Palm Oil Traceability Working Group (TWG)

Presentation to Tropical Forest Dialogue workshop

May 2015

Rationale and purpose of the TWG

• Many companies announced commitments to traceability, but definitions vary

• Concern that multiple traceability definitions create confusion and proliferation of requirements and systems, leading to inefficiencies and extra costs

• IDH convened small yet significant group of growers, traders and users to develop a common definition of traceability and how to leverage traceability for sustainability

• Any outcomes must support and align with existing initiatives (e.g. RSPO), rather than creating something new

Members of TWG

Regular attendees Have attended/ expressed interest

Progress to date

• Alignment on traceability definition and glide path

• Commissioned Accenture to recommend pragmatic solutions to key challenges and assess traceability systems

• Developing risk assessment tool and mechanisms for verification

• RSPO interested to trace non-certified oil and platform integration

• Co-funding development of traceability platform

Definition and glide path

All mill sources known

All mill and plantation

sources known and certified/

verified

All mill and plantation

sources known

2015* 2020**Year end. Timeline is indicative only. Each company has its own commitments and targets, but most are aligned around these dates.

• Traceability is defined as knowing all palm sources within one's supply chain all the way to plantation level (including smallholders), and traceability to mill is an intermediary step in achieving full traceability. Traceability is not a chain of custody concept and is not the same as segregated.

• Traceability is not the end goal but a critical step for sustainability

• Key criteria (for mill level traceability) are: mill name; mill location (coordinates); mill parent company; certification/verification status; % traceable (from refinery to mill initially, later from mill to plantation)

• Aligned on the following glide path to traceability:

Accenture study

• Accenture commissioned to recommend pragmatic solutions to key challenges and assess traceability systems

• Key challenges include suppliers fear of being “bypassed” and additional time and effort required without clear payback

• Recommendation: industry wide traceability reporting platform (blackbox) to overcome competitiveness and cost concerns

• Platform should be interoperable with RSPO E-Trace and companies’ existing traceability systems, and cover non-certified oil

• Based on assessment of six vendors, KnownSources emerged as best positioned to develop such a platform for palm oil

• KnownSources is not a tracking system like E-Trace, but a platform for mapping suppliers and reporting their traceability and other criteria in an industry-standardized way

Risk/priority assessment methodology for verification

• WRI co-leading development of a methodology through which companies can view their supply base and prioritize mills for action where necessary based on environmental and social criteria

• Mills indicated as high-priority would be subject to on-the-ground verification to confirm risks and further investigate additional potential issues (e.g. social risks)

• Where issues are identified, companies would seek to support change in practices to improve performance against the risks

• If no progress is observed over a specified time, companies could consider exclusion as a last resort

• For lower priority mills, companies might rely more heavily on existing certification mechanisms or standards rather than prioritizing verification

Schematic of assessment and verification process

Consolidated mill dataset

developed

Annual mill assessment (desktop +

remote sensing)

Highe

r pr

iorit

yLowest priority

Verification on the ground*

Not

com

plia

nt

Improve practices

Record of verification maintained by mill

owner and buyer(s)

Record of assessment incorporated into WRI

system and/or traceability platform?

Compliant

Illustrative only

Traceability to the mill level established

*TWG currently exploring how this could be done

Exclude

Grace period

Possible verification, certification, etc. on case-by-case basis.

Potential for integration with RSPO

Illustrative only

Mill reports data on all oil to

RSPO

Certified oil enters GREEN LINE to be traced as certified throughout the supply chain

Non-certified oil enters RED LINE to be traced as non certified throughout the supply chain

End user can trace oil

regardless of certification

• TWG is proposed as RSPO Innovations Lab supply chain initiative

• Coordination on FFB Legality and Traceability Task Force

• RSPO agreed to manage traceability of all oil (certified and noncertified) in order to provide a single, efficient system

• Known Sources platform could be endorsed and/or administrated by the RSPO

Way forward and next steps

• Coordinate with other initiatives (KADIN-IPOP, RSPO FFB Task Force, SHARP, Consumer Goods Forum)

• Continue to engage with RSPO and its members • Operationalise traceability platform and integration with

new RSPO system• Refine risk assessment and verification tools; consult

more widely with stakeholders, e.g. NGOs• Begin projects on the ground in Indonesia and Malaysia

Annex

Example of proposed platform

*Alternatively, volume data could be held mainly by individual systems, requiring only “% traceable” passed to platform. That could make data validation and verification more complex.

