Creating European market demand for responsible soy
The IDH soy program works on increasing both market demand for and responsible production of soy. On the demand side IDH aims to gradually raise the bar (of sourcing guidelines) to reach zero-net deforestation and further move towards RTRS (or equivalent) compliance. IDH aims for 50% of European soy import being responsible by 2020. On the production side, IDH supports responsible soy production and creating a physical connect between the end buyer and the producer via Area Mass Balance.
We exercise two approaches to drive this process simultaneously. The first approach supports retail and other front running buyers to source RTRS (or equivalent level) compliant soy from a jurisdiction in which we support all producers to become RTRS compliant (or equivalent).
The second approach leverages legality requirements in Brazil to raise the bar in mainstream sustainable soy production and trade and bring it gradually towards RTRS (or equivalent) standards.
Concerning the first approach, we convened 4 front running European retailers to conduct a materiality assessment to determine the appropriate scope of the soy sourcing policy. This is followed by creating a physical connect between the sourced soy and the producer via an Area Mass Balance system. It is important that a physical connection exists between what is sourced in Europe and what is produced in South America, as this not only supports the individual farmer, but especially his region to produce sustainably. Our pilot project will facilitate the transactions between end buyers and producers via long term contracts between a region and a retailer, in which both agree to reach RTRS (or equivalent) through continuous improvement in a pre-determined amount of time. An example of such a long-term contract will be presented soon.
To leverage legality, IDH is bringing mainstream European market demand and soy production in Brazil together, to build a market system that rewards and incentivizes more sustainable practices. The end goal of this market system is to move the entire soy sector towards an RTRS (or equivalent) level of sustainability. The recently announced Memorandum of Understanding between FEFAC, Fediol, Aprosoja and Abiove and IDH is part of that approach.
The IDH soy program is fully integrated with the landscape program in Mato Grosso, where we work as a part of a coalition of public and private sector stakeholders led by the Government of Mato Grosso and including leading cattle and soy companies and civil society organizations to address deforestation and forest degradation in the state. Our role here is bringing international investment to the landscape, co-funding farmer trainings and creating innovative financial solutions to incentivize farmers to conserve the forest through intensification and reforestation. Read more on our landscape page here.
As part of the MoU, a program with Aprosoja will be launched in the first week of May. This includes the benchmarking of SojaPlus against the FEFAC Soy Sourcing guidelines, greatly increasing transparency and adding continuous improvement. The program consists of two main elements
Improving production practices by restoring 400 hectares of APP, ensuring all participating farmers have a PRADA and a 10% annual sustainability increase.
In an 80-kilometer radius around Sorriso, Mato Grosso, a verified sourcing area is being developed. By enabling end buyers to buy soy from a region in which the sustainability performance can be tracked, their market commitments can be linked to increased sustainability.
On the European end, IDH is supporting FEFAC to include a definition of zero net deforestation in their guidelines, develop a monitoring tool and annexes on supply chain models. Besides the project with FEFAC, IDH actively convenes traders, retailers and other supply chain members.
In 2011 an agreement was reached between stakeholders in The Netherlands which stated that by the end of 2015, all processed soy would be responsible. This target was not fully achieved; in 2015 44% of the 1.8 MMT of soy processed by the Netherlands was responsible (RTRS), covering all the soy consumed in the country and a small part of the exports. The dairy sector is the only sector that sources 100% responsible soy.
In 2011, only a few producers were RTRS certified. So to create sufficient supply of responsible soy, IDH started the Soy Fast Track Fund I + II, a producer support program. This ended mid 2016, achieving 2.4 million hectares under sustainable management, of which 0.5 million hectares RTRS certified in Paraguay, Argentina and Brazil. Over 1.000 producers received support, and IDH proved that producing in an environmentally and socially sustainable way is also economically viable, as certification is a great management tool, it mitigates risks and has proven to be very positive for real estate value. Please find a selection of learning documents here. In 2014, IDH initiated the Soy Fast Track Fund III projects, which are seven projects prototyping a landscape approach in Brazil and Paraguay.
To accelerate cost efficient sourcing of responsible soy, IDH supported the development of the Fefac Soy Sourcing Guidelines and benchmark. The Fefac Guidelines are a list of 57 criteria, with a baseline of legal compliance and a structure that promotes continuous improvement on the farm. Currently 13 schemes have been benchmarked.
During this period, three key insights emerged that would change the shape of the program. Firstly, a study with KPMG made clear that 95% of the RTRS compliance costs in Brazil are related to legal compliance. Secondly, on farm certification does not guarantee that deforestation in the region will stop. And lastly, a physical supply chain connect between market and production is needed to drive improvements – book & claim is not enough. This is why the soy program is now integrated with the landscape program in Mato Grosso.
