‘In-built premium in soy standards doing farmers a disservice’ - Nutreco

We caught up with Jose Villalon, corporate sustainability director, Nutreco, to hear more.

He said Nutreco’s strategy is to engage our suppliers in a conversation about how to improve processes. “We try to work with them in areas where they may not be compliant, to plug those gaps.”​

“All new suppliers are asked to sign our supplier code of conduct. They commit to comply with the criteria [in that code]. Since 2014, 86% of our ingredient direct spend has signed-off their commitment to comply."​

Audits​

The company also carries out internal audits of suppliers, and Villalon said the group prefers engaging with suppliers to improve in areas [where they are] found to be non-conforming, but, under the worse conditions, would discontinue the service agreement with certain raw material providers if they prove disinterested in engaging.

“We asked a fishmeal supplier candidate based in South East Asia to take action over suspected child labor in their supply chain - they did not feel obliged to work with us on this so we delisted them.”​

The internal audits are a challenge, he admitted.

“The system is far from perfect but we are trying to improve our coverage of suppliers. ​

“We don’t have the resources to assess all of our raw material providers on an annual basis. ​

“To optimize our audit process, we regularly piggy-back sustainability assessments onto our existing quality audits; this approach increases efficiency but this means we don’t spend as much time as we would like to on the sustainability auditing side,”​ he said.

To further optimize internal resources, the feed manufacturer gives a particular focus to high-risk raw material suppliers. “Typically, that includes fishmeal, fish oil, palm oil and soy ingredient suppliers. As a result, 100% of our suppliers of those materials have signed our code of conduct.”​

Nutreco, he added, is currently weighing up other systems it could adopt in terms of expanding its supplier assessments.

“We are evaluating whether we could use platforms that would allow the sharing of audit reports among members.​

“However, some of the platforms we have evaluated don’t quite match our needs so we would hope to negotiate with them to see if they could widen their scope.”​

Audit platforms​

Quickfire from Muddy Boots Software has been designed to manage and monitor the process of harvesting large amounts of data more effectively. The company said the platform enables businesses to collaborate with their suppliers on any type of audit or assessment, allowing information to be shared both up and down a supply chain. 

EcoVadis also runs a collaborative platform that is aimed at minimizing redundant work for suppliers and giving buyers useful, actionable information on how a supplier benchmarks on HCSR dimensions versus others in the same segment.

Palm oil purchasing ​

Nutreco does not have a significant footprint in palm oil though, so it does not have a lot of influence on that supply chain, he said. “All of the palm oil we use is covered by Green Palm certificates to offset the use of all palm oil used in our products, excluding palm kernel oil.” ​

The company has excluded palm kernel oil, due to the limited availability of the product and the associated costs, he said.

Soy story ​

While all of Nutreco’s Norwegian produced salmon feed uses ProTerra certified soy, Villalon argues that the premium attached to either GMO-free ProTerra or Roundtable on Responsible Soy (RTRS) schemes makes them non-competitive and there are limited volumes under both standards.

“Currently only 2 to 3% of global soy production is certified.”​

In a previous position as vice president of aquaculture at the WWF, Villalon led the formation of the independent Aquaculture Stewardship Council (ASC), and was the ASC’s first chair of the board.

“The ASC environmental/social standards today cover 12 species of farmed seafood and they have been widely adopted, but during the developmental period we made sure not to promise market premiums for certified product. It was always outside of the scope of that process. ​

“Premiums are driven by the markets not the developmental process. ​

“In the development of the RTRS and ProTerra soy standards, it appears that farmers were told they would get a premium for their certified production. I think that is doing the farmers a disservice. The market decides whether a commodity product should be sold at a premium not the standard setter.”​

Retailers are not really showing support for certified responsibly produced soy, he said. “There is resistance to paying more for it. We are not seeing that demand downstream.”​

However, it is ultimately the food service companies and retailers that are the influencers in the food chain, not the feed industry, he added.

The feed value chain is a high volume low margin model, and, thus, must work collaboratively with other stakeholders and the industry as a whole to instigate change, he added.

“We, in Nutreco, find it frustrating when we hear aspirational statements from retailers, but with no follow through in terms of concrete action.”​

“When you talk about ending deforestation all stakeholders are in agreement, but retailers could, instead, state in their product spec sheets their specified requirement for certified soy in their supply chains. It is not common today but would have a direct impact.”​

Collaborative action ​

Nutreco, which buys its soy from the big four traders, has recently joined the Collaboration for Forests and Agriculture (CFA), he said.

The initiative was jointly launched last year by the National Wildlife Federation (NWF), The Nature Conservancy (TNC), and the World Wildlife Fund (WWF). It is currently funded by the Gordon and Betty Moore Foundation.

CFA is aiming to achieve solid commitments to zero conversion by the leading companies that buy, distribute and process soy and beef in the Amazon and Cerrado regions in Brazil, and in the Gran Chaco region spanning Argentina and Paraguay - to eradicate the deforestation caused by the supply chain for these commodities, without this being displaced, by 2021.

Villalon was also involved in the development of the FEFAC sustainable soy sourcing guidelines.

“We have created minimum, entry-level sustainability criteria that we can all agree on, to start building volume. The guidelines, while they exclude sourcing from illegally deforested land, are far from the RTRS level. It is about ensuring no company is at a competitive disadvantage, ensuring the playing field is level. However, the guidelines as they stand are not the end of the game. This is a process, and we are the transition stage.”​

He said the revised environmental governance laws in Brazil, the Forest Code are definitely an improvement on what went before and, arguably, among the most progressive forest regulation, even if a certain amount of legal deforestation is allowed under the regulation.

“The officials use satellite imaging to monitor and control and the code includes requirements for landowners to register their land and demonstrate ownership.”​

CFA's strategy is to ​

Promote Leadership by the Private Sector​

Encourage action at a sectorial level with different actors in the supply chain that commit to implementing zero-deforestation practices. The focus is to work with a critical mass of leading companies, including national and international retailers, distributers and brands, traders, meat processers and groups of producers, so that they will collaborate in the alignment, strengthening and expansion of the adoption of commitments to supply zero-deforestation commodities. 

 
Guarantee Robust Transparency​

Support the development and adoption of cost-effective tools and platforms that enable the evaluation, monitoring and verification of the implementation of purchase and production commitments for zero-deforestation beef and soy on a sectoral level. This will include platforms to monitor changes in land use and coverage, and effective supply chain monitoring systems that enable habitat conversions associated with the purchase and production of commodities to be traced.
 
Alignment of Capital Flows​

Guarantee a significant increase in private and public capital to support zero deforestation and conformity with laws related to zero conversion. This strategy will focus on improving the access and availability of capital aimed at the transition of beef and soy production to practices involving zero deforestation, through actions establishing incentives, business models and financial mechanisms.