As the number of companies committed to producing and sourcing fully deforestation free palm oil increases, there is growing awareness that traceability is an essential requirement for meeting that commitment. Companies throughout the supply chain need to be able to prove sustainability at source in order to safeguard their reputation and comply with internal or customer sourcing guidelines. As a result, many companies have signaled their intention to move to full traceability.
However, unless the industry aligns and articulates clearly what traceability means and how it can be achieved, traceability will remain an ambiguous concept and the scale required to make it economical will not be possible. The Palm Oil Traceability Working Group (TWG) was formed in early 2014 to address this challenge. The TWG is a committed group of palm oil producers, traders and users who are working together to define traceability and the roadmap to get there.
Although the ultimate goal of the group members is to achieve full traceability and sustainability to plantation level, the group has set some intermediary milestones that are essential to meet the ultimate goal and will also serve to measure progress. These milestones are:
- All mill sources known
- All mill and plantation sources known
- All mill and plantation sources known and certified/verified
The palm oil supply chain is complex, and there are a large number of actors involved. For this reason, once mill sources have been identified, a prioritization approach will be adopted to ensure that the highest risk areas receive attention first.
This approach will involve the following steps:
Step 1: Identify all mills within the company’s supply chain. For derivatives or oleochemicals, this may initially be limited to the supply chains of select priority products.
Step 2: Conduct a risk assessment on mills and sourcing areas (50-100km radius) using social and environmental criteria, based on WRI PALM Risk Assessment Methodology tool. Classify areas as high/medium/low priority for further investigation.
Step 3: Prioritization of mills in the highest priority areas and on-the-ground verification according to each individual company’s process and policies. For low priority areas, proceed to Step 5.
Step 4: Engagement and support to mills needing corrective action. Verification and/or certification may be an iterative process. Exclusion from the supply chain would be a last resort.
Step 5: Continuous monitoring and re-verification as necessary.
Each individual company will prioritize areas for action according to its own needs. In general, members of the TWG will seek to prioritize those areas where high risks and high sourcing volumes coincide. The TWG members see the benefit of aligning on key risk assessment criteria so as to have an efficient process and avoid multiple verifications of the same shared mills.
The TWG will work together with other parties to define these criteria, e.g. deforestation, peat and social/labor. The TWG memmbers have worked together with the World Resources Institute (WRI), Daemeter Consulting and Proforest to develop the WRI PALM Risk Assessment Methodology, which is a free-to-use online methodology for assessing environmental risk in mill sourcing areas.
Areas considered high priority would be further investigated. The risk assessment tool will be to identify where action may be required. It is not a verification or certification process in itself, and TWG members will not use the results of an assessment to exclude or penalize suppliers.
The members of the TWG are united in their ongoing commitment to the RSPO as the leading industry standard on certification for palm oil sustainability. The purpose of the TWG is not therefore to create a new set of standards for sustainability. However, in recognition of the fact that a large proportion of palm oil used around the world is not RSPO certified, and that some company policies include criteria not covered by the RSPO, there is a role for verification processes to support the achievement of traceable, certified/verified palm oil. Members will decide individually on the role of verification. For some, verification may be a stepping stone on the route to 100% certification, while others may use verification as a complementary tool alongside certification.
Where verification is used, the methodology of verification and the criteria against which mills are verified will be determined individually by each company, although the TWG, in partnership with Proforest, has produced guidelines for verification including verification criteria that cover common elements of no deforestation, no peat and no exploitation policies. It is the ambition of the members to link this process to ongoing monitoring that will allow companies to be proactive in their management of sustainability risks, and to find a workable, fair way to minimize duplication by sharing verification findings while avoiding anti-competitive practices, free riders and the sharing of commercial data. Verification will be carried out in a transparent way by independent third parties or through self reporting.
The TWG members see traceability as a necessary means to an end but not an end in itself. The ultimate goal of traceability is to drive impact on the ground. It is foreseen that supply chain mapping and traceability can help identify supply sheds that represent significant sustainability risks and should therefore become the focus of concerted interventions. Defining the structure of intervention will likely be an iterative learning process, but it is expected the following levers could be used to drive change: the application of incentives and disincentives to specific mills, jurisdictional approach, and consideration for area certification/verification. It is expected that public sector funding and buyers will be able to provide incentives to help drive these changes.
The members of the TWG are united behind the working definition of traceability as: knowing all palm sources within one’s supply chain all the way to plantation level (including smallholders), and traceability to mill as an intermediary step in achieving full traceability. In this context traceability is not a chain of custody concept and traceable is not the same as segregated.