Responsible Sourcing

Astra Agro is committed to ensuring the responsible sourcing of raw materials by consistently ensuring that every raw material received from the production of the nucleus, associated, and third-party suppliers plantations must come from production processes that adhere to the principles in Astra Agro’s Sustainability Policy. To realize this commitment, we have developed systems and initiatives that apply to the operations of the nucleus and third-party suppliers’ plantations, which include supply source traceability processes, supplier due diligence, risk analysis and monitoring, compliance assessment, and supplier assistance.

We conducted an environmental risk assessment of 31 Astra Agro’s palm oil mills in 2018 with CORE to ensure that the supply chain of all Astra Agro’s palm oil mills implements and/or is in line with the Company’s Sustainability Policy. The assessment results serve as the foundation for determining future activities in an endeavor to mitigate environmental risk. Furthermore, we developed a sustainability implementation tool called Sustainability Assessment Tool (SAT).

The SAT was developed in 2018 in collaboration with CORE. It comprises six principles, 24 criteria, and 178 indicators that apply to Astra Agro’s subsidiaries and third-party suppliers. The principles covered in the SAT include 1) Fulfillment of legality and compliance with laws and regulations, 2) No deforestation, 3) Peatland conservation, 4) Best agricultural practices and mill management, 5) Respect for human rights, and 6) Responsible sourcing. SAT is used to identify the gap between subsidiaries and supplier companies in terms of Astra Agro’s Sustainability Policy to ensure that the entire supply chain can be aligned in the future.

Third-party suppliers play a significant role in implementing Astra Agro’s Sustainability Policy due to their large numbers and they have the same obligations as Astra Agro’s subsidiaries to align with the Sustainability Policy. Each supplier or prospective supplier must meet the predetermined criteria to reduce risks to the environmental and social aspects of the community. We employ several approaches to ensure that all raw materials from third-party suppliers come from responsible sources, including due diligence, monitoring violations, and providing support.

Astra Agro has established a system to explore, screen and evaluate potential new suppliers of crude palm oil (CPO) and palm kernel oil (PKO) that will enter the supply chain. This procedure is also applied to suppliers who are no longer actively engaged in transactions with Astra Agro and suppliers who have been suspended for violating Astra Agro’s Sustainability Policy.

Violation monitoring is conducted to ensure that suppliers do not violate Astra Agro’s Sustainability Policy. Every month, an internal team monitors all suppliers at the firm group level for violations, which include spatial monitoring (aspects of deforestation and fire) and public information monitoring (social aspects of society, employment, environmental pollution, and legal sources of fruit supply). Violation monitoring is also carried out based on complaints submitted directly to us by third parties with credible evidence. Based on these two sources, if an alleged violation is found, we will verify it as a basis for determining the next steps.

Based on spatial monitoring, monitoring of public information and direct complaints from stakeholders

If a suspected violation is found, it will be immediately communicated to the supplier

If the allegation is proven, the supplier is required and assisted to develop a corrective action plan. If it is not proven, the process will be discontinued

Ensure suppliers have implemented the corrective action plans

In the process, it is possible to suspend a supplier if any of the following events occur: 1) The supplier is unwilling to provide clarification on the issues or potential risks verified within the specified timeframe; 2) Suppliers who are proven to have committed violations, is unwilling to implement the proposed corrective action plan; or 3) Suppliers who are proven to have committed violations, do not carry out or do not show improvement progress according to the agreement and within the specified period. In this case, the company must suspend any transactions with these suppliers until clarification is given or the corrective action plan is implemented.