Last Updated on March 19, 2021 by monica chan
In January, 2021 Olam issued a press release which recounted the work they were doing with the Rainforest Alliance in “La Frailescana” region of Chiapas in Mexico. Bartalks contacted Olam to understand more about how this sustainability framework works at a high level and how it fits in with the other initiatives at Olam.
Both Olam and the Rainforest Alliance were kind enough to spend time on a call with Nick Baskett from Bartalks and provide an insight into the reasoning that drives the programme and how it successfully brings a multi-stakeholder approach together to tackle some of the most urgent and difficult issues facing the industry.
Some people hold sceptical views about the real motivation and intent of the big companies’ sustainability approach, and in particular how value and risk is distributed. If you look at the facts – the earnings of the big companies’ vs the enduring hardship of farmers, it’s an understandable opinion.
However, speaking for myself I’d prefer to see a discussion that widens the dialogue beyond convenient, but simplistic viewpoints. Frankly, I don’t often find these good vs evil arguments useful in finding solutions. I’m curious to discover better questions to ask.
The question of ‘fairness’ is not isolated to farmers. The pay gap between CEO’s and their workers is particularly acute in my country (the UK), and getting bigger. In 2016 a CEO was paid 128 times more than the average employee, and in 2017 it was even higher at 145 times.
At the same time, it is also true that global poverty has been decreasing. Since 1999 the total number of extreme poor has seen a reduction by 50 million per year.
More wealth is being created than ever before, but while the lion’s share of this goes to an increasingly small number of individuals at the top, the cost of this to the environment is often borne the most by those that benefit the least.
As participants in this industry, we should do what we can to be transparent in our reporting on the efforts to help achieve a fairer balance.
Unfortunately, there are temptations for organisations to gloss over problems, cherry pick favourable outcomes and spotlight those positive results over the failures. When this happens, the wins are short term, but the negative impact, including loss of trust, last.
Businesses exist to pay the shareholders a profit. However, that does not mean it is impossible for them to have a positive outcome for those in their supply chain. In fact, they are arguably the best placed to do so.
Forcing a change, for example, through government legislation is not practical in a competitive global environment, and not desirable in any case. So how would persuasion work instead?
Motivation Drives Action
One year ago, on 20 January 2020 Olam co-founder and Group CEO, Sunny Verghese told Bloomberg of their plans to split the business into two and maximise long-term value through their IPO’s. He went on to say that Olam Food Ingredients needed to fit in with the growing consumer preferences that are sustainable and traceable.
In other words, consumers have put a value on ethically sourced products. The two follow-on questions I’m curious to know are first, how much is a sustainability premium valued by the consumer? And second, can we trust what the big companies are telling us?
There is a common belief that altruism is mutually exclusive from selfishness. In the 1950’s philosophical works of Ayn Rand, and her less famous book “The virtue of selfishness” Rand makes a plausible argument that all altruism is, in fact, at the root, selfish, and that there should be no apology made for doing something in your own interest if it also benefits others.
But I can see there is a potential for some abuse in some areas – This is a general observation, and I am not referring to any one company here. Some areas of potential abuse that come to mind include.
- Reporting metrics and KPI’s could be abused, for example by having so many of them that it’s always possible to weave enough positive signals together to give a misleading interpretation.
- Auditing is weak, infrequent, or relies on self-certification.
- Inter-organisation cross certification, where one part of the company certifies another part.
One temptation is to set goals that can be achieved easily but frame those same goals as ambitious. Executives, like all of us, want to succeed, but many of them are also rewarded on results.
If you review the salary structures from the remuneration committee’s at public companies, you may be surprised to discover that the Executives salary makes up only a small amount of their overall pay. Stock options and other bonuses may represent two thirds or more of their total remuneration.
Since stock options increase in value when the company’s share price goes up, these executives are heavily incentivised to achieve results in a time frame as short as 12-36 months.
If as a society, we want a better environment, and a fairer distribution of risk and wealth, then we have to be prepared to pay for it.
The most important weapon in our arsenal to achieve this, are the opinions of consumers, and the public needs simple messaging to explain how closely a brand is aligned to their own sustainability priorities.
