The private sector is of vital importance to adaptation in Africa. Many businesses in Africa take resilience and adaptation action that help them manage climate risks and positively impact productivity and profitability. The benefits of such actions extend along the supply chains and sometimes also to surrounding communities. In this series of GCA Insights, we feature leading businesses and their adaptation and resilience related efforts across Africa.

Olam International, Singapore

Based on the interview conducted in collaboration with the World Business Council for Sustainable Development (WBCSD) on September 10th, 2021 with Dr. Christopher Stewart, Head of Corporate Responsibility & Sustainability, and Ms. Brenda Makona, Manager, Corporate Responsibility & Sustainability.

Introduction

Olam International is a major food and agri-business company, operating in over 60 countries and supplying food, ingredients, feed and fibre to over 17,300 customers worldwide. Olam International has two operating groups- Olam Food Ingredients (OFI) and Olam Global Agri. OFI offers products, ingredients and category solutions for five agricultural products- cocoa, coffee, nuts, spices and dairy. Olam Global Agri is a leading business in food, feed and fibre in high-growth emerging markets with global origination, processing, trading and risk management capabilities in grains, animal feed and protein, rice, specialty grains and seeds, edible oils, cotton, and wood products. Olam is among the world's largest suppliers of cocoa beans, coffee, cotton and rice. Olam Food Ingredients is also one of the world’s largest suppliers of ingredients such as almonds and black pepper.

Climate risks assessment

Climate change is a prominent business issue for Olam as it seeks to ensure the long-term viability of the business sectors in which it operates. It is working to take action to help build resilience to climate change across its supply chains, as it continues to identify and understand the implications of climate-related risks.

For Olam, adaptation incorporates resilience building of farmers and estates, and the improvement of farmers’ livelihoods. Olam doesn’t use the term adaptation specifically to refer to its livelihood activities, because predicting the direction of climate change at site and farm level is uncertain, and farmers also adapt to year-on-year seasonal variations which are difficult to statistically attribute to climate change. However, the company is already witnessing climate change impacts, for instance on the margins of cocoa-growing areas in West Africa, which are expected to shrink dramatically affecting farmers in Côte d'Ivoire and Ghana. Elsewhere the direction of climate change is not clear and long-term trends are swamped by seasonal and decadal cycles e.g., Olam’s palm plantations in Gabon, where a run of dry years has occurred but climate models predict a wide range of potential long term rainfall outcomes including wetter scenarios than today.

The majority of Olam’s products are sourced from smallholder farmers worldwide, all of whom face daily challenges to provide for themselves and their families, and many of which are amongst the world’s poorest farmers, especially in semi-arid areas such as the cotton areas of Cote D’Ivoire and Chad. Poverty, lack of access to education, finance and food security are major threats to farming communities and to the supply chains for Olam’s products. Olam works across many products to provide farmers with training, skills, finance, material inputs, and access to markets to produce more profitable crops, as well as work directed at community development and enterprise building. Olam’s activities represent an integrated business model with the entire supply chain represented from the field to the customer’s port or shelf.

Climate risks

Olam has conducted Climate risk assessments for all its upstream fames and estates and is now turning to understanding the impacts systematically across supply chains; in the meantime, it is working with farmers to provide agronomy support to profitably grow disease, pest and drought resistant crop varieties. To help anticipate the impacts of climate change such as droughts and water scarcity, Olam also facilitates research on salinity and drought-resistant varieties of crops, including wheat and maize.

“Many of the places that we operate in have high variance in year-to-year seasons, so it's very difficult for us even when we experience a run of dry years with less than usual precipitation, to be able to statistically attribute that to climate change.”

“For some of the crops we work with, such as cashew, there is limited ongoing research on resistant or high-yielding varieties due to its niche nature as a crop that has less global economic importance. This is a real issue for farmers growing these crops and for the business.”

Current actions undertaken

Sustainability is an integral part of Olam’s core business strategy with a number of its businesses establishing strategies and targets for sustainability across operations and supply chains.

