Unilever Makes Produce and Protect Commitments, New Corporate Palm Oil Reporting Guidance Launched

Unilever Makes Produce and Protect Commitments, New Corporate Palm Oil Reporting Guidance Launched

Unilever Makes Produce & Protect Commitments

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As reported by Chain Reaction Research, on January 20, trade media confirmed that Unilever has signed a three-year Memorandum of Understanding with governments in Indonesia to drive sustainable sourcing of palm oil. The three-year agreement is between the company, the Government of Central Kalimantan and various other regions.

The Consumer Goods Forum and Tropical Forest Alliance 2020 (TFA 2020) – a global partnership focusing on reducing deforestation from the production of palm oil, soy, beef and pulp & paper – have been promoting “Produce & Protect” investment models such as Unilever’s for the past two years. Produce & Protect models source commodities from areas practicing sustainable agricultural production, forest protection and protection of livelihoods.

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Beef, soy, palm oil and pulp & paper production is worth $180 billion annually across the tropical forest regions. 45 percent of these commodities, worth $81 billion annually, are exported globally.

As reported by TFA 2020, 415 companies globally have made at least one relevant commitment to eliminate deforestation from the production of these four commodities. In the palm oil supply chain, 59 percent of the companies have committed to commodity specific policies, followed by pulp & paper with 53 percent of companies, soy with 21 percent and beef with 12 percent.

Initially, the pilot program will impact 600 smallholders on 1,400 ha. This is important as smallholders in the palm oil industry in Indonesia contribute to 40 percent of Indonesia’s overall production yet average productivity is 32 percent lower than palm oil plantation companies.

The financial benefit from this program to investors and smallholders alike is the ability to use longer-term contracts to de-risk investments in sustainable agriculture intensification. This is forecasted to result in both improved yields per ha, and improved ability by corporations to achieve their sustainable sourcing commitments.

New Corporate Palm Oil Reporting Guidance Launched

Today, a coalition of civil society and investor groups launched the Reporting Guidance for Responsible Palm. The guidance is intended to facilitate improved reporting and due diligence on palm oil. It recommends specific disclosures for companies across the palm oil sector and provides a consistent reference for these companies to use to disclose information on issues including grievances, land expansion, supply chain transparency and labor rights. The Reporting Guidance was collaboratively developed by over 18 investor and civil society groups – including Ceres, CDP, Forest Heroes, Green Century Capital Management, and others – who thought that working together on the guidance would create greater consistency and clarity for companies, investors, and other stakeholders.

Numerous companies across the palm oil sector are working to implement ambitious commitments to end deforestation and exploitation and are publishing information on these efforts and their supply chain. This information is invaluable to all of their stakeholders. As such, the Reporting Guidance enables financial risk management best practices by helping investors, corporations, and procurement officers better understand their portfolio and supply chain risks.

Importantly, more than 20 corporations with supply chains located in SE Asia provided confidential input into construction of the guidance. These include some of the largest producers, traders, retailers and consumer goods companies in the world.

“Marks & Spencer recognizes the value of transparency as part of supply chain management and is working with industry partners to measure and compare performance of Growers, Processors and Traders in our supply chain,” said Fiona Wheatley, sustainable business manager at Marks and Spencer, a British retailer. “This document guides companies towards reporting that is most meaningful and material to a wide range of stakeholders and contributes towards our collective goal of making palm oil production sustainable and deforestation free.”

The Reporting Guidance and further information are also available in Bahasa Indonesia here.

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Gabriel Thoumi, CFA, FRM works as Director Capital Markets at Climate Advisers where he manages global financial analytics focusing on mitigating systemic climate risk while advising on “greening” capital markets. He has 18 years of experience managing and deploying frameworks to improve global capital markets sustainability through risk mitigation and return enhancement. Previously, for Calvert Investment Management, he valued global equity, index, and fixed income portfolios and their component positions in the utilities, energy, materials, chemicals, and financial sectors. He worked on quantitative index construction and asset allocation strategies. He engaged Fortune 500 CEOs on approaches to mitigating climate risk using financial risk management tools. He led initiatives to improve financial accounting of exchange-listed products and incorporated natural capital into financial tools. He has also worked at Morgan Stanley's carbon offset company, Wells Fargo Capital Management, and American Express. He is an adjunct at John Hopkins University.
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