Afg responsible procurement document eng 01 16 hr

Agrifirm’s Responsible Procurement Approach

Version 1.1 01-16

Towards a complete, objective and verifiable approach for the responsible procurement of significant raw materials for feed.

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Contents 1.

Introduction

3

1.1 Reason why behind the new responsible procurement approach

3

1.2

Ambition and scope of Agrifirm’s responsible procurement approach

4

2.

Agrifirm’s responsible procurement approach

6

2.1

Combining regions and crops

6

2.2

The advantages of the new approach

6

2.3

The steps in our new approach

7

3.

Methodology & Data

9

3.1 Establishing a framework of relevant responsibility issues 3.2

Determining ‘essential topics’ and ‘responsibility topics’

3.3

Data collection

9 9 10

3.4 Risk calculation method

10

4.

Stakeholder involvement

13

4.1

Finding a balance between transparency and confidentially

13

4.2 Strategic dialogue about the new approach

13

4.3

Dialogues in the countries of origin

13

5.

Milestones

14

5.1

Brief overview of all milestones

14

5.2 Objectives for 2016

14

5.3

15

After 2016: Start the expansion to measures

5.4 Once every two years: Monitoring of progress

15

Appendix

16

Appendix 1: Decision tree generic – specific risk assessment

16

Appendix 2: Essential topics (light blue) and sustainability topics (light green)

17

Appendix 3: Data sources per sustainability category

21

Appendix 4: Report of stakeholder session of 2 December 2015

22

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Agrifirm

Responsible Procurement Approach

1. Introduction For quite a long time now, the responsible procurement of raw materials has been an important topic within Agrifirm. This was mainly focused on the implementation of an advanced system for feed safety, but now it’s time to proceed to another phase.

In this document we present our new risk-based approach to responsible procurement of feedstuffs and grains. We explain why and how we will proactively cooperate with our supply chain partners to arrive at the responsible procurement of all our main raw materials. The approach presented has been prepared and piloted in close cooperation with two independent consultancy companies.

1.1 Reason why behind the new responsible procurement approach

for feed safety and ethical trade, setting up a system for responsible production and processing practices in origination areas of other raw materials is the new aspect in the procurement policy of Agrifirm Feed

With a growing world population and increasing prosperity, demand

(Netherlands).

for food, feed and biomass for other purposes will increase in the coming decades. This growing demand results in increasing pressure

Still, when it comes to the procurement of responsible raw materials

on natural resources such as fertile land, biodiversity and water. The

for feedstuffs and grains, historically we have always been a very active

agricultural sector faces the challenge of producing raw materials in a

stakeholder. For many years now, Agrifirm has been closely involved

sustainable way, managing the world’s natural resources responsibly.

in the debates regarding responsible soy and responsible palm oil; two raw materials that are of great importance for the feed industry.

Agrifirm is committed to play its part to contribute to this global

Both soy and palm oil are the subject of intense debates regarding

challenge. One of the main ways in which Agrifirm has an impact on

nature conservation, environmental impact and human rights. We

agricultural production is by means of the procurement of responsibly

have learned a lot from the various initiatives taken in the palm oil

produced raw materials for its feed solutions and crop caring solutions.

and soy chain.

In this policy document of Agrifirm Group, the specific approach that has been developed, together with the procurement department of

Because we also procure other raw materials from soy or palm

Agrifirm Feed (Netherlands), for our agro commodities for producing

regions, and because we are aware of the sustainability and social

compound feed will be explained.

challenges in the production regions closer to home, we believe a more comprehensive view on agro commodities and regional risks

Feed safety and business integrity are essential aspects of our

is needed. Therefore we have decided to develop a new approach

operation and procurement. For decades now, feed safety has been of

to create transparent, objective and specific information about all

the highest priority for Agrifirm and we have initiated generic control

important procurement regions and supply chains.

systems for the branch, such as GMP+ and SecureFeed. Monitoring and controlling of feed safety standards is obviously at the core of our

Being an intermediary actor in the supply chain, we believe that it is

operational guidelines, but is also part of our existing procurement

important to work together on this approach with our suppliers and

policy. A code for business ethics, which is the basis for legal and

stakeholders. We are highly committed to strong cooperation with

transparent trading relations with our suppliers, is also part of our

our supply chain partners and stakeholders and we are convinced that

existing procurement policy. Along with principles and agreements

we can only take the right measures to make agricultural production

3

more responsible in close cooperation and based on a shared vision.

Since we have sharpened our CSR policy in 2015, we make a clear

Generally speaking, when we talk about responsible procurement, we

distinction between contributing to responsible raw materials

think of the following actions as having an impact as Agrifirm: gathering

by supply chain initiatives and programs such as Skylark and the

the right information, implemention of thorough regional-based risk

cultivation and supply of Dutch soy that are reported under the pillar

analyses, initiating supply chain cooperation and supporting the

‘Sustainable Consumer Supply’, versus initiatives that contribute to the

creation of structural dialogues about impactful measures towards

responsible procurement of raw materials, that are reported under the

responsible production of agro commodities. We are convinced that

pillar ‘Responsible Raw Materials’.

it is of great importance to work on this ambition together with our We know we will have the greatest positive impact on ‘Responsible

suppliers to realise true change in countries of origin.

Raw Materials’ if we first direct our energy and resources towards

1.2 Ambition and scope of Agrifirm’s responsible procurement approach

the most strategic raw materials in terms of their shared volume in the total raw materials portfolio. This volume based focus is also very clearly linked to the ‘material’ activities (see table 1) of our feed

The use of responsibly produced raw materials is an important element

organisation; procurement major volumes of agro commodities.

of Agrifirm’s CSR policy. In our CSR policy, we distinguish six different pillars (see figure 1) and we frequently report on the progress for all six pillars. When we report on progress, we follow the internationally

Sales volume (x 1,000 tonnes)

2014

recognised principles of the Global Reporting Initiative (GRI). In the

Compound feeds

4,248

current version of GRI, an organisation is challenged to focus on the

Co-products 2,371

sustainability subjects on which it has the biggest impact (‘material

Premixes & concentrates

461

subjects’). That is what we are aiming at for all our activities, and also

Cereals, potatoes, onions and carrots

612

for the new responsible procurement approach.

