Introduction to Traceability Importance of Traceability Traceability has gained significant importance in recent years, particularly due to the new European Union deforestation regulation enacted in 2024. This regulation aims to ensure that products entering the EU do not contribute to deforestation. The focus on traceability highlights the need for effective systems in agricultural supply chains to monitor and verify the origins of products. Sinarmas Agribusiness and Food Company Overview Sinarmas Agribusiness and Food is a leading player in the palm oil sector, known for its commitment to responsible palm oil production. Operates under Golden Agri-Resources (GAR), which oversees the entire palm oil supply chain from plantation management to processing, refining, and distribution. Operational Scale Established in Indonesia in 1985, Sinarmas manages approximately 536,000 hectares of palm oil estates. The company collaborates with six smallholder farmers to enhance production capabilities. Traceability Achievements By 2022, Sinarmas achieved an impressive 98% traceability rate back to its plantations, showcasing its dedication to sustainability. Membership and Global Reach Sustainability Membership Sinarmas has been a member of the Roundtable on Sustainable Palm Oil (RSPO) since 2005, aligning its practices with internationally recognized sustainability standards. Global Distribution The company distributes its products in over 100 countries and encompasses more than 30 consumer brands, demonstrating a broad global market presence. Conservation Initiatives In addition to palm oil production, Sinarmas has set aside nearly 80,000 hectares as conservation areas, highlighting its commitment to environmental preservation. GAR Social and Environmental Policy (GSEP) Framework for Sustainability The GAR Social and Environmental Policy (GSEP) serves as the framework for Sinarmas’s commitment to a sustainable palm oil industry. Four Main Pillars of GSEP Environmental Management Focuses on reducing environmental impact and promoting conservation efforts. Social Community and Community Engagement Emphasizes social responsibility and the importance of building positive relationships with local communities. Work Environment and Industrial Relations Ensures fair labor practices and safe working conditions for all employees. Marketplace and Supply Chain Promotes responsible sourcing and ethical management throughout the supply chain. Commitments The GSEP includes strict commitments to “no deforestation,” “no peat,” and “no exploitation,” reinforcing the company’s dedication to sustainable practices. Understanding the Palm Oil Supply Chain Complexity of the Supply Chain The palm oil supply chain involves various stages that can be broadly categorized into upstream and downstream activities. Upstream Activities The process begins with the cultivation of oil palms, producing fresh fruit bunches (FFB) harvested from company estates or smallholder farms and transported to palm oil mills. Downstream Activities At the mills, FFBs are processed to extract crude palm oil (CPO) and palm kernel oil (PKO). These oils are sent to refineries for further processing into refined products such as cooking oil, specialty fats, and chemicals. The refined products are ultimately delivered to consumers. Defining Traceability Definition of Traceability Traceability is defined as the ability to identify and track the history, location, or application of a product through documented information regarding its production, distribution, and location. Traceability in the Palm Oil Supply Chain In the palm oil supply chain, traceability involves meticulously tracking and documenting the movement of products and their components from their origin through various production and distribution stages. Components of Traceability Key Components of Effective Traceability Identification Establishing unique identifiers for products and their sources. Documentation Maintaining comprehensive records that provide detailed information about the product’s journey. Tracking and Monitoring Continuously monitoring the movement and status of products throughout the supply chain. Data Management Organizing and managing data to facilitate easy access and analysis. Visibility Ensuring transparency at every stage of the supply chain. Data Integration Combining data from various sources to provide a comprehensive view of the supply chain. Importance of Traceability in the Palm Oil Industry Key Reasons for Traceability Sustainability Assurance Enables the tracking of palm oil products from their origins, ensuring compliance with sustainable and ethical practices. Regulatory Compliance Companies can demonstrate adherence to national laws and regulations, including the European Union Deforestation Regulation (EUDR) and certification requirements. Risk Mitigation Traceability data allows for effective risk assessment and management by identifying potential issues within the supply chain. Consumer Confidence By controlling suppliers and ensuring ethical sourcing, traceability helps build consumer trust in the brand. Market Access and Differentiation Companies with robust traceability systems can access new markets and differentiate their products based on sustainability credentials. Traceability for Oil Palm Smallholders Access to Support Programs For smallholders, traceability opens access to vital support programs provided by governments, NGOs, and industry initiatives. These programs often include financial assistance, training, and access to improved agricultural practices. Requirement for Participation Effective traceability is a prerequisite for smallholders to participate in these programs, ensuring they can adopt sustainable practices. Golden Agri-Resources (GAR) Traceability Journey Initial Steps Toward Traceability GAR’s journey toward traceability began with two petitions in 2015, achieving 100% traceability to mills by that year. This accomplishment means that all CPO, PKO, and palm kernel (PK) processed in GAR’s refineries are sourced from known mills. Expansion of Traceability Efforts In 2017, GAR expanded its efforts to achieve 100% traceability to plantations for its 