Traceability

Responsible sourcing through supply chain traceability

As one of the largest processors and traders of palm oil in the world, we have placed sustainability strategically at the core of our business. Our approach to sustainability includes risk-based assessments for supply chain profiling, stakeholder engagement for palm oil traceability and policy compliance and support for suppliers through capacity building and recommendations on sustainable good practices.

Supply chain traceability is a fundamental first step towards producing sustainable palm oil and ensuring the reliability and quality of our raw materials. Traceability lays the groundwork for compliance with our Sustainability Policy by revealing where our supply comes from and helps us identify priority suppliers to engage with for improved agricultural practices.

There are a huge number of players along the supply chain from the moment the fruit is picked by smallholders to when it reaches us as some supply goes through middlemen. It requires enormous effort to map our supply chain down to its origin; however this is necessary to ensure the level of transparency that is expected by our customers.

A reliable and extensive sourcing network upstream enhances our ability to trace the origin of the raw materials supplied to our refineries and to monitor sustainable practices. With the commitment of senior management and guided by a comprehensive sustainability framework, we have found that an effective way forward is to involve and engage with key decision makers from diverse groups of stakeholders: plantation owners and smallholders, government authorities, non-governmental organisations (NGOs), civic groups and activists.

Our traceability efforts are categorised into traceability to Crude Palm Oil (CPO), Crude Palm Kernel Oil (CPKO), Palm Kernel (PK) mills and traceability to plantation (Fresh Fruit Bunch suppliers).

Traceability to Mill (TTM)

As we do not own any upstream assets or facilities such as plantations and mills, we rely on third party supplying mills to provide us with raw materials such as CPO, CPKO, and PK. One of our long-term supplier is Asian-Agri. A majority of our supplying mills are located within the provinces of Riau, North Sumatera, Jambi, and Kalimantan.

In 2015, we began gathering and verifying information about mills supplying to our refineries and achieved 100% traceability to mill in the same year. We have maintained full traceability to mill since then. We have 323 mills supplying CPO contracted as suppliers for all our refineries within Q4 2020.

All our refineries source 100% directly from supplier mills. The total percentage of supply traceable to mill and traceable to Kernel Crusher Plant (KCP) is 100% as of December 2020. We have also achieved 100% traceability to mill KCP suppliers as of December 2020.

Sari Dumai Sejati Refinery
Sari Dumai Sejati Kernel Crushing Plant
AAJ Marunda Refinery
AAJ Tanjung Balai Refinery
Kutai Refinery Nusantara
Padang Raya Cakrawala Refinery

In order to be traceable, suppliers need to provide correct information of their GPS coordinates to show their accurate location, the name of their parent company and mill, and a specific address. This information is then further verified by our sustainability consultants known as CORE (which consists of Proforest & Daemeter). We update our Traceability Declaration Document (TDD) every quarter for the facilities above to reflect our changing sourcing patterns and the TDD can be accessed through the list below.

Supply chain information of our refineries can be accessed in the map below. The map comprises of Apical’s network of refineries, kernel crusher, oleo chemical and biodiesel plants. By selecting the facilities on the map, you can access details of the supply into each.

Traceability to Plantation (TTP)

Mills are usually in close proximity with supplying plantations as FFB needs to be processed within 24 hours of harvest, in order to maximise the quantity and quality of oil extracted. As such, achieving traceability to a mill will provide an indication of the approximate location of their FFB suppliers. However, traceability to plantation remains challenging due to the thousands of dealers and independent smallholders involved, and the highly dynamic relationships between FFB traders and mills.

Our network of FFB suppliers comes from three main sources: estates (usually owned by mills), smallholders (often linked to mills) and dealers (who buy FFB from a wide variety of sources). Apical subscribes to the Sustainable Landscape Working Group’s (SLWG) working definition of traceability.

FFB Sources
Estimated percentage of palm oil supplied to our mills
Estate (<25 Ha and > 25 Ha)
54.04%
Koperative/Schemed/ Smallholder Groups
16.20%
Dealers (sourced from independent smallholders)
29.76%

Apical’s suppliers source from either own estates or third party plantations. Out of our total number of third party supplier mills, 59% source from their own plantations while 41% source from third party plantations.

In terms of volume of FFB supplied to Apical, 29.4% MT is sourced from third party supplier mills’ own plantations while 70.6% MT is sourced from third party plantations. These figures are as of December 2020.

