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As a sustainable investor, Robeco is convinced that engaging with companies on the most material sustainability issues enhances their competitiveness and profitability. In addition, it generates measurable benefits for investors and society as a whole. Our engagement with Olam is a case in point.
Olam International is one of the most diversified companies supplying raw and processed agricultural commodities to large food manufacturers and retailers. In March 2014, Temasek, a Singapore based sovereign wealth fund, acquired an 80% stake in the company. Our portfolio managers supported this. In 2016 Temasek reduced its stake to 51.4% in another deal with Mitshubishi, which bought 20% of the shares. Since we started our engagement theme ‘Social issues in the food and agri supply chain’ in 2014, we have had multiple meetings with Olam’s Global Head of Corporate Social Responsibility & Sustainability to discuss social risks in palm oil, cocoa, and cotton cultivation.
With 3% annual global growth in cocoa demand, and falling production levels in key countries such as Ivory Coast and Ghana, where Olam operates, the cocoa price on the global market is likely to rise. This will make it increasingly attractive for smallholders to produce cocoa and for Olam to buy it and trade it on the global market.
We also communicated investors’ expectations in terms of RSPO (Roundtable on Sustainable Palm Oil) certification and smallholder capacity building. With the help of a consultant, the company identified the parts of their land that should be classified as high conservation value forest (HCVF) and protected wetlands which are not developed, but rather managed as conservation areas. On smallholder capacity building, the company committed to an ambitious plan to develop 30,000 hectares for smallholder palm oil production. This will have a major impact on the agricultural sector in Gabon, which represents just 5% of GDP – small compared with other African countries. This model makes Olam International a sector leader when it comes to smallholder capacity building.
Later in June 2015, the company renewed its palm oil policy which also covers suppliers. By doing this, Olam is part of a growing group of companies that have developed a policy stipulating strict sustainability requirements on plantations, traceability of trade and transparency on the status of the objectives outlined in the policy.
Olam, along with other leading international cotton purchasers have joined the Association for Cotton Merchants (ACME) to work closely with International Labor Organization (ILO), the UN Global Compact Labour Working Group, as well as international governments, to influence Uzbekistan government to enforce recognized labor standards. Olam noted that progress by the Uzbek government has been slower than desired. However, it firmly believes that a withdrawal from Uzbekistan at this stage would be ineffective, and would instead inadvertently undermine the advances that have been made, particularly as the Uzbek government has not been short of other international buyers. Having voluntarily reduced its purchases since 2012, Olam is still able to retain a level of access (through ACME) to apply pressure on the government. We expressed our appreciation for the proactive approach by Olam.
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