Terms of Reference: Engagement of a Consultant on Sustainable Procurement Practices for Sustainable Oil Palm
IDH and Solidaridad are leading organizations dedicated to sustainable trade and value chains, recognizing the crucial role of smallholder farmers in the palm oil industry. While smallholders contribute significantly to production, they often face challenges in accessing markets, receiving fair prices, and achieving a living income. Sustainable procurement practices are essential to address these challenges and ensure the long-term viability of the palm oil sector.
Background
Asia is the dominant producer and buyer of palm oil, so production standards in Indonesia and Malaysia and the policies of palm buyers in the region will determine the next stage of its sustainability journey. The palm oil industry brings money, trade and jobs to producing economies and employs millions of smallholder farmers. Around 25 - 30% of the world’s palm oil is produced by smallholder farmers, which means they are a key part of the puzzle to ensure the long-term sustainability of the palm oil sector. Commonly, families operate as independent units and pursue their own livelihood strategies with a combination of different production activities to generate household income.
To drive more smallholder inclusive palm oil value chains, we will need to transition from buyers imposing a checklist of sustainability requirements, to systematically supporting suppliers to produce sustainably. If a company wants to truly make an impact on sustainability with its procurement system, the key is a responsible and inclusive approach.
To develop such an approach, we use the term ‘procurement practices’, rather than ‘purchasing’ or ‘sourcing’ practices. Procurement practices have the potential to support and enable key improvements in global supply chains, including contributing to the payment of living incomes and living wages.
To contribute to a more resilient sector, ensure farmer livelihoods, implement existing voluntary standards and prepare for upcoming regulation, we must take farmer realities into account. This means looking at the value chain through an inclusive lens. Do smallholder farmers have ownership, can their voice be heard, are they able to control risk and are they sufficiently rewarded through the payment of fair prices?
While guidelines for Sustainable Procurement of palm oil do exist, none of them – as far as we have found – explicitly