Fertilisers 430 Organic fertilisers

537

For the pillar ‘responsible raw materials’, we have formulated the

Crop protection products (€ millions)

following ambition for 2020:

Table 1: Agrifirm’s activities in terms of volume

131.7

Working on Responsible Raw Materials By 2020, all major commodities, including wheat,

In the initial phase, we limit the scope of the program (at this

corn and soy, will be part of Agrifirm’s sustainable

moment) to all purchases of Agrifirm Feed (Netherlands), because of

procurement policy. The specific risks of

the relatively large contribution of the procurement of raw materials

producing all these commodities are charted for

of Agrifirm Feed (2.9 million tonnes) as can be observed in figure 2.

a certain region with the actions Agrifirm is taking

Responsible Raw Materials

in that context. We also make organic fertilisers

However, Agrifirm Belgium and Agrifirm Germany (from 2017 Agrifirm NWE) will be very relevant companies to continue with when the approach has been implemented for the Netherlands.

and compost widely available to growers.

Figure 1: The six pillars of the responsible procurement policy

Responsible Raw Materials

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Agrifirm

Efficient Use of Raw Materials

Efficient Production and Logistics

Responsible Procurement Approach

Healthy Plants and Healthy Animals for Healthy People

Sustainable Consumer Supply

Employees, the Foundation for Success

AGRIFIRM POLSKA 3 production facilities 195.000 ton compound feed

AGRIFIRM FEED 6 production facilities 2.900.000 ton compound feed

AGRIFIRM BELGIUM 1 production facility 292.000 ton compound feed

AGRIFIRM MAGYARORSZÁG 2 production facilities 229.000 ton compound feed

AGRIFIRM DEUTSCHLAND 3 production facilities 748.000 ton compound feed

STO POSTO* 1 production facility 92.000 ton compound feed * Minority interest

Figure 2: Agrifirm compound feeds European production facilities

For Agrifirm Feed (Netherlands), the following raw materials are

Generally speaking, we can identify a dominant production

included, based on the criterion that a raw material accounts for

region for each of the raw materials. Based on our own

at least 2% of the macro ingredients for Feed Netherlands, which

procurement experiences, we identified the following main

is approximately 90% of our total volume of feed ingredients.

procurement regions:

> Maize

> Soybean extract

> South America

> Black Sea region

> Wheat

> Wheat feed meal

> USA/ Canada

> Asia

> Rapeseed extract

> Citrus pulp1

> Northwwestern Europe

> Australia

> Barley

> Sunflower meal

> Baltic States

> Palm kernel expeller Citrus pulp is often substituted with beet pulp when relative prices change. We will take this into consideration when we start with the regionalbased risk assessment for citrus pulp by also taking into account sugar beet.

1

Figure 3: Regions of raw materials

Remark: The use of raw materials by our clients – the farmers – is not part of this specific strategy, neither is the search for alternative raw materials (e.g. alternative protein sources).

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2. Agrifirm’s responsible procurement approach In this chapter, we briefly explain what the new responsible procurement approach entails and we introduce the basic elements: the generic risk assessment, the specific risk assessment and stakeholder involvement in those processes. The leading idea behind the new approach is that we want to know the risks on societal and environmental issues in our supply chain and start cooperation with suppliers to jointly work on these issues.

2.1 Combining regions and crops

(the farmers) and our clients’ clients (the meat, dairy and egg sectors, manufacturers of A-brands and retailers).

The basic idea behind this new approach is that there is a great deal of public information available about sustainability risks in a particular

The approach as described in this document has the following

agricultural region. These risks can be supply-chain-specific or crop-

advantages for Agrifirm:

overarching. Analysing these risks using publicly available data can

> Strengthen cooperation and trust between Agrifirm and its

help structure the dialogue with suppliers regarding the relevant,

suppliers

specific issues that may play a role in the region in which the supplier

> Take co-responsibility of certain sustainability problems and solve

procures its ingredient.

these at the appropriate level

> Involve local stakeholders to provide with up-to-date and realistic

data about local situations

Major crops in the

Distinguished

> Improve farming practices to increase productivity and make

analysis

procurement regions

Maize

South America

> Substantiate decision-making of the procurement department

Wheat

USA / Canada

Rapeseed extract

Northwestern Europe

> Proactively identify and mitigate sustainability issues in the supply

Barley

Baltic States

chain

Palm kernel expeller

Black Sea region

Soybean extract

Asia

The added value for our suppliers is that they:

Wheat feed meal

Australia

> Improve and strengthen the relationship with their customers

farming more sustainable concerning responsibility aspects of our supply chains

Citrus pulp / Beet pulp

> Obtain a structured method to analyse sustainability

Sunflower meal

Table 2: Nine crops and seven procurement regions

> Are able to share responsibility with the next link in the

risks in their supply base supply chain

> Are able to implement measures that are supported by

2.2 The advantages of the new approach

Agrifirm has initiated this new approach because we see substantial

The added value for our clients – the farmers – is that they:

advantages in a structured risk-based approach to procurement of raw

> Can make use of a transparent and reliable system to realise their

materials. We are convinced that this is a very positive and constructive

ambitions to also apply their responsible procurement principles

approach that has additional advantages for our suppliers, our clients

to raw materials for feed

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Responsible Procurement Approach

local stakeholders

> Cost-ineffective measures for responsible raw materials for feed

decision-making process when it comes to verifying publicly available

are prevented by integrating those with existing systems for

data sources.

risk management (feed safety systems).

