This is one of a series of case studies developed by WBCSD and the Just Rural Transition to examine how large agribusinesses empower and engage SME suppliers and stakeholders to reach their sustainability goals. These examine the business case for supplier empowerment; what good policy looks like; and challenges and solutions involved in engaging suppliers. The cases identify best practices around how procurement can support a company’s sustainability priorities and performance. Click here for a synthesis that identifies key themes and recommended action from the series of case studies.
Background and business case context
Traceability to guarantee palm oil fruits’ origins
Golden Agri-Resources (GAR) is a vertically integrated “seed-to-shelf” palm oil plantation business. In Indonesia, GAR manages almost 538,000 hectares of palm oil estate – 4% of the country’s total planted estates. GAR operates 49 palm oil mills and works with another 353 third-party operated mills. The company also sources palm oil fruits from many smallholder farmers.
GAR has committed, as part of being a responsible company, to ensuring that its SME third party suppliers are operating responsibly. Traceability is a key part of the company’s supply chain transformation efforts. This means tracking refined palm oil and palm oil products back to their origin. GAR’s public commitments include establishing where palm oil fruits are sourced from and ensuring the oil is produced in a sustainable manner. Full traceability means that GAR can guarantee the origin of the raw materials used in palm-derived products for customers and consumers.
Meeting customer sustainability commitments
In addition, GAR’s customers – among which are big international food brands – are increasingly making no deforestation, no peatland conversion and no exploitation (NDPE) commitments. For them, traceability and guarantee of production sustainability of palm oil is increasingly a requirement. For GAR and its suppliers, traceability to plantation and on-going improvements in sustainable agricultural practices are becoming necessities if they are to continue to supply these customers.
Solution: Sawit Terampil smallholder support program
Empower farmers – 100% traceability aim
GAR division Sinar Mas Agribusiness and Food has a dedicated supplier support program in the regions of Aceh and north Sumatra known as Sawit Terampil, which roughly translates as producing palm oil with skill. This aims to enable the smallholder farmers that provide palm oil fruits to the company’s supplier mills eventually to achieve 100% transparency to plantation.
In addition, the program is set up to encourage farmers to develop more sustainable practices, and to empower them with the capacity to do so. Recognizing that improving farmer livelihoods sustainably and at scale requires commitment from all parts of the value chain, the project is supported by Mars and Fuji Oil, with technology company Koltiva providing support services to the program, consisting of its KolitTrace system and agronomists and field agents giving on-the-ground assistance to farmers.
Project progress: 21,000 farms mapped
To enable traceability to plantation for smallholder suppliers, the first step is to map where their plantations are. By June 2022, approaching 21,000 farms had been mapped in the project region.
Overall, Sinar Mas Agribusiness and Food has mapped 95% of its supplier chain to the plantation so far. Once the farmers are identified, targeted programs to help improve livelihoods are progressively implemented. These include support towards sustainable agricultural practices and eventually certification and livelihood projects beyond palm oil for their families and communities.
Targeted support and farmer champions
The Sawit Terampil program provides comprehensive support to smallholder farmers via group coaching and targeted individual support to help them implement improved agricultural practices. More than 4,000 independent farmers have been involved so far.
The information gained from traceability initiatives enables the company to identify the potential gaps in productivity, yield and agricultural practices, and provide targeted assistance to the farmers.
A key part of the process is identifying farmer champions who can encourage their peers about the benefits of the program. These champions are given additional training sessions to help them engage others in their communities.
Certification preparation
The capacity building training helps the smallholders improve their cultivation methods and enables them to prepare to register for Roundtable on Sustainable Palm Oil and Indonesian Sustainable Palm Oil certification.
RSPO certification is a voluntary industry scheme, whereas ISPO certification is mandatory for the Indonesian palm oil sector. While this is not yet being fully enforced across the industry, it does mean that all plantations are required to move towards alignment.
Communication challenges
A challenge for the program has been the initial lack of knowledge among some farmers about the benefits for them of adopting a more sustainable approach – and in some cases significant explanation is necessary.
The challenge is heightened by high levels of illiteracy in some communities – making communication with them difficult and meaning that farm record keeping is sometimes lacking. The Sawit Terampil program targets such farmers with assistance and special capacity building training.
Next steps
Sinar Mas Agribusiness and Food is committed to the Sawit Terampil program through until December 2023. The company says that as of September 2022, 76% of participants have increased their understanding of sustainable palm oil cultivation practices since the implementation of the program in 2021. Farm traceability, yield and income are being tracked to demonstrate Sawit Terampil’s progress over the coming months.
Summary
GAR is committed to developing the sustainability of its independent smallholder suppliers. Many of the company’s customers require this to meet their own supply chain commitments. The rolling out of mandatory Indonesian Sustainable Palm Oil certification means that farmers need to align with a more sustainable approach. Through the Sawit Terampil program GAR subsidiary Sinar Mas Agribusiness and Food has mapped almost 21,000 supplier farms and enaged 4,000 farmers in targeted training.