{"id":26941,"date":"2017-11-15T23:04:10","date_gmt":"2017-11-16T04:04:10","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/reducing-deforestation-impacts-in-the-agricultural-supply-chain-at-bunge\/"},"modified":"2017-11-16T00:06:10","modified_gmt":"2017-11-16T05:06:10","slug":"reducing-deforestation-impacts-in-the-agricultural-supply-chain-at-bunge-is-algae-oil-the-answer","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/reducing-deforestation-impacts-in-the-agricultural-supply-chain-at-bunge-is-algae-oil-the-answer\/","title":{"rendered":"Reducing Deforestation Impacts in the Agricultural Supply Chain at Bunge: Is Algae Oil the Answer?"},"content":{"rendered":"

Bunge is a food production company, predicated on suppling commodities, such as grains (corn, wheat, rice etc.) and oilseeds (soybeans, palm oil, etc.) to the world economy. Bunge\u2019s operations are integrated across agricultural supply chains, as it sources directly from farmers and suppliers, manages a complex physical transport and storage flow, processes and refines products and then distributes them to foodservice companies.1<\/sup> With a footprint in more than 40 countries, Bunge is a leading world exporter, operating 32 port terminals worldwide and 1,600 ocean voyages per year.2<\/sup><\/p>\n

Climate change should be top of mind for Bunge given that direct agricultural production contributes to at least 15% of global greenhouse emissions. Factoring in the wide-scale deforestation caused by agricultural expansion, that figure rises to 30%, given the loss of carbon-sequestering trees.3<\/sup> Climate change in turn threatens food production because temperature shifts, extreme weather events, and heightened seasonal variability can all impact agricultural productivity.3<\/sup> Thus, given Bunge\u2019s positioning in the macro agricultural supply chain, Bunge is both susceptible to, and a potential contributor to, global climate change. As such, Bunge faces the threat of 1) shortened production supply from the farmers it works with directly 2) price changes in commodity markets due to changes in global supply (even if Bunge\u2019s supply is stable) 3) operational disruptions to its transportation and logistics network due to extreme weather events and 4) reputational risk associated with being a climate change contributor.<\/p>\n

Operating as a \u201cfull value chain\u201d provider increases Bunge\u2019s risk exposure, but also positions Bunge well to advance traceability of its products, ensuring they are sourced, transported, and processed sustainably. To that end, Bunge is pursing various initiatives to build a more resilient, sustainable supply chain. First, in 2015, it made a commitment to zero deforestation, aiming to have full compliance by 2020-2025.4<\/sup> Given that soy and palm oil are two of the most detrimental commodities as it relates to deforestation,3<\/sup> Bunge has focused its efforts on improving the supply chain of these products. Bunge aims to motivate its entire network of farmers and suppliers. For example, Bunge is seeking suppliers that do not disrupt High Carbon Stock (HCS) forests, as these are critical to reducing global GHG emissions. Bunge has put in place a robust system of recording and controls for its raw material inputs to validate and manage its supplier network.5<\/sup> As of Q4 2016, Bunge was able to trace the origination of 87% of its palm oil production, with areas in Asia as the key region outstanding. Improving traceability in Asia is Bunge\u2019s long-term goal to achieving its zero-deforestation target.6<\/sup><\/p>\n

As a short-term objective, Bunge seems to be diversifying its product mix to include a land-light line of business. Through a joint venture with TerraVia, Bunge is cultivating algae oil as an alternative to its existing oilseed products. Bunge and TerraVia have developed two AlgaWise products, an ultra omega-9 fatty acid algae oil and an algae butter, which are expected to launch in retail in 2018.7<\/sup> The environmental ramifications of producing high volumes of algae oil remains to be seen, however, its cultivation should be a more sustainable offering relative to other oil alternatives. Bunge and TerraVia are in the early days of product development, but the commitment to pursuing alternatives that lessen their dependency on land cultivation is promising.<\/p>\n

