Fuji Oil : Progress report on responsible palm oil sourcing

Fuji Oil Group formulated and announced its Responsible Palm Oil Sourcing Policy in March 2016. The Responsible Palm Oil Sourcing Policy outlines commitments towards a No Deforestation, No Peatland and No Exploitation (NDPE) policy for all palm oil production within our supply chain - Fuji Oil Responsible Palm Oil Sourcing Policy.
https://www.fujioilholdings.com/pdf/en/csr/sustainable/160310.pdf

The progress on our initiatives to implement the Responsible Sourcing Policy is shared every six months to our stakeholders. This report will provide information on new developments made since January 2019.
※For traceability, data in this report covers the period from January 2019 to June 2019.

FUJI OIL Group promotes a number of key activities to carry out our Responsible Palm Oil Sourcing Policy as explained in Figure 1. This report focuses on 7 activities:

• ■ Traceability
• ■ Improvement activities for PALMAJU supply
• ■ Engagement for Policy Implementation for direct suppliers other than PALMAJU
• ■ Supporting small holder activity
• ■ Grievance mechanism
• ■ APT landscape initiative
• ■ Ethical recruitment project

We work together with smallholders, mills, refiners and suppliers to identify and address gaps within our supply chain.

Figure 1: Overview of main activities to improve Fuji Oil Group's responsible palm oil sourcing policy

■Traceability : (1) in Figure 1
Our Group aims for a transparent supply chain that is free from deforestation, peatland development and exploitation, therefore our focus is on traceability from our sourcing regions. We plan to achieve full traceability to mills for all palm oil purchased and processed across the Group by 2020.

We have achieved a global palm oil traceability score of 99% for the period from January 2019 to June 2019, which is consistent with the last reporting period. This refers to a global average of 99% for all Palm Oil (PO) and 99% Palm Kernel Oil (PKO) products.

Transition of traceability score to oil mills (％)

January 2019 - June 2019	July 2018 - Dec 2018	January 2018-June 2018	July 2017-December 2017
Palm Oil	99	99	97	96
Palm Kernel Oil	99	99	100	94
Total	99	99	98	95

Although the score varies depending on each region, the Group as a whole managed to maintain the Palm Oil sourcing score as the previous report for the July to December 2018 period. This is due to the continuous efforts in strengthening communication with suppliers in all Fuji Oil sourcing regions. Fuji Oil is fully committed to supply chain transparency as stated in our Responsible Palm Oil Sourcing Policy and will continue to strengthen engagement with suppliers in improving the full traceability scores.

Note on results

• ・Traceability levels may vary over time due to data availability, changes in sourcing or other issues.
• ・All traceability numbers are based on self-disclosed information provided by our suppliers. In some cases, the GPS coordinates of mills were shared with our partner Earthworm Foundation (EF)^※１ and not directly with Fuji Oil.
• ・Some mill data is bound to NDA's between EF and our suppliers. Plans for Fuji Oil Group to hold this data are being developed.

■Improvement activities for PALMAJU supply chain Aggregator Refinery Transformation Plan (ART) : (2) in Figure 1
Since July 2016, we have been partnering with the Earthworm Foundation in the Responsible Palm Oil Sourcing Policy implementation. As part of the policy implementation strategy, we have initiated an ART plan for Crude Palm Oil (CPO) and Palm Kernel Oil (PKO) suppliers in the supply chain of PALMAJU EDIBLE OIL SDN BHD, in which PALMAJU is one of our group companies and one of the first refineries in Malaysia. The ART plan aims to provide support to changes on the ground faced by actors in the supply chain: refiners, millers and growers.
Please see our progress article below:
https://www.earthworm.org/members/fuji-oil

Figure2: The ART plan process

As shown above in Figure 2, we have grouped the activities into three categories as below:
① Transformation activities with company A:
Ⅲ. Company A Focus (Prioritized supplier)
② Transformation activities with suppliers other than company A:
Ⅳ. Seminar/ workshop (Roll out of Tools for Transformation Self-Assessment T4T)
Ⅴ. Support improvement: (One on one post self-assessment visits)
③ Other engagement activities:
Ⅵ. Labour Transformation Program (One on one engagement)

① Transformation activities with company A (Prioritized Supplier)
Please refer to the video link below for the achievements we did with company A:
https://www.youtube.com/watch?v=sUWBgu07Tp8

Several milestones were achieved by company A, in which their good practices and progress in their sustainable transformation journey were shared at EF's Pioneer Forum in 2018.

Pioneer forum is an event for palm oil plantations and oil mills to share good practice.
The following link provides more information on company A and the Pioneer Forum:
https://sway.com/pLEOS156F4OgnrC7

② Transformation activities with suppliers other than company A
Other than working with the prioritized supplier, Fuji Oil Group is also working to reach out and transform the other suppliers in the supply chain in a more effective manner.

