Environmental and Social Policies and Risk Assessment. Olam’s Growing Responsibly Strategy (2018) is based on achieving sustainability goals focusing on 10 social (economic opportunity, safe and decent work, education and skills, health and nutrition, diversity and inclusion) and environmental (climate, health ecosystems, health soils, water, reduced waste) areas. The goals underlying each of these material areas are aligned with the United Nations Sustainable Development Goals (SDGs). To assess and manage these goals, Olam has adopted a Sustainability Framework which is made up of a set of Policies, Codes and Standards addressing all its business segments (primary production, processing and sourcing). This Framework is composed of Olam’s Sustainable Palm Oil Policy (2016); Olam’s Living Landscape Policy (OLLP, 2018), Olam’s Plantations, Concessions and Farms (PCF) Code (updated version will be available in Q1, 2020); Olam’s Supplier Code (OSC, 2018); Olam’s Quality, Environment, Health and Safety (QEHS) and Food Safety Policies and Standards (Manual of Procedures) (2016); Olam’s Fair Employment Policy (2018); and, Olam’s Grievance Procedure for the Olam business and its third-party suppliers (2018).
Relevant to the EHS sustainability of its sourcing operations, Olam committed in April 2018 to eliminate unacceptable land management practices by Olam’s own operations and third-party supply chains. Specifically, the OLLP requirements include: (i) no illegal activities (compliance with applicable national and international laws, including human and labor rights); (ii) respect legally protected areas or international recognized areas; (iii) no conversion or degradation of critical habitats, such as High Conservation Value (HCV) areas and other nationally-recognized conservation priorities; (iv) no conversion or degradation of peatlands of any depth; (v) no conversion or degradation of other natural habitats with high level of organic carbon such as High Carbon Stock (HCS) forests; (vi) no use of fire in land preparation, including planting and replanting; and (vii) no development without the Free, Prior, and Informed Consent (FPIC) of indigenous peoples and/or local communities, recognizing traditional and customary rights.
To operationalize this set of requirements, including its commitment to deforestation-free sourcing, Olam developed in 2019, using World Resource Institute’s (WRI) publicly available Global Forest Watch (GFW), and in partnership with consultancy firms (GeoInsight and Valuing Nature), a Forest Loss Risk Index (FLRI), which is a risk-based approach to prioritize corrective action on deforestation risk in its supply chain. The base assumption of the methodology is that recent past deforestation is a good indicator to anticipate short-term future deforestation activity. The tool uses the GPS coordinates of its buying stations (sourcing area level) available in Olam Farmer Information System (OFIS) and tree cover/loss from the Global Forest Change 2000-2017, applying a radius of 10-50 km around each buying station. Olam has completed its risk assessment for coffee in all origins, including Indonesia, PNG, Timor-Leste, and Vietnam. Out of the 25 buying stations in these four coffee origins, two sourcing locations were deemed of high risk of future deforestation (Indonesia /Lampung and Vietnam/Pleiku). Even though the initial high risk of the FLRI does not imply direct causation, Olam sourcing teams have been deploying a number of corrective actions, including on the ground investigation, detailed mapping of the farms in the area using OFIS, farmer support and training, increased monitoring, both spatial and temporal, and, at last resort, ceasing business with suppliers operating illegally or who continue legal deforestation in contravention of the Olam Supplier Code. Please refer to PS1 Management System for corrective actions for the above two buying stations.
The FLRI has been completed for cocoa in Indonesia (448 buying stations), out of which 31 stations are deemed high risk. The same corrective actions as defined above for coffee sourcing have been deployed. The FLRI remains to be completed for cocoa sourcing in PNG (4,500 buying stations), cashew and spice sourcing in Vietnam and cotton sourcing in Uganda. Olam will provide the results of such risk assessments, including proposed mitigation measures (ESAP #1). As part of this process, Olam will also identify if its sourcing operations in all origins impact Indigenous Peoples and ethnic minorities and will undertake, if applicable, Free, Prior, Informed Consent (FPIC) process, as defined in the OLPP/OSC policies. Olam convened its first multi-stakeholder forum on the implementation of its OLLP, including sharing Olam’s systems, processes (e.g. AtSource, OFIS platform and its FLRI) and case studies in October 2019.