> Can refer their customers – the downstream partners2 who are

Step 2a: Discuss supply-chain-specific situation with the suppliers

increasingly challenged on sustainability in their supply

The generic assessment will be shared and discussed in detail with the

chains – to Agrifirm to receive information about the responsibility

supplier(s). Supplier meetings will be organised for every raw material.

of their feed ingredients

In those cases in which the supplier does not recognise certain issues that have been identified in the generic assessment, we will discuss

The added value for the clients of our clients – downstream chain

whether he has additional information that demonstrates the issue

partners – is that they:

does not occur/ occurs less in the specific region or supply base. In

> Do not have to be concerned about responsibility issues in

case of agreement on certain risks, a discussion will be started about

prioritising these risks. More information can be found in the decision

their supply chains (at least concerning the feed part)

> Gain sound insight into the process used by Agrifirm to arrive

tree as presented in Appendix 1.

at responsibly sourced ingredients Step 2b: Select priorities

2

Egg, dairy and meat industry, producers of A-brands and retailers.

When the one-on-one supplier meetings are finished for a minimum volume share of 80% of each ingredient, the next step will be taken.

2.3 The steps in our new approach

The 80% rule is established to prevent severe delay of the process if one or few (smaller) suppliers cannot ( yet) cooperate.

Before we describe the risk assessment and stakeholder involvement in greater detail in chapter 3 and 4, we would like to introduce the

When this substantial part of the supplier conversations has taken

various steps taken in the process.

place for a specific raw material/region combination, an overview of the most important priorities can be discussed with a broader

Step 1: Generic region-based risk assessment

range of local stakeholders. It is also possible that we will organise

First, we make a generic risk assessment for our main procurement

a stakeholder session together with our supplier about a selection

regions and our major raw materials. The generic risk assessment is

of raw materials that is related to the same issue or region. It is also

based on publicly available data. All data sources used as an input for

possible that the dialogue about priorities with be integrated in step

the generic risk assessment are well documented. The purpose of the

3b (discussion mitigation options).

generic assessment is to arrive at a systematic analysis of the most relevant responsibility risks for a specific crop in a specific region. It

Step 3a: Discuss risk-mitigation options with the supplier(s)

helps to focus the discussions with our suppliers rather than talking

The next step is to investigate possible measures to mitigate the high-

about all potential risks. The generic analysis helps to quickly focus

priority responsibility risks with our suppliers (the red areas in figure

on the main issues. In the first analyses we will carry out, we invite

4). We map all measures that are already taken by the supplier and we

independent third-party experts, to implement this process of a

will discuss additional measures that can be implemented (long list)

generic region-based assessment in order to demonstrate the right

to achieve positive change (green areas in figure 4). Subsequently, we

Figure 4: From risks to mitigation measures for a positive impact

Probability

RISK

IMPACT

CHANGE

100%

20%

80%

40%

60%

60%

40%

80%

20%

100%

IMPACT

7

will try to bring back the long list to a short list of measures, taking into account the scope of influence of the supplier, the costs involved with certain measures and the likelihood of the measure being accepted by a broader group of stakeholders.

Step 4a: Draw up and implement an action plan Together with our suppliers, we will develop an action plan for collaboration on mitigating high-priority risks. These action plans will be developed in such a way that the direct effect of mitigation measures can be verified by external stakeholders.

Step 3b/4b: Connection with relevant stakeholders To challenge and discuss the appropriate local measures for a high priority responsibility risk, sessions will be held with local stakeholders at various stages of the process. These stakeholders are invited to share their thoughts about the impact and effectiveness of the proposed measures.

Step 5: Monitoring and control All action plans that Agrifirm agreed upon with suppliers will be summarised in an overall action plan for responsible procurement. In this overall document, Agrifirm will also account for the overall impact of those plans on the entire supply base of our main raw materials (see section 1.2). Once every two years, all generic and specific risk assessments will be updated, and the contribution of risk mitigation plans will also be evaluated.

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Responsible Procurement Approach

3. Methodology & Data In this chapter we will discuss the methodology that we will use to arrive at a prioritisation of responsibility risks. We will first describe how we arrived at a framework covering all relevant responsibility issues, we discuss how we selected so called ‘essentials’, we elaborate on the data sources used in the generic risk assessment and we present the risk calculation method.

3.1 Establishing a framework of relevant responsibility issues

We used ISO 26000 as a starting point to come up with a list of concrete responsibility items per category. For example for Human Rights we listed child labour, forced labour, discrimination etc.

We first establish a framework for assessing all relevant responsibility

For The Environment, we listed a number of topics such as water

issues. This framework helps to direct the data search, ensures that no

depletion, water pollution, soil erosion, soil quality decline, invasive

issues are left outside the scope of the analysis and ensures that the

species, waste, illegal agrochemical, etc. We noticed that the category

risk assessment is carried out in a similar manner for all crops, regions

Consumer Issues was not entirely relevant for our generic risk

and years.

assessment, as we are performing the risk assessments in a businessto-business environment.

Wherever possible, we use internationally established and recognised definitions. Therefore, the ISO 26 000 guideline – a well-known and

We observed a similar problem for Business Integrity. A number of

widely accepted international standard on responsible production

items are relevant in the generic risk assessment and can be linked

– is our starting point. We consider ‘consumer issues’ to be outside

to responsible production (for instance, interaction of farmers with

the scope of our analysis and have decided to slightly alter the

smallholders, market exclusion of smallholders etc.), but other topics

‘Organisational Governance’ category.

are about the individual business relationship between Agrifirm and a specific supplier (for example, respecting confidentiality agreements, keeping promises, etc.). As explained previously, the basic principles

ic approach Holist

of ‘business integrity’ are included in the Agrifirm a code of conduct

Community involvement Human and rights development a s i t gan iona Or

for conducting business. Following the principles from this code of conduct is always a prerequisite of working with suppliers.

l

The environment

Organisation

Labour practices

3.2 Determining ‘essential topics’ and ‘responsibility topics’ At Agrifirm, we consider it very important to have a structural

Gov ernance

Consumer Issues

Fair operating practices

dialogue with our suppliers and relevant stakeholders about the responsibility issues and mitigation options. Our aim is to have a complete list of all responsibility risks. We also recognise that certain responsibility issues should be addressed with high priority. These so