As of December 2020, we have been able to trace 99.28% of our FFB sources to plantations, which has been externally verified by Control Union.

CPO

Sari Dumai Sejati Refinery
98.47%
AAJ Marunda Refinery
100%
Kutai Refinery Nusantara
100%
Padang Raya Cakrawala Refinery
99.98%

CPKO

Sari Dumai Sejati Refinery
93.16%
AAJ Marunda Refinery
83.50%
AAJ Tanjung Balai Refinery
100%
Kutai Refinery Nusantara
100%

Apical subscribes to the Sustainable Landscape Working Group’s (SLWG) definition of traceability and the following data as a requirement to establish FFB traceability by 2020:

FFB Sources
Data required for FFB Traceability
Estate (<25 Ha and > 25 Ha)
• Estate name
• Parent company name
• Certification status
• % of overall FFB tonnage to mill
• A GPS coordinates as a representative source location
• Planted hectarage
• Total concession area
• FFB volume
Koperasi/Schemed/Smallholder Group
• Number of smallholders
• % of overall FFB tonnage to mill
• Overall FFB volume
• A GPS coordinates as a representative source location
• Planted hectarage
Dealers (sourced from independent smallholders)
• Dealer names (and/or dealer unique ID)
• % of overall FFB tonnage to mill
• Overall FFB volume
• GPS coordinates of first-tier dealers (office/ramp)
• Number of smallholders
• Village/sub-district of smallholders

Supplier Engagement

We recognise the importance of establishing a tailored approach to communicating with our wide spectrum of stakeholders. Our commitment to sustainability extends throughout our supply chain. We engage with suppliers before and after they are integrated into our supply chain because we believe that our sustainability goals cannot be achieved in isolation and require the collaboration of all stakeholders. Suppliers, in particular, are our focus to transforming the industry and ensuring palm oil is produced sustainably.

Priority in engagement is given to long term suppliers or those who sell us large quantities of raw materials. However, smaller suppliers who are willing to adopt more responsible practices are also given equal priority to enter our sustainable supply chain.

For suppliers, we conduct regional workshops that spur discussions on incorporating sustainability and traceability as part of their quality management system. The engagement process involves visits to the mills and estates to identify areas for improvement needed to adhere to Apical’s Sustainability Policy commitments and global standards.

Apical has developed a Sustainability Implementation Framework (A-SIMPLE Framework) to ensure effective implementation of our policy in bringing suppliers on our sustainability journey. We report the risk level of all our mills on an annual basis.

Potential Suppliers

Apical has a Sourcing Policy with a clear set of criteria of what we consider as responsible sourcing. Potential suppliers are evaluated based on a full review of their company profile and their ability to present official licenses and/or permits that meet legal requirements. All new suppliers must provide information of their sustainability practices as well as the level of traceability within their operations.

Apical’s suppliers are required to comply with our Sustainability and Sourcing policies – we emphasise this within the terms and conditions of our commercial arrangement.

Active Suppliers

Once suppliers are contracted into our supply chain, we continue to pro-actively engage with them to monitor policy compliance and facilitate continuous transformation towards sustainability. We have developed useful guidelines on topics such as:

Our KPIs to ensure all suppliers comply with our Sourcing Policy:

  • All suppliers must commit to Apical Sustainability Policy
  • Suppliers must be fully traceable within 1 year of doing business with Apical
  • All suppliers to be NDPE compliant by 2025
  • Suppliers must cooperate with Apical on any grievance matters within the stipulated timeline in accordance to Apical’s Grievance Protocol.

Non-Compliant Suppliers

Apical does not knowingly source from non-compliant suppliers such as those that engage in illegal activities or violate community rights. We have established the Apical Grievance Procedure – a formal process to address grievances – for our stakeholders to raise concerns related to our business or suppliers.

The Apical Grievance procedure covers all these activities: recording of grievance; verifying claims; rectifying confirmed claims; reporting the results and actions taken; and delivering official responses to stakeholders whilst monitoring and managing follow-up actions.

For any proven violations, suppliers are required to provide a concrete corrective action plan with clear timelines. Failure to respond and commit towards remedial action triggers a suspension of contracts until progress has been made or the issue has been resolved. Apical reserves the right to cease transactions with all suppliers who have repeatedly violated our sustainability commitments.