Human rights impact assessment on palm oil supply chain addresses labour issues with an in-depth approachRANesia
In 2017, Nestlé commissioned the Danish Institute for Human Rights (DIHR) and The Earthworm Foundation* (formerly The Forest Trust) to carry out a study of Nestlé’s actual and potential impacts on human rights, specifically labor rights in their palm oil supply chain in Indonesia.
As the world’s largest food and beverage company, Nestlé buys 425,000 tons (2018) of palm oil annually to produce its products.
Most of this percentage of palm oil comes from Indonesia.
Source: The Eartheworm Foundation
In 2017, Nestlé requested Danish Institute for Human Rights (DIHR) and The Earthworm Foundation in Indonesia (EF) –previously The Forest Trust– to carry out a study of actual and potential impacts on human rights, specifically labor rights in their palm oil supply chain in Indonesia. Nestle and the Earthworm Foundation have been working together since 2010. Earthworm Foundation is a non-profit organisation built on values and driven by the desire to positively impact the relationship between people and nature. EF is working with 64 global private sector businesses.
“We tried to understand the impact of human rights in the entire supply chain from small farmers to oil refineries, along with intermediary agents at each stage” Janhavi Naidu, ’Respect’ Programme Manager of Earthworm Foundation.
“This study aimed to have a wider scope than refinery or plantation labour compliance audits. We tried to understand the impacts and roots causes of human rights issues in the entire supply chain from palm oil refineries to mills, plantations and smallholders along with intermediary agents at each stage, ” said Janhavi, ‘Respect’ Programme Manager, EF.
Source: Danish Institute for Human Rights and The Eartheworm Foundation
As one of the largest suppliers of palm oil for Nestlé, Golden Agri-Resources (GAR) participated in the study conducted during the year (April 2017-May 2018). The study was conducted at a GAR palm oil refinery. In addition, four independent mills that supply crude palm oil to the refinery were also visited by the team. One of the mills had an integrated plantation supplying the mill with palm fruit or Fresh Fruit Bunches (FFB).
Many labour issues were found across all levels and sizes of sites in the supply chain studied by the team. Issues such as low wages, excessive working hours, poor health and safety are commonly found at all levels in the supply chain.
An interesting observation at the refinery level was that workers’ felt that minimum wages were insufficient and didn’t reflect living wages. Additionally in mills, excessive overtime is a systemic issue. In plantations, gender-based discrimination was found in terms of women’s access to permanent employment- even when undertaking job roles permanent in nature. The team also found instances of children between 14 and 17 helping their family members in plantation work. On the issue of Freedom of Association several types of concerns were raised at all levels of the supply chain such as poor awareness levels among employees on their rights to associate, the purpose of Unions and conditions of membership.
At the smallholder level, labour issues such as low wages and health and safety arise due to the increasingly informal context of work especially as there are more layers and intermediaries between the workers and the farmers or land owners.
Source: Danish Institute for Human Rights and Earthworm Foundation
“When there are brokers in the supply chain, the tendency for labor rights violations is higher.” Janhavi Naidu, ‘Respect’ Programme Manager of Earthworm Foundation.
“When there are brokers in the supply chain, the tendency for labor rights violations is higher,” said Janhavi. “By outsourcing workers to third party agents or recruiters, employees become more removed from management and are often unable to raise their concerns or secure their rights effectively. As the study shows, workers are more vulnerable in plantations of independent smallholders or small FFB collectors and distributors as work arrangements are often temporary and informal.”
After the publication of this research, Nestlé and GAR
each issued an action plan on labor rights to follow up on the results of the report. Efforts to assist suppliers to fulfill workers’ rights continue to be carried out through intensive facilitation, research, capacity building, training and multi-stakeholder dialogue involving trade unions and the government.
“In 2019, GAR is targeting more labor issues, especially workers’ rights,” said Sinar Mas Agro Resources Technology (SMART) Supply Chain Team, one of the subsidiaries of GAR.
“Working conditions on oil palm plantations face a number of challenges such as the implementation of labor standards that still require various improvements.” the SMART Supply Chain Team added.
“This study also emphasizes that labor issues in the oil palm supply chain cannot be resolved by one party. A multi-stakeholder approach is needed.” Janhavi Naidu, ‘Respect’ Programme Manager of The Forest Trust TFT.
Multi-stakeholder approach is needed
“This study also emphasizes that labor issues in the oil palm supply chain cannot be resolved by one party. A multi-stakeholder approach is needed. “explained Janhavi.
In this effort, the report makes recommendations to other stakeholders, such as other palm oil buyer companies, the Indonesian government, national and international sustainability certification bodies such as ISPO and RSPO, and investors.
Focus on Impact Assessment
“Assessing human rights impacts is a useful way to understand labour challenges in the palm oil industry more deeply than the scope of supplier compliance frameworks.” said Janhavi Naidu, Respect Program Manager, EF.
For effective multi-stakeholder collaboration that has a positive outcome on people in supply chains, an impact-based approach centred on human rights is a useful tool. Similar to the collaborative efforts of Nestle, GAR, DIHR and Earthworm Foundation, initiatives involving multiple actors, each playing to their strength, can deliver impactful work leading to positive impacts for people and businesses.
Disclaimer: This story captures experiences and opinions from various perspectives on a particular situation, and is designed to share lessons learned on some of the issues involved. It is not intended to be a comprehensive case study nor does it claim to give a definitive account of a specific case or perspectives on that case.