Interde pendence

called ‘essential topics’ are derived from the OECD-FAO Guidance for Responsible Agricultural Supply Chains and are based on a number

Figure 5: The ISO 26000 responsibility categories

of Conventions and Treaties that are generally accepted as ‘ways to

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conduct business in a responsible and ethical manner’, particularly

data collection, validation, aggregation and analysis is transparent

the 8-core ILO Conventions. The ’essentials’ are clearly defined in

and reproducible. Therefore all data sources used in the generic risk

Appendix 2 and deal with themes such as: forced labour, child labour,

assessment must be registered.

discrimination, remuneration, protection of the right of workers to organise themselves and to carry out collective bargaining and the

The information for the generic risk assessment is gathered from

protection of land and water rights.

a wide range of public sources. Wherever possible, official data by governments or international institutions such as the World Bank

To be sure to cover all ‘risks’ that could occur in the production of raw

or FAO are used, for example World Bank Open Data, FAOSTAT,

materials, we analysed several responsibility standards, programs and

EUROSTAT or databases managed by local authorities. Furthermore,

codes (e.g. SAI, UN Code of Conduct, Global Gap, etc.). We therefore

indices or tools created by universities or NGOs are used, such as Yale’s

formulated the remaining ‘responsibility topics’ in such a way that

Environmental Performance Index, the Corruption Perception Index,

they:

commodity.globalforestwatch.org and LandMark. In Appendix 3 we provide an overview of possible data sources for each ISO category.

> describe a concrete risk – in other words they are

phrased negatively

We explicitly instruct the third party who carries out the generic risk

> guide the third party that conducts the risk assessment

assessment not to include supplier specific information in the generic

assessment. This supplier-specific information can come from annual

about what kind of information to search for

> do not, or as little as possible, describe (positive mitigation)

reports, responsibility reports, news articles, the company’s website

measures

and so on. We make this clear distinction between the generic and

> are specific enough to make sure that when we talk about

specific risk assessment because this supplier-specific information

measures in a later phase of the process, the measures can

might create a biased view on certain responsibility problems in a

be connected to the specific responsibility problems

certain region. The supplier-specific information will be obtained in the one-on-one conversations with the suppliers and will be included

In section 3.4 we explain how and why we aggregate a number of

in the specific risk assessment.

responsibility items into ‘overarching responsibility problems’. Soil depletion, soil pollution, soil compaction and soil erosion do for

3.4 Risk calculation method

instance add up to the risk category ‘soil’ and a similar example can be given for biodiversity or water.

We used the Fine & Kinney model (1971) as a starting point for quantifying the responsibility risks in the generic analysis. Fine & Kinney

Although we have done our utmost to arrive at a consistent and complete

introduced a very pragmatic and objective management method for

system, we welcome suggestions from our (local) stakeholders to add new

analysing and prioritising risks: multiplying the expected frequency of

issues.

a certain ‘event’ to occur with the expected impact of that ‘event’. The model is very helpful for determining various risk levels and coming

3.3 Data collection

up with decision rules for dealing with these risks.

The risk assessment process starts with a generic risk assessment

Before explaining the method to arrive at a numerical assessment of

using publicly available data. The generic risk assessment is carried

various responsibility risks in detail, it is important to understand the

out for all of the various raw material-region combinations. To avoid

limitations of attaching numerical values to items as intangible and

unnecessary duplication, a general analysis of the responsibility issues

diverse as responsibility risks in agricultural supply chains. The reason

in a specific region is first made which will be the starting point for the

why we still do so is to arrive at an approach that is transparent, can

risk assessment of various crops in that same region.

be repeated in time and by different people, and enables an analysis

For the first analyses, the generic risk assessment is carried out by an

of effectiveness of various risk mitigation options.

independent third party. We want to make sure that the process of

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Responsible Procurement Approach

In the Fine & Kinney model, particularly the impact classification can be problematic for responsibility risks. Although it is possible to give

Frequency category

Frequency score

each indicator an individual impact score, we decided not to do so

Never happens, almost never happens (<5x per year) 20%

also after consultation with stakeholders. It is difficult and subjective

Happens occasionally (5-10x per year)

40%

to determine the severity of the impact of the various indicators and

Happens regularly (>1x per month)

60%

they can hardly be compared with each other. It is more relevant to

Happens often (>3x per month)

80%

observe whether or not the issue occurs and how frequently it occurs.

Happens very often (>1x per week)

We use the following frequency scoring:

Table 3: Frequency categories

100%

Because not all responsibility topics will have the same number of observable indicators (the essentials automatically have one definition

20%, 40%, 60%, 80% and 100%. For the ‘responsibility topics’, an

for a topic), we will transform these scores into percentages to make

average score will be calculated based on an average of all indicator. If

them comparable. For each topic the maximum overall score will be

a separate indicator or an overarching theme scores 50% or higher, all

100% (being the riskiest) and the score per indicator can vary between

topics related to this theme will be on the priority list.

Score on an essential topic ‘X’

Score on a responsibility topic ‘Y’

Indicator ‘a’

Indicator ‘b’

Indicator ‘c’

Never happens, almost never happens (<5x per year) (20% probability) Happens occasionally (5-10x per year) (40% probability)

40%

40%

Happens regularly (>1x per month) (60% probability)

60%

Happens often (>3x per month) (80% probability)

80%

Happens very often (>1x per week) (100% probability) Overall score

60%

Sum of 40%, 80% and 40% divided by 3 indicators = 53.33%

Decision

≥ 50%: On the priority list for

≥ 50%: On the priority list for further discussion with supplier

further discussion with supplier

N.B. If indicator a or c would have scored lower, the theme

would not have been on the priority list, but indicator b would

have been part of further discussion.

Table 4: Critical thresholds for responsibility risk scores

We will explain the methodology in more detail using a concrete

occur very frequently. We count a 100% probability for frequency.

example. The responsibility topic discussed below is biodiversity loss.

