Codes and Standards
Underneath our policies sit a suite of Codes and Standards.
Our Codes, such as the Plantations, Concessions and Farms Code, tell our teams what they need to do, while our standards tell them how to do it. All are developed in line with international standards including BRC, IFC, RSPO, FSC® and ISO guidelines. Where international standards are lacking we are initiating industry discussion, for example, with the development of an International Rubber Standard through the Sustainable Natural Rubber initiative (SNRi).
Implementing the Codes and Standards across all of our operations is not without its challenges, particularly when engaging with colleagues of different nationalities and cultures. In 2015 we relaunched the Communities of Practice (CoP) where learnings are shared across supply chains. This included merging the Farms CoP with that of Plantations in an effort to hone learnings, particularly from the developed world operations to the developing countries. As we progress in 2016, the Plantations and Upstream Farming CoP will be refining its approach to ensure that real value is derived.
Our farmer suppliers are made up of 20,000 large-scale farmers mainly in the USA, Australia, Ukraine and Argentina (e.g. tomatoes, onions, grain, peanuts, cotton, teak) and 4 million smallholders who are in Asia, Africa and Latin America (e.g. cocoa, coffee, cashew, cotton, spices, rice, rubber, oil palm and sugar).
When sourcing from so many, and from such a diverse supply chain, issues such as traceability, food safety, child labour and deforestation can present both quality and reputational risks to us and to the brands of customers. We therefore have the following Codes in place:
Supplier Code: applies to both large and small-scale farmers. Launched in 2014, by the end of 2015 the Supplier Code had been signed by farmers supplying 30% of overall tonnage, committing them to abide by the environmental and social criteria. Key challenges in rolling out the Code include:
- Ensuring that smallholder farmers, many of whom have very low levels of literacy, understand what they are signing. To overcome this, our teams on the ground:
- have turned the Code into pictorial posters which are clearly displayed at co-op buildings
- empower the cooperatives to sign the Code on behalf of the farmers. The cooperatives then train and audit the farmers to ensure that they comply.
- Auditing the suppliers to ensure that they are complying with the Code. In our hazelnut (Turkey) and Cocoa (Côte d’Ivoire) supply chains, the Fair Labor Association, of which Olam was the first agri-business to become an affiliate member, is a key partner in the audits. Our overall approach, however, is to work with the farmer on remedial actions so that he improves, rather than simply continues the negative practices and selling to a less concerned buyer. By the end of 2016 the Supplier Code will be rolled out to other products including sesame, cashew, rubber and coffee.
Olam Livelihood Charter – applies to smallholder farmers only.
Launched in 2010, the Olam Livelihood Charter (OLC) is our flagship sustainability programme. As of the end of 2015, it embraces 344,466
smallholder farmers in products such as coffee, cocoa, cotton and cashew. It is based on 8 principles – see box – that must be fulfilled for a programme to achieve OLC status.
Some stakeholders ask why it does not cover all 4 million smallholders in our supply chain. The answer is simply the scale of resource required. Olam employs 26,300 people across 47 products from sourcing to growing to trading to processing to distribution, plus all of the supporting functions.
Taking this on board, we can only physically buy product directly from about 1 million smallholder farmers via cooperatives and farmer groups. We have to purchase the other volumes from the other 3 million via third parties or licensed buying agents.
How do we support the 1 million farmers in our direct network?
Olam has over 1,100 CR&S workers in the field in Asia, South America and Africa, working with multiple partners but even then we cannot physically manage to embrace all 1 million farmers in the flagship OLC. We estimate the breakdown for 2015 as per the table opposite.
Plantations, Concessions and Farms
From 2007, Olam began to ‘go upstream’ and develop our own plantations (palm, rubber, coffee), concessions (wood products), orchards (almonds) and farms (dairy and rice).
Today we manage 2.6 million hectares. This is a huge responsibility in terms of environmental stewardship, community acceptance and economic investment. The Plantations, Concession and Farms Code was therefore
developed to define the stringent process and standards for managing the environmental and social requirements of acquisitions and new and existing upstream developments across the entire project life-cycle. It is applicable for Olam-owned and operated projects as well as partnerships and joint ventures in operating upstream enterprises.
In 2015 the Code was applied to new investments including our coffee plantation in Zambia. In purely financial terms, a key business benefit of applying the Code has been the ability to undertake a number of sale-and-leasebacks (e.g. Olam Palm Gabon) as we
have been able to meet due diligence criteria. See the Land section for more information on sale-and-leasebacks, as well as the Annual Report on page 25.
Processing facilities and workers
This set of documents has a hierarchy and takes the following structure:
High level statements including general commitments (why and generally what). There are 3 Policy statements
- Quality and Food Safety Policy
- Environment and Sustainability Policy
- Health and Safety Policy
Business expectations of actions to be undertaken (specifically ‘what’). There are several standards for each Policy area e.g. under Quality and Food Safety, there is a standard for establishing a Food Safety System. In addition to Q, E, and H&S standards, there are QEHS Management System (M) standards e.g. Incident Notification and Escalation.
Codes of Practice
Specific actions to be undertaken to deliver the requirements of the relevant standard (‘how’). There can be several codes of practice per standard e.g. under the Food Safety System standard, there are codes of practice for Good Manufacturing Practice (GMP), Hazard Analysis and Critical Control Points (HACCP), and Good Laboratory Practice (GLP).
For completeness, there is another level called Standard Operating Procedures (SOPs) which clearly detail hazards, risks and actions required for task level activities. SOPs form a key part of a site-specific management system, are typically pictorial in nature, and form the basis of all line level training and education programmes. For this reason, SOPs cannot be standardised centrally requiring local development as required.