The first step is by establishing a sustainability framework that can be applied in different contexts on the ground and scaling to large numbers, so that a real impact can be made.
This framework should have verification mechanisms through audits, and a set of KPI’s that are appropriate for the context of the environment and project, and which are reported consistently from year to year.
There is a lot to learn from others much more knowledgeable than me on this subject, so I’ve tried to keep my opinions to areas where I have some experience or based on common sense.
I have experience in creating and running programmes for large companies, setting up the KPI’s and reporting structures, so in this regard at least, I think I am qualified to comment.
I came into this interview with little exposure to Olam’s sustainability initiatives, so I wanted to keep the objectives simple:
- The nature of the different initiatives Olam uses for managing sustainability; Coffee LENS, AtSource, and Rainforest Alliance’s LandScale.
- How LandScale can be a basis of collaboration between RA and Olam, and what each brings to the table
- What LandScale does to create a more holistic answer than just increasing farmer productivity
- If the metrics consistent and enduring – that is to say, used for a real purpose beyond allowing the positive ones to be cherry-picked for good PR sound bites
- If we are genuinely moving the sustainability goals forward. Is there cause to be optimistic?
What Olam Says about their Objectives
Olam’s overarching approach to sustainability is outlined by their Living Landscapes Policy (LLP) has a time-bound element. That is to say, it must be completed by 2020, and we believe the company is planning to publish the updated goals.
The specific goals set were (text taken from the report directly):
- We will consult widely on our Living Landscapes principles and lay the groundwork for appropriately measuring, valuing and reporting natural and social capital in our operations and in the landscapes we work in.
- We will establish a consultative multi-stakeholder group to help us further develop the net positive impact framework for agriculture.
- We will set out a framework of action for putting the Living Landscapes principles in operation in key geographies.
- We will develop a set of indicators related to this Policy for priority businesses during the course of 2018. We will report on these in the FY 2018 report.
These were achieved through multiple processes:
- Convening the multi-stakeholder Living Landscapes Forum to advise how Olam achieves its vision to put more back into food and farming systems than they take out, as defined by the LLP.
- Developing the Forest Loss Risk Index (FLRI), a tool to understand recent trends in tree cover loss, and identify the riskiest areas on which to focus our attention.
- AtSource, specifically the environmental and social country-risk indicators, water risk metrics, and establishing the AtSource Infinity framework – geared towards achieving change at scale through multi-stakeholder partnerships.
- Based on our consultative process, we will analyse gaps in our current approach to Living Landscape production systems in key geographies, comprising not just the elimination of unacceptable practices, but the triple-positive impact objectives. We are implementing the FLRI across priority areas with action plans in progress.
- We will include in our Annual Reports a standardised valuation of natural and social impacts of agriculture and land use across our businesses, including third-party sourcing. (this is captured in our Annual Reports)
- We will set out a long term plan to embed a net positive approach in the commodity systems in which we participate. Reflected in AtSource roll-out and the CR&S strategies of our Business Units, such as Coffee LENS (standing for Livelihoods, Education, and Nature at Scale).
- We will continue to catalyse, build and support effective partnerships for local and large-scale conservation efforts in the landscapes where we operate.
This represents the programmes and work under AtSource.
Interview with Olam and the Rainforest Alliance
To help alleviate my curiosity, I was fortunate enough to be allowed to pick the brains of some subject matter experts, Jeremy Dufour the Global Sustainability Projects Manager of Olam Coffee, and Sophie Persey, a Senior Manager for LandScale at the Rainforest Alliance.
The rest of this document is based on the conversation I had with these parties. The writing reflects more of a conversational tone, which I hope is a closer representation of the discussion than if I was to transform it into a report.
During the discussion, we learned how Olam is using LandScale to help assess and evidence sustainability impact at the landscape level, under one of its AtSource Infinity programmes in Chiapas, Mexico.
First up, Jeremy explains the different initiatives in Olam and how it fits together.
Living Landscape Policy
This is an international policy that forms part of its core purpose. It tries to address how Olam translates interventions in the landscape, not only with things like deforestation but how to regenerate the environment.
