Relationship with Partners and Suppliers
The partnerships forged by Odebrecht Agroindustrial with its Suppliers are long-term and based on ethical conduct and transparency. Over the past few years, we have enhanced our practices and mechanisms in supply chain management with a view to capturing operating efficiency gains and to imparting greater agility and security in the processes for acquiring inputs and contracting services.
One of the main advances in the 2015/2016 crop year was the implementation of a Supplier approval system that allows users to monitor these Partners' compliance with legal requirements, as well as their practices for managing and controlling socio-environmental performance through a self-evaluation questionnaire. Since the platform’s launch, all of our new Suppliers, which corresponds to 2.9% of our total base of partner companies active in the period, were registered and approved. By the end of the 2016/2017 crop year, our target is to have 100% of our Suppliers approved by the system. G4-13Click here to learn more about this aspect in the GRI Supplement G4-EN32Click here to learn more about this aspect in the GRI Supplement G4-LA14Click here to learn more about this aspect in the GRI Supplement
Also in the crop year, we launched a Supplier performance evaluation process in which the Leader responsible for the contract evaluates aspects related to practices involving HES, people management, routine management, service quality, compliance with Brazil's labor laws, among other items. At the end of the evaluation, Suppliers are scored on the Supplier Performance Index (SPI), which is adopted as a criterion to support decision-making in future contracts. If a Partner's performance is considered dissatisfactory, a plan of remedial and improvement actions is created. More than 800 evaluations had been concluded as of the publication of this Report.
The process for selecting, approving and evaluating Suppliers is conducted on the Supplier Portal, which is an online tool hosted on the Company's website where Partners submit the required documentation, participate in bid processes and monitor payments. The Portal also makes available our Code of Ethical Conduct for Suppliers, which is a document through which the contracted companies undertake to conduct themselves ethically, comply with labor and environmental laws and regulations and adopt mechanisms for managing social and environmental impacts, among other good practices.
Another target set by the Company for the coming crop year is to develop a criticality matrix for Suppliers that assesses two main aspects: influence on productivity and costs; and environmental, labor and compliance risks and impacts. Based on this mapping, specific actions are planned to improve the management of the Partners that appear in the most critical categories.
In the 2015/2016 crop year, spending on Suppliers amounted to R$2.8 billion, of which 20% was allocated to compensating Agricultural Partners, which is managed by the Agricultural Partnerships department. Approximately 42% of the amount was spent on purchases and contracts involving local Suppliers, i.e., located in the same states as the Production Clusters.
Proportion of spending on local Suppliers (%)* G4-EC9Click here to learn more about this aspect in the GRI Supplement
|São Paulo Cluster||73.7||80.9||72.9|
|Santa Luzia Cluster||24.3||33.6||43.6|
*Includes Suppliers and Agricultural Partners at Clusters (except land Partners and Suppliers to the headquarters). The proportion is calculated based on total spending on local Suppliers/total spending on Suppliers.
Growth in partnerships to supply sugarcane G4-12Click here to learn more about this aspect in the GRI Supplement
Under our business model, we strive to form strategic partnerships focused on supporting continuous production growth at our units. For this, a department called Agricultural Partnerships coordinates the Suppliers Program, which works to find entrepreneurs that are aligned with our values and good practices to provides services such as crop planting, tillering, cane cutting, loading and transportation, expansion of planted areas at competitive costs and operational quality.
In the 2015/2016 crop year, we worked with 31 Agricultural Partners, which accounted for aggregate sugarcane production of 4.9 million tons, or 17% of the Company's total crushing volume in the period (up from 12% in the 2014/2015 crop year). We estimate that, over the next four years, our Partners’ contribution to total crushing volume will reach 30%, which compares with our goal of 40%.
Under this operational operation, everyone involved in the value chain benefits. For the Company, it mitigates risks, reduces costs in the agricultural operation and allows investments to be concentrated in own properties. For Partners, in addition to compensation, they receive support for developing their business plans and technical support to improve crop yields and quality. And local Communities benefit from growth in job creation and the local economy due to the inflow from new investments.
For our sugarcane procurement, we work with two different profiles of Partners. One is formed by large companies that are responsible for the entire agricultural operation and have the capacity to deliver over 200,000 tons per year. Meanwhile, the second profile is formed by small producers with which we share responsibility for sugarcane production. In both cases, the contracts signed are long-term, with a horizon of at least one production cycle (seven years).
An important aspect of the sugarcane partnerships is the commitment to expanding cultivation on new areas captured by the Company, which would enable units to reach their maximum crushing capacity. In the 2015/2016 crop year, we signed new expansion agreements in addition to those already signed in the previous crop year with our Partners, representing an aggregate 27,100 hectares, or 30% above the target.
All sugarcane Partners are evaluated in a selection process that involves requests for information and periodic visits to production sites to evaluate practices involving Health, Environment and Safety (HES) and compliance with laws and regulations, which adopts the same criteria and commitments used in the management of our cane fields. G4-EN32Click here to learn more about this aspect in the GRI Supplement G4-LA14Click here to learn more about this aspect in the GRI Supplement
In addition to supplying sugarcane, we forge partnerships with land owners located near our Industrial Units, and most of the partnership agreements in our agricultural operations are of this type. In the 2015/2016 crop year, these agreements involved 480,000 hectares and over 1,300 partners. These Partners can cede their land for sugarcane cultivation or join the Real Partnership Program, in which they share responsibility for production. In the latter case, crop management is conducted by the Company and the Agricultural Partner and the results are shared with the owners in the form of compensation.
One of the Partners with which we operate is Odebrecht Terras, a company incorporated during the 2014/2015 crop year whose purpose is to ensure optimal use of the farms and greater safety in the sugarcane production process, while also managing the Legal Reserves and Permanent Preservation Areas.