Olam Food Ingredients has published sustainability targets to tackle the biggest challenges in the global cashew supply chain, starting with farmer livelihoods. The Cashew Trail strategy sets 2030 targets across OFI’s cashew business – in line with the United Nation’s Sustainable Development Goals[1] and OFI’s commitment to deliver naturally good, sustainable ingredients. These include ambitious goals to fight poverty by increasing average yields by 50% and by improving the livelihoods of 250,000 cashew households.

Additionally, Olam is one of the founding members of the Sustainable Rice Platform (SRP), a multi-stakeholder platform, co-convened by United Nations Environmental Programme (UNEP) and the International Rice Research Institute to promote resource efficiency, sustainable trade flows, production and consumption operations, and supply chains. Since 2015, Olam’s rice business in Nigeria increased yields by 125%, improving storage facilities, and reduced post-harvest losses by 70%, helping to triple farmers’ income within three years.

Olam also works in partnership with the Ghana Cocoa Board (COCOBOD) to distribute locally-sourced fertilizer to cocoa farmers within its cocoa sourcing operations in the country. The Olam Farmer Information System (OFIS) was launched in 2014, using GPS and detailed surveys to provide smallholder farmers with data and information to increase yields and to improve quality. Olam has the world's only independently verified and Roundtable on Sustainable Palm Oil (RSPO) certified climate positive palm oil plantations in Africa, where ecological networks are integrated with plantations to strengthen biodiversity conservation and water and climate regulation.

Olam emphasizes the need for systems that benefit both farming communities and natural ecosystems in mixed-use landscapes, creating a win-win situation for the environment as well as farmers’ livelihoods. It supports the need to reimagine land use allocation for food production at a large-scale to safeguard ecosystem services, which places the interests of local communities and farmers at the heart of decision-making in order to ensure benefits from regenerated lands.

“We adjust our strategy to address the challenges in our supply chains and to meet evolving market needs which are not specifically linked to climate change. Recent additions to our portfolio are consistent with considerations of climate resilient crops and the potential market for these products.”

“All our livelihood activities cater to building farmer resilience. The economic sustainability of supply chains depends on farmers being able to make a livelihood from the crops that they grow, which will also encourage younger farmers to stay in the farming business rather than go to the cities to try to escape from rural poverty.”

Support provided

Olam is working to provide end-to-end support packages for farmers to enhance their livelihoods. Olam’s experience highlights that farming is a risky business and farmers tend to be conservative. Investing in climate resilient crops can sometimes lead to short term loss of income, for instance due to replanting and switching fertility management. To build farmer resilience, it has introduced a range of digital farmer services including crop support and market information.

While Olam works with farmers to address some of these issues, there are limitations on private sector operators to bridge this gap at scale. Climate smart agriculture requires behavioral change, new skills and technologies, crop varieties and innovative finance mechanisms. Currently, there is a lack of financing mechanisms which can enable farmers to switch to climate smart practices. Olam is constantly innovating to support profitable farming that includes environmental protection. It is organizing and supporting communities to improve access to services such as, water, sanitation, education, health, and infrastructure, such as schools. For instance, Olam initiated a water stewardship programme to conserve the water catchments of the upper Ruvuma River basin in Tanzania which is essential to provide water for Olam’s Rainforest Alliance certified Aviv coffee plantation, as well as to surrounding communities. It has helped set up a water management board to better understand and manage water resources in collaboration with the local government, which has expanded to incorporate Water, Sanitation and Hygiene (WASH) activities in the area.

[1] Sustainable Development Goals addressed: 1. No poverty, 2. Zero Hunger, 3. Good Health & Wellbeing, 4. Quality Education, 5. Gender Equality, 6. Clean Water and Sanitation 8. Decent Work, 10. Reduced Inequalities, 12. Responsible Consumption and Production, 13. Climate Action, 15. Life on Land.

Climate-related Development Finance