Their ‘Core Purpose’ comprises, not just a list of ‘do nots’, but also a list of ‘dos’.
For example, how DO Olam regenerate ecosystems and supply chains in the areas they operate.
AtSource is Olam’s sustainability insights platform that allows customers to track the social and environmental footprint of their coffee purchase–as well as other products – at each stage of its journey right back to the farmer group and/or Olam estate. They access this via a digital dashboard which is customised to their supply chain and product(s).
AtSource will allow the customer to access up to 180+ social and environmental metrics including the value of quality premiums paid, the number of farmers receiving training on good labour practices, or the total number of hectares rehabilitated. The idea is that this transparency helps customers meet their own sustainability requirements, but also work with Olam on action plans to transform supply chains.
They can interrogate the platform to see what has been done over the last year or more and it gives the full environmental footprint including carbon, water, and land.
For social issues, data is available on diversity inclusion, education and health and nutrition.
Jeremy wanted to emphasise that customers should also access the ‘impact stories’, which turns the numbers into meaningful narratives on the difference Olam’s sustainability programmes are making for people and the planet. These
can be shared with their consumers to demonstrate customers’ own role in advancing sustainable sourcing.
In October 2020 Olam launched ‘Coffee LENS’ which is their vision of the future of the coffee sector.
In a way, the Coffee LENS announcement was similar to a mission statement for their coffee business. It commits Olam to report on an annual basis as they move toward achieving the overall goal by 2025.
Numbers are reported consistently using the same metrics each year, and they hope to achieve some of them early so they can set new goals.
Coffee LENS is a translation of Olam’s sustainability commitments for the coffee division of Olam explained Jeremy, with published targets that are aligned with the Olam Living Landscapes Policy and the global sustainability vision.
They believe this can only happen when working collaboratively with other stakeholders. So from this starting point, they ask how do we make this a collective effort, because larger objectives need a multi-stakeholder approach.
How the Rainforest Alliance works with Olam
Sophie explains that the mission of the Rainforest Alliance is to create a more sustainable world by using social and market forces to protect nature and improve the lives of farmer and forest communities.
For this purpose, they have a couple of tools in the toolbox, but the longest established and best known is the farm-level certification scheme. This scheme promotes and develops best practices to ensure farms are managed sustainably.
LandScale is a new initiative, co-led by Conservation International, Vera and the Rainforest Alliance. It provides an impartial, holistic, and globally recognised system for assessing the cumulative impact of activities within landscapes dominated by natural resource-based industries.
This could include, for example, the Rainforest Alliance certification at the farm level, Olam’s contribution with AtSource programmes, or the work they are collaboratively doing on things that go beyond the farm. So LandScale is a way to assess and monitor all of the different efforts and then communicate them in a credible manner.
In Mexico, they’re working together on an agroforestry project in Mexico as part of the Alliance for Sustainable Landscapes and Markets and piloting the LandScale framework to assess the impact of their interventions at the landscape level.
In response to a question over whether the Rainforest Alliance’s activities are aimed at a micro level, Sophie explains that the Rainforest Alliance has several different roles, including certification, but then also have regional teams that work collaboratively on sustainability interventions.
LandScale then is a more ‘macro level’ tool that is complementary to the certification tool and used by a variety of different organisations around the world, such as Olam. LandScale includes an assessment framework, verification mechanism, and reporting platform. These tools help the private sector, governments, and civil society access robust insights that can guide and incentivize sustainability improvements at scale.
LandScale has had good responses to the public consultations they’ve held in which they’ve published the framework and asked for feedback. There is a lot of buy-in to the further development of the framework.
They can point to a growing coalition of global partners, and incorporate a number of different perspectives via the advisory panel, including Christopher Stewart, Global Head of Sustainability at Olam
Sophie points out that there are other schemes out there, and LandScale is open to collaboration and learning from all of them.
However, the broader partnership has been going for much longer, and we ask Jeremy for his comment.
Jeremy picks up the conversation and suggests that while the Mexico project is 2 years in, one key point they have learned is that Stakeholder engagement is critical for success, not only with organisations like the Rainforest Alliance, but, for example, with the local communities to ensure their buy-in to the initiative that intends to bring change in the way they work and live, and with local governments and authorities.
