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Olam: An interconnected-triple-bottom-line-athon in action!

By Alex Nichols on July 01, 2015 at 5:17pm.

So, what a confident 25 year old! It’s a go-getter, full of energy, channelling enthusiasm, facing the challenges of life.
Headquartered in Singapore, Olam is a leading agri-business operating from seed to shelf across the world.  Edible Nuts & Beans. Confectionery & Beverage Ingredients. Food Staples & Packaged Foods. Industrial Raw Materials. Commodity Financial Services. Shareholders are: Temasek Holdings (58.4%), The Kewalram Chanrai Group, management team and public shareholdings. Business is ok for Olam, whilst sales dipped during 13-14, profits almost doubled.

Scale! This is the world’s ‘largest corporate farmer’. Some 3.9m smallholders and 20,000 large scale farmer suppliers; 80 primary processing plants; 55 secondary plants.  Nearly 14,000 global customers.  65 countries. 23,000 employees. They say, “…the coffee we handle equates to 1,750 cups of coffee consumed per second.” Gulp.
They’ve been ‘quietly getting on with it’ with a new CR&S strategy three years ago, yielding a Framework called the Olam Sustainability Standard. Their Goal by 2020: to have end-to-end sustainable supply chains. Two target periods: 2015 and then 2020.

The report shows an understanding of interconnectedness, illustrated with little vignettes along the bottom of each performance chapter, for example. It’s even in ‘landscape’ layout, appropriate to landscape issues!

What should a company such as Olam report on then? Interestingly, the materiality process is not described in the “Materiality and connectivity” sections (I looked online too). Their (extensive) material issues are though. They say, “We have prioritised our seven focus areas: Livelihoods, Water, Land, Food Security, Labour, Climate Change and Food Safety”. And they are showing “integrated reporting type” thinking: there’s even a pre-cursor to integrated reporting. They estimate the natural capital value of “cost for water and carbon emissions…” and “…the benefits that flow from nature to us…” (US$200m).

What’s missing? I wonder about issues such as peat burning in Indonesia and the resultant regional contribution to haze (air pollution); they have such good relationships with farmers, what scope is there to encourage farmers to change practices to avoid (often accidental) peat burning? Or, what happens when Olam decide not to proceed with an ‘upstream development’ such as a plantation? Is there a tier of agriculture below Olam-approved suppliers that is inferior? And whilst deforestation is mentioned in the climate change chapter, with reference to the World Bank Forest Carbon Partnership Facility, I wonder what plans are ahead to engage farmers on wood used for domestic fuel, or tree-planting.

And 20% of the business is in “Industrial Raw Materials” (by revenue) such as cotton, fertiliser, wood, rubber. At times I felt perhaps they should have commodity SD reports! Where is the fertilizer production, does it involve potash extraction? If not where does it comes from?

The ‘management’ nuts & bolts are there: what they understand to be their impacts, and what they are doing about them. On their Management approach they have the Olam Sustainability Standard for all of the business activities across the complete supply chain. “The purpose of creating the Standard is to manage our environmental and social risks whilst maximising opportunities across the entire breadth of the Olam value chain.”

The “Aspirations and progress” (pdf p5) is a list of goals, with descriptions of actions, although it doesn’t really convey progress other than saying “on plan”. Despite that it’s a clear, uncluttered way of conveying progress.

There is good solid ambition, stated clearly. But snippets of information raise questions, such as the challenges you face in – for example – getting farmers to sign up to the Olam livelihood charter (OLC). Many are surely illiterate, and wouldn’t understand contracts, so changing behaviours and reinforcing new practice is a tall order? I presume the ‘extension services’ will help, building on their relationships already established. And many companies talk about ‘relationships’: how they try to retroactively instigate them as part of a CSR strategy. Olam seem to have used the existing relationships (or engagement) to nurture their supply chain management. It’s all very encouraging.

And it’s the challenges that perhaps need to come through more. This is the principle of balance in reporting terms – talk challenge as well as achievement! It’s ok, we won’t mind! Olam taunts and tempts the reader at times… give us a taste then hold back on the detail. Eg, “Land Selecting and managing land responsibly” pdf p10, which covers a USA case study, with some factoids on Laos (a dispute resolved) and Gabon. I note a land tenure dispute is mentioned on pdf p11.