In 2018 Olam updated its 2014 Supplier Code (OSC) which is applicable for its third-party primary suppliers over which Olam has management control and leverage. This updated 2018 Code is aligned with IFC PS2 and PS6 supply chain related requirements. The six principles underlying the OSC include: (i) commitment to corporate governance and integrity (e.g. no unethical transactions); (ii) suppliers must guarantee the quality of the goods and services they supply (e.g. quality and safety, traceability); (iii) ensure no exploitation with their sourcing operations (e.g. no child/forced labor, freedom of association and right to collective bargaining are present, wages, non-salary benefits, working hours and working conditions are reasonable and non-discriminatory); (iv) respect the natural environment (e.g. no encroachment in legally protected areas, critical habitats or High-Carbon Stock areas, no use of banned agro-chemicals, including WHO Class Ia and Ib products); (v) respect local communities (e.g. prevention of health and safety impacts on surrounding communities); (vi) ensure compliance (e.g. communication to Olam on non-compliances, communities complaints).
One key challenge in rolling out the OSC is to confirm that smallholder farmers (many of whom have very low levels of literacy) understand what they are signing. To overcome this challenge, Olam sourcing teams have turned the Code into pictorial posters which are clearly displayed at cooperative buildings; empower the cooperatives to sign and commit towards the implementation of the Code and subsequently train the cooperatives’ farmers. The cooperatives then audit the farmers to ensure that they comply with the OSC provisions. Given the scale of Olam supplier base of 4.8 million farmers, Olam has been focusing on primary third-party suppliers for priority products (cocoa, cashew, coffee, cotton, hazelnut, palm and rubber) signing up to the Code. According to Olam’s 2018 sustainability report, by the end of 2018, 82% of priority product volumes were procured under the OSC. For the scope of this investment, the supply chain’s risk assessment and mitigations measures to meet IFC PS requirements are directed to the targeted 40,000 smallholders in all origins.
To assess the level of E&S risks associated with its sourcing operations, Olam has developed a high-level risk assessment system assessing country/commodity specific supply chain risks using publicly available risk assessment tools (e.g. Ecoinvent (https://www.ecoinvent.org/); FAO - Farm Agri (http://www.fao.org/faostat/en/#data/QC); Global Forest Watch - (http://www.wri.org/applications/maps/aqueduct-atlas/); World Resource Institute (WRI) Aqueduct / Water Risk Atlas : http://www.wri.org/applications/maps/aqueduct-atlas/; World Economic Forum (WEF) - Gender Gap Index: http://reports.weforum.org/global-gender-gap-report-2016/economies/#economy=ISL; International Finance Corporation (IFC) - GMAP: https://gmaptool.org; University of Notre Dame Global Adaptation Initiative (ND GAIN): https://gain.nd.edu/our-work/country-index/; FAO Global Soil Organic Carbon : http://www.fao.org/global-soil-partnership/pillars-action/4-information-and-data/global-soil-organic-carbon-gsoc-map/en/; World Justice Project (WJP) - https://worldjusticeproject.org/our-work/wjp-rule-law-index/wjp-rule-law-index-2017%E2%80%932018.
Olam’s high-level risk assessment approach was implemented by all Olam Business Units covered by this investment. Coffee sourcing in Indonesia, PNG, Timor-Leste and Vietnam, and cocoa sourcing in Indonesia and PNG were considered “high-risk” from a deforestation and ecosystem services standpoint. Cashew sourcing in PNG was considered high risk from a child labour standpoint. The findings of this risk assessment are then used by the sourcing teams in prioritizing the signing of the OSC with targeted farmers, including training on its requirements, implementing the FLRI risk screening mentioned above, and in defining the scope of the farmer’s training as well as regular monitoring and auditing programs.
Environmental & Social Management System. Olam created AtSource (https://www.atsource.io/index.html), a sustainable sourcing solution, for agricultural raw materials and food ingredients in April 2018 to document the implementation progress of its corporate policies as defined in its OLLP and OSC, to monitor its traceable/certified sourcing and to report on its overall sustainability initiatives and impacts over multi-year period. AtSource products are tracked on a user-friendly dashboard against 10 core sustainability topics (aligned with Olam’s 10 material environmental and social issues mentioned above), grouped into three pillars, namely (i) prosperous farmers and food systems, (ii) thriving communities, and (iii) regeneration of the living world.
A three tiers approach has been defined in AtSource with progressively enhanced levels of sustainability impact and verification. AtSource Entry Level (Tier 1) provides reassurance to Olam end-customers that Olam undertook a high level risk assessment of country level environmental and social risk screening, using publicly available databases as indicated above, that third-party suppliers are engaged on responsible sourcing principles and practices under the OSC, that training on Good Agriculture Practices (GAPs) is delivered to farmers and that implementation effectiveness of OSC is internally verified by the Monitoring and Evaluation (M&E) team in Business Units (10% sample of OSC signatories by origins each year), Olam Internal Audit function and AtSource team.
