We caught up with two senior BioMar executives, Vidar Gundersen, global sustainability director and Morten Holdorff Møjbæk, global sourcing director, to hear about the approach used to rethink the company’s materiality matrix.
They also told us how the Danish firm goes about its supplier audits.
First off, Gundersen said the aim of any materiality process is to identify, understand and prioritize critical sustainability topics, both from a commercial and stakeholder perspective.
“We develop key performance indicators (KPIs) for sustainability every second year to keep in line with stakeholder needs while also keeping the workload manageable.”
BioMar used Norwegian consultancy, DNV GL, to ensure objective reporting in its latest sustainability report.
DNV GL interviewed several of the Danish company’s major stakeholders, including customers, owners, financial institutions, environmental organizations and industry experts. Its senior management and key functions from sustainability, business development, HR, strategy, research and innovation also contributed with their views.
“Consumers are more educated about environmental issues these days, and we want to do what we can to satisfy the needs of the local consumer who may be concerned about deforestation or local pollutants,” added Gundersen.
Accelerators and performers
To address that and all aspects of the sustainable value chain, BioMar, is piloting a new supplier and raw material evaluation model.
“We are in the process of adopting the BASF methodology – Sustainable Solution Steering - for ingredient assessment that includes four raw material categories: The Accelerator, the Performer, the Transitioner, and Challenged.”
BASF licensed its sustainable portfolio management method to the specialized consultancy and software developer, thinkstep, in 2015.
The Accelerator category is for raw materials that demonstrate a substantial contribution to sustainability in the value chain: “Typically, that could be MSC sourced Antarctic Krill or AlgaPrime DHA [fish oil alternative produced by TerraVia and Bunge]. Accelerator ingredients are the real drivers of sustainability in the supply chain,” he continued.
Performer rated raw materials would meet the standard market requirements. “Most of the ingredients we source would fall into this category, including around 90% of the fishmeal we buy.”
Transitioner ingredients would have specific sustainability issues. “There would be a gap in terms of sustainability criteria in production of an ingredient within this category. We would work with the supplier to make sure the raw material becomes a Performer,” explained Gundersen.
Challenged ingredients do not meet the relevant sustainability criteria sufficiently and would trigger an aggressive action plan to rectify the issues. He said a Transitioner ingredient could eventually qualify as a Performer or even an Accelerator if the supplier demonstrates improvements in certain areas. “We will look to see how we can achieve that.”
Hotspot analysis
“The methodology also allows us to take into account consumer opinion, to look at hotspots, where and who we buy the raw material from in terms of geography and the supplier, and the target market. If we look at Asia compared to Europe, or Europe compared to North America, these are markets that can have vastly different views on the same sustainability issues.
“For example, in Europe, GM material is allowed but there is little acceptance by the public. Thus, it is a challenged ingredient in terms of our supply chain for that region but could be an accelerator in the US,” added Gundersen.
Another example of public opinion differing relates to land animal protein (LAP) use in fish feed, he noted. There is resistance to that from retailers in Europe but LAPs are used in fish feed in other regions with little fanfare.
“We are just getting started on gauging public opinion on the big ingredient hot topics. We have carried out surveys in the UK and Norway. We are planning to do the same in the rest of Europe and in other regions such as the Americas and Asia.”
Møjbæk said the materiality matrix is a joint initiative by the sustainability and sourcing departments of BioMar. “We are working closely together on this. We are hoping to have all the data amalgamated in the next couple of months, and then start using the methodology to assess our supply chain at the end of 2017.”
Auditing
However, audits remain an important control mechanism for the group, which Møjbæk said has around 200 global ingredient suppliers.
The Supplier Approval, Audit and Traceability (SAAT) team is BioMar’s first line of defense in raw material procurement. “They see things with their own eyes,” said Gundersen.
Suppliers sign up to the producer’s Code of Conduct. However, cooperation is the guiding principle.
Raw material suppliers in the SAAT mandate includes producers and traders within the categories: Fishmeal, plant protein and oil, binders, processed animal products (PAPs) and additives.
The sourcing team comprises 30 experts, said Møjbæk.
“SAAT set the procedures and tools that we must follow when auditing suppliers and their ingredients. BioMar has developed a further questionnaire that goes beyond SAAT to review other parameters. The combined results of these assessments determine the individual audit level needs for each supplier.”
Above a certain score, the supplier can then be approved.
Suppliers with multiple certificates like ISO or GMP+ would get a more favorable score, he said.
The group does see an elevated level of risk in doing business in countries like China, India and Russia, he added.
“Sometimes we carry out ad hoc audits but they are just to make sure we continue to improve performance at certain suppliers," said Møjbæk.
In new markets, or in the case of a new supplier or new product, he said it is often required to run both ad hoc and systematic audits to gain knowledge about the supplier’s processing methods, to share BioMar’s manufacturing expertise, and to ensure quality and compatibility with the Danish group’s production process.
“We do such audits when something pops up that we don’t understand. In one instance, a vegetable oil processor was using a different drying process to what was normally done in the industry; we went to see for ourselves if this method met the standard.”
“There was also a contamination case at another supplier, where the rapeseed oil contained palm lumps. We went out to the site. We found that processing lines hadn’t been fully cleaned between runs. Once that was identified as the cause of the contamination of the oil, we were able to eliminate the problem,” added Møjbæk.
BioMar also evaluates for social aspects, such as any evidence of child labor in the supply chain. “We have not been in that situation yet.”
“We can’t be there all the time, so getting suppliers to agree to the code of conduct, and building relationships and trust with them is key to eliminating risk,” he said.
Gundersen said BioMar is working with fishmeal suppliers to improve traceability in procurement. “We very seldom buy fishmeal where the complete batch is from one species. Typically, it would be 70% Menhaden, and the rest from a mix of other species. We are working with fishmeal producers to change the way they operate; we want them to identify and number each batch of fishmeal or fish oil in the future.”
Feed standard
Gundersen is on the committee steering the new Aquaculture Stewardship Council (ASC) feed standard. “It is quite challenging to develop the feed standard, to get all stakeholders to agree to one set of requirements and we are slightly behind schedule. However, such a standard makes sense, as, currently, there are variable raw material prerequisites under the IFFO RS, MSC and ASC models
The ASC said the feed standard will enable an ASC certified feed mill to produce both ASC compliant and non-ASC compliant feed via the use of mass balance requirements. An ASC certified feed mill would be required to conduct a risk assessment on all the ingredients they source – regardless of whether they are destined for ASC compliant feed, or non-ASC compliant feed. This risk assessment will assure that a certain level of legal, environmental and social responsibility is taken, it argues.
“These developments are about driving sustainability and responsible practice forward in the supply chain. Of course, things will get more complicated for companies like ourselves. We will have to anticipate how many of our customers will demand ASC standard compliant feed. We have to look at how we would go about fulfilling that demand.”