environmental and social risks in agro-commodity supply chains - IFC

196 Pages·2014·2.19 MB·English

Good Practice Handbook
Assessing and Managing
Environmental and Social Risks
in an Agro-Commodity
Supply Chain
A
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Photo Credits:
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Kathleen Bottriell
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B GOOD PRACTICE HANDBOOK: E&S RISKS IN AN AGRO-COMMODITY SUPPLY CHAIN
Good Practice Handbook
Assessing and Managing
Environmental and Social Risks
in an Agro-Commodity
Supply Chain
The Handbook has a tabbed structure for easy reference. The
following sign posts have been used throughout the Handbook to
differentiate specific types of information.
This symbol indicates information that is specific to
potential or existing IFC clients.
This symbol indicates information that explains how to do
something in practice.
This symbol indicates additional resources or references to
support implementation.
This symbol indicates key concepts and definitions
discussed in the Handbook.
Table Of Contents
Acknowledgements .....................................................................................iv
Introduction ................................................................................................v
List of Acronyms .......................................................................................vii
Executive Summary ....................................................................................ix
Part 1. Agro-Commodity Supply Chains ..............................................1
Part 2. The Business Case for Managing Environmental and
Social Risk in Agro-Commodity Supply Chains .....................9
Part 3. Environmental and Social Risks
in Agro-Commodity Supply Chains .....................................15
Part 4. Environmental and Social Management Systems.....................25
Part 5. Case Studies: Environmental and Social Risk Assessment
and Management in Agro-Commodity Supply Chains ........31
Case Study 1: Malaysian Palm Oil ......................................31
Case Study 2: Tanzania Sugar .............................................35
Case Study 3: Smallholder Cocoa in Côte D’Ivoire ................40
Case Study 4: Multicountry Multicommodity Trader ............46
Part 6. Traceability in Supply Chains .................................................49
Part 7. Certification ...........................................................................55
Toolkit 1. Assessing Enivronmental and Social Risk
and Leverage in a Supply Chain ...........................................63
Toolkit 2. Managing Environmental and Social Risk in a Supply Chain ....89
Annexes
Annex I. Understanding Agro-Commodities .........................................125
Palm Oil ..........................................................................125
Soybean ...........................................................................130
Sugarcane ........................................................................133
Coffee ..............................................................................137
Cocoa ..............................................................................141
Annex II. Business Models in Agro-Commodity Production .................146
TABLE Of CONTENTS iii
Acknowledgements:
This Good Practice Handbook: Assessing and Managing Environmental
and Social Risks in an Agro-commodity Supply Chain was prepared by the
Environment, Social and Governance Department (CES) of the International
Finance Corporation, with primary contribution from Patricia Miller (IFC Chief
Sustainability Advisor, previously with IFC), Louis-Philippe Mousseau (IFC
Principal Environmental Specialist), Amina El-Sharkawy (IFC Environmental
and Social Consultant), and Kathleen Bottriell (IFC Operations Officer). The
Handbook is based on primary contributions and technical expertise from
William Vorley (International Institute for Environment and Development,
Principal Researcher and Team Leader), Neil Judd (Pro-forest, Co-founder
and Director), and Abbi Buxton (International Institute for Environment and
Development, Researcher), as commissioned by IFC.
Additional contributors include Larissa Luy (IFC Senior Operations Officer),
Robert Gerrits, and Carmen Navarro (previously with IFC). The Handbook also
significantly benefited from extensive comments from an internal and external
peer review process, which involved a diverse group of individuals and institutions
that are too many to acknowledge individually. However, the drafting team is
very thankful for their valuable and insightful comments and hopes they find
their input reflected in this final version.
Finally, we would like to thank the CES Knowledge Management team,
including Susan Botha, Dickson Tang, Fiorella Facello, and Amelia Hui Xin
Goh who consistently and diligently supported the development of this Good
Practice Handbook.
iv GOOD PRACTICE HANDBOOK: E&S RISKS IN AN AGRO-COMMODITY SUPPLY CHAIN
INTRODUCTION
Supply chain risk has become a major area of concern for companies in the
agribusiness sector, as well as for their customers, financiers, and external
stakeholders. The threats that environmental and social (E&S) risks pose to
brand values and product quality are making those risks more material, often
reaching thresholds of major importance to the core business of agriculture and
food companies.