Let’s assume we do not find any signals that hunting takes place,

Based on the analysis of existing standards, we find that the decline

that species are declining or that highly protected areas are poorly

of species, the presence of invasive species, hunting on threatened

protected. Both receive a 20% probability for frequency. Adding them

species and the preservation of high biodiversity value areas are

up leads to an average score for biodiversity loss of 40%. This is below

important observable indicators that tell something about the

the critical limit of 50%, however the score of indicator one is above

risk of biodiversity loss. Imagine we find that invasive species are a

the critical limit of 50% and therefore will remain on the list of priority

major problem in a certain region because outbreaks of the species

topics.

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For the essential topics the analysis is slightly different. Because for

specified with only one indicator. This is true for all essential topics, as

instance child labour or forced labour are typically topics that are

essential topics follow the exact definitions from their accompanying

essential when it comes to responsible raw materials, the analysis if the

Convention or Treaty (often the ILO Conventions). Indicator 1 in the

occurrence of such a problem is identified with one comprehensive

table below defines child labour based on the age of the children,

international acknowledges definition. However, such an essential

the type of work and the interference with schooling. If there are

topic can be identified more or less frequently in a specific region. As

reports that child labour occurs occasionally, the score of 40% will

described previously, there are five categories to assess the frequency

immediately be given for this topic. Because we are referring here to

with which a problem can occur.

an essential topic, it is very good to realise that a score of 40% does not lead to a direct priority, but that it is very important to monitor and

In the example below, we give an example of what happens in the

check whether this assessment is still realistic for the generic situation

case of an essential topic. First, it can be noticed that child labour is

in a region.

Responsibility topic

Indicator

Frequency

Total score

40%

40%

Child labour

Indicator: Children under 15 do carry out work that is mentally,

physically, morally or socially dangerous and interferes with their

schooling (e.g. they cannot attend school, must leave early, cannot

finish their education or must work lengthy hours after school)

Table 5: Example of a calculation for â&#x20AC;&#x2DC;essentialâ&#x20AC;&#x2122; child labour

The methodology as described above can also be used to assess the impact of a proposed measure. If we take the example of biodiversity loss, measures can be implemented that affect one of the three indicators. As a consequence, the frequency of occurrence of that specific item is likely to decrease and the risk score will improve, also impacting the overall risk score. The framework therefore can also help to make the impact of certain measures visible.

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Responsible Procurement Approach

4. Stakeholder involvement In this chapter we describe how we have involved and will continue to involve several stakeholders in our new sustainable procurement approach. First, we discuss the strategic dialogue with stakeholders in the Netherlands and then we discuss the role and responsibilities of regional stakeholders.

4.1 Finding a balance between transparency and confidentially

NGO’s, advice companies and food processing companies to discuss the transition towards a risk-based approach. The outcomes of the last meeting (2 December) can be found in Appendix 4.

Many important aspects play a role in the procurement of raw materials: price, origin, technical specifications, quality, safety and

We have adjusted and improved the approach on the base of the input

responsibility characteristics are all variables in the decision-making

from these stakeholders and are really grateful for their willingness to

process.

cooperate with us in a very open and honest way. In order to discuss the plans and progress of our next steps, we will formalise this type of

Agrifirm acknowledges the importance of transparency and

process discussion in a stakeholder board.

stakeholder involvement to arrive at credible and trustworthy solutions for responsible procurement. At the same time the delicate

4.3 Dialogues in the countries of origin

balance between various tradeoffs – see the items mentioned above – cannot always be carried out in full transparency. If we want to arrive

Local stakeholders play an important role in the stepwise, regional,

at solutions that can count on support within our company and by

risk-based approach. In the process of assessing, prioritising and

our suppliers, we must find the right balance between transparency

developing mitigation measures, we will organise local stakeholder

and confidentiality. We believe we do so when we are transparent

session to include the right knowledge and experience regarding a

about the methodology, the risk-assessment process, the data sources

region/raw material combination or specific high priority topics. In

used and the actual mitigation measures taken, whilst not sharing the

that way, we can:

supplier specific information. > Make sure not to miss relevant responsibility risks in a Furthermore we greatly appreciate the involvement of relevant

certain region

stakeholders, as their knowledge and experience is invaluable in

> Set priorities that are recognised as logical by the relevant

‘new’ approaches such as the one proposed here. We involve our

stakeholders

stakeholders on two different levels: in the strategic dialogue about

> Come up with mitigation measures that are accepted

the approach itself and in specific stakeholder dialogues with experts

of the countries of origin, about the priorities and measures to mitigate

> Look for alignment with existing regional approaches

and supported

certain responsibility risks in a region.

4.2 Strategic dialogue about the new approach In the past year that we have been preparing the new approach, we invited the representatives of a number of internationally operating

13

5. Milestones In this chapter we will discuss the project planning in more detail. It is important to mention that we must gain experience with this new approach to have a better idea of the time and effort involved in all the various steps. Therefore the objectives mentioned below are not cast in concrete.

5.1 Brief overview of all milestones

5.2 Objectives for 2016

Figure 6 provides a graphical representation of the various steps we

In 2016, Agrifirm will achieve the following results:

will take through 2020. We have used 2014 and 2015 to develop a

> Finalise the generic risk assessments for the first 3 major raw

solid methodology and involve our stakeholders. We also tested the

first phase of the methodology (generic assessment and first supplier

> The generic risk assessment will be discussed with a minimum

discussions) in three pilot projects focusing on wheat, maize and

number of suppliers that are together accounting for at least 80%

rapeseed. In 2016 we will gain experience with the stakeholder

of the total volume of the 3 raw materials

conversations at the local level and finish the generic risk assessments

> This will lead to a first view on priorities related to specific

for the next raw material-region combinations. In the preceding years

up until 2020 we will run through all steps for the 9 major raw materials

> We will also gain experience with a first local stakeholder

and 7 regions. In 2020, all major raw materials will be included in the

responsible procurement policy.

