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Home / case studies / Case study: How IOI Group improves traceability and transparency across its supply chain

Case study: How IOI Group improves traceability and transparency across its supply chain

Employing more than 28,000 people in several countries, IOI Corporation Berhad is a leading global integrated and sustainable palm oil player, consistently ranked as one of the most efficient major plantation owners producing one of the highest oil yields in the industry. Tracing the origins of its oil allows IOI Group to monitor and engage with its suppliers to ensure a more transparent and sustainable supply chain.  Tweet This!

This case study is based on the 2019 Sustainability Report by IOI Group 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.

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IOI Group’s three-step palm oil verification approach requires that all mills and refineries in its supply chain disclose information such as GPS coordinates and ownership groups. In order to improve traceability and transparency across its supply chain IOI Group took action to:

  • support third-party suppliers to adopt sustainable practices
  • monitor suppliers
  • implement a supply chain compliance programme
  • launch a Palm Oil Dashboard

What are the material issues the company has identified?

In its 2019 Sustainability Report IOI Group identified a range of material issues, such as anti-corruption, community relations, workers’ rights and welfare, occupational safety & health and process safety, GHGs and energy efficiency. Among these, improving traceability and transparency across its supply chain stands out as a key material issue for IOI Group.

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:

“The reporting organization shall identify its stakeholders, and explain how it has responded to their reasonable expectations and interests.”

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 IOI Group engages with: 

Stakeholder Group
Employees
Customers
Communities
Suppliers
Civil Societies
Regulators
Shareholders
Industry Association

How stakeholder engagement was made to identify material issues

To identify and prioritise material topics IOI Group engaged a range of internal and external stakeholders using a variety of techniques, including direct engagement and email surveys.

What actions were taken by IOI Group to improve traceability and transparency across its supply chain?

In its 2019 Sustainability Report IOI Group reports that it took the following actions for improving traceability and transparency across its supply chain:

  • Supporting third-party suppliers to adopt sustainable practices
  • For existing third-party suppliers (“TPS”), IOI Group implements and communicates a proactive mill-level programme. This TPS Programme supports third-party mills, smallholders, and supplier companies to adopt sustainable practices that adhere with IOI Group’s SPOP (Sustainable Palm Oil Policy) commitments. IOI Group is also using Earthworm Foundation’s Tools for Transformation (“T4T”) digital platform to underpin engagement with its TPS in Malaysia. The self-assessment platform and sustainability resource materials allow IOI Group to evaluate its TPS against its commitments whilst providing guidance and resources towards the adoption of sustainability best practices. Non-compliance with IOI Group’s SPOP will trigger corrective action plans and will require re-evaluation of commercial relationships for repeated failures. Additionally, as of July 2019, three of IOI Group’s direct suppliers, NPC Resources Bhd., BLD Plantation Bhd. and Prosper Group, have adopted NDPE (no deforestation, no peat, no exploitation) policy. NPC Resources Bhd. adopted NDPE commitments at the end of 2018, and progressively completed improvement and rectification time-bound activities. IOI Group has also been engaging with BLD Plantation Bhd. (“BLD”) to support their adoption of sustainability best practices. During May 2019, BLD, under the guidance of Earthworm Foundation, published their Sustainable Palm Oil Policy, which detailed their NDPE commitments. Since then, BLD has been making satisfactory progress in the delivery of their policy commitments. They prepared their policy implementation plan which included a grievance mechanism and publishing of supplier mill list. This policy implementation plan had time bound objectives and milestones. Prosper Group, similarly, adopted a Sustainable Palm Oil Policy which covered NDPE commitments. Earthworm Foundation is guiding Prosper Group in their development of a policy implementation plan, along with a grievance mechanism.
  • Monitoring suppliers
  • IOI Group has contracted the services of Aidenvironment for land use change monitoring of its supply base and a pre-monitoring group-level risk assessment of IOI Group’s third-party suppliers has been completed, followed by monthly reports or as and when land use change occurs. The services also include increasing awareness and enhancing capacity of both IOI Group and its third-party suppliers towards eliminating deforestation and new peat development. As for the compliance of indirect suppliers, these are mainly managed by IOI Group’s trading partners who hold NDPE and other sustainability commitments that are aligned with IOI Group’s policy.
  • Implementing a supply chain compliance programme
  • In Sabah, IOI Group’s supply chain compliance programme, commenced in August 2018 with an 18-month activity schedule which included the collection of traceability data, supplier assessments using Earthworm Foundation’s T4T platform, engagements, workshops, and capacity building. The planning of this programme was based on feedback from suppliers and stakeholders on their experience with past activities during 2016 and 2017.
  • Launching a Palm Oil Dashboard
  • IOI Group’s Palm Oil Dashboard was launched in December 2016 and contains information such as certified volumes, traceability numbers, supplier engagement and risk assessment, as well as links to the latest IOI Group sustainability news and grievance list. Concession boundaries for IOI Group’s operations in Sabah and Kalimantan can be found on the Geo-RSPO (Roundtable on Sustainable Palm Oil) platform, while the Indonesian concession map is also downloadable from IOI Group’s website. Mill lists including the name, coordinates and controlling group of each mill in IOI Group’s supply chain are also published in the dashboard.

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: Achieve gender equality and empower all women and girls
  • Business theme: Workplace violence and harassment
  • Sustainable Development Goal (SDG) 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
  • Business theme: Labor practices in the supply chain
  • Sustainable Development Goal (SDG) 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
  • Business theme: Workplace violence and harassment

 

80% of the world’s 250 largest companies report in accordance with the GRI Standards

SustainCase was primarily created to demonstrate, through case studies, the importance of dealing with a company’s most important impacts in a structured way, with use of the GRI Standards. To show how today’s best-run companies are achieving economic, social and environmental success – and how you can too.

Research by well-recognised institutions is clearly proving that responsible companies can look to the future with optimism.



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References:

1) This case study is based on published information by IOI Group, 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/

Note to IOI Group: With each case study we send out an email requesting a comment on this case study. If you have not received such an email please contact us.

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