Crosslands Bulletin

April 12, 2016

West Africa: What Are We Doing There?

A pair of corporate sustainability reports are so different the two companies may as well be working on separate continents.

Cocoa farming Côte d’Ivorie. Photo: The Barry Callebaut Group
Barry Callebaut and Equatorial Palm Oil have at least two things in common.  They are in the food processing industry.  Each also depends on sourcing in West Africa.  Their approaches to corporate sustainability reporting, however, are poles apart.

Swiss-based, publicly traded Callebaut has a hand on every link of the chocolate supply chain.  The company buys and processes beans, manufactures cocoa, and produces sweets.  The group came into being in 1996 through the merger of Belgian producer Callebaut (founded in 1911) and the French company Cacao Barry (founded in 1842).   Callebaut is a business-to-business operation.  They have partnership agreements with global and local food companies.

Callebaut personnel are on the ground in all the leading countries of cocoa origin.  But the bulk of the world’s supply grows in West Africa.  The company’s sustainability activities are concentrated in Côte d’Ivoire, the largest producer with about 40% of the global market.

Equatorial Palm Oil (EPO) is a UK company set up exclusively to develop agricultural estates in Liberia in West Africa.  Trading on the Alternative Investment Market (AIM) of the London Stock Exchange, the business is majority owned by KL-Kepong International.  The partner, registered in the Cayman Islands, is itself a subsidiary.  Malaysia’s Kuala Lumpur Kepong, one of the world’s largest palm oil producers, owns them.

Liberia’s neighbor to the east is Côte d’Ivoire where palm oil is also an important product.  Both nations are healing from gruesome civil conflicts that ended in the first decade of this century.  Some UN peacekeeping forces remain in each country.

Former Liberian leader Charles Taylor, 68, is serving a 50-year sentence in a jail in the UK after his conviction for war crimes.  Former Ivorian President Laurent Gbagbo pleaded not guilty in January 2016 to charges of crimes against humanity in The Hague’s International Criminal Court.

Liberians are doubly cursed.  They were hard hit by the Ebola outbreak in 2014.  The International Monetary Fund (IMF) recorded GDP of just 0.7% that year, dropping from 8.7% the year before.   A UN Development Program (UNDP) report buries Liberia at 177 on a composite measure of well-being of 188 countries.

Côte d’Ivoire is relatively better off.  The IMF says the national election in October 2015 was peaceful, and considered free and fair by international observers.   After the hostilities, foreign investment and economic growth continues to be strong.   From a global perspective, though, Cote d’Ivoire ranks just 172 on UNDP’s human development index. 

Content
The circuitous road from EPO’s plantations in Liberia to Callebaut’s Cocoa Centre of Excellence in Pacobo, Côte d’Ivoire,  runs roughly 950 kilometers.  The drive takes about 13 hours, not so bad under the circumstances.  Direct flights from the capital cities take just 1 ½ hours.  The corporate sustainability reports, though, are so different the two companies may as well be working on separate continents. 

Callebaut sticks to the Global Reporting Initiative (GRI) guidelines in the most literal way imaginable.  EPO’s report amounts to an 80-page brief presenting the rationale for the corporation’s behavior in Liberia. 

EPO’s concession agreements came into force in August 2008 for two idled oil palm plantations and their associated “expansion lands” south of Monrovia.   In total, the area is equivalent to 877 square kilometers. 
EPO’s intention is to become “a fully sustainable producer.”  About two-thirds of the report describes in fine detail what, in the company’s view, that means. 

The explanations revolve around adherence to the tenets and standards promulgated by the multi-stakeholder Roundtable on Sustainable Palm Oil.  (Callebaut is also a member of RSPO.)  The report covers the company’s community engagement methods and environmental program.  A chapter describes the employment and training situation.  Three pages are devoted to the multi-dimensional response to the Ebola epidemic. 

A six-page chapter of the report refutes allegations made by a coalition of international and local NGOs.  They accused the company of being involved in human rights abuses, intimidation, and land grabbing.  The strenuous defense and rebuttal concludes with a breakdown showing the company’s expenditures to fulfill commitments, and their tax and royalty regime.

A two-page summary neatly highlights the key points made in the report.  One annex presents EPO's sustainability policies.  The other breaks down expenses on labor, education, and clinic costs, and presents data for all  the social responsibility initiatives. 