Figure 6: Schematic overview of the most important milestones

14

Agrifirm

Responsible Procurement Approach

materials: wheat, rapeseed and maize

raw materials session for one raw material and or region

Agrifirm, third party & suppliers Agrifirm & Stakeholders Agrifirm, suppliers & stakeholders

Figure 7: Schematic overview of the monitoring process

5.3 After 2016: Start the expansion to measures After these first steps, consisting of supplier meetings, we will continue with the following steps:

SUSTAINABLE SUPPLY CHAINS IN COOPERATION WITH

> Complete the local stakeholder process for the first three raw

materials – wheat, maize and rapeseed extract

> Develop the initial plan(s) together with the involved suppliers

to mitigate high-priority risks and to start up the first local

stakeholder sessions to discuss those plans

> Evaluate overall challenges and results with the generic

stakeholder board

5.4 Once every two years: Monitoring of progress Because changes of situations might occur, all ‘finished’ content processes related to working on risks for specific raw materials, will become part of regular monitoring processes as described above. This enables us to anticipate timely on changing risks, or different options to realise impact with measures.

2014 CorPorATE SUSTAINABILITY rEPorT

link to success

15

Appendix 1: Decision tree generic - specific risk assessment

No

Does the supplier recognise the outcome of the generic risk analysis?

Yes

No

Does the generic analysis indicate that there is a risk for a specific issue?

Yes

Does the Supplier recognise the outcome of the generic risk analysis?

No

If the supplier considers this specific issue relevant, does the supplier have information that an issue is not applicable for the region/supply base?

Yes

Yes

No

Did the supplier take credible Mitigation measures to ensure that the problem is not in their supply chain?

Yes

No

Yes

No

Agrifirm

Responsible Procurement Approach

Are these Mitigation Measures considered to be substantial?

No

Yes

Yes

16

This sustainability item is recognised as a priority and must be discussed in detail with the supplier.

This sustainability item seems not to be an issue and is therefore left off the priority list.

Does the supplier have additional Information proving that this is indeed not an issue?

Adequate measures are taken to deal with this risk, but it is still important to follow the latest developments for this issue in the monitoring cycle.

Is this information considered to be sufficient to prove that this is indeed not an issue?

The generic analysis will remain leading and this topic will be discussed in further detail with the supplier.

Adequate measures are taken to deal with this risk, but it remains important to follow the latest developments for this issue in the monitoring cycle.

This sustainability item is recognised as a priority and must be discussed in detail with the supplier.

This sustainability item is recognised as a priority and must be discussed in detail with the supplier This sustainability item seems not to be an issue for this supplier and is therefore not a priority, however it is important to track the latest developments for this issue in the monitoring cycle.

No

This sustainability item is recognised as a priority and must be discussed in detail with the supplier

Appendix 2: Essential topics (light yellow) and sustainability topics (light green)

Item

Definition

Based on

1. Organisational governance Conflict /

Conflict / high-risk areas are those environments in which a significant proportion of the

FAO (http://www.fao.

high-risk areas

population is acutely vulnerable to death, disease and disruption of livelihoods over a

org/docrep/013/i1683e/

prolonged period of time.

i1683e03.pdf )

Weak governance

Weak governance, whether in formal land administration or customary tenure arrange-

FAO (http://www.fao.

areas / areas with

ments, means that the land rights of the poor are not protected.

org/3/a-a1179e.pdf )

Areas with a high vio-

Weak governance reduces security of tenure. Illegal transfers may cause legitimate

FAO ( http://www.fao.

lation of tenure rights

owners or occupiers to lose their rights. Informal transfers and informal ownership are

org/3/a-a1179e.pdf )

(severe conflicts over

not protected by law, and the protection offered by customary tenures may be weake-

land or water)

ned through external pressures, and may not be extended to newcomers.

Vulnerable natural

Community-based natural resource conflicts may occur at the local level, but often invol- FAO (http://www.

resource areas (indi-

ve regional, national or even global actors. They range from conflicts among local men

fao.org/docrep/008/

cators: food insecu-

and women over the use of land, to conflicts among communities disputing control

a0032e/a0032e04.htm)

rity, water shortages

over woodland, or fishers disagreeing about the devices used for fishing.

a high presence of corruption

or environmental degradation) 2. Human Rights Occurrence of child

Child labour refers to situations in which children (younger than 15*) carry out work

Minimum Age Conven-

labour

that is mentally, physically, socially or morally dangerous and harmful to children and

tion, 1973 (No. 138)

interferes with their schooling by: depriving them of the opportunity to attend school; obliging them to leave school prematurely; or requiring them to attempt to combine

Worst Forms of Child

school attendance with excessively long and heavy work.

Labour Convention, 1999 (No. 182)

* A declaration of 14 years is also possible for a specified period of time. Laws may also permit light work for children aged 13â&#x20AC;&#x201C;15 (not harming their health or school work).

Violation of the

Violating the minimum age refers to a situation in which the minimum age of 15 years is

Minimum Age Conven-

minimum wage

ignored. Countries are free to specify a minimum age for labour, with a minimum of 15

tion, 1973 (No. 138)

years. A declaration of 14 years is also possible for a specified period of time. Laws may also permit light work for children aged 13â&#x20AC;&#x201C;15 (not harming their health or school work).

Forced labour

Forced labour refers to situations in which persons are coerced to work through the use

Forced Labour Conven-

of violence or intimidation, or by more subtle means such as accumulated debt, retenti-

tion, 1930 (No. 29)

on of identity papers or threats of denunciation to immigration authorities

Abolition of Forced Labour Convention, 1957 (No. 105)

17

Item

Definition

Based on

Discrimination

Discrimination refers to situations in which certain individuals are placed in a position of

Equal Remuneration

subordination or disadvantage in the labour market or the workplace because of their

Convention, 1951 (No.

race, colour, religion, sex, political opinion, national extraction, social origin or any other

100)

attribute which bears no relation to the job to be carried out.

