asia Europe Americas Indirect sourcing Total (direct & indirect combined) Direct sourcing Origin of total volume sourced IOI LC Asia P. Malaysia 100% IOI LC Europe Sabah Indonesia Latin America Sarawak PNG P. Malaysia 61% 19% 11% 3% 3% 2% IOI LC Americas Sabah Indonesia P. Malaysia Europe Unknown 77% 16% 4% 2% 1% 13

14 3. RSPO Certified Palm Oil 3.1 Palm oil IOI Loders Croklaan has seen a 65 increase in the percentage of the SG RSPO volumes sourced. During FY14-15 IOI Loders Croklaan Europe imported 51% of its total palm oil volumes as SR RSPO certified. These volumes were either sold as SG or MB RSPO certified to its customer base in Europe. In North America demand for RSPO certified palm oil seems stable at 12%. However, during the final quarter of FY14-15 the share of SG RSPO certified material increased to 23% of all palm oil volumes sourced in that specific quarter. Percentage SG RSPO palm oil of the total volume purchased and imported by IOI Loders Croklaan 60% 40% 20% 32% 38% 43% 51% 0% 12% 12% 0% 0% Global IOI LC Europe IOI LC Americas IOI LC Asia FY FY The high percentage of traced palm oil (94%) complements the volumes that are sold as RSPO MB, whereby SG RSPO palm oil is mixed with conventional palm oil from known sources (94% traced volumes), allowing any higher risk of uncertified origins to be scrutinized. 14

15 Palm kernel During FY14-15 at group level, IOI Loders Croklaan imported 17% of its palm kernel oil volumes as SG RSPO certified. IOI Loders Croklaan Europe took the lead as 46% of its palm kernel oil volumes were SG RSPO certified. Another 17% (group level) was imported as MB RSPO certified. All MB RSPO certified volumes were sourced by IOI Loders Croklaan Americas. Traceability to plantation level During the FY , the majority (95%) of the palm oil volumes sourced as RSPO SG palm oil originated from IOI owned and managed mills and plantations. The remaining 5% was sourced from RSPO certified third party suppliers. Products delivered to customers of IOI Loders Croklaan on the basis of the RSPO SG scheme are therefore fully traceable to plantation level (group of RSPO certified plantations, predominantly IOI plantations). For SG RSPO certified palm kernel oil volumes, 89% originated from IOI owned and managed mills and plantations. 15

16 4. Next Steps The objective for June 2016 is to maintain an overall traceability level of between 95% and 100% for palm oil and palm kernel oil products. In order to achieve this target IOI Loders Croklaan will be executing the following actions: Maintain 100% traceability for directly sourced palm oil and achieve 100% traceability for directly sourced palm kernel oil. Continue to work with our current group of third party suppliers and step up efforts to obtain mill data for these indirectly sourced volumes. Continue to deliver on MVO initiative for Rotterdam market (make the trade traceable). Complete another remote sensing analysis on the total FY supply base for IOI Loders Croklaan (868 mills). Appoint independent external auditing party to verify the IOI Loders Croklaan traceability protocol and data. Complete at least 10 on-site mill assessment together with Proforest to verify compliance with the IOI Loders Croklaan Sustainable Palm Oil Policy. These 10 mills will be selected out of the 179 directly sourced mills. Enhance targeted supplier engagement in order to achieve greater positive impacts in terms of policy implementation. Support third party mills that are progressing towards RSPO membership and/or RSPO certification: IOI Loders Croklaan supports the Solidaridad Farmer support program in Guatemala. Initiate program to map palm oil supplies back to plantation level with a primary focus on peninsular Malaysia and Sabah. Actively participate in the IDH lead Traceability Working Group (TWG) and other industry initiatives. Seek and provide collaboration with regard to the implementation of on-site mill assessment programs (e.g. support and contribute to the success of RSPO Next, increase impact of verification program by cooperating with other buyers and avoid duplication of mill visits). 16

17 5. Internal and External Assurance During FY , the Sustainable Palm Oil Sourcing Committee (SPOSC) continued to meet on a regularly basis. To be more hands-on a selected group of IOI Loders Croklaan employees (mini-sposc) met quarterly to: Review supplier adherence to the IOI Loders Croklaan Sustainable Palm Oil Policy. Monitor the progress made with regard to traceability. Review the weekly alerts on supplying mills. Oversee mill prioritization and on-site mill assessment process and progress. Decide on further actions needed to support our objective of building a traceable, transparent and sustainable supply chain. Minutes of these meetings are recorded and distributed to the regional COOs and other relevant departments for further implementation. The committee members of the SPOSC are from both IOI Loders Croklaan (Group Director Sustainability, Group Director Supply & Trading, Sustainability Assurance Manager) and IOI Group (Head of Group Commodity Marketing and Head Sustainability). The mini-sposc members include the Group Director Sustainability, Group Director Supply & trading, Group controlling and the Sustainability Assurance Officer. The traceability data has been collected following the Protocol for Monitoring the Traceability of Palm Oil. On the basis of delivery-related documents, a list of mills is generated, including detailed information about these mills and their parent companies (e.g. GPS coordinates). The traceability methods have been reviewed as part of the verification of the traceability report by an external auditor/ certification body for FY Another review is scheduled for FY IOI Loders Croklaan works with the World Resource Institute ( and Proforest ( to evaluate its palm oil supply chain. Limited Claims Given the complexity of the palm oil supply chain, it is impossible to link a specific mill to an individual parcel of palm oil delivered to food manufacturing companies. The traceability claim that we provide is that the volumes sourced by IOI Loders Croklaan within a certain timeframe originate from a defined list (group) of mills. LLoyd's Register Nederland B.V.-LRQA was commissioned to verify the traceability information in the report: ''Mapping the Origin of Our Palm Oil. Traceability report ". The complete assurance statement of LLoyd's Register Nederland B.V. is available at our website: 17