agrifirm’s responsible procurement appro ach · 5.2 objectives for 2016 14 5.3 after 2016: start...

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

Agrifirm’s responsible procurement ApproAch

link to success

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Agrifirm Responsible Procurement Approach2

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 9

3.2 Determining ‘essential topics’ and ‘responsibility topics’ 9

3.3 Data collection 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 After 2016: start the expansion to measures 15

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

3

1.1 Reason why behind the new responsible procurement approach

With a growing world population and increasing prosperity, demand

for food, feed and biomass for other purposes will increase in the

coming decades. This growing demand results in increasing pressure

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

agricultural sector faces the challenge of producing raw materials in a

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

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

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

agricultural production is by means of the procurement of responsibly

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

in this policy document of Agrifirm Group, the specific approach that

has been developed, together with the procurement department of

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

compound feed will be explained.

Feed safety and business integrity are essential aspects of our

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

the highest priority for Agrifirm and we have initiated generic control

systems for the branch, such as GMP+ and secureFeed. Monitoring

and controlling of feed safety standards is obviously at the core of our

operational guidelines, but is also part of our existing procurement

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

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

existing procurement policy. Along with principles and agreements

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

(netherlands).

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

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

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

in the debates regarding responsible soy and responsible palm oil;

two raw materials that are of great importance for the feed industry.

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

nature conservation, environmental impact and human rights. We

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

and soy chain.

Because we also procure other raw materials from soy or palm

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

challenges in the production regions closer to home, we believe a

more comprehensive view on agro commodities and regional risks

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

to create transparent, objective and specific information about all

important procurement regions and supply chains.

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

important to work together on this approach with our suppliers and

stakeholders. We are highly committed to strong cooperation with

our supply chain partners and stakeholders and we are convinced that

we can only take the right measures to make agricultural production

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.


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

Generally speaking, when we talk about responsible procurement, we

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

the right information, implemention of thorough regional-based risk

analyses, initiating supply chain cooperation and supporting the

creation of structural dialogues about impactful measures towards

responsible production of agro commodities. We are convinced that

it is of great importance to work on this ambition together with our

suppliers to realise true change in countries of origin.

1.2 Ambition and scope of Agrifirm’s responsible procurement approach

The use of responsibly produced raw materials is an important element

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

recognised principles of the Global reporting initiative (Gri). in the

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

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

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

for the new responsible procurement approach.

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

following ambition for 2020:

since we have sharpened our Csr policy in 2015, we make a clear

distinction between contributing to responsible raw materials

by supply chain initiatives and programs such as skylark and the

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

‘sustainable Consumer supply’, versus initiatives that contribute to the

responsible procurement of raw materials, that are reported under the

pillar ‘responsible raw Materials’.

We know we will have the greatest positive impact on ‘responsible

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

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

organisation; procurement major volumes of agro commodities.

Sales volume (x 1,000 tonnes) 2014

Compound feeds 4,248

Co-products 2,371

Premixes & concentrates 461

Cereals, potatoes, onions and carrots 612

Fertilisers 430

Organic fertilisers 537

Crop protection products (€ millions) 131.7

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

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

the relatively large contribution of the procurement of raw materials

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

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.

SustainableConsumer Supply

ResponsibleRaw Materials

Efficient Production and Logistics

Employees, the Foundation for

Success

Efficient Use ofRaw Materials

Healthy Plants and Healthy Animals for

Healthy People

Figure 1: The six pillars of the responsible procurement policy

Working on Responsible Raw Materials

By 2020, all major commodities, including wheat,

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

procurement policy. The specific risks of

producing all these commodities are charted for

a certain region with the actions Agrifirm is taking

in that context. We also make organic fertilisers

and compost widely available to growers.

Responsible Raw Materials

Table 1: Agrifirm’s activities in terms of volume

5

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

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

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

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

> Maize > soybean extract

> Wheat > Wheat feed meal

> rapeseed extract > Citrus pulp1

> Barley > sunflower meal

> Palm kernel expeller

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).

Generally speaking, we can identify a dominant production

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

procurement experiences, we identified the following main

procurement regions:

> south America > Black sea region

> UsA/ Canada > Asia

> northwwestern europe > Australia

> Baltic states

1 Citrus pulp is often substituted with beet pulp when relative prices change. We will take this into consideration when we start with the regional-

based risk assessment for citrus pulp by also taking into account sugar beet.

