Case Study: Golden Agri’s Multi-stakeholder Approach to Sustainable Practices

Palm oil plays a strategic role in global development. Not only is it a highly versatile oil with a wide range of uses from food to healthcare to biofuel production, it is the most efficient and lowest cost vegetable oil. Oil palm has a long replanting cycle of 25 years and uses significantly less land than other sources of vegetable oil to produce the same amount of oil. With the world population projected to increase to more than nine billion people in 2050, sustainable palm oil plays an important role in mitigating the mounting pressures on food security and inflation.

Governments, environmentalists, corporates, banks, customers and investors around the world are increasingly cautious of the potential threats of global climate change. There has been growing international interest in environmental, social and governance standards. This is evidenced by the no deforestation commitments enforced by global brands in their responsible sourcing guidelines for palm oil and pledges to work proactively with palm oil producers and other stakeholders to identify ways to prevent deforestation. Increasingly brands, palm oil growers and companies in the supply chain are taking conscientious steps to support deforestation-free palm oil production.

As a leading palm oil player in Indonesia, Golden Agri-Resources (GAR) is committed to adopting the best industry practices and standards, managing the environment responsibly and empowering the communities in which it operates, while maximising long-term shareholder value. The company believe that multi-stakeholder engagement is the best way to achieve solutions for sustainable palm oil production. This involves reducing deforestation, greenhouse gas emissions and biodiversity loss, and demonstrating respect for indigenous and local communities. GAR shares a common ground in conserving the forests, creating much needed employment and ensuring long-term growth of the palm oil industry, which is a vital part of the Indonesian economy.

Ensuring no-deforestation and sustainability

In line with its commitment to ‘no deforestation’ palm oil in its entire supply chain, GAR is implementing processes to ensure that the palm oil for both its upstream and downstream operations are in line with the company’s forest conservation policy (FCP).

We take a pragmatic approach towards the growing market demand for traceable, deforestation-free palm oil, and are taking steps to achieve traceability that makes business sense. It has to be practical and commercially viable. To implement the FCP, the company needs the buy-in from multi-stakeholders – communities to value and protect high carbon stock (HCS) land; governments to implement policies that enable HCS forest conservation; and industry players to adopt a similar forest conservation policy.

GAR’s yield improvement policy leverages technology and innovation to improve CPO yield and reduce the pressure to open new land. In 2013, the company achieved a CPO yield of 4.76 tonnes per hectare while our plasma smallholders obtained 4.65 tonnes per hectare.

The company complies with all relevant laws and internationally accepted certification principles and criteria (P&Cs). Industry certification is part of GAR’s ongoing commitment to adopt best practices and standards in sustainable palm oil production. GAR continues to make progress in obtaining roundtable on sustainable palm oil certification for all its existing 433,200 hectares of oil palm plantations and 42 mills (as at June 2010) by December 2015. The company is also advancing in attaining international sustainability and carbon certification and Indonesian sustainable palm oil certification to meet the demand for sustainably produced palm oil.

Treasury’s role in sustainable practices

Sustainability has always been an integral part of the business and is supported by both management and the board. At GAR, treasury plays its part through implementing the following practices:

  • In a quest to ensure that going green is effective and efficient, the company constantly invests in paperless operations, and virtual storages through share point and data storage infrastructure.
  • GAR also encourages sustainable and environmentally-friendly practices amongst stakeholders in its supply chain. As the company moves towards higher standards of sustainability, the team is conscious that we must take our suppliers with us on this journey and is committed to working with them to ensure that they adopt the appropriate social and environmental standards.
  • As part of its multi-stakeholder engagement, GAR keeps its stakeholders such as customers, banks and investors amongst others abreast of its best practices. The multi-stakeholder engagement approach helps the company to reduce risk, ensure smoother operation, enhance reputation, and reduce cost of doing business.
  • All mergers and acquisitions or joint venture investments projects pass through a rigorous due diligence to ensure sustainability practices of these businesses or projects are in place.

At GAR, treasury adopts sustainable practices that ensure prudent risk management practices as the company remains committed in developing solutions for sustainable palm oil production.

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