Mitigating risks in the soy supply chain

By Jane Byrne contact

- Last updated on GMT

BioMar recently asked commodity supply chains risk assessment provider, NEPCon, to scrutinize its soy value chain in Brazil, as part of the Danish company’s source-to-market rating process of its raw material portfolio – Sustainable Solutions Steering.

NEPCon (Nature Economy and People Connected) is a Denmark headquartered non-profit organization that provides expert support in responsible sourcing of palm oil, soy and beef. It has developed tools to help companies improve their supply chain management when sourcing palm oil, soy and beef from developing countries.

We spoke to Erik Olav Gracey, global sustainability analyst, BioMar, at Aqua 2018 in Montpellier to hear why the company saw fit to commission the NEPCon review of soy production in Brazil.

“Brazilian soy has always been a hotspot feed ingredient for us. We have been in a dialogue with the Rainforest Foundation Norway about it as well. It is hot topic in Norway. We just wanted to learn more. We are a fish feed producer, not an environment assessment consultancy, yet we understand that we have a responsibility to have as much knowledge as possible about our value chain, about our raw materials. We decided to make Brazilian soy a case study for how we should go in depth in the triple S - Sustainable Solutions Steering​ – assessment.

“We are not in Brazil, we are not on the ground. We wanted to contact a third party that is impartial, that is expert in performing a risk assessment on these kind of commodities and that either has been in Brazil itself or has partners on the ground.

“We found out about NEPCon through a project it was doing for the Danish ministry.”

Through the Danida project​, NEPCon said it has developed an online platform with risk results, tools and guidance. The objective of that Danish government backed-initiative was a reduction in the negative social and environmental impacts of Danish trade in forest-impact commodities - soy, palm oil and cattle. 

alffoto soy harvesting istock

The project, in which Danish agricultural knowledge hub, SEGES, also partnered, looked to give Danish buyers access to specific, reliable and unbiased information and guidance on  corporate social responsibility (CSR) related risks in the geographic areas from which they source. 

NEPCon's online souring hub also outlines the risks attached​ to sourcing soy in Brazil. 

BioMar buys Brazilian soy produced under the ProTerra Standard only, which Gracey said is the best the company can source in that market, the most sustainable soy a feed raw material buyer can purchase from Brazil.

But we felt that we didn’t really have a profound knowledge of the difference between ProTerra soy and non-ProTerra soy, beyond what it says in the standard, the actual impact on the ground for what it means for farmers, for local communities, what it means for biodiversity.”

He said, over the course of a few months, BioMar discussed its value chain, its sourcing practices, its sourcing policy, its code of conduct and where it sourced soy from in Brazil with NEPCon.

“And they worked on providing us with a really comprehensive checklist of different risk assessment criteria that we didn’t totally have covered in our current risk assessment criteria.

“I think the biggest takeaway for us [from this report] was more or less realizing that, in essence, we were a little too reliant on the standard and finding that there were a lot of aspects of Brazilian soy production that we weren’t completely aware of, and that could potentially lead to us having new risk assessment criteria when we perform audits, [and also] maybe some of our risk assessment scores will change depending on how we intend to use the results of this report.

“But I think, overall, it has just really increased our understanding of that specific part of our value chain and how we can incorporate that knowledge into audits so we can be really sure the soy we are sourcing and claiming as responsible through a standard actually is.”

Alliance to tackle deforestation

Meanwhile, last week, agri-business multinational Bunge, banking giant, Banco Santander Brazil, and environmental organization, The Nature Conservancy (TNC), announced a new initiative aimed at tackling deforestation related to booming soy production in Brazil's Cerrado region.

The organizations said they have developed a ‘first-of-its-kind’ financing mechanism for soy farmers in the region, which will provide them with access to loans that help them boost production without clearing additional land.

They said that most of the loans currently available to soy farmers are for less than a year to finance their annual crop costs. This new mechanism will offer loans of up to 10 years, recognizing that investments in land acquisition and preparation have a long-term payback, said the partners.

Soybean production in Brazil nearly tripled between 2001 and 2017. The Cerrado has supported much of this expansion, adding 9.6 million hectares of planted soy during this timeframe, a significant part of which were in areas with native vegetation, according to data from Bunge and TNC. Over the next decade, they said it is estimated that large additional planted areas will be needed in the Cerrado to accommodate forecasted growth.

The new financing mechanism is part of a broader effort by NGOs, companies and banks to meet the growing demand for soy beans in a sustainable way, said the organizations involved.

While TNC and Bunge, along with a coalition of other companies, NGOs, research organizations and government departments, recently launched​ a tool to enable intelligent planning for stakeholders to continue soy expansion without forest degradation, they concluded that, to date, little has been done to create incentives for farmers to expand production on already cleared land.

Currently there are more than 25 million hectares of already cleared land in the Cerrado suitable for soy expansion, said Mark Tercek, CEO of TNC.

“We believe that introducing long-term financing will provide a real incentive for farmers willing to produce more sustainably and go beyond compliance with environmental laws and regulation. TNC brings its science-based approach to the environmental framework and monitoring for this mechanism. We will also invest our own capital in the project, together with Bunge and Santander Brazil.”

The financing program will be piloted with US$50m in capital, and provide loans to individual, family or corporate farmers in eligible locations, likely beginning this month.

Bunge, Santander Brazil and TNC said that once the model is demonstrated to be financially viable and environmentally sound, they intend to scale the program with additional investors and farmers. 

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