AGRIFIRM FEED6 production facilities2.900.000 ton compound feed

AGRIFIRM POLSKA3 production facilities

195.000 ton compound feed

AGRIFIRM BELGIUM1 production facility292.000 ton compound feed

AGRIFIRM MAGYARORSZÁG2 production facilities


AGRIFIRM DEUTSCHLAND3 production facilities748.000 ton compound feed

STO POSTO*1 production facility


* Minority interest

Figure 3: Regions of raw materials

Figure 2: Agrifirm compound feeds European production facilities

Responsible Procurement Approach6 Agrifirm

2. Agrifirm’s responsible procurement approach

2.1 Combining regions and crops

The basic idea behind this new approach is that there is a great deal

of public information available about sustainability risks in a particular

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

overarching. Analysing these risks using publicly available data can

help structure the dialogue with suppliers regarding the relevant,

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

procures its ingredient.

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.

(the farmers) and our clients’ clients (the meat, dairy and egg sectors,

manufacturers of A-brands and retailers).

The approach as described in this document has the following

advantages for Agrifirm:

> strengthen cooperation and trust between Agrifirm and its

suppliers

> Take co-responsibility of certain sustainability problems and solve

these at the appropriate level

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

data about local situations

> improve farming practices to increase productivity and make

farming more sustainable

> substantiate decision-making of the procurement department

concerning responsibility aspects of our supply chains

> Proactively identify and mitigate sustainability issues in the supply

chain

The added value for our suppliers is that they:

> improve and strengthen the relationship with their customers

> obtain a structured method to analyse sustainability

risks in their supply base

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

supply chain

> Are able to implement measures that are supported by

local stakeholders

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

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

ambitions to also apply their responsible procurement principles

to raw materials for feed

2.2 The advantages of the new approach

Agrifirm has initiated this new approach because we see substantial

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

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

approach that has additional advantages for our suppliers, our clients

Major crops in the Distinguished

analysis procurement regions

Maize South America

Wheat USA / Canada

Rapeseed extract Northwestern Europe

Barley Baltic States

Palm kernel expeller Black Sea region

Soybean extract Asia

Wheat feed meal Australia

Citrus pulp / Beet pulp

Sunflower meal

Table 2: Nine crops and seven procurement regions

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> Cost-ineffective measures for responsible raw materials for feed

are prevented by integrating those with existing systems for

risk management (feed safety systems).

> Can refer their customers – the downstream partners2 who are

increasingly challenged on sustainability in their supply

chains – to Agrifirm to receive information about the responsibility

of their feed ingredients

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

partners – is that they:

> Do not have to be concerned about responsibility issues in

their supply chains (at least concerning the feed part)

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

at responsibly sourced ingredients

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

2.3 The steps in our new approach

Before we describe the risk assessment and stakeholder involvement

in greater detail in chapter 3 and 4, we would like to introduce the

various steps taken in the process.

Step 1: Generic region-based risk assessment

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

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

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

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

generic assessment is to arrive at a systematic analysis of the most

relevant responsibility risks for a specific crop in a specific region. it

helps to focus the discussions with our suppliers rather than talking

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

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

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

generic region-based assessment in order to demonstrate the right

decision-making process when it comes to verifying publicly available

data sources.

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

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

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

in those cases in which the supplier does not recognise certain issues

that have been identified in the generic assessment, we will discuss

whether he has additional information that demonstrates the issue

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

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

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

tree as presented in Appendix 1.

Step 2b: Select priorities

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.

The 80% rule is established to prevent severe delay of the process if

one or few (smaller) suppliers cannot ( yet) cooperate.

When this substantial part of the supplier conversations has taken

place for a specific raw material/region combination, an overview

of the most important priorities can be discussed with a broader

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

a stakeholder session together with our supplier about a selection

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

possible that the dialogue about priorities with be integrated in step

3b (discussion mitigation options).

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

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

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

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

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

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

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

RISK IMPACT CHANGE IMPACT

100% 20%

80% 40%

60% 60%

40% 80%

20% 100%

Prob

abili

ty


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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3. Methodology & Data

3.1 Establishing a framework of relevant responsibility issues

We first establish a framework for assessing all relevant responsibility

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

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

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

and years.

Wherever possible, we use internationally established and recognised

definitions. Therefore, the iso 26 000 guideline – a well-known and

widely accepted international standard on responsible production

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

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

‘organisational Governance’ category.