The Tools for Transformation Self-Assessment (T4T) is a tool to help palm oil suppliers to self-assess and understand where they stand against Fuji Oil Responsible Palm Oil Sourcing Policy requirements (No Deforestation, No Peat, No Exploitation), developed by Earthworm Foundation. The Tools for Transformation Self-Assessment is useful to both suppliers and Fuji Oil to understand the supplier's current status vis-à-vis Fuji Oil Policy by sending out the questionnaire and answered by suppliers.

In 2019, we conducted a supplier engagement workshop to:

• 1. Review 2018 T4T results
• 2. Socialize T4T to Palmaju's suppliers
• 3. Launch T4T to Palmaju's suppliers - Second wave targeting new suppliers

A total of 48 entities attended the workshop. The attendees consist of:

• ■ 17 oil mills
• ■ 9 parent companies
• ■ 1 kernel crushing plant
• ■ 2 refineries (including Palmaju)

③ Other engagement activities:
Our work through the T4T has also enabled us to have a better visibility on the need to strengthen our transformation work especially to improve labor practices and standards. We have also started to engage with our suppliers using the face to face approach. This activity will be intensified in H2 2019.

Eliminating forced and bonded labor within the palm oil supply chain is currently a priority not only for our policy implementation but also for key palm oil suppliers and buyers especially due to market demand for NDPE compliant supplies.

In order to provide supports to small and medium sized entities to embark on transformative activities especially in alleviating Forced and bonded labour, EF has designed and built the Labour Transformation Program structured on five key steps:

We are currently at step 3 and we are planning to conduct visit 2 (step 4) in quarter 4 2019 or quarter 1 2020.

Key objectives for the Labour Transformation Program are:
1. To build the understanding and capacity of Palmaju's suppliers on Labour and Human Rights topics, focusing on 4 main focus areas:

• Ⅰ. Passport Retention
• Ⅱ. Ethical Recruitment
• Ⅲ. Employment Contract
• Ⅳ. Grievance Mechanism

2. Identify good practices and gaps in entities current operation. 3. Provide dedicated and customized support in transformation activities to enable entity to close gaps identified.

■Engagement for Policy Implementation (EPI) for direct suppliers other than Palmaju's suppliers : (3) in Figure 1
Other than palm oil mills, Fuji Oil Group is also committed to engage with different category of suppliers such as refineries. To better understand their supply chain progress towards implementing Responsible Sourcing Policy within the refinery, the EPI questionnaire has been used. EPI is used to understand where direct suppliers are in their transformation journey, in meeting our policy and for supporting direct suppliers in that journey through regular updates.

EPI questionnaire covers six main topics relevant to achieving transformation in the palm oil supply chain:

• ■ Company Policy Commitment
• ■ Traceability Status
• ■ Approaches to Changing Practices
• ■ Global Grievance Mechanism & Non-Compliant Supplier Process
• ■ Transparency
• ■ Verification

Fuji Oil Group has engaged with all direct suppliers (38 refineries) globally by sending out the EPI questionnaire in 2018. Through this exercise, we were able to determine the NDPE status of our suppliers. Based on the findings from EPI, we have started to further communicate with each supplier for progress updates.

■Supporting small holder activity : (4) in Figure 1
With the pressure from the market in responsible sourcing, the challenge for smallholders who contribute 40% of global supply, in palm oil industry is always lacking of knowledge especially in sustainable forming. Hence, Fuji Oil Group supports smallholders in Kinabatangan of Sabah, Malaysia, as a member of Wild Asia Group Scheme (WAGS) together with our supplier since January 2016. WAGS is an initiative established by Wild Asia, a Malaysian NGO who is very experience in engaging smallholders, to increase both productivity and awareness for sustainable farming of smallholders. In 2019, 13 of smallholders have been newly certified by RSPO and/or MSPO through the support by WAGS (as of December 10, 2019).

■Grievance Mechanism: (5) in Figure 1
We have established and published our grievance mechanism in May 2018 to carry out our NDPE policy in our supply chain. The Grievance procedure and Grievance list have been published on our Grievance website on the following link:
https://www.fujioilholdings.com/en/csr/grievance_mechanism/

The Grievance List is updated on a quarterly basis, and Fuji Oil Group is currently revising the Grievance mechanism based on the incidents and experience which took place in the past year. Feedback was received from NGOs, suppliers and buyers which will be utilized to make improvements to the mechanism accordingly. The revised Grievance Mechanism will be published once this review is completed.

We have started to monitor the grievances that associated to our suppliers (directly or indirectly) but not in our supply chain. All updates will be shared upon to request. For group level grievances, which are not occurred in our supply chain but we have linkages with parent company of the NDPE against company directly or indirectly, we have started to monitor them internally and inform group level grievances information to our direct suppliers.

