An Interview

Introduction

On September 14 2012, Sophia Gnych and Elizabeth Clarke from ZSL met with Peter Holland and Russell Cooper from Sainsbury’s to discuss some of the key issues facing retailers as they work towards their targets for certified sustainable palm oil (CSPO). Sainsbury’s target, which is part of the company’s 20 by 20 Sustainability Plan, is to source 100% CSPO for its own-brand products by the end of 2014.

Keywords: time-bound sustainability targets, retailers, RSPO, sourcing CSPO, palm oil derivatives, engaging palm oil suppliers

Sainsbury’s store in UK © Alexander P Kapp

Sainsbury’s store in UK © Alexander P Kapp

1. As a founding member of the RSPO, how successful do you think this organisation has been in driving changes in palm oil supply chains to increase transparency and facilitate access to CSPO?

About 10% of palm oil production is now sustainable, and the fact that it has reached that scale within a few years is a big success. Obviously we want it to go further than that, but the fact that it has got to that point is not irrelevant – it is growing, and hopefully going from strength to strength. This means that the RSPO is seen to provide a credible solution to the situation. Of course there are details. How could it be more effective? How could it do things better? I am sure that we could come up with suggestions; but looking at the big picture, the fact that it has got to 10% has got to be absolutely welcomed, and it has helped create the supply of sustainable palm oil. As founding members of the RSPO we were key players in trying to join the supply chains up. So yes, the RSPO has a significant part to play. The principles and criteria (P&C) for certification are being reviewed this year. We, amongst other retailers, had an input into those P&C, and we will see what comes out of the review to further improve the processes and standards.

2. Would you say the RSPO has done a lot to connect up retailers with growers and really build that link? As the supply chain is quite complicated – would you say that the RSPO has acted as a bridge between different stakeholders?

I’m not sure – I don’t think the different stakeholders really understand each other. I think the growers don’t understand why people are not using the certified sustainable palm oil but—obviously this is from the retail perspective—it is very difficult to source CSPO in your supply chain when you are sometimes five or six people removed. There is frustration that it is not being picked up quickly enough. On the other hand, retailers probably don’t understand the growers enough. The supply chain is very complicated, and I am sure that there is more that we can do to better understand the complexities of the supply chain and how we can join the dots from Asia over to Europe and the UK.

3. What are the major challenges you have encountered in working towards meeting your time-bound commitments to sourcing CSPO?

The major challenge is the availability of sustainable palm oil in the form that we require it. If it is in 2000 ingredients within our portfolio in all shapes and sizes, it is difficult to have all those different forms available from sustainable sources. Some years ago now we were the first British retailer to launch a food product—our Basics Fish Fingers—containing segregated sustainable palm oil. Then within the biscuit arena we were the first to work with a certified mass balance supply chain. Mass balance is a step towards working with a segregated supply chain, bearing in mind the complexities of silos and extra investment in sites required to segregate product. So we started with mass balance and are now trying to get to that tipping point where there is enough sustainable palm oil available through segregated supply chains to move to pure CSPO.

There is a will among all the retailers to achieve our targets on sustainable palm oil. Everyone wants to get there and there is supply, it is just a matter of making sure that it gets pulled through the supply chain. Some forms are readily available, but when you get into complex derivatives that are used in cosmetics, for example, we need to make sure that more of that is available and more of that is used and that it gets all the way through the supply chain to us. We do a lot of work with our suppliers, informing them, raising awareness, and getting them to convert to sustainable palm oil products. One of the issues we find is that suppliers do not know what is available as sustainable segregated or mass balance and what is not yet available. The challenge is to ensure the availability of all the different complex ingredients first of all, and then to make sure that everyone uses them.

4. Would you say, then, that the drive for sustainable palm oil products is really coming from downstream, from retailers trying to influence refineries and manufacturers, rather than from the growers?

There is enough raw material coming from Indonesia and Malaysia to meet the requirements of the UK, but the issue is converting that raw material into the components that we actually need in Europe and the UK at the refineries stage. But then what happens to the other components of the palm oil that we do not need in Europe – there is no market for those – so there are commercial complexities. There is a big pull from the UK for all these various derivatives that we need, but the challenge is to find a sustainable commercial supply chain for all these components.

5. How easy or difficult has it been to get your suppliers onboard; have they been cooperative and proactive in improving the transparency and sustainability of the supply chain for palm oil?

We have a prioritised plan for achieving our target by 2014, so we have been working with the heavy users first of all—biscuits are the heaviest user within our categories—and the manufacturers have been pioneering, with us, to get sustainable palm oil into the country and into their products. Within that arena it is working very well, and we are working with our biggest suppliers—bread manufacturers, pastry manufacturers—so we can reach our commitments on tonnage as a priority. The big users are really coming onboard very well. For the smaller users, it is a lot more complex. It’s a question of resources as well; you need someone within the organisation who can take on the responsibility for joining the RSPO, who knows that they have to get chain-of-custody certification and have systems in place to do so. For a big company that’s ok, but for a small company it is a matter of capacity. What does help us in the UK is that, if you look at all the retailers, they have all got these targets, so ultimately suppliers will have to respond to the increasing demand. If they look at the bigger picture, they will know that they have to do it sooner or later; it just requires time and effort and it can be more complex than you might think.