Figure 5: The ISO 26000 responsibility categories

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.

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.

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

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

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

Consumer issues was not entirely relevant for our generic risk

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

to-business environment.

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

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

to responsible production (for instance, interaction of farmers with

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

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

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

for conducting business. Following the principles from this code of

conduct is always a prerequisite of working with suppliers.

3.2 Determining ‘essential topics’ and ‘responsibility topics’

At Agrifirm, we consider it very important to have a structural

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

called ‘essential topics’ are derived from the oeCD-FAo Guidance for

responsible Agricultural supply Chains and are based on a number

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

Organisation

Human rights

Labourpractices

ConsumerIssues

Theenvironment

Fair operatingpractices

Communityinvolvement

and development

Holistic approach

Organisational

Governance

Interdependence


conduct business in a responsible and ethical manner’, particularly

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

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

discrimination, remuneration, protection of the right of workers to

organise themselves and to carry out collective bargaining and the

protection of land and water rights.

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

materials, we analysed several responsibility standards, programs and

codes (e.g. sAi, Un Code of Conduct, Global Gap, etc.). We therefore

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

they:

> describe a concrete risk – in other words they are

phrased negatively

> guide the third party that conducts the risk assessment

about what kind of information to search for

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

measures

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

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

be connected to the specific responsibility problems

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

responsibility items into ‘overarching responsibility problems’. soil

depletion, soil pollution, soil compaction and soil erosion do for

instance add up to the risk category ‘soil’ and a similar example can be

given for biodiversity or water.

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

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

issues.

3.3 Data collection

The risk assessment process starts with a generic risk assessment

using publicly available data. The generic risk assessment is carried

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

unnecessary duplication, a general analysis of the responsibility issues

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

risk assessment of various crops in that same region.

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

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

data collection, validation, aggregation and analysis is transparent

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

assessment must be registered.

The information for the generic risk assessment is gathered from

a wide range of public sources. Wherever possible, official data by

governments or international institutions such as the World Bank

or FAo are used, for example World Bank open Data, FAosTAT,

eUrosTAT or databases managed by local authorities. Furthermore,

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

environmental Performance index, the Corruption Perception index,

commodity.globalforestwatch.org and LandMark. in Appendix 3 we

provide an overview of possible data sources for each iso category.

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

assessment not to include supplier specific information in the generic

assessment. This supplier-specific information can come from annual

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

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

specific risk assessment because this supplier-specific information

might create a biased view on certain responsibility problems in a

certain region. The supplier-specific information will be obtained in

the one-on-one conversations with the suppliers and will be included

in the specific risk assessment.

3.4 Risk calculation method

We used the Fine & Kinney model (1971) as a starting point for

quantifying the responsibility risks in the generic analysis. Fine & Kinney

introduced a very pragmatic and objective management method for

analysing and prioritising risks: multiplying the expected frequency of

a certain ‘event’ to occur with the expected impact of that ‘event’. The

model is very helpful for determining various risk levels and coming

up with decision rules for dealing with these risks.

Before explaining the method to arrive at a numerical assessment of

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

limitations of attaching numerical values to items as intangible and

diverse as responsibility risks in agricultural supply chains. The reason

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

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

of effectiveness of various risk mitigation options.

11

We will explain the methodology in more detail using a concrete

example. The responsibility topic discussed below is biodiversity loss.

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

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

species and the preservation of high biodiversity value areas are

important observable indicators that tell something about the

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

major problem in a certain region because outbreaks of the species

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

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

that species are declining or that highly protected areas are poorly

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

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

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

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

topics.

in the Fine & Kinney model, particularly the impact classification can

be problematic for responsibility risks. Although it is possible to give

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

also after consultation with stakeholders. it is difficult and subjective

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

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

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

We use the following frequency scoring:

Because not all responsibility topics will have the same number of

observable indicators (the essentials automatically have one definition

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

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

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

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

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

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

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

Frequency category Frequency score

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

Happens occasionally (5-10x per year) 40%

Happens regularly (>1x per month) 60%

Happens often (>3x per month) 80%

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

Table 3: Frequency categories

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


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

instance child labour or forced labour are typically topics that are

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

occurrence of such a problem is identified with one comprehensive

international acknowledges definition. However, such an essential

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

described previously, there are five categories to assess the frequency

with which a problem can occur.