Common reporting platform• 5 key criteria (see previous slide) would fed from individual systems

and be housed here*• This data would be audited/verified by an independent 3rd party

periodically

Sin

gle

plat

form

Mul

tiple

S

yste

ms

Company A traceability

system

Company B traceability

system

Company C traceability

system

Company D traceability

system

Illustrative platform interface appearance (buyer view)USER: Buyer A

My suppliers

Owner % traceable

Refinery 1 Refiner x 90% + Click + to view mills & suppliers

Refinery 2 Refiner y 90% + Click + to view mills & suppliers

Refinery 3 Refiner z 80% - Click - to hide mills & suppliers

Mill name Geo coordinates

Parent company

Certification status

Risk status % traceable*

Mill a X: 000000Y: 000000

Refiner z RSPO Low

Mill b X: 000000Y: 000000

Independent company n

none High. To be verified 11/2014. Click here to view risk assessment

*for the future. Not immediately required

Appearance and content illustrative only.

Concession analysis: Indicators and thresholdsCategory of Risk How calculated Low Risk Medium Risk High RiskRSPO Certified Is the mill listed by RSPO? Certified n/a Not CertifiedAdherence to Legislation (Indonesia)

Concessions overlap with illegal land (APL/HPK)? 0% n/a >0%

Adherence to Legislation. (Protected areas; outside Indonesia)

Concessions overlap with protected areas 0% n/a >0%

Deforestation A combination of the following: All tree cover loss % of total tree cover that was lost in

concession areas (2000-2012) <5% 5% - 28% >28%

Tree cover loss on primary forest / intact forest landsc.

% of primary forest lost within concession areas (2000-2012) 0% n/a >0%

Recent clearance alerts

# of clearance alerts in concessions (Jan 2013 – current month) TBD TBD TBD

Recent clearance alerts on primary forest

# of clearance alerts on primary forest in concession areas (Jan 2013 – current month) 0 alerts n/a >0 alerts

Carbon/HCS (when ready) % of carbon-rich land lost within concession 0% n/a >0%

Peat Loss on Peat

% of tree cover loss on peat lands 0% n/a >0%

Presence of Peat % of concession area that is peat land 0% 0-20% >20%

FiresCount of fire alerts over XXXX period 0 n/a >0

Radius analysis: Indicators and thresholdsCategory of Risk How calculated Low Risk Medium Risk High RiskRSPO Certified Is the mill listed by RSPO? Certified n/a Not CertifiedAdherence to Legislation (Indonesia) % of radius with illegal land (APL/HPK)? TBD TBD TBD

Adherence to Legislation. (Protected areas; outside Indonesia)

% of radius with protected areas TBD TBD TBD

Deforestation A combination of the following: All tree cover loss % of total tree cover that was lost in radius

area (2000-2012) TBD TBD TBD

Tree cover loss on primary forest / intact forest landsc.

% of primary forest lost within radius area (2000-2012) TBD TBD TBD

Recent clearance alerts

# of clearance alerts in radius (Jan 2013 – current month) TBD TBD TBD

Recent clearance alerts on primary forest

# of clearance alerts on primary forest in radius area (Jan 2013 – current month) TBD TBD TBD

Carbon/HCS (when ready) % of carbon-rich land lost within radius TBD TBD TBD

Peat Loss on Peat

% of tree cover loss on peat lands TBD TBD TBD

Presence of Peat % of radius area that is peat land TBD TBD TBD

FiresCount of fire alerts over XXXX period TBD TBD TBD

• Need for effective carrots and sticks for 3rd party suppliers engagement

• IDH willing to co-fund and innovate solutions for these

• Examples could be: productivity improvements, public recognition, more attractive financing, greater efficiency, etc.

How to approach supply sheds

TWG member priority areas*

Political will

High deforestation/ carbon risk

*may be linked to volumes, business relationships etc.

Where the magic happens