This Good Practice Handbook is intended for those agro-commodity companies
that want to better manage supply chain E&S risks. Many companies are seeking
to identify and manage E&S risks as part of their own responsible business
practices—which are often part of their overall quality, phyto-sanitary, and food
safety considerations and programs—and in response to (or anticipation of)
demands from their customers and financiers.
Agro-commodity supply chains often stretch over multiple supplier companies
and multiple countries. In the past, the boundaries of responsibility extended
only to directly owned operations and responsibility was largely delegated to
suppliers, often through codes of conduct. However, the management of E&S
risk is now continuing a trend toward strategic supply chain management with
extended boundaries of responsibility that reach upstream to primary production
where the key E&S risks are generally found.
Through its eight Performance Standards on Environmental and Social
Sustainability, the International Finance Corporation (IFC) requires its clients to
identify, avoid, mitigate, and manage E&S risks and impacts as a way of conducting
sustainable business. Where the IFC client can reasonably exercise control, the
risks and impacts identification process also considers those risks and impacts
associated with primary supply chains, defined more narrowly in the sections
of Performance Standard 2: Working and Labor Conditions and Performance
Standard 6: Biodiversity Conservation and Sustainable Management of Living
Natural Resources that are dedicated to supply chains. Specifically, these primary
INTRODUCTION v
supply chain risks, which are to be identified and managed where a high risk has
been determined, are child labor, forced labor, significant safety issues related to
supply chain workers (Performance Standard 2), and significant conversion of
natural and/or critical habitats (Performance Standard 6). These are also the focus
of this Good Practice Handbook.
IFC recognizes that there is a broader range of significant E&S risks in agro-
commodity supply chains beyond these four core areas, and the approach set out
in this Handbook can be applied beyond these areas. The Handbook focuses on
five major agro-commodity supply chains—palm oil, soy, sugarcane, cocoa, and
coffee—however, many of the tools, resources, and case studies can be used as
guidance for other agro-commodities.
vi GOOD PRACTICE HANDBOOK: E&S RISKS IN AN AGRO-COMMODITY SUPPLY CHAIN
LIST OF ACRONYMS
4C Common Code for the Coffee Community
CDC Cocoa Development Centres
CEO Chief Executive Officer
CMEG Chicago Mercantile Exchange Group
COC Chain of Custody
CODEX Codex Alimentarius Food Safety Standards
CPO Crude Palm Oil
CSR Corporate Social Responsibility
CVC Cocoa Village Clinics
EC European Commission
ECX Ethiopian Commodity Exchange
EHS Environment, Health, Safety
EMAS Eco-Audit and Management Scheme
ESIA Environmental and Social Impact Assessment
ESMS Environmental and Social Management System
ETP Ethical Tea Partnership
EU European Union
FAO Food and Agriculture Organisation
FELCRA Federal Land Consolidation and Rehabilitation Authority (Malaysia)
FELDA Federal Land Development Authority (Malaysia)
FFB Fresh Fruit Bunches
GIS Geographic Information Systems
GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit
GM Genetically Modified
ICA International Coffee Agreement
ICE Intercontinental Exchange
ICCO International Cocoa Organization
IFC International Finance Corporation
ILO International Labour Organization
ISO International Organisation for Standardisation
LIDAR High-Resolution Laser Range Detection
NGO Non-Governmental Organizations
NSEL National Spot Exchange Limited
NYSE New York Stock Exchange
OHS Occupational Health and Safety
PKO Palm Kernel Oil
LIST Of ACRONYMS vii
PKM Palm Kernel Meal
PPE Personal Protective Equipment
RED Renewable Energy Directive
RISDA Rubber Industry Smallholders Authority
RPP Responsible Purchasing Policy
RS Remote Sensing
RSPO Roundtable on Sustainable Palm Oil
RTRS Roundtable on Responsible Soy Association
SAI Social Accountability International
SAN Sustainable Agriculture Network
SME Small and Medium-Sized Enterprise
SPS Sanitary and Phyto-Sanitary
TTF Timber Trade Federation
TSGA Tanzania Sugar Growers Association
UK United Kingdom
USAID United States Agency for International Development
UTZ UTZ Certified Standard
WCF World Cocoa Foundation
WTO World Trade Organization
WWF World Wildlife Fund
viii GOOD PRACTICE HANDBOOK: E&S RISKS IN AN AGRO-COMMODITY SUPPLY CHAIN
vIII GOOD PRACTICE HANDBOOK: E&S RISKS IN AN AGRO-COMMODITY SUPPLY CHAIN