Coconut Oil Supply Chain Slides toward Sustainability via P&G, BASF, Cargill Partnership

Companies that source coconut oil from the Philippines and Indonesia – the world’s two largest producers and exporters of coconut-based products – face several challenges: little or no economies of scale, lack of financing and training resources, and a rigid supply chain all serve to increase the farmers’ dependence on middlemen and perpetuates inefficient and unsustainable agricultural practices. Now, Procter & Gamble, Cargill and BASF are working together with German development agency GIZ to solve the problems by creating a sustainable certified and transparent supply chain of coconut oil in that area of the world.

By working with the smallholder farmers and teaching them better practices, the main goal of the development partnership is to increase their incomes and economic self-sufficiency by improving the productivity of their farms. This will be achieved through trainings on agricultural practices, intercropping and enhanced farm management skills, and the strengthening of farmer groups. Around 3,000 smallholder farmers in the Philippines and 300 in Indonesia will benefit from the program, the companies say. Out of this group, around 800 smallholder farmers will receive additional training on the Sustainable Agriculture Network (SAN) standards in order to apply for Rainforest Alliance certification. The partnership is also working on establishing a chain of custody for certified material to help increase transparency along the supply chain.

Cargill, which owns and operates copra-buying stations and crushing plants, is providing training to smallholder farmers and setting up the structures for certification. The crude and refined oil produced by Cargill is then further processed by BASF and P&G for ingredients in the home and personal care and in the nutrition and health markets. GIZ will steer the project and manage its implementation on the ground, working with government agencies including Philippine Coconut Authority (PCA) and the Agricultural Training Institute (ATI) in the Philippines.

In June, 3M released a study showing that manufacturers and suppliers undertake sustainability measures in their supply chains because they have tangible business value. Those positive business outcomes in supply chain sustainability, suppliers say, mean that sustainability and CSR will remain core focus areas for organizations and their suppliers in 2017, according to the study.