Discrimination (Employment and Occupation) Convention, 1958 (No. 111)

Violation of the

Violation of the freedom of collective bargaining refers to a situation in which employers

Freedom of Association

freedom of collective

and their organisations and trade unions cannot establish fair wages and working condi-

and Protection of the

bargaining

tions. It also provides the basis for sound labour relations. Typical issues on the bargai-

Right to Organise Con-

ning agenda include wages, working time, training, occupational health and safety and

vention, 1948 (No. 87)

equal treatment

Right to Organise and Collective Bargaining Convention, 1949 (No. 98)

Violation of equal re-

Violating freedom of association refers to a situation in which employees cannot form or

Equal Remuneration

muneration principle

join organisations of their own choosing.

Convention, 1951 (No. 100) Discrimination (Employment and Occupation) Convention, 1958 (No. 111)

3. Labour practices Fair compensation

Violating fair compensation refers to a situation in which the level of minimum wages is

Protection of Wages

not appropriate in relation to national practice and conditions, include (a) the needs of

Convention, 1949 (No.

workers and their families, taking into account the general level of wages in the country,

95)

the cost of living, social security benefits, and the relative living standards of other social

Minimum Wage Fixing

groups; (b) economic factors, including the requirements of economic development,

Convention, 1970 (No.

levels of productivity and the desirability of attaining and maintaining a high level of

131)

employment

Equal Remuneration Convention, 1951 (No. 100) -

Violating safe

Violating safe employment practices refers to a situation in which workers are not pro-

Safety and Health in

employment

tected from sickness, disease and injury arising from their employment. E.g. no adequa-

Agriculture Convention,

practices

te first aid/ medical assistance tools, protective clothing and tools, no clear instructions

2001 (No. 184)

for hazardous tasks (risk assessment), etc.

18

Agrifirm

Responsible Procurement Approach

Item

Definition

Based on

Violating working

Violating working times refers to a situation in which workers do not have a daily and

Forty-Hour Week

hours

weekly rest periods, and annual holidays. We talk about serious situations in which

Convention, 1935

employees carry out excessive hours of work (normal working hours do not exceed 48

(No. 47)

hours, weekly overtime does not exceed 12 hours) and inadequate periods of rest and

Reduction of Hours of

recuperation, which damage workers' health and increase the risk of work accidents.

Work Recommendation, 1962 (No. 116) http://www.ilo.org/ empent/areas/business-helpdesk/faqs/ WCMS_DOC_ENT_HLP_ TIM_FAQ_EN/lang--en/ index.htm

Item

Definition

4. The environment Climate _ Ozone

Products that are classified as destructive to the ozone layer are (still) being used

Climate _ Burning

There is illegal burning of crop residues, waste or vegetation

Water _ Depletion

Water sources are depleted by agricultural practices (e.g. irrigation) causing the availability of natural water for neighbouring communities, farmers and future generations for drinking and irrigation to be threatened

Water_ Pollution

Surface and/or ground water are polluted by chemical residues, fertilizers, mineral oil or other sources of contamination

Soil _ Quality decline

Soil quality is threatened, there are for instance problems with soil compaction, loss of organic matter, macro nutrients, pH, salinity, etc.

Soil_Erosion

Soil erosion is a serious problem. Erosion can be caused by the circumstances in the region (water, wind, steep slopes), poor farm management practices (tillage, lack of crop rotation, covering crops, etc.) or the removal of native vegetation/ forest

Soil_ Contamination

Soils are contaminated by a surplus or incorrect usage of agrochemicals, fertilizers, or improper disposal of waste

Waste _ Pollution

Waste ends up in the environment causing pollution of soil, water and air, caused by an inadequate storage and disposal of fuel, batteries, tires, lubricants, sewage and other waste

Pesticides_ Illegal use

Banned agrochemicals are found in the environment or at the property of farmers (or there is evidence of a black market for such chemicals)

Pesticides_ Pollution

Agrochemicals are found in and threaten the environment (soil, air and water), caused by either incorrect

of the environment

use (timing and dosing) storage or disposal of agrochemicals

Pesticides_Negative

Agrochemicals threaten the health of employees or people in the surroundings of the farm, for instance by

health effects people

aerial spraying, drift, etc.

Pesticides_ Resistance

The (incorrect) use (timing and dosing) of agrochemicals causes problems with pesticides resistant pests and weeds

Fertilizers_ Illegal use

Forbidden fertilizers are found in the environment or at the property of farmers (or there is evidence of a black market for such fertilizers)

19

Item

Definition

Fertilizers _ Pollution

The (incorrect) use (timing and dosing) or storage of fertilizers causes threats to the environment

of the environment Fertilizers _Negative

The (incorrect) use (timing and dosing) or storage of fertilizers causes threats for employees or people in the areas

health effects people

surrounding the farm

Deforestation

Lands are illegally deforested

Biodiversity_Decline

The number of animal and plant species is decreasing

in species Biodiversity_High

There is no preservation of high conservation value areas

conservation value areas Biodiversity_ Invasive

Invasive species and new pests threaten the local biodiversity

species Biodiversity_ Hunting

Hunting of rare, threatened or endangered species takes place on the property

Biodiversity _ Origin

Traditional crop varieties are threatened or smallholders have limited access to quality seeds and/or propagation

of seeds

materials

5. Business Integrity Smallholders

Trading opportunities for local smallholders are hindered

6. Consumer issues 7. Community involvement & development Community_Grievan-

Local communities or indigenous peoples have no possibility to discuss (or complain) developments in their lands

ce mechanism

with land owners / farmers.

