Asian Agri, as one of Indonesia’s largest palm oil producers, is committed to ensuring that its entire supply chain comprises of palm oil which has been produced or sourced responsibly, in line with its sustainability policy.
Supply chain is a complex process in a company. Under the One to One Partnership Commitment, Asian Agri aims to manage smallholders partner plantations the same as its own estates, which currently covering almost 100,000 hectares of smallholders’ partner land in 2018. Through, the One to One Partnership Commitment, Asian Agri aims to match each hectare of its own land with land owned by smallholder farmers.
In order to ensure that none of the Fresh Fruit Bunches (FFB) entering its supply chain come from protected areas (such as protected forests, national parks, and conservation areas), Asian Agri has developed a solid traceability system, achieving 100 per cent FFB traceability as of 2017.
Asian Agri currently has 20 palm oil mills in the North Sumatra, Riau and Jambi provinces of Indonesia, and its FFB traceability system allows the company to know exactly which plantation each FFB it receives originated from.
“FFB traceability is developed to avoid and reduce exploitation of protected forests and national parks,” said Ivan Novrizaldie, Asian Agri Certification and Traceability Sr. Manager.
“By understanding our own supply chain from whichever source to mill, we show our commitment to overcoming social and environmental issues, and we can also improve the efficiency and quality of the supply chain.”
Common data used within the traceability system include the estate or supplier’s name, owner, location (including exact GPS coordinates), plantation size, type of organization (association, farmer group, or individual), productivity, production data, and land history (if original documents exist).
“Since 2017, Asian Agri can claim that we have the data on every supplier. We can sample-check any FFB truck that comes to us and find out the source of the FFB that it carries,” Ivan explained.
To implement FFB traceability, Asian Agri’s Traceability Department works closely with the Purchasing Department, the Mill Department, and the Research & Development Department.
All four parties are fully involved in applying a FFB traceability mechanism whenever a new farmer, group or agent wants to register as an FFB supplier for Asian Agri.
The interested party will first have to submit a variety of documents as initial requirements.
"The team from the Purchasing Department will then make a visit to the farmer's area to assess the condition of the farm – taking into account crop quality, productivity and road accessibility - and to negotiate initial pricing.
"The new FFB supplier will provide several samples of FFB to our factory. The Mill Department will then examine the FFB sample for quality. Based on this, the final price will then be agreed upon,” Ivan said.
Another visit will then be made by the Traceability Department to obtain the supplier’s exact coordinates and total area. After that, the R&D Department will check the coordinates to see whether the plantation is in a ‘clear’ or ‘no-go’ area, he added.
When all the requirements are fulfilled, the new supplier will sign a contract to establish an agreement with Asian Agri, and can start delivering FFB to the company mills on a regular basis.
Assessing a supplier before they are engaged provides a degree of certainty, but it is not possible to check the contents of each delivery to ensure it really did come from the supplier in question. To manage this risk, Asian Agri applies several methods.
First, each supplier is given a monthly quota based on their production capacity (determined from the visits to the farmer's plantation), thus preventing them from buying additional FFBs from third parties (with unclear plantation origins) in order to sell more to Asian Agri.
“If the quota is exceeded, our team will once again make a visit to the plantation and check if such production is plausible. An adjustment to the quota will be made if that is indeed the case. If not, then the supplier will not be allowed to send more FFB to our mill before the month ends,” Ivan said.
The risk of receiving illegal FFB is higher from suppliers whose plantations are adjacent to conservation areas, so Asian Agri stations an on-site traceability team which is responsible for ensuring suppliers’ compliance to the FFB traceability system.
Each supplier also signs a contract agreeing that they will send FFB only from their own plantation and not from unregistered plantations, protected forests, national parks or conservation areas.
“Breaching of this agreement could result in immediate contract termination,” he said.