6. For the smaller manufacturers, when they are dealing with quite small quantities of palm oil derivatives, is supply chain certification cost-effective for them?

That is a good, debatable question. Within one product you might have six different palm oil derivatives, and we would want to see 100% CSPO in all those derivatives and we certainly would not label it as using CSPO unless that was the case. When you get into flavourings and colourings, they are a tiny, tiny percentage of the product, but we would not say that the product was sustainable unless all ingredients were certified as such. There is a question, then, of whether that flavour manufacturer needs to be an RSPO member or whether they can just agree to have certain systems in place. If we can make it easier for them to participate, it might speed things up, but ultimately they will have to provide mass balance and segregated sustainable products in the future. There is a temptation for them to just opt out of palm oil and use something else. As part of the BRC (British Retail Consortium) group we have put forward recommendations for making the audit process easier—similar to the complementary audits for other schemes such as organic and fair trade—so that there is less of a burden on the smaller supplier that is using only a tonne or less per year of RSPO-certified palm oil. There are some trials taking place to see what we can do.

7. Does your work on sustainable palm oil encompass all of the products sold in Sainsbury’s or are you only looking at your own-brand products? And within that, do you prioritise the Taste the Difference range, for example, because that commands a slight premium?

Our targets are focused on Sainsbury’s own brand, and the reason for that is that you need to know how much palm oil is in your ingredients, and in what form. The branded suppliers won’t tell you that because it is a trade secret. Really, we prioritised the products that are the biggest users of palm oil, and when we converted biscuits, we actually converted products across our all of our ranges all at the same time.

8. Do your commitments apply to both food and non-food products?

Yes. All of our soaps use sustainable palm oil. The detergents are more complex, and we haven’t quite cracked those yet. We have converted as much as we can, focusing on the big lines first of all, and now we need to focus on the smaller derivatives. In essence, our approach is to try and get as much tonnage of sustainable palm through the supply chain into Europe and into the UK. Palm oil and palm fats are easily available so we can push hard on those. We need to work on the derivatives that are not currently available through sustainable supply chains and figure out how to get those through.

9. Do you have a dedicated team working on this at Sainsbury’s?

Initially we employed a consultant to get our figures and understand where we were on usage. We are now doing that in-house. We monitor our usage across all Sainsbury’s own brand products, and from that we can put our plans in place. We then use those plans to facilitate the rest of the teams to work with their suppliers to obtain sustainable palm oil. We have also run several training sessions to inform our suppliers about sustainable palm oil, the process they need to go through to get chain-of-custody certification, and our company policy on sustainable palm oil. We have trained at least 60 suppliers in that process. We also had a big conference on 1 October this year attended by many of our palm oil suppliers, where we clearly stated: this is our palm oil policy; this is our target. It can be achieved, and we have a lot of support to get there. We also involved tier-two suppliers – these are not our direct suppliers but ingredient suppliers – to say what is available and try and get conversations going and build links. So our internal strategy is like a pyramid: there are people who set the policy and the strategy, then you roll it out and train staff internally and get them to push it out. Then you train suppliers, and over time you get positive examples of change, which you can show to other people, and you roll it out further all the time.

10. The larger brands such as Unilever and Nestlé have made their own commitments, but there are also smaller brand names that Sainsbury’s stocks. Are you attempting to tackle the issue of sustainable palm oil with these smaller companies? Are you opening up a discourse with other brands?

Not directly, but if they are dealing with us then they understand our policies and what we are trying to achieve. It is something to look at in the future, but right now we are focused on meeting our own 2014 target and doing what we need to do with our own products, because that is where we have the most leverage. We can control what is in those products and make sure that they meet our requirements.

11. How important a role do consumer awareness and retail activism play in driving your sustainability policies and what strategies are you using to raise awareness of sustainable palm oil? What are consumers’ priorities?

We receive a lot of communication from customers about palm oil. There is public concern about palm oil. Two years ago it was the biggest issue in the letters coming in, just linked to orangutans. Those communications, though, did not quite understand the whole complexity of the issue and of the supply chain. It is important to send out the right message about palm oil to consumers, but it is a very difficult message to convey. If the public are confused by the message then it is very hard to tackle the issue.

Then there is the question of whether you should be sourcing sustainable palm oil anyway, regardless of consumer support – and the answer is absolutely yes. There are all sorts of reasons why we want to do it. We don’t want the reputation of being responsible for causing problems elsewhere. We do not want an insecure supply chain, because if it is unsustainable then you cannot guarantee it in the long term. So, how much do we tell people? We obviously label on pack and specify where palm oil is used, whereas others simply label it just as vegetable oil. That decision led to a lot of customer queries, but it was our decision to be open about this so that customers could make an informed choice. We got a lot of people asking ‘why are you using palm oil in biscuits?’ but actually everybody does. Customers rely on retailers to do the right thing; they don’t generally think about every single choice they make in the supermarket. It is a matter of trust, and we are trying to gain that trust in our customers so that they feel confident that Sainsbury’s is fully committed to the environment and sustainability. When it comes to the choices we offer, customers can trust that we have done the right thing.

Interview of: Peter Holland and Russell Cooper
Organisation: Sainsbury’s
Date: September 14 2012