■APT Landscapes Initiative - Indonesia : (7) in Figure 1
In 2017, our sustainability partner, EF, launched the Areal Prioritas Transformasi (APT) or Priority Transformation Areas initiative in Aceh Taming, Indonesia. The initiative takes a 'landscape approach' in addressing the competing interests of stakeholders in ecologically significant areas of Indonesian Sumatra that are at risk of deforestation from palm oil expansion. These areas have been defined and selected based on their importance as key forest and habitat areas that are under threat from accelerating rates of deforestation. The goal of the APT work in Indonesia is to support government land use planning processes and leverage our supply chains connections in order to ensure that land is managed in a way that responds to local environmental, social and economic needs.

Fuji Oil Group has participated in the APT program since April 2018 as around 60% of Fuji Oil's Indonesia sourcing comes from Sumatra. Subsequently, we are proud to announce that APT Program is making progress in achieving its key objectives.

As of April 2019, milestones in Aceh Tamiang and Southern Aceh include: increasing stakeholder engagement meetings and consultations, conducting field surveys and planning workshops as well as formation of task force, and actions plans with multi-government agencies and local community and society organizations. Moreover, the EF team is looking forward to positive developments that would accelerate the APT Landscapes initiative mainly in:

• ・Improving coordination among multi-stakeholder initiatives and key stakeholder groups
• ・A concerted move towards better impact measurement

The APT Program is currently operating in three landscapes where Indonesia's precious tropical forests are threatened due to expanding agriculture, which includes two landscapes in Aceh, the last place on earth where orangutans, tigers, elephants and rhinoceroses still co-exist. Please refer to below for further information on this initiative:
https://www.earthworm.org/our-work/projects/aceh-tamiang-sumatra-indonesia

■Ethical Recruitment Project; Collaboration with the Malaysian palm oil industry : (8) in Figure 1
Fuji Oil Group is committed to protect the rights and welfare of workers. In 2019, Fuji Oil Group affirmed this commitment by supporting EF's Ethical Recruitment project in Malaysia which aims to ensure that palm oil supply chains are free from exploitation of workers and communities.

Fuji Oil Group supported the project by working together with EF to visit one of the group's direct suppliers (Palmaju's supplier) to trial the Human Rights Due Diligence Tool for palm oil suppliers on Ethical Recruitment. The tool will enable EF to document good practices, identify gaps or risks and provide a report of findings which can support our suppliers in closing the gaps identified.

We also participated in the Multi-Stakeholder Forum on Ethical Recruitment for the Palm Oil Industry hosted by EF in June 2019. This event aims to raise awareness amongst millers and planters on good practices in ethical recruitment and to share challenges from EF and partners.
Here's an update on the Forum:
https://www.earthworm.org/news-stories/transparency-ethical-recruitment-malaysia

■Palm Oil Dashboard; a communication tool with stakeholders
To better communicate our sustainability journey to our stakeholders and partners, we have established a Dashboard on our website in April 2019. The dashboard informs latest supply chain data such as traceability score, sourcing regions and the number of suppliers and as well as our progress.
The Palm Oil Dashboard can be accessed through the following link:
https://www.fujioilholdings.com/en/csr/supplychain_database/

Together with our partner, EF, we will continue our efforts in implementing our Responsible Sourcing Policy. The ART plan will be continued, and we have made progress in introducing a larger number of suppliers to the Tools for Transformation Self-Assessment. We have also distributed the T4T to the wider supply shed, indirect (PK) suppliers (oil mills) and even plantations, in the second half of FY 2019. We will also work closely with our partner to step up our transformative activities which is aimed to eliminate Forced and Bonded Labour, practices through the Labour Transformation Program.

We will continue to monitor the progress with our supplier engagement program. We will also engage with our refinery suppliers based on the EPI responses.
さらに、グリーバンスへの対応の継続およびグリーバンスメカニズムの見直しを進めます。内容の確認後、グリーバンスプロシージャーにしたがって登録されたグリーバンスの進捗状況は、全てグリーバンスリスト上で公表いたします。また、当社グループは持続可能なパーム油調達の活動に関して、次回レポートは2020年5月に公表予定On top of this, we will continue to review and respond to grievances raised through our Grievance Procedure, in which all grievances will be listed in our Grievance List after verification. Fuji Oil Group also will continue to update our supply chain data such as our traceability score publicly on a half-yearly basis on our dashboard.
https://www.fujioilholdings.com/en/csr/supplychain_database/

Please stay tuned for further information in our next progress report which will be released in May 2020 along with our activities on palm oil sustainability.

※１ Earthworm Foundation (EF)
Since 2016, Fuji Oil Group has been working together with Earthworm Foundation (EF) to influence and scale up change among our palm oil suppliers. This includes setting targets, conducting regular monitoring and actively disclosing information.
EF is formerly known as The Forest Trust and went through a rebranding exercise earlier this year to reflect its broader mission. It is a non-profit organization which supports companies to improve sustainability in their supply chains.