AtSource Plus (Tier 2) provides a granular traceability and environmental footprint right from the farm through to logistics, processing and delivery to the client. To qualify for AtSource Plus, traceability to farmer groups is required (using OFIS platform), on-the-ground sustainability initiatives are documented, detailed metrics and footprint assessed through completing AtSource’s 80 KPIs, all supported by annual third-party verification.
Finally, AtSource Infinity (Tier 3) aims for landscape interventions having net positive ecosystems and livelihoods impacts, implemented through partnership with other stakeholders (environmental NGOs, local government, off takers, etc.). Annual third-party verification is also required.
Olam’s objective is to have 100% of Olam’s business AtSource Entry Level ready by 2025, with interim milestones defined (50% in 2019, 75% in 2021). Progress status achieved by all countries/commodities targeted by this investment to meet AtSource Entry level (including farmers being signatories to the OSC) was assessed during this appraisal. For coffee (Indonesia, PNG, Timor-Leste and Vietnam) and cocoa (Indonesia, PNG) sourcing, measurable progress has been achieved (75% of all suppliers having signed the OSC and being trained on GAPs) as both commodities are being considered “high-risk.
Olam has committed that 100% of all coffee and cocoa procured purchases from all targeted origins will be AtSource Entry ready by December 2020 (and, as such, PS supply chain requirements compliant). For the remaining combinations (Vietnam/cashew and spices, Uganda/cotton), 100% of the sourcing will be AtSource Entry ready by end of 2021.
IFC’s appraisal concluded that the requirements of AtSource Entry Level management system will meet the provisions of IFC PS2 and PS6 supply chain requirements. Successful registration of all 40,000 third-party primary suppliers targeted by this investment at AtSource Entry level (and OFIS) in accordance with the timelines quoted above is expected to confirm the suppliers’ PS compliance. As mentioned above, to mitigate the “high-risk” FLRI result of one of the buying stations in Vietnam (Pleiku), Olam is in the process of certifying all its third-party suppliers as Rainforest Alliance to mitigate deforestation risks. Similar approaches will be adopted for any other identified high-risk buying stations.
As for AtSource Plus, there is currently a comparative analysis being done between AtSource Plus requirements (including KPIs) and voluntary agro-commodities standards’ requirements. Based on results, existing coffee and cocoa sourcing volumes under third-party certification (e.g. Organic, FairTrade, Rainforest, UTZ) in all origins could potentially qualified at AtSource Plus level. Indonesia/coffee arabica and PNG/coffee farmers groups have already satisfied a high percentage of its sourcing as AtSource Plus. Olam is currently implementing and rolling-out a self-assessment checklist for AtSource Plus supply chains. The checklist covers Olam OSC requirements. Once roll-out is completed, origins with red (critical) and medium (amber) risk ratings will need to outline certain corrective action points (CAPs) to either rectify or improve their ratings. This process will be the first step in enrolling in AtSource Plus level. Olam is planning to conduct the same exercise for all origins and supply chain already in AtSource Entry level to ensure that all its data on the AtSource platform has gone through the same entry criteria. This is planned to be up and running for the campaign starting in mid-January 2020.
Finally, Olam sourcing teams have not yet defined sustainability initiatives qualifying as AtSource Infinity level. Olam aims to have five (5) projects AtSource Infinity ready by 2020. All business units will nominate potential projects in the next months. Criteria qualifying for AtSource Infinity must meet several high-level criteria, including (i) having successfully achieved all requirements of AtSource Entry and AtSource Plus levels, and having a net positive landscape and ecosystems services impacts, above and beyond the boundary of Olam sourcing operations. Multi-stakeholders’ participation is also required. Example of such landscape project is the one which Olam established in partnership with Wildlife Conservation Society (WCS) and other companies to tackle deforestation from illegal coffee production inside Indonesia’s Bukit Barisan National Park. Olam contribution for this KEKAL project included training 7,000 farmers in North/South Sumatra on OSC/GAPs, sharing OFIS platform with WCS, and a financial contribution of $200,000.
The Global Coffee Business Unit has been relying on the AtSource framework as a vehicle for defining its sustainability sourcing strategy and targets in all origins. A draft Global CSR coffee strategy has been finalized in 2019 with global goals, targets and KPIs. This draft is presently under review to provide more granular plans and targets for coffee sourcing in all origins. On its side, the Global Cocoa Business Unit launched a global sustainability vision called Cocoa Compass. This Compass sets concrete goals for most pressing challenges facing the cocoa value chain, including 100% traceability, 100% deforestation free, 100% child labor free, and 100% farmers under productivity programs (ref. Farm Development Plans). Olam will provide sustainability sourcing strategies for 2020-2023, including traceability targets and benchmarks for Indonesia, PNG, Timor-Leste and Vietnam for coffee, Indonesia and PNG for cocoa, Vietnam for spice and cashew, and Uganda for cotton (ESAP #2).