Callebaut’s report, based on GRI guidelines version 3.1, is the company’s fourth.  But a separate, distinct publication complements it. 

Callebaut’s GRI report is a blast of fresh air.  The company treats the guideline as a true standard it was really meant to be. 

The matter-of-fact format is like a ledger of accounts.  The report reproduces in sequence each performance indicator — all 135 of them — found in GRI’s food processing sector supplement.   Each indicator is followed by unadorned text  in order by category and number from the GRI standard.   In some cases the responses refer to additional information found on pages in the current corporate annual report or in a separate Chocolate Sustainability Report 2014/15.

An accompanying table states whether any given indicator is reported “fully,” or as “partial information,” or as “not reported” with the explanation either of being “not relevant” or determined to be “not particularly relevant to Barry Callebaut and its stakeholders.” 

If you believe your company’s disclosures adhere to the GRI, better reconsider after checking out Callebaut’s version.

Callebaut’s 52-page Chocolate Sustainability Report mirrors most corporate social responsibility disclosures.  Augmented by the typical assortment of photos and illustrations, the narrative explains Callebaut’s support for farmers and communities.  The company's sustainable chocolate and cocoa products are featured and the company’s efforts to protect the environment are described. 

Communication
Callebaut strips GRI reporting to bare essentials.  By jettisoning the baggage, the clarity of the company’s disclosure soars.  GRI pretenders can only imagine — indeed most try studiously to avoid — reaching such heights. 

As they stand now, the GRI guidelines do not expressly demand consistent responses.  Users can — and do — cherry-pick the provisions and recommendations to suit themselves.  Consequently, GRI has embarked on a new approach.  A 15-member GRI Global Sustainability Standards Board representing major stakeholder groups is rewriting and restructuring the guidelines using conventional standards jargon. Callebaut is way ahead of the game.

The Chocolate Sustainability Report does tend to confuse.  Only one footnote in it refers obliquely to the GRI guidelines.  Standing alone, the report can easily fool readers into thinking they have retrieved the main disclosure document and not the supplement to it.  Both use the same cover photo cropped differently.

EPO takes full advantage of having to report solely on operations in Liberia.  It does not squander the opportunity shouldering the burdensome GRI formula or by filling the sustainability report with distracting and extraneous information.  EPO’s messages are direct and unabashed.  The chapter headings reflect the plainspoken style, for instance, “Palm Oil and Its Place in Liberia,” “Certified Palm Oil: Why?” and “2013-15 Land Issues: Problems and Resolutions.”
 
Credibility 
Callebaut’s GRI G3.1 report is checked by the Global Reporting Initiative itself as meeting the application C level.   This means it covers all points on strategy and analysis, commitments and engagements, and other profiling parameters.   Level C also requires data disclosures on at least 10 performance indicators in each of six categories.
 
An external assurance statement applies for the Chocolate Sustainability Report.  An independent auditor elaborates on the extent of the company’s incorporation of the principles of inclusivity, materiality, and responsiveness for stakeholder dialogue contained in the AA1000 AccountAbility Principles Standard 2008. 

One-of-a-kind reports are unlikely to have external assurance.   EPO’s doesn’t.  Worries are allayed by mentions of certifications throughout the report.  

All of the company’s free, prior, and informed consent procedures leading  to planned new plantings at one estate were vetted by third party, certified assessors before being approved by RSPO.

EPO froze plantation expansion while independent, third parties conducted an international study to identify high-carbon-stock areas.  The research ended in December 2015.  The world’s five biggest growers of oil palm and others (e.g., Unilever), funded the research to set thresholds for new oil palm cultivation.   Environmentalist Jonathon Porritt and forest ecologist John Raison led the steering committee overseeing the scientific effort. 

EPO’s report has a web link to the original charges leveled in a press release from the NGOs.  The report doesn’t stop with rebuttals to those claims the company believed to be untrue.  The outcome of follow-up meetings are mentioned, including sticky points.  For example, the report admits:  “EPO was providing logistical support to the police, a practice disliked by some community members.  EPO took this criticism on board and discussed it directly with the NGOs, and the practice has remained suspended up until time of writing in October 2015.”

This review first appeared on CorporateRegister.com.

For more information contact William D'Alessandro, Editor, Crosslands Bulletin, P.O. Box 464, Amherst, NH 03031, USA. Tel: +1 603 672 5811: E-mail: wdalessandro@crossandsbulletin.com.

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