In this case, when talking about stakeholders, Jeremy says he is referring to the communities and government. It is important to understand what they are willing to do and what efforts they are also going to put into the project.
Local government is a critical actor, for example, because some landscape initiatives require the support and a level of ownership from the authorities. He believes the partnership is going in the right direction.
Jeremy calls this a ‘3 Pillar’ collaboration, which brings much more success. In this structure, Olam works with NGO’s and other Stakeholders. We asked Jeremy to expand upon his definition of stakeholder and to explain what each of them has to gain in the partnership.
He explains the key stakeholders are the community, including the farmers. What’s in it for them? Getting access to technology allows them to move up the value chain and get a better price for their products.
But they look beyond the coffee producers into the wider community as a whole, they identified nutrition as an example of how they can make a positive impact on the community. This was done with an academic partner – who is another stakeholder in the project, showing what should be done and how, and then demonstrating the benefit.
At the Federal and State level such as the“National Forestry Commission of Mexico (CONAFOR)” and the “National Commission of Natural Protected Areas of Mexico (CONANP)”. They see the benefit of working together to prevent deforestation and the destruction of natural resources.
Working with partners such as these stakeholders and the Rainforest Alliance complements Olam’s capabilities, so that together they can be more effective.
Assess. Verify. Communicate.
Before the interview, Bartalks reviewed the framework of metrics from Olam’s AtSource platform and compared that to the metrics included in LandScale, and we were honestly a little surprised when we saw that there was indeed a strong correlation between the two. This seems to support the case Olam is making for having all their initiatives move towards a common set of goals.
In the interview, Nick noted that sometimes it seems, fairly or unfairly, that different numbers get used from year to year by some companies reporting on sustainability, and it becomes hard to see whether real progress in any one area is happening.
The sustainability numbers from companies always seem to be positive, which suspiciously looks like they are ‘cherry picking’ the best metrics. While this is understandable, it would be preferable to have a list that included some metrics where the programs fell short and hear how the companies were planning to address the problems.
Jeremy said that it is a relevant question to ask, but he hopes and truly believes their annual reporting of the KPI Matrix and targets are consistent and lasting over the next five years.
It is first important to understand the key material areas that are critical to the coffee sector. They understand the needs are for climate action, development of a healthy ecosystem, and water and soil management are priorities.
Jeremy moves to discuss the social area – where education and skills are critical. In coffee farming, the average age of farmers is an issue, he says. For example, in Colombia, the average age of a coffee farmer is 62 years. So, it makes sense that Olam invests in helping the next generation learn the skills of the industry and encourage them to see farming as an attractive career.
Last but not least is the economic viewpoint. If coffee farmers can’t be profitable from coffee farming, perhaps with the support of a supplementary crop, then there’s no hope for the sector, and as a result, no hope for Olam. This is why the community and Olam have a shared interest in addressing any issues in this regard.
So, the stakeholders conducted a detailed analysis and identified that nutrition was the biggest issue, so they will be focused on developing an intervention at Chiapas in Mexico to address this concern.
Jeremy agreed that as an industry, they must use a common language that avoids being overly technical or focused on metrics, else risk losing the engagement that they want from people in the communication. He explains that behind each output there is an internal discussion on how best to communicate them.
As we start to wrap up, we post a question to Sophie – “What is the biggest challenge in sustainability in the supply chain.”
I think particularly focusing on landscape scale, there hasn’t been that much effort yet in terms of collecting social data sets at landscape scale.
On the environmental side, she explains, there are a lot bigger data sets available that enable assessments to be done relatively quickly and easily for those indicators.
However, for some of the social issues, it requires more effort to collect the data and that means assessments take longer. But they don’t want to ‘over prioritise’ environmental issues at the cost of social issues. She believes this will change over time as more data is gathered, which will enable more holistic assessments to be conducted easier.