In addition, Olam developed Olam Livelihood Charter (OLC) for a few targeted combinations. The OLC includes eight economic, social and environmental principles (e.g. access to finance, yield improvement, labor practices, market access, quality, traceability, social community investment and environmental management). Based on latest available mapping (April 2018), the list of existing OLC programmes matching IFC’s targeted country-commodity combinations under this investment included the Sustainable Coffee Initiative - Western Highlands of Vietnam; the Nespresso Sustainable Coffee Initiative - Sunda Indonesia; the Cocoa Revolution Initiative – Indonesia; the Mars Sustainable Cocoa Initiative – Indonesia; the Mondelez Cocoa Life Initiative – Indonesia; the Nestle Cocoa Plan – Indonesia; the Alliance of Farmers and Olam – Indonesia (COCOA), and the Productive Partnership in Agricultural Projects (WB-PPAP) - Papua New Guinea (COCOA). At the completion of these OLC programs, the OLC recipient farmers will be eventually transferred into AtSource Plus level (Tier 2).
The Olam risk assessment and management procedures for its sourcing operations is codified in an Olam Farmer Information System (OFIS) module delivered via a digital portal. The module addresses the 10 material issues of Olam’s operations which are also captured through the AtSource platform. The OFIS platform specifically supports the traceability of Olam’s smallholder farmers using GPS coordinates of the farms. Using GPS mapping and on-site surveys, OFIS can identify potential environmental and social hotspots with farmers. Olam’s business units in all targeted origins started such farmers’ recording progress.
Based on information shared during the appraisal, OFIS registered farmers globally has reached 410,000 farmers as of November 2019, including 41,596 for Indonesia/cocoa (target of 50,000 by 2021), 6,368 for Indonesia/coffee (target of 9,000 by 2021), 1,933 for Vietnam/coffee (target of 4,500 by 2021), 6,719 for PNG/cocoa (target of 12,000 by 2021), target of 3,000 for PNG/coffee and finally 3,038 for Timor-Leste/coffee (target of 4,200 by 2021). OFIS registered farmers for Vietnam/cashew and spices is 1,225 and 832 respectively. Based on the actual figures and targets for all combinations, all 40,000 smallholders targeted by this investment will be OFIS registered by end of 2021. Aside from its data collection and analysis function, OFIS also provides Internal Management System (IMS) capability allowing farmer groups and cooperatives to manage their cooperatives, while buying agents used OFIS for keeping track of stock, finances and counterparties. End-to-end traceability can be managed from farm to fork through OFIS bag coding system and provide for digital payments directly to farmers giving them the opportunity to access a range of financial services. The Asian Development Bank (ADB) Technical Assistance (TA) program will support the additional roll-out of OFIS to coffee value chain in all targeted origins, including at least 25% women, provide farmer’s GAP training and personalized farm management plans.
Organizational structure and competency. Olam’s CRS function have been leading the development of Olam’s Sustainability framework, including the drafting of OLLP and OSC, the organization of multi-stakeholder consultation, and the implementation of country-level EHS risk assessment for Olam’s sourcing (using FLRI). For high-risk agro-commodity (coffee, cocoa), the Business Units have recruited Global and Country-level Sustainability Leaders to ensure the effective progress of Olam sustainability sourcing practices against AtSource Entry, Plus and Infinity levels. The Monitoring and Evaluation (M&E) team in all Business Units are trained on OSC, OFIS and AtSource requirements. A global AtSource team oversees the continuous development of AtSource (e.g. comparative analysis of AtSource Plus requirements versus Voluntary Agro-Commodities Standards), its mainstreaming into BU’s sourcing strategies at global and origins level and undertakes verification of integrity/veracity of the data registered (internal audit). Olam CRS Executive Committee continuously oversee progress status of the timely and effective implementation of OSC, especially for “high-risk” combinations on a quarterly basis.
Training. Olam’s CRS Global Head has been socializing OLLP and OSC among the Olam Business Units’ management teams (more than 100 managers) since April 2018 while CRS Asia Head has provided technical assistance to origin-level sourcing teams having high-risk commodities (especially coffee and cocoa). An OSC online training program has been established for the effective implementation of the OSC, with learning objectives including the rational of having a Supplier Code, who must respect the Code, the six principles of this Code (see above), the four exclusion criteria (worst forms of child labor, forced labor, use of banned chemicals and encroachment in legally protected areas, critical habitats and HCS areas) and the four steps (sensitize, sign, file and follow-up) to ensure that effective implementation is taken place with third-party primary suppliers. Based on records shared during the appraisal, as of October 2019, 64% of the sourcing teams targeted by this investment had completed the OSC online training program. It is expected that 100% completion rate will be achieved by December 31st, 2020 (in line with Olam commitment to achieve 100% coffee and cocoa sourcing in all origins to AtSource Entry level ready).
As it relates to coffee farmers, as of June 2019, 96% of Vietnam third-party suppliers, 95% of Indonesia third-party suppliers and 18% of PNG third-party suppliers had signed the OSC. The proportion of signatories in PNG will increase as the ADB TA program started in December 2019. For cocoa, the total volume signed third-party suppliers are 75% and 51% respectively for Indonesia and Vietnam. It is thought that 100% of cashew and 80% of pepper suppliers in Vietnam have signed the OSC.
The scope of the ADB TA training program in all coffee origins to farmers is anchored on a holistic climate-smart agriculture training programs, including training sessions, field trial and demonstration plots. Productivity and quality improvement (Good Agricultural Practices - GAPs), environmental sustainability of production (Integrated Pest Management - IPM), farmer organization, and household financial management are the key focused areas. This coffee training program has started in Timor-Leste (reaching 6,500 new farmers) in 2019 and is scheduled to start in 2020 in Indonesia (reaching 9,000 new farmers), PNG (reaching 3,000 new farmers) and Vietnam (reaching 4,500 new farmers). Olam will develop and implement training programs for farmers for Indonesia & Vietnam/cocoa farmers, for Vietnam/cashews and spice farmers and for Uganda/cotton farmers (ESAP #3).
EHS Monitoring and Reporting. To ensure the effective implementation of its OSC, statistics on successful training completion of Olam’s sourcing teams are closely monitored and of third-party suppliers and farmers having signed the OSC. In addition, 80 Key Performance Indicators (KPIs) have been defined for AtSource sustainability topics as described above, grouped into three (3) pillars (prosperous farmers and food systems, thriving communities and regenerating the living world). The roll-out of the indicators is progressively taking place, especially for commodities sourcing qualifying for AtSource Plus level. As indicated above, OFIS module is being used to provide the traceability to the farmer, socio-economic and environmental parameters, and all agronomic metrics for agricultural management (e.g. fertilizer use).
The M&E function of the Business Units and Olam Internal Audit function undertake internal verification audit of the implementation effectiveness of the OSC and farmers training program as defined in the AtSource Entry level (sample of 10% each year), and of voluntary agro-commodity standards as defined in the AtSource Plus level. The AtSource team has developed a Supplier Assessment Checklist which is required to be completed by the Business Unit’s Sustainability Lead and M&E team to verify data accuracy and KPIs collected and registered into AtSource platform.
Emergency Preparedness and Response. All Olam warehouses are maintained as per the local Fire Code and/or regulations. The warehouses are inspected and certified by the local authorities. Corrective Action Plans (CAPs), if any, are implemented in a timely manner. The warehouses’ OHS Committee is accountable for the timely implementation of these CAPs. Olam sourcing/warehouse teams have successfully implemented these CAPs and complied with each country’s fire prevention standard. Fire certificates delivered by local authorities have been sighted for the Indonesia’s cocoa warehouses during IFC appraisal.
Community Grievance Mechanism. Olam implemented in July 2018 a community grievance mechanism (https://www.olamgroup.com/sustainability/grievance.html) accessible on its website and applying to its upstream, midstream and downstream (sourcing) operations, including third-party suppliers. This grievance is open to any complaints applying to Olam Living Landscape Policy, Olam Supplier Code, Olam Employee Grievance Handling Policy and Olam Code of Conduct. A grievance procedure has been prepared which defines the admissibility registration and processing of complaints. The grievance can be submitted to the Grievance Manager (London-based) or to relevant country office. Whilst grievances can be made anonymously, Olam encourages providing contact details to enable to better understand and address the concerns. As of November 2019, there has been no grievances received through this channel. With the increasing implementation of the OLLP and OSC in all origins, Olam will further publicize and communicate its grievance mechanism in all origins and will incorporate this grievance procedure within the scope of the online OSC training for targeted Business Units and sourcing teams on how to communicate this grievance channel to all stakeholders and to receive and respond to such grievances, including keeping a grievance log (ESAP #4).