49 mills. The company recognizes the need to extend traceability to third-party refineries and mills, as it sources from approximately 400 third-party entities. Technology Integration in Traceability Embracing Technology GAR has embraced technology to enhance its traceability efforts. In 2018, the company collaborated with KOLTIVA and GeoTraceability to pilot traceability programs in Jambi and Riau. This collaboration resulted in the development of a comprehensive traceability platform that continues to be used today. Role of Technology The complexities of tracing FFB from smallholders to palm oil mills necessitate the use of technology, particularly GPS mapping and mobile applications. Importance of Smallholders in Indonesia Significance of Smallholders Smallholders play a significant role in Indonesia’s palm oil landscape, owning approximately 41.3% of plantations, which amounts to around 6.77 million hectares. Their involvement is crucial for promoting sustainable practices and ensuring that the palm oil industry operates ethically. Conducting Traceability for Oil Palm Smallholders Key Components for Smallholder Traceability Socialization Training Conducting training and capacity-building sessions for palm oil mills, agents, and smallholders to highlight the importance of data collection. Identification and Record Keeping Collecting and maintaining records about smallholders, including their names, land area, and production volumes. Mapping with GPS Technology Utilizing mapping technologies to accurately identify the locations of plantations. Data Collection Gathering mandatory and optional information for estates, smallholders, and dealers or agents. Data Collected in Traceability Types of Data for Estates Data collection for estates typically includes: Group company name. Estate name and type (nucleus or plasma). Plantation location and area. Monthly FFB production volume. Optional data may include land legality, year of planting, and certification status. Mandatory Information for Smallholders For smallholders, mandatory information includes: Farmer name and location. Coordinates of the plantation. Area size and FFB volume. Optional information may cover plantation management type, year of planting, and land legality. Dealer Data Collection Focus Dealer data collection focuses on: Dealer name and location. Total supply from dealers to companies and smallholders. Area and volume supplied. Technology for Smallholder Identification Mobile Application Use GAR utilizes a mobile application called “Quality Trace” in collaboration with Koltiva to identify and map smallholders within the supply chain. This app facilitates data collection and monitoring, allowing GAR to support around 80 palm oil companies and identify approximately 150,000 smallholders in its supply chain. However, this only represents about 20% of the total smallholders involved. Risk Analysis and Monitoring Risk Analysis Capabilities The mobile application allows for risk analysis by overlaying smallholder locations with protected areas, ensuring that smallholders are not operating within forest regions. This capability enhances GAR’s ability to monitor compliance with environmental regulations. Challenges in Traceability Implementation Challenges Implementing traceability is fraught with challenges, including: Time Intensiveness Mapping all smallholders is a time-consuming process that cannot be rushed. Cost Factors The traceability system is costly due to the sheer number of smallholders involved. Resistance from Mills Despite financial backing from Golden Agri, some mills remain resistant to joining the traceability program. Mobile Application Adaptation Piloting mobile applications to track FFB from farm to mill has revealed challenges for partners and agents in data entry. Supply Chain Transformation through Traceability Leveraging Traceability Data GAR leverages traceability data to drive supply chain transformation, engaging with various stakeholders, including mills, plantations, and farmers. By utilizing traceability information and conducting risk assessments, GAR can ensure a deforestation-free supply chain. Insights gained from traceability efforts inform interventions and capacity-building initiatives tailored to the supply chain actors. “Sawit Terampil” Program Program Objectives The “Sawit Terampil” program is designed to enhance sustainability practices across environmental, social, and labor aspects. This initiative aims to improve productivity and increase income for farmers while securing measurable impacts for smallholders. Program Participation The program has seen participation from approximately 12 mills, 50 agents, and nearly 7,000 smallholders, with over 8,000 coaching sessions conducted. RSPO Certification for Smallholders Certification Progress One group of smallholders has achieved RSPO certification, while four additional groups are in the process of obtaining certification. These certifications represent a commitment to sustainable palm oil production and adherence to best practices. Good Agricultural Practices and Impact Stories Improvements and Initiatives GAR’s efforts have led to improvements in good agricultural practices, pest control, and disease management among smallholders. These initiatives aim to promote a sustainable palm oil supply chain that benefits all stakeholders involved. End Product Traceability Implementation of Traceability Systems GAR has implemented systems to trace products back to their sources, allowing for compliance and transparency in sales orders. For example, one batch of refined palm oil was traced back to nine production batches originating from 25 mills and 90 estates, demonstrating the complexity of tracing even a single order. Blockchain Technology for Enhanced Traceability Development of Blockchain Solutions Golden Agri has developed blockchain technology to bolster trust in traceability efforts. Blockchain provides a secure method of tracking data, ensuring transparency and accountability within the supply chain. Unique Data Hashing Each data entry generates a unique hash, making it difficult to alter information without detection, which enhances trust among stakeholders.