How we work with Natures Organics on Palm Oil
Policy, Targets and Work Plan:
Natures Organics revised their existing commitment for responsible sourcing of palm oil, from focusing on certification to going a step beyond by ensuring no link to deforestation and/or human rights issues and violations. The basis of the action plan to implement this policy follows;
- Ensuring all suppliers demonstrate continuous improvement towards becoming fully traceable and fully meeting our policy
- Distributing and monitoring progress on this policy
- Publically reporting progress every six months
The original target was to achieve traceability back to the palm oil mills of suppliers by early 2015.
The first phase of the project focused on explaining the new policy to third party sourcing agents and oleo-chemical manufacturers, followed by building an understanding of the supply chain beyond this first tier.
The majority of product containing palm oil has been sourced from six Tier 1 (oleo-chemical manufacturers) suppliers who were targeted in this first phase. We started with email and phone call introductions, followed by in person meetings in Australia and in source countries, including; Indonesia, Singapore and Malaysia. Meetings were also carried out by sourcing agents in Korea who facilitated conference calls with TFT and manufacturers.
In general, the supplying oleo-chemical manufacturers expressed a willingness to assist with traceability requests, however also explained the difficulty regarding complexity and confidentiality. In most cases it required several rounds of contact and feedback to gather initial basic traceability. Oleo-chemical manufacturers typically source from multiple palm oil refineries and/or mills from a variety of suppliers in various geographical locations. A refinery will often source from tens of palm oil mills and a mill will source from tens to several hundred growers/plantations. Their visibility beyond their direct suppliers is typically very limited and often requires further support. Furthermore, Natures Organics represent only a relatively small volume of total buy from each oleo-chemical supplier, and so isolating the specific supply chains is difficult and sometimes not possible with current infrastructure and diversity of inputs and outputs. We therefore often need to consider the broader supply chain of each oleo-chemical company and subsequent supplier, which requires further work to firstly build trust and then the supply chain database.
Of the six key Tier 1 oleo-chemical suppliers engaged;
- TFT met with a supplier who later provided a full list of supplying refineries and mills. This oleo-chemical company is one of the largest of its kind and is also developing a plan for ongoing traceability and policy compliance beyond certification, in line with Natures Organics and other TFT palm oil member commitments.
- Another supplier, in November 2015, revised their sourcing commitments to go beyond certification. TFT met with the supplier on numerous occasions in Australia, Asia and in their headquarters in Europe. TFT will continue to communicate with them to monitor progress and to assist where possible towards building traceability and policy compliance.
- Two Korean oleo-chemical manufacturers provided a list of their major direct suppliers. One of the two is able to segregate their inputs and has identified that all palm oil for Natures Organics is sourced from one Tier 2 supplier who is already working with TFT through other TFT Member programs to provide traceability back to refinery and mill. This Tier 2 supplier also supplies the other Korean Tier 1 oleo-chemical supplier. Of the other three Tier 2 suppliers identified, one has a policy beyond certification similar to Natures Organics already in place, the other two require further communication and support to build traceability and policy compliance.
- One oleo-chemical supplier based in China was in the process of determining the best source of oil palm when they decided to switch from palm oil to coconut oil.
- A Tier 1 supplier is willing to collect traceability information, however requires further support/training. TFT have met twice at their facility and will provide further assistance in the coming months to review traceability information and a subsequent engagement plan based on risk.
Based on available information, we were able to conduct risks assessments to the refinery and mill level for two major supply chains and have prioritised further follow up based on this risk. The other suppliers still require further support to firstly build visibility back to refinery and mill level.
The next phase of targets for traceability and policy compliance are currently under review. So far all suppliers have shown a willingness to provide traceability information, although follow up and support is required. In some cases where risk was identified supply has been shifted, however, in most cases we are still in the process of developing a working relationship with suppliers towards understanding their supply chain dynamics, risks, and how we can best support them, including engaging with their suppliers to show progress towards policy compliance. The next phase of work will also include a broadening in the scope of Tier 1 and successive suppliers engaged to include new suppliers and non-major suppliers.
In parallel to this top down work of traceability and policy compliance, TFT and Natures Organics also support field based projects with key stakeholders such as conservation groups and with small-holder support initiatives. Further information on this will be provided and can be requested.