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

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

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

essential topics follow the exact definitions from their accompanying

Convention or Treaty (often the iLo Conventions). indicator 1 in the

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

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

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

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

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

check whether this assessment is still realistic for the generic situation

in a region.

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.

Responsibility topic Indicator Frequency Total score

Child labour Indicator: Children under 15 do carry out work that is mentally, 40% 40%

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 ‘essential’ child labour

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4. Stakeholder involvement

4.1 Finding a balance between transparency and confidentially

Many important aspects play a role in the procurement of raw

materials: price, origin, technical specifications, quality, safety and

responsibility characteristics are all variables in the decision-making

process.

Agrifirm acknowledges the importance of transparency and

stakeholder involvement to arrive at credible and trustworthy

solutions for responsible procurement. At the same time the delicate

balance between various tradeoffs – see the items mentioned above

– cannot always be carried out in full transparency. if we want to arrive

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

our suppliers, we must find the right balance between transparency

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

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

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

supplier specific information.

Furthermore we greatly appreciate the involvement of relevant

stakeholders, as their knowledge and experience is invaluable in

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

stakeholders on two different levels: in the strategic dialogue about

the approach itself and in specific stakeholder dialogues with experts

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

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

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.

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.

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

from these stakeholders and are really grateful for their willingness to

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

process discussion in a stakeholder board.

4.3 Dialogues in the countries of origin

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

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

developing mitigation measures, we will organise local stakeholder

session to include the right knowledge and experience regarding a

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

that way, we can:

> Make sure not to miss relevant responsibility risks in a

certain region

> set priorities that are recognised as logical by the relevant

stakeholders

> Come up with mitigation measures that are accepted

and supported

> Look for alignment with existing regional approaches


5. Milestones

5.1 Brief overview of all milestones

Figure 6 provides a graphical representation of the various steps we

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

solid methodology and involve our stakeholders. We also tested the

first phase of the methodology (generic assessment and first supplier

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

rapeseed. in 2016 we will gain experience with the stakeholder

conversations at the local level and finish the generic risk assessments

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

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

responsible procurement policy.

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.

Figure 6: Schematic overview of the most important milestones

5.2 Objectives for 2016

in 2016, Agrifirm will achieve the following results:

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

materials: wheat, rapeseed and maize

> The generic risk assessment will be discussed with a minimum

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

of the total volume of the 3 raw materials

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

raw materials

> We will also gain experience with a first local stakeholder

session for one raw material and or region

15

5.3 After 2016: Start the expansion to measures

After these first steps, consisting of supplier meetings, we will continue

with the following steps:

> 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.

Figure 7: Schematic overview of the monitoring process

IN COOPERATION WITHSUSTAINABLE SUPPLY CHAINS

link to success

2014 CorPorATE SUSTAINABILITY rEPorT

Agrifirm &Stakeholders

Agrifirm, third party& suppliers

Agrifirm, suppliers& stakeholders


Appendix 1: Decision tree generic - specific risk assessment

Does the generic analysis indicate

that there is a risk for a specific issue?

Does the supplier recognise the

outcome of the generic risk

analysis?

If the supplier considers this specific issue

relevant, does the supplier have

information that an issue is not

applicable for the region/supply

base?

This sustainability item is recognised as a priority and

must be discussed in 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.

Is this information considered to be

sufficient to prove 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.

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 develop-ments for this issue in the monitoring

cycle.

Does the supplier have additional

Information proving that this

is indeed not an issue?

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

Are these Mitigation Measures

considered to be substantial?


must be discussed in detail with the supplier.

The generic analysis will remain

leading and this topic will be

discussed in further detail with the

supplier.


must be discussed in detail with the supplier


must be discussed in detail with the supplier

Did the supplier take

credible Mitigation

measures to ensure that the problem is not in their supply chain?

Does the Supplier

recognise the outcome of the

generic risk analysis?

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No No

No

No

Yes

17

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

Item Definition Based on

1. Organisational governance

Conflict /

high-risk areas

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

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

prolonged period of time.

