“The erosion of Natural Capital poses threats to continued national and global prosperity, yet political and economic systems are unprepared for responding to that risk.”1
As detailed in our new Living Landscapes Policy (developed in 2018), our ambitious vision is to be a net positive company which means adopting principles to put back more into food and fibre systems than we take out – critical if we are to feed an extra 2 billion people by 2050. We are committed to aligning our goals with internationally agreed science-based targets which includes operating within Planetary Boundaries and reducing our contribution to the 13% of Greenhouse Gas emissions contributed by farms globally2.
Accounting for the current and potential financial value of Natural Capital is critical for future-proofing our business. For example, a 2017 study on potential impacts of water risks on business profits revealed that if the full costs of water availability and water quality impairment had to be absorbed, this would equate to a decline in average profits of 44% for utilities and 116% for food and beverage companies; hence our focus on water stewardship3.
While there is currently no standardised methodology for putting a value on the earth’s ecosystem services, our approach is being informed by the Task Force of Climate Related Disclosures (TCFD), Impact Valuation Roundtable (IVR), membership of the Natural Capital Coalition, and The Prince’s Accounting for Sustainability Project (A4S). We are using Life Cycle Assessment methodology to calculate the related environmental impact linked to the production of commodities, using the indicators most material to our business: Climate Change, Water Depletion and Land Use. We are already making considerable progress.
1. Green Economy Coalition
2. World Resources Institute
Minimising Natural Capital impacts – desired outcomes
- Impacts from agriculture on climate, water, forests and other resources stay within Planetary Boundaries
- Profitable and sustainable orchards, plantations and farms for Olam and our third-party suppliers
- The living world and ecosystem services are regenerated for long-term food security and commercial volumes
- Better crop resilience in the face of climate change
- Equitable use of resources at a landscape level avoiding societal risks.
- Pursue 2020 CR&S goals for identified material areas under Natural Capital: Climate Change, Land, Water1
- Follow and implement Policies, Codes and Standards applicable to Olam-owned and third party operations (Living Landscapes Policy; Plantations, Concessions and Farms Code; Supplier Code; and specific Standards and Operating Procedures)
- Aim to achieve maximum productivity with minimum impact (e.g. more crop per drop)
- Incorporate climate, water and soil risks into Enterprise Risk Management procedures.
- Be clear on unacceptable practices; particularly No HCV, No HCS & No Peat (see Living Landscapes Policy)
- Increase levels of biodiversity to improve pollination and minimise chemical pesticides (employ Integrated Pest Management techniques. Limit to exceptional circumstances the use of WHO Class 1A and Class 1B pesticides)
- Ensure judicious use of inorganic fertilisers and promote organic composting
- Actively engage with stakeholders, particularly when assessing Natural Capital trade-offs when creating financial and social value
- Collaborate in sector initiatives for scale e.g. co-chair the Climate Smart Agriculture working group under the World Business Council for Sustainable Development. Vision is to make 50% more nutritious food available and reduce agricultural emissions by 50% by 2030
- Invest in research and development
- Support development of Natural Capital accounting protocols.
1. Material Areas for FY17. New Material Areas agreed for FY18. See Group CEO Review.
- Select and manage land responsibly, in such a way as to maintain or enhance critical habitats, regenerate the natural capital of soil, water and ecosystems; and store carbon
- Implement international standards and codes where applicable, including RSPO, FSC®, PEFC, SRP, AWS and IFC Performance Standards
- Require Environmental Impact Assessments, including HCV assessments verified to international norms
- Establish integrated water resource management and encourage water stewardship where appropriate
- Increase the efficiency of all resources used including soil, fuel, energy, water and land
- Increase the proportion of renewable and non-fossil fuels and energy and utilise by-products for energy.
For third party operations
- Progress actions to end deforestation across smallholder supply chains as per the Olam Living Landscapes Policy
- Work with customers, partners and other third parties, maximise farmgate presence to train suppliers on requirements and address underlying factors required to eliminate these practices from supply chains – e.g. poverty
- If unacceptable practices are reported, assess the extent and nature of non-compliance and establish a time-bound plan to address the issue and, where necessary, remediate material negative impacts of non-compliance. We will disengage from suppliers who are unable to demonstrate positive steps to eliminate unacceptable practices in a time-bound manner
- Harness technology – e.g. Olam Farmer Information System to map individual farmer suppliers and buying stations, and identify hot spots
- Put in place viable monitoring and evaluation procedures with audits, spot checks, and satellite monitoring.
Challenges and influencing factors in 2017
- A year of extreme weather events – third hottest year on record1 with reduced water availability for many farmers
- Lack of globally agreed definitions for complex issues like deforestation
- Ongoing issues of pests and disease
- Limited leverage to prevent suppliers in smallholder supply chains from encroaching into forests, under continuing pressure to increase agricultural income
- Attendance, capacity issues and uptake of training by smallholders – requires repeated training, model farms
- Resource limitations to verify on-the-ground compliance with Olam Supplier Code and product policies in highly fragmented third party supply chains. Reliance on satellite technology and industry initiatives
- Need to decouple business growth from GHG emissions through science-based targets.
1.National Oceanic and Atmospheric Administration.
Supporting Science-Based Targets
In 2016, Olam signed up to the Science-Based Targets Initiative which seeks to increase the number of companies reducing their Greenhouse Gas (GHG) emissions. This is to ensure alignment to a 2 degree Celsius global warming scenario, and companies should pursue efforts to limit the increase to 1.5 degrees Celsius. At the beginning of 2018 we submitted these targets to the Initiative and are awaiting their feedback.
As part of this process, during 2017 we undertook a review and set ourselves stretch targets to reduce GHGs by 50% by 2030 both in our own operations and in our supply chain. This requires a reduction of 3.85% per year.
By 2050, we aspire to be carbon positive in operations, requiring a 5% emissions reduction per year from 2031 – 2050. We are developing stretch targets for our supply chain. We are also exploring how to set similar operational targets for water by reviewing global regions at risk of water stress and agriculture-linked pollution.
“By 2050, we aspire to be carbon positive in operations, requiring a 5% emissions reduction per year from 2031 – 2050.”
1. High Carbon Stock Science Study Group. Independent Technical Report 2015.