Stepwise approach to producing responsibly
Transitioning a supply chain to become more sustainable is a long and challenging process. Investment into changing farming practices, land registration, and other responsible practices without slowing existing business operations means that transformation will happen step by step. Therefore, IDH has a stepwise approach to bringing responsible soy production from niche to mainstream:
- Endorsing the purchase of RTRS or equivalent certificates
- Supporting farmers that are already legally compliant towards zero net deforestation
- Supporting farmers towards legality and continuous improvement.
Making responsible soy mainstream requires working with a majority of farmers. IDH’s approach puts farmers at the central stage, empowering them to become responsible producers. Our continuous improvement strategy enables producer engagement, because it takes their needs into account. Most farmers still struggle to become legally compliant. In Brazil, the Forest Code has historically been resisted by the agricultural lobby, however currently there is a clearly discernable switch in the discourse towards acceptance and actual implementation. Supporting implementation of the Forest Code and the continuous improvement of farmer practices are key steps towards achieving responsible soy and ultimately, zero net deforestation.
We support producers through the IDH landscape program in Mato Grosso, Brazil, where 27 percent of the Brazilian soy is produced. We work as a part of a coalition of public and private sector stakeholders led by the Government of Mato Grosso, the Produce, Conserve and Include (PCI). The PCI plan aims to increase production and decrease deforestation; restore forests and degraded pastures; and enhance social inclusion. To implement this state plan at a local level, IDH is developing PCI regional compacts in high-deforestation risk regions in the Amazon and Cerrado biomes. (A compact is an agreement between public and private parties around a predefined area to produce sustainably and conserve natural resources.) Regional compacts will result in multi-sector formalized, long-term sustainable land use and management plans. IDH will support implementation of the plans through co-funding projects, the development of business cases for investors and links to markets.
Producers need a clear signal from end-buyers that there is a market for responsible soy. The end game of regional compacts is that they become verified sourcing areas, which are sourcing regions from which the end buyer is fully aware of the sustainability status and risks.
We define a verified sourcing based on a number of criteria: it benefits the region, it is a defined area with a clear governance structure measured by a simple set of landscape criteria, and there is a link to markets.
Further, monitoring and verification systems and dashboards provide clear overviews of aggregated farmer and regional data and thus strengthen local governance. Using these dashboards, producers can demonstrate compliance with key sustainability indicators and the continuous improvement in the region.
Together with Aprosoja, IDH is modelling a verified sourcing area in an 80-kilometer radius around Sorriso, Mato Grosso, which has a trade volume of approximately 2.7 MMT. Monitoring of the region will be based on the Fefac Soy Sourcing Guidelines, with aggregated anonymous farmer data cross referenced against publicly available data. Besides working on updating the Soy Sourcing Guidelines, Fefac is developing a monitoring tool, to assess the flows of responsible soy in Europe. The supply chain modelling to support a direct connection between end buyer and producer is happening under the auspices of Fediol and Abiove.
On the market side, IDH facilitates producer – end-buyer dialogue to align on criteria and next steps to accelerate responsible production and trade of soy. To this end IDH convened a Memorandum of Understanding with representatives from the Brazilian producers (Aprosoja), Brazilian crushers (Abiove), the European crushers (Fediol) and the European feed industry (Fefac). The objective of the MoU is to accelerate demand and production of responsible soy and decrease deforestation via a landscape approach.
IDH also facilitates a bi-monthly retail, manufacturer & brand co-think tank, to support the development of direct connections to producing regions. To determine the appropriate scope of soy sourcing policies, IDH supported 4 UK retailers – Asda, Marks&Spencer, Sainsbury’s and Tesco – with a soy footprint analysis. This not only clarified where the soy came from, but also how much is in which products. The results clearly demonstrated that only a handful of direct suppliers to the UK retail deliver about 50% of the volume of meats, dairy and eggs:
- Five feed suppliers deliver the feed to the farmers to cover the volume.
- Three soy traders deliver up to 75% of the soy imported into the UK.
By connecting the (zero) net deforestation commitments of demand side actors to the compacts on the supply end, we help unlock long-term investments and benefits to land-users and owners as well as help deliver upon sustainability commitments. One of the ultimate objectives of the verified sourcing areas, in turn, is to export responsible soy with a direct link to the end-buyer. Part of IDH’s current work is exploring the supply chain implications to make this a reality.
In 2011 an agreement was reached between stakeholders in The Netherlands which stated that by the end of 2015, all processed soy would be responsible. This target was not fully achieved; in 2015 44% of the 1.8 MMT of soy processed by the Netherlands was responsible (RTRS), covering all the soy consumed in the country and a small part of the exports. The dairy sector is the only sector that sources 100% responsible soy.
In 2011, only a few producers were RTRS certified. So to create sufficient supply of responsible soy, IDH started the Soy Fast Track Fund I + II, a producer support program. This ended mid 2016, achieving 2.4 million hectares under sustainable management, of which 0.5 million hectares RTRS certified in Paraguay, Argentina and Brazil. Over 1.000 producers received support, and IDH proved that producing in an environmentally and socially sustainable way is also economically viable, as certification is a great management tool, it mitigates risks and has proven to be very positive for real estate value. Please find a selection of learning documents here. In 2014, IDH initiated the Soy Fast Track Fund III projects, which are seven projects prototyping a landscape approach in Brazil and Paraguay.
To accelerate cost efficient sourcing of responsible soy, IDH supported the development of the Fefac Soy Sourcing Guidelines and benchmark. The Fefac Guidelines are a list of 57 criteria, with a baseline of legal compliance and a structure that promotes continuous improvement on the farm. Currently 13 schemes have been benchmarked.
During this period, three key insights emerged that would change the shape of the program. Firstly, a study with KPMG made clear that 95% of the RTRS compliance costs in Brazil are related to legal compliance. Secondly, on farm certification does not guarantee that deforestation in the region will stop. And lastly, a physical supply chain connect between market and production is needed to drive improvements – book & claim is not enough. This is why the soy program is now integrated with the landscape program in Mato Grosso.
|Learning report on first landscape projects on soy – Portuguese||Learning Study||2018|
|Learning report on first landscape projects on soy – English||Learning Study||2018|
|Soy Fast Track Fund Learning report for EU partners||Learning Study||2017|
|UK soy retailer footprint analysis||Report||2017|
|Memorandum of Understanding||Factsheet||2017|