The intricacies of balancing ethical supply chain management with other core procurement functions like spend analytics and cost reduction have taken centre stage for Unilever, which has just suspended orders of palm oil from two major suppliers following evidence from Greenpeace that they were destroying large swathes of rainforest in Papua, Indonesia.
Greenpeace reported that satellite analysis had indicated that approximately 4,000 hectares of rainforest in Papua had been decimated in just two years, between May 2015 and April 2017. The environmental lobbying group said that video and photograph evidence from March and April this year showed vast deforestation in the palm oil concession known as PT Megakarya Jaya Raya (MJR), an area controlled by the Hayel Saeed Anam (HSA) Group.
Greenpeace claims that two HSA subsidiaries, Arma Group and Pacific Oils & Fats, have supplied palm oil to three major firms: Unilever, Nestlé, Mars and PepsiCo.
Unilever issued the following statement in the wake of the revelations, which it had been aware of and had been seeking to address:
“Following recent investigations and monitoring of HSA Group’s activity, we have concluded that the allegations were not being sufficiently addressed. As we have not seen progress that complies with our Sustainable Palm Oil Sourcing Policy, we have therefore suspended the placement of any new orders from Pacific Inter-Link and Arma Food Industries, HSA Group’s suppliers, until the allegations have been satisfactorily addressed by them.”
The issue highlights the danger of taking one’s eye off procurement ethics in favour of cost reduction. Nestlé was forced to issue a statement acknowledging that it was concerned about the Greenpeace findings and was working diligently with its supplier and the Forest Trust to rectify the problem.
Mars also announced that it was prepared to “take further action” if Arma proved to be non-compliant.
The fallout from the revelations is already spreading. Supermarket chain Iceland, for example, has now pledged to remove all palm oil from its own-brand products by the close of 2018.
Nick has over 30 years procurement experience in consulting, outsourcing and line roles within industry with international experience across many sectors and industries and led many procurement programs with blue chip organisations.