In the Labour ‘Landscape’ example (“Turkey, Hazelnuts” sounds like we’re getting ready for Thanksgiving or Christmas), Olam tells us that “each farmer owns between 1 and 2.5 hectares of trees”. This is fascinating because this is the real “supply chain management challenge” right there. You sort this issue out and you cover off many socio-economic-environmental-triple-bottom-line issues. I for one will be following their progress. I want to see how it’s going. What are the challenges? From child labour risk to pesticides, to education, to decent wages. Olam say it themselves; all credit to them for that, and for their wonderful phrasing, “Intervention is made more complex due to the many intermediary buyers and crackers, so connectivity and traceability is low.” How are the farmers reacting? Can it be solved? I note the GAP training, and training with WWF-Turkey, for example, with an update on progress too. This is meaty stuff (well, nutty stuff). Shift over to Uzbekistan or Indonesia and other more fragile ecosystems: the story intensifies.

Having said that, Olam do acknowledge where they are on their ‘journey’, eg, “Olam is still learning”, “influencing … producers and … roll-out of the Olam Supplier Code”. And they haven’t worked out targets in some areas eg, waste water or renewable energy. I have no objection to a reporter stating this in a public report; it conveys a notion of work in progress, and not having all the answers in this complex field. And, in a way, it’s good to have ambitious targets. Eg “Compliance to the Supplier Code in products rated as higher risk such as rubber and palm, and Compliance to Supplier Code for all products”. Holcim also have done this – setting a goal and not knowing if, really, it can be achieved.

Olam use many case studies to tell their partnership and community ‘story’. That’s where their energies went in reports published before 2013.

The report is nice and short: 28pp. It is accessible, colourful and simple for me to get into. I like the infographics and ‘call-outs’.

It is a bit of a pain to read on screen, unless your screen very wide! And I resisted printing it off as I would probably need a magnifying glass.

The information is generally interesting and well presented. I would estimate that there will be a need in future to provide detailed data, perhaps as more interest from public institutional investors emerges. Rio Tinto’s interactive data charts are a good example.

Also, as their sustainability practices gradually include more use of technology such as remote sensing or labour practices ‘live field monitoring’, perhaps the reporting could do with some new channels of communication. I am thinking of real time updates from the extensive supply chain.

Overall, I sense some real expertise behind the sustainability management practices at Olam. Some third party engagement would help in the ‘DMA part c’ areas of their work (we note the partnerships in place in helping deliver management of issues (‘DMA part a, b’). A description of the engagement behind their reporting practice would be useful too.

Their Reporting started to use the GRI framework in 2013. A GRI checklist is presented at the back – a summary version. The unfussy pdfs of a GRI 3.1 Index and checklist can also be found on the website. They state they shall “continue to examine the business need for external assurance”.

Olam claims to be the world’s ‘largest corporate farmer’. I have a slight niggle about this claim: not the bigness part, it’s just that, can a corporation ever really be a farmer? Farming is a vocation, a bit like nursing. Inextricable family links, environmental stewardship and personal connections exist between a farmer and her animals and her land. I am impressed by the company and I like the report. It’s just that a more measured approach about what they are could help with credibility.

• Describe the materiality assessment process.
• Give a little detail (I can hear them now saying how stakeholders have said ‘less is more’!) but do it efficiently using online platforms.
• Balance: Talk about challenges as well as achievements, eg, tell us about how extension services are working upstream.
• Carry on with the ‘integrated, five-capitals style’ thinking, and resist the urge, for now, to move to integrated reporting.
• Prepare for richer data presentation.
• Use AA1000AS assurance.
• Change the book layout to portrait (sorry!).
• Use communications technology.

Alex Nichols runs international consulting projects for business on sustainability reporting, strategy, materiality assessment, stakeholder engagement, assurance and training. Alex is also Associate Director at Paia Consulting, Singapore, Senior Associate Consultant with IMS plc, Bristol, and a Senior Associate Consultant with Gorham & Partners mining strategy and research firm. www.alexnicholsconsulting.com   |  www.paiaconsulting.com.sg