Just How Material is Material Tracebility?

In two separate articles, Reuters reported trouble in the source of palm oil supply.  The first article states:

Greenpeace has named [Sinar Mas, Wal-Mart, Tesco, WH Smith, Hewlett Packard and Paperlinx] as sourcing products from Sinar Mas’ APP subsidiary, which the NGO has demonstrated in a recent report is responsible for extensive deforestation in Indonesia through the destruction of rainforest and peatlands …  In response to the report, HSBC indicated last week that it has divested all of its shares from Sinar Mas.

A copy of the report is available here.

Today, additional fallout was announced:

Sinar Mas group’s palm oil unit, PT SMART Tbk lost top customers Unilever and Nestle after earlier Greenpeace allegations of virgin forest destruction…

Agribusiness giant Cargill Inc has threatened to delist Sinar Mas as a supplier if the RSPO [Round Table on Sustainable Palm Oil – an industry body made up of producers, consumers and non-government organizations] validates allegations of improper land conversion in earlier Greenpeace reports.

Clearly, there is growing direct and rapid action being taken in supply chain decisions where suppliers are not meeting sustainability commitments.

Companies in industries that have sustainability commitments – or that do business with such companies – must have a complete understanding of the source of their raw materials.  And a contingency plan in the event a key supplier fails to meet such standards.  You can learn more here.


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