FAo (http://www.fao.

org/docrep/013/i1683e/

i1683e03.pdf )

Weak governance

areas / areas with

a high presence of

corruption

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

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

FAo (http://www.fao.

org/3/a-a1179e.pdf )

Areas with a high vio-

lation of tenure rights

(severe conflicts over

land or water)

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

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

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

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

FAo ( http://www.fao.

org/3/a-a1179e.pdf )

Vulnerable natural

resource areas (indi-

cators: food insecu-

rity, water shortages

or environmental

degradation)

Community-based natural resource conflicts may occur at the local level, but often invol-

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

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

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

FAo (http://www.

fao.org/docrep/008/

a0032e/a0032e04.htm)

2. Human Rights

occurrence of child

labour

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

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

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

school attendance with excessively long and heavy work.

* A declaration of 14 years is also possible for a specified period of time. Laws may also

permit light work for children aged 13–15 (not harming their health or school work).

Minimum Age Conven-

tion, 1973 (no. 138)

Worst Forms of Child

Labour Convention,

1999 (no. 182)

Violation of the

minimum wage

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

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

years. A declaration of 14 years is also possible for a specified period of time. Laws may

also permit light work for children aged 13–15 (not harming their health or school work).

Minimum Age Conven-

tion, 1973 (no. 138)

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

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

on of identity papers or threats of denunciation to immigration authorities

Forced Labour Conven-

tion, 1930 (no. 29)

Abolition of Forced La-

bour Convention, 1957

(no. 105)



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

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

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

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

equal remuneration

Convention, 1951 (no.

100)

Discrimination (employ-

ment and occupation)


111)

Violation of the

freedom of collective

bargaining

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

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

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

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

equal treatment

Freedom of Association

and Protection of the

right to organise Con-

vention, 1948 (no. 87)

right to organise and

Collective Bargaining


98)

Violation of equal re-

muneration principle

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

join organisations of their own choosing.

equal remuneration


100) Discrimination (em-

ployment and occupa-

tion) Convention, 1958

(no. 111)

3. Labour practices

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

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

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

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

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

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

employment

Protection of Wages


95)

Minimum Wage Fixing


131)

equal remuneration


100) -

Violating safe

employment

practices

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

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

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

for hazardous tasks (risk assessment), etc.

safety and Health in

Agriculture Convention,

2001 (no. 184)

19


Violating working

hours

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

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

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

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

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

Forty-Hour Week

Convention, 1935

(no. 47)

reduction of Hours of

Work recommendation,

1962 (no. 116)

http://www.ilo.org/

empent/areas/busi-

ness-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

of the environment

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

use (timing and dosing) storage or disposal of agrochemicals

Pesticides_negative

health effects people

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

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)


Item Definition

Fertilizers _ Pollution

of the environment

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

Fertilizers _negative

health effects people

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

surrounding the farm

Deforestation Lands are illegally deforested

Biodiversity_Decline

in species

The number of animal and plant species is decreasing

Biodiversity_High

conservation value

areas

There is no preservation of high conservation value areas

Biodiversity_ invasive

species

invasive species and new pests threaten the local biodiversity

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

Biodiversity _ origin

of seeds

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

materials

5. Business Integrity

smallholders Trading opportunities for local smallholders are hindered

6. Consumer issues

7. Community involvement & development

Community_Grievan-

ce mechanism

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

with land owners / farmers.

Community_ Free pri-

or informed consent

Local communities or indigenous peoples are not consulted when developments that impact their livelihoods are

planned

Community_ neigh-

bouring production

systems

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

Item Definition

21

Item Definition

Appendix 3: Data sources per sustainability category

Organisational

governance

Human rights Labour practices Environment Business integrity Community

involvement and

development

Corruption perception

index

ITUC Global Rights

Index

ITUC Global Rights

Index

EUROSTAT Corruption perception

index

LandMark Map

LandMark Map Amnesty

international reports

per country

Amnesty

international reports

per country

Global Invasive

species database

FAO Indigenous Peoples

Map

‘Freedom in the world’

https://freedomhouse.

org/

‘Freedom in the

world’

https://freedomhouse.

org/

ILO STAT (ILO)

Country profiles

FAOSTAT

CIA ‘The world fact-

book’

World report on child

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


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 busi-

ness 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


> 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.

23

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


> 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


> Who is the partner in the supplier chain for Agrifirm, the producer or the supplier?


> 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


> 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?


> our responsible sourcing Policy is clearly built on the pillar ‘responsible raw materials’. 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


> 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.


> 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.

link to success

P.o. Box 200007302 HA ApeldoornThe netherlands

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

[email protected]

Royal Agrifirm Group

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