Sustainable soy: Cargill, Bunge, LDC and ADM seek to boost transparency in Brazil supply chain

19 Feb 2019 --- Members of global platform the Soft Commodities Forum (SCF) are boosting their commitment towards a transparent and traceable supply chain for soy in Brazil. The extent and pace of native vegetation loss resulting from cattle and soy expansion in the Cerrado region pose a significant threat to social, environmental and economic values. And now SCF members are upping their game to ensure that any agricultural expansion occurs hand-in-hand with the preservation of native vegetation and the long-term sustainability of the Cerrado biome.

SCF members have committed to a common framework for reporting and monitoring progress on transparent and traceable supply chains for soy in the region, which plays a significant role globally in terms of climate change mitigation, biodiversity and freshwater systems. The area is also an economic engine for local communities and a production region for exported agricultural commodities. 

Louis Dreyfus Company (LDC), Archer Daniels Midland (ADM), Bunge and Cargill are all founding members of SCF. 

“We are continuously seeking to rise to the challenge of feeding the world’s growing population in a sustainable manner. This means being mindful to preserve the environment, including areas of importance for their biodiversity,” says Ian McIntosh, CEO of LDC. 

“The SCF allows us to set common sustainability goals with our peers and mutual reports on our progress, as one of the means we have to ensure fair and sustainable value creation,” he notes.

Food and beverage companies are becoming increasingly conscious of sustainability issues – including the impacts that extreme weather events can have on the supply chain, particularly raw materials. Indeed, sustainability is at the very core of what many leading suppliers are doing – increasing their commitment to sustainable ingredient solutions based on renewable resources.

As part of this, traceability and transparency are becoming increasingly vital within food supply chains. This comes as global consumers increasingly want to know where their food comes from and the practices of the companies involved in the supply chain.

As a leading global merchant firm involved in agriculture and food processing, LDC has already noted how the soy supply chain is growing so rapidly that even managing its supply chain sustainability is becoming “increasingly urgent.”

As the second most widely used oil in the world (after palm oil), global production of soybean oil is predicted to grow significantly to provide edible oil and livestock protein feed. Its use is also boosted by the biofuel sector which uses the crop to produce an alternative to fossil energy. But soy production comes with other types of costs, namely for the environment and local communities.

Brazil is the world's leading soybeans exporter due to the boom in animal feed production caused by the global rise in meat demand and the Cerrado region provides more than 70 percent of the beef cattle production in the country. Other grains such as maize and rice are also produced in the Cerrado region. 

In terms of exports, Brazil was reportedly set to end 2018 with a record 82.5 million tons in soy exports, up from 68 million tons in 2017, according to the National Association of Grain Exporters (ANEC). The country also benefited from the US-China trade dispute which resulted in excessive tariffs on US soybeans. 

As the trade conflict intensified dramatically last year, China upped the severity of its sanctions against the US by targeting soybeans for 25 percent retaliatory tariffs, after initially not including the commodity on its list of items impacted. The impact of this has been rippling through the US soybean sector for seven months now as the soybean tariff initially took effect on July 6, 2018. 

According to reports, 82 percent of the amount exported from Brazil during last January to November, 65.7 million tons went to China.

The SCF is convened by the World Business Council for Sustainable Development (WBCSD) for the purpose of advancing collective action around common sustainability challenges. The SCF is made up of WBCSD member companies who share a vision of ensuring sustainable agricultural supply chains and working in partnership with government, producers, consumers and civil society to create a safer, more sustainable food system.

The SFC membership has also expanded to include China National Cereals, Oils and Foodstuffs Corporation (COFCO) International and Glencore Agriculture.

SCF member companies recognize the existing risks and commit to act on supporting transparent and traceable soy supply chains in Brazil. Each member company will report updates on progress every six months. Additionally, the SCF member companies are participating in the processes of the Cerrado Working Group, also known as GTC, to develop agreed common definitions, to design appropriate financial incentives and to outline actions which should be taken. 

The GTC was established by a multistakeholder coalition to develop terms of agreement between producers, industry, consumer organizations and civil society, as well as an action plan for eradicating deforestation and conversion of native vegetation in Brazil’s Cerrado biome.

What exactly are members committing to?
Starting with 2018 harvest data, the SCF member companies will report individually the percentage of soy they each source in the Cerrado from the total Brazilian volume. Together, the SCF members will closely monitor municipalities with the highest risk of conversion of native vegetation to soy, based on GTC information. 

Sourcing in these municipalities will be reported in percentages of direct purchase from farmers and indirect purchase, from parties like aggregators, cooperatives and third parties. The first report will be issued in June 2019. 

The process will be supported by Proforest, a non-profit organization that supports companies, governments and others to implement their commitments to the responsible production and sourcing of agricultural commodities and forest products.

Subsequent reporting will provide information on specific actions being taken to improve direct engagement with farmers to address risks in the municipalities.

“Cargill is proud to join other leaders in the industry to support actions that help Brazilian farmers protect forests, preserve natural resources and maintain their livelihoods,” says David MacLennan, Cargill Chairman and CEO. 

“This brings the industry together around shared goals and accountability to ensure continued progress against our sustainability commitments.”

“For ADM, sustainable practices and a focus on environmental responsibility are integral to everyday work,” adds ADM Chairman and CEO Juan Luciano. 

“Since we first made our Commitment to No Deforestation in 2015, we’ve made significant progress in achieving transparency in our own supply chains and in working with our industry counterparts so that we are all advancing these important goals,” he says. “The framework and standards we’ve agreed upon as part of the SCF is a critical step forward in our collective efforts to preserve and protect the environment and the people of the Brazilian Cerrado biome.”

“Transparency and data improve trust and facilitate problem solving. This commitment will generate more of both,” states Greg Heckman, Acting CEO, Bunge Limited. “It is an important step by industry leaders that will help optimize agricultural sustainability in a vital region.”

According to Johnny Chi, Chairman of COFCO International, this initiative is a great example of collaborative action urgently needed to safeguard future food and agricultural production, while ensuring environmental conservation.

Diane Holdorf, Managing Director Food & Nature at WBCSD, states that the SCF facilitates the first time leading global commodity traders are working together in a pre-competitive project to address sustainability risks they all share, but which no single company can resolve alone. 

“Unprecedented collaboration such as this, together with other stakeholders, is required to address these complex food system challenges,” she says.

The importance of sustainability was underscored recently in Switzerland’s Davos where the annual World Economic Forum (WEF) took place in January. The heads and members of more than 100 governments, top executives of the 1,000 foremost global companies, leaders of international organizations, the most prominent cultural, societal and thought leaders came together at the beginning of the year to define priorities and shape global, industry and regional agendas.

Last week, Nestlé accelerated its journey towards reaching full supply chain transparency by disclosing the list of its suppliers alongside a variety of data on its 15 priority commodities, including soy. 

The world’s largest food company, Nestlé says that transparency in its supply chains is essential and it wants to continue to lead in this area. Following the public disclosure of its palm oil and pulp and paper supply chains last year, the Swiss food giant is now releasing supply chain information for soy, meat (beef, pork, veal, lamb/mutton), hazelnuts and vanilla. 

By Gaynor Selby