“Olam is leading the way in terms of commitment at improving sustainability at a landscape scale.” – Sophie Persey
In the World Cocoa Foundation, for example, we see lots of collaboration on that scale, but we need to see more cross-sectorial and multi-stakeholder collaboration. A willingness to look beyond your own borders and realise that no organisation can operate in a vacuum.
So even though Olam might have the best practices in the world in their own supply chain, that alone is not enough if other actors are not at the same level, for example consuming more water than is necessary, or where we see deforestation. So we all need to realise the interconnected nature of the challenges we’re facing.
Is Competition a Barrier to Sustainable Investment?
We pose the question “Does being a commercial organisation, operating in a competitive environment, mean that sometimes you can’t do as much as you’d like, because unless the industry co-invests equally, an expensive sustainability programme could put the company at a cost-disadvantage”.
Is this why some organisations are actually calling for governments to regulate them?
Jeremy responds that he may not be the right person to ask about this point in Olam. But that working on a level playing field, helps everyone to work in the same direction.
Jeremy moves the discussion to ask a related question “how do we achieve critical mass? Doing something on a scale of 1,000 farmers is a small intervention, but how do we move that to 10,000, 15,000, or 20,000 farmers.
This is not possible for a single organisation acting alone but requires a multi-stakeholder approach which may require the stick or the carrot. This is the first thing, but having a pathway to scale is critical.
The example of Chiapas is a good example because it’s been categorised as an AtSource Infinity programme. These ‘Infinity’ programmes are the cherry at the top of the platform, under which Olam wants to incorporate all aspects of transformational goals.
Any initiative must still have boots on the ground, says Jeremy, which gives the connection to the small holders and coffee farmers they’re working with.
But in this programme, all stakeholders are participating and sharing the same vision and goals, so in this way, we can address the issue of a level playing field. This is the objective of Infinity and the LandScale project.
We ask about the three tiers of AtSource, which offer customers increasing levels of granularity and opportunity, depending on the maturity of their sustainability ambition.
We asked Jeremy what the key differences were between these levels.
Jeremy explains that the entry-level is where they are able to give assurances to the customer that the coffee they’re buying is produced in adherence to a set of codes, principles and procedures. This is formulated around what they refer to as the ‘Olam Supplier Code’.
It also comes with a general third-party risk screening, so the customers feel involved and are aware of the risks that exist in their supply chain, starting in this specific community and country.
At the Plus level, they start talking about the metrics – they report on the social aspect, the number of farmers they are training, the number of acres they conduct soil management, etc.
So this is providing a Farmer Group level where they can ensure the traceability at the AtSource Plus Level.
So AtSource Infinity, they translate the principles of the Living Landscape Policy into tangible actions and focus on transformation of the supply chain at scale.
One last question from Nick – If we are improving the farmer’s production through better agricultural practices, that’s going to present an overall increase in supply, which of course puts downward pressure on prices.
Jeremy said you should not just look at increasing the supply, but he feels that emerging markets like China may take up the slack, and he points out that sometimes demand is not even relatable to a specific region, but to pockets within that region. Yet, of course, there must be a consideration of what the demand level is at.
Furthermore, he feels that farmers should not be putting all their eggs in one basket of producing coffee. They should be more resilient by having more diversification in their crops.
There is also their question of what kind of quality they should be growing. One way they try to do this is to give more transparency, for example, a digital tool called Olam Direct allows farmers to access market prices and therefore the ability to negotiate and retain more value for their crop. Additionally, they can discover in advance the price they can attain if they are able to meet certain quality levels.
So the story is much more complex than looking at a single dimension of supply, and Jeremy wraps up by stating Olam is addressing several elements of this complex equation, not just the prices, but improving yields, resiliency levels and better business planning which helps de-risk the farmers’ income.
I bring the interview to a close by asking all parties on whether they have an optimistic or pessimistic for outlook.
Both Sophie and Jeremy were optimistic, citing examples how the sector is organising itself around Living Income as one example.
Jeremy credits his optimism to the increased level of maturity in the industry as all organisations are realising the importance of sustainability, not only for altruistic reasons but on an existential level for themselves.
I’d like to thank Olam and the Rainforest Alliance for taking the time to help put this article together. At no point did they seek to influence the direction of the interview.