To pursue its zero-deforestation target, Bunge should invest more heavily in technology in the near term to ensure that its suppliers are following climate-focused protocols. As a point of reference, Cargill recently announced that it will be leveraging blockchain in its supply chain of its Honeysuckle White turkey product. Through a data tagging system on every turkey in its supply chain, Cargill will be able to better monitor product sourcing with digital tracking and analytics.8<\/sup> Bunge could better digitize its palm oil and soy operations with similar systems.<\/p>\n

In the medium to long term, rather than focusing on slowing<\/em> deforestation, Bunge should help to reverse<\/em> it through reforestation practices and agroforestry. By investing in agricultural products that are derived via thriving forest rather than cleared land, Bunge can grow its operations while also mitigating climate impacts. Sugar palm is an example of a product that relies upon agroforestry, in which vegetation such as trees and shrubs are integrated into crop and farming systems.3<\/sup> The challenge is that Bunge\u2019s current product portfolio does not lend itself to forest-minded agricultural practices \u2013 ultimately, palm oil and soy are detrimental to the land and expose Bunge to intractable climate risk. Bunge needs to support the development of alternatives to these products that will can satisfy global demand and should invest more heavily in R&D to that end.<\/p>\n

What is Bunge\u2019s role in reducing the use of palm oil across the supply chain? What will happen if they reduce its supply?<\/p>\n

Word Count: 797<\/p>\n

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    \n
  1. Bunge Limited, \u201cOur Businesses,\u201d https:\/\/www.bunge.com\/our-businesses<\/a>, accessed November 2017.<\/li>\n
  2. \u201cInvestor Day,\u201d Bunge Limited 2016 Investor Day Presentation, December 13, 2016, on Bunge Limited website, https:\/\/bunge-ltd-micro.prod-use1.investis.com\/~\/media\/Files\/B\/Bunge-Ltd-Micro\/event-calendar\/2016-investor-day-presentation.pdf<\/a>, accessed November 2017.<\/li>\n
  3. Sonia Vermeulen, Bruce Campbell, John Ingram. \u201cClimate Change and Food Systems,\u201d\u00a0Annual Review of Environment and ResourcesNo. 37,\u00a02012, p. 195\u2013222.<\/li>\n
  4. \u201cNon-Deforestation Policy: Grain and Oilseeds Update\u201d Non-Deforestation Progress Report, September 2017, on Bunge Limited website, http:\/\/www.bunge.com\/sites\/default\/files\/non-deforestation_progressreport_sep2017.pdf, accessed November 2017.<\/li>\n
  5. Bunge Limited, \u201c2016 Global Sustainability Report,\u201d https:\/\/www.bunge.com\/sustainability2016\/index.html<\/a>, accessed November 2017.<\/li>\n
  6. \u201cGlobal Palm Oil Sourcing Update,\u201d March 2017, on Bunge Limited website, https:\/\/www.bunge.com\/sites\/default\/files\/bunge_palm_oil_update_-_033117.pdf, accessed November 2017.<\/li>\n
  7. Elaine Watson, \u201cTerraVia algae butter to launch in early 2018, could be a \u2018blockbuster,\u2019 predicts CEO,\u201d FoodNavigator-usa.com, May 3, 2017, https:\/\/www.foodnavigator-usa.com\/Article\/2017\/05\/04\/TerraVia-algae-butter-to-launch-in-early-2018#<\/a>, accessed November 2017.<\/li>\n
  8. \u201cHoneysuckle White\u00ae<\/sup>brand leads the way in food transparency, delivering a farm-to-table Thanksgiving featuring first-ever traceable turkeys,\u201d Cargill press release, October 25, 2017, on Cargill website, https:\/\/www.cargill.com\/2017\/honeysuckle-white-brand-leads-the-way-in-food-transparency<\/a>, accessed November 2017<\/li>\n<\/ol>\n

     <\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

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