Case study: How IndoAgri promotes responsible sourcing
IndoAgri and its subsidiaries operate plantation and processing facilities that produce palm oil, rubber, sugar, cocoa and tea. IndoAgri also operates research & development, seed breeding, manufacturing and marketing of award-winning edible oils brands. IndoAgri’s commitment to a traceable and responsible supply chain requires it to work with its suppliers to ensure that they operate in line with its Policy.
This case study is based on the 2019 Sustainability Report by IndoAgri published on the Global Reporting Initiative Sustainability Disclosure Database that can be found at this link. Through all case studies we aim to demonstrate what CSR/ ESG/ sustainability reporting done responsibly means. Essentially, it means: a) identifying a company’s most important impacts on the environment, economy and society, and b) measuring, managing and changing.
Abstract
IndoAgri is committed to excellence in supply chain relations Tweet This! to encourage transparent, responsible, and profitable practices. In order to promote responsible sourcing IndoAgri took action to:
- achieve ISPO certification
- implement a Sustainable Agriculture Policy
- assess suppliers
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With this case study you will see:
- Which are the most important impacts (material issues) IndoAgri has identified;
- How IndoAgri proceeded with stakeholder engagement, and
- What actions were taken by IndoAgri to promote responsible sourcing
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What are the material issues the company has identified?
In its 2019 Sustainability Report IndoAgri identified a range of material issues, such as deforestation and land management, environmental impacts and compliance, occupational health and safety, product quality and safety, smallholder engagement and livelihoods, human rights. Among these, promoting responsible sourcing stands out as a key material issue for IndoAgri.
Stakeholder engagement in accordance with the GRI Standards
The Global Reporting Initiative (GRI) defines the Principle of Stakeholder Inclusiveness when identifying material issues (or a company’s most important impacts) as follows:
Stakeholders must be consulted in the process of identifying a company’s most important impacts and their reasonable expectations and interests must be taken into account. This is an important cornerstone for CSR / sustainability reporting done responsibly.
Key stakeholder groups IndoAgri engages with:
To identify and prioritise material topics IndoAgri engaged with its stakeholders through the following channels:
Stakeholder Group | Method of engagement |
Shareholders, investor and bankers | · Meetings · Surveys |
Customers and consumers | · For new customers: · Surveys · Approach and product trials · For existing customers: · Regular visit/ meeting, · Bakers forum · Customer gathering · Customer support line |
CPO Suppliers | · Surveys · Audits · One-to-one meetings |
Local Suppliers | · Technical assistance to local businesses on construction of civil projects |
Government and Regulators | · Public forums and regular meetings |
Non-Governmental Groups | · RSPO process meetings · Other NGO meetings e.g. IDH · Local multi-stakeholders initiatives |
Employees | · Training sessions · Dialogue with unions · Grievance/whistle-blowing processes |
Smallholders (FFB Supplier) | · Development of platforms and projects on socialisation · Plasma assistants |
Local Community | · Regular feedback and awareness meetings · Forums for grievance & resolution · Other ad hoc engagements |
What actions were taken by IndoAgri to promote responsible sourcing?
In its 2019 Sustainability Report IndoAgri reports that it took the following actions for promoting responsible sourcing:
- Achieving ISPO certification
- Developed by the Indonesian Government, the Indonesian Sustainable Palm Oil certification system (ISPO) is a mandatory certification for all oil palm growers in the country. ISPO aims to cultivate a sustainable plantation industry, and in the process contribute to the Indonesian Government’s commitments to reduce GHG. Independent smallholders are currently exempt from ISPO, but the Government plans to make participation mandatory in the future. To register for ISPO certification, palm oil companies have to first pass a Plantation Business Assessment, Penilaian Usaha Perkebunan (PUP) administered by the Regional Plantation Estates Office to ensure that the company’s operations have implemented ISPO requirements. The ISPO audit is conducted by a government approved certification body in two stages; the first stage is a compliance audit of plantation licenses and required business documentation, and the second stage is plantation audit and assessments. IndoAgri’s ISPO-certified production in 2019 was 503,000 tonnes, representing 71% of its nucleus CPO (Crude Palm Oil) production. All of IndoAgri’s plantations have been registered for ISPO certification, out of which 80% have been certified and audited.
- Implementing a Sustainable Agriculture Policy
- IndoAgri’s Sustainable Agriculture Policy commits it to traceable palm oil that ensures:
- no deforestation,
- preservation of HCV (High Conservation Value) areas and HCS (High Carbon Stock) forests,
- no planting on peat regardless of depth,
- no burning,
- respect for labour and human rights,
- Free Prior and Informed Consent (FPIC).
- IndoAgri conducts annual audits on its plantations, including its plasma smallholders, to ensure 100% compliance with its Policy. Additionally, all IndoAgri and third-party CPO suppliers must formally accept IndoAgri’s Sustainable Agriculture Policy and Supplier Guidelines. IndoAgri regularly assesses risk levels of all its own mills on an annual basis as part of its risk management and audit process. For third-party suppliers, IndoAgri tracks their names, parent company, ownership structure, scale of operations, and location coordinates. IndoAgri also regularly engages with them to ensure compliance with its Policy. Major findings and recommendations will be communicated and followed-up and IndoAgri will cease supplies from uncooperative and non-complying third-party mills. In 2019, IndoAgri ceased sourcing from one supplier due to non-compliance with its Policy. In 2019, 75% of CPO volume from suppliers complied with IndoAgri’s Sustainable Agriculture Policy.
- Assessing suppliers
- In 2019, IndoAgri conducted 191 visits, workshops, and audits on 100% of its mills and their supplying estates. Besides compliance to its Policy, IndoAgri’s assessments also focus on:
- agronomy (good agricultural practices, yield, soil health, crop protection),
- responsible operations (safety, biodiversity, peatland, fire risk, human rights, community engagement, FPIC),
- efficiency of operations (energy and water consumption, GHG emissions, waste production), and
- compliance with government regulations and ISPO certifications.
- Additionally, IndoAgri reports its human rights assessments based on its ISPO certification achievements. As such, 80% of IndoAgri’s operational units have been formally assessed for human rights risk as of 2019.
Which GRI Standards and corresponding Sustainable Development Goals (SDGs) have been addressed?
The GRI Standards addressed in this case are:
1) Disclosure 308-1 New suppliers that were screened using environmental criteria
2) Disclosure 414-1 New suppliers that were screened using social criteria
Disclosure 308-1 New suppliers that were screened using environmental criteria does not correspond to any SDG.
Disclosure 414-1 New suppliers that were screened using social criteria corresponds to:
- Sustainable Development Goal (SDG) 5: Gender Equality
- Targets: 5.2
- Sustainable Development Goal (SDG) 8: Decent Work and Economic Growth
- Targets: 8.8
- Sustainable Development Goal (SDG) 16: Peace, Justice and Strong Institutions
- Targets: 16.1
78% of the world’s 250 largest companies report in accordance with the GRI Standards
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References:
1) This case study is based on published information by IndoAgri, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original, please revert to the original on the Global Reporting Initiative’s Sustainability Disclosure Database at the link:
http://database.globalreporting.org/
2) https://www.globalreporting.org/standards/gri-standards-download-center/
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