Community_ Free pri- Local communities or indigenous peoples are not consulted when developments that impact their livelihoods are or informed consent

planned

Community_ Neigh-

The production systems of one farmer negatively impacts the production system or land use of neighbours

bouring production systems

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Agrifirm

Responsible Procurement Approach

Appendix 3: Data sources per sustainability category Organisational

Human rights

Labour practices

Environment

Business integrity

governance

Community involvement and development

Corruption perception ITUC Global Rights

ITUC Global Rights

index

Index

Index

LandMark Map

Amnesty

Amnesty

Global Invasive

FAO Indigenous Peoples

international reports

international reports

species database

Map

per country

per country

‘Freedom in the

ILO STAT (ILO)

‘Freedom in the world’

https://freedomhouse. world’ org/

EUROSTAT

Corruption perception LandMark Map index

FAOSTAT

Country profiles

https://freedomhouse. org/

CIA ‘The world fact-

World report on child

book’

labour

Data.worldbank.org FLUDE Forest data explorer (Commodity) Global Forest Watch Environmental Performance Index WWF’s Water Risk Filter Map of Agriculture FAO Country profiles Forestry Risk Profiles

21

Appendix 4: Report of stakeholder session of 2 December 2015

On 2 December 2015 we organised the first stakeholder session on the Agrifirm responsible sourcing policy. This first session comprised the conceptual approach of the methodology that was challenged against the experience and vision of three non-governmental and three business parties. The objective of the session was to include the insights of those parties in the process steps for the coming years. We shared our conceptual approach with the following parties: IUCN NL, Rainforest Alliance (RA), Solidaridad, Unilever, FrieslandCampina (FC) and a business expert on agro commodity markets. We received comments on various aspects of our methodology that have been (partly) included in our final approach. For each point of discussion, the following remarks can be categorised.

Conceptual setup and formulation of the region-based risk matrix (draft version December 2015) Input from stakeholders > Concerning the criteria used: There are already widely accepted definitions and wordings relating to degrees of impact. Adhere as closely

as possible to generally accepted definitions.

> For some topics, there is no degree of unacceptability, e.g. concerning child labor. The nuance is not needed in the impact, but in selecting

the mitigation actions.

> Quality standards are intended to mitigate risks. Through due multi-stakeholder dialogue risk topics have been discussed and addressed.

Such frameworks (think of the well-elaborated RSB criteria) also serve for investigating possible risks on new chains and in new areas. > Do not force yourself in five levels of impact, a high level of detail does not always contribute and deliver more. For social topics in particular,

less impact levels are needed to classify social risks.

> Probability is not the same as frequency, the fact that the impact does not occur (yet) > does not mean that there is no chance of major incidents. Think, for example, about the impact of nuclear energy. This would also apply to

climate change (with events such as droughts, floods).

> Take into account that public or private regional risk assessments are available already.

Response from Agrifirm > We have reconsidered the impact categories of our draft (version December 2015) region based risk matrix, which was built on criteria of

existing standards and programs, but the impact categories were a free translation and ‘forced’ into five categories.

> In order to make a clear link with existing internationally accepted definitions, we redefined our impact categories (and frequency

categories) by referring to internationally acknowledged resources/ institutes and took a critical look at specific topics that require less

nuance when it comes to ‘acceptable’ versus ‘unacceptable’ impacts.

> Existing quality standards/ frameworks to assess the responsibility risk we want to take into consideration for our main agro commodities,

does not exist in a form we can directly integrate/apply to our procurement operations, because of the fact criteria are formulated in

terms of required actions and/ or mitigation measures, and not in terms of neutral issue definitions.

> We acknowledge certification as an option to mitigate risks and do consider this as a valuable method when those existing and suitable

standards are relevant for the specific situation.

Level of transparency regarding risk assessments and progress reports Input from stakeholders > There is no dilemma between credibility and transparency. Share what is publicly available and share your methods and the process, but

do not share names of suppliers, etc.

> The is nothing wrong with sharing dilemmas. > From assessment to actions is the most important thing to communicate about.

22

Agrifirm

Responsible Procurement Approach

> Be aware of the engagement that is needed, do not go too deeply in detail.

Response from Agrifirm > The stakeholder dialogue strengthened us in our approach: sharing our confidential supply chain information is not necessary, as long

as our impacts of supply chain cooperation are material and can be verified.

The way of working together in the supply chain Input from stakeholders > Who is the partner in the supplier chain for Agrifirm, the producer or the supplier?

Response from Agrifirm > In our supply chains for raw materials, we aim to buy our products as much as possible from suppliers who are producer or closely

connected to the producer, as well. Our efforts to cooperate on responsible raw materials start with good collaboration with the supplier.

Obviously, we need a link with the producer as well, to actually change things in the origination areas.

Position of the responsible sourcing in broader context of Agrifirm policy Input from stakeholders > What is the relationship between responsible raw materials and the other pillars of the CSR strategy? > How does it relate to your quality standards? Combine quality and CSR. > Risk driven approach does not give added value for your clients and members. What is the market value of your approach?

Response from Agrifirm > Our Responsible Sourcing Policy is clearly built on the pillar â&#x20AC;&#x2DC;responsible raw materialsâ&#x20AC;&#x2122;. However, monitoring results and realising progress

can result in new supply chain partnerships that not only result in mitigating risks, but (in the long run) can also result in adding value

with programmes/measures that are related to market and consumer demands.

> Obviously Responsible Sourcing is not an isolated approach within our procurement policy. The policy is completely integrated in a

broader set of procurement standards, such as safety risks, nutritional value and price of a raw material.

Overall comments on the conceptual approach Input from stakeholders > You selected 9 products, based on the main volumes. But are you sure that some other (smaller) products could not provide

higher risk? Look at the other product on a high level to avoid missing an important issue.

> Supply chain approach is based on B-B market, but governments are often needed to reach > Improvement. > Train your staff, buyers and suppliers. > You cannot change the world. It is a way of thinking, therefore be transparent and achieve as much as possible.

Response from Agrifirm > We will take those remarks into serious consideration with the implementation of our policy. With respect to the remark about the

selection of the 9 product: we will take this serious, but expect that material impact is important by implementing our strategy.

23

link to success Royal Agrifirm Group P.O. Box 20000 7302 HA Apeldoorn The Netherlands

T +31 (0)88 488 10 00 F +31 (0)88 488 18 00

info@agrifirm.com www.agrifirm.com