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The Sustainable Palm Oil Puzzle

September 3, 2018
Posted by Duncan Grewcock

The negative environmental impacts of palm oil have been well documented for over twenty years, but as more and more consumers take an increasingly conscious approach to buying, retailers are being forced to look more closely at where and how they create their products using this ingredient.

The palm oil supply chain is complex and there are a lot of areas to consider, from the plantations where the fruit is grown to the refineries its further processed on, the process is lengthy. One of the main problems with the production of palm oil is its link to deforestation, despite organisations such as the Roundtable on Sustainable Palm Oil (the world’s largest and most widely used voluntary certification scheme for palm oil) and FSC (Forest Stewardship Council) uniting stakeholders across the industry to promote a no deforestation policy and ensure forests are responsibly managed.

A prime example of this problem can be found in the recent reports about Wilmar International, which has a no deforestation policy yet have been accused by Greenpeace of having not only personal, but business relationships with Gama group, who have been associated with deforestation. While Wilmar has now ceased sourcing from all suppliers that are allegedly associated with Gama, and has stated that neither company has influence or power over another, the question marks have been raised. Wilmar operate with some very large retailers, a lot of whom are now assessing the company to see whether or not it really can be trusted as a source of more sustainable palm oil.

So how can retailers avoid getting involved in situations like this? Placing focus and importance on the three areas below can be a good place to start.

1. Full Visibility

It’s important for retailers to broadly monitor all suppliers and include any third parties in reports. To do this retailers need to trace suppliers all the way from top level information to the finer details, such as those in charge of the land that has been used for the plantations, declaring their timber sources (i.e. actual forests) and providing sustainability certification. By implementing the right tools and mapping real-time information from product to supply chain and raw material sourcing, teams can easily gain complete supplier visibility. Accurate and up to date information will empower retailers to instill ethical compliance all the way through the supply chain from raw material to final product.

2. Information Hubs

Dashboard workflows, reports and automatic notifications can all help retailers to analyse risk levels and supplier performance quicker and more accurately. Ethical trade managers can also oversee each type of material being used by suppliers, which 2nd tier production factory they are run through and even the origin of the material. For retailers auditing their palm oil suppliers this can be of great significance as often the amount of deforestation taking place in order to create the plantations can be hidden under a different name, such as alleged in the Wilmar case. If however retailers observe the exact source of their palm oil, then they can identify any potential breach of certifications or masked deforestation projects and block sourcing from those suppliers.

3. Supplier Communications

Supplier relationship management is all about strategic collaboration with suppliers to add value, minimise risk and ensure consistent and compliant governance. By working together to put in place corrective actions and certificates each party will gain an advantage. Ethical trade managers should send reminders and raise actions for suppliers to complete when needed and inspire suppliers to share complete information and improve their processes.

Corporate ethics are under greater scrutiny than ever before; any failing is rapidly exposed on social media and very soon hits the global headlines. Retailers should make use of technology to allow supplier re-confirm factories in use at different stages in the supply chain: such as order confirmation, origin inspections and origin shipment booking. Technology plays a key role to build and work with a stable and connected network of suppliers and their factories that will help retailers enhance their reputation and products, not put them at risk.

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Duncan Grewcock - Chief Operating Officer – Asia Pacific, Adjuno
Duncan has over 16 years’ of experience in management consulting, business process re-design and solution implementations.
Duncan is an expert in product sourcing, PLM and supply chain management solutions.
At Adjuno he leads the Asia-Pacific team and is responsible for all elements of the business and customer experience: business development, solution design and delivery, account management and P/L accountability.
He relishes working with clients in multiple geographies and the challenge of implementing best practice software solutions.
As a member of Adjuno’ s global leadership team, he contributes to the group’s business strategy and product road map. His vision, leadership and hands-on experience has enabled the successful implementation of software solutions across Adjuno Asia- Pacific’s key clients. He is also a member of British Chamber of Commerce and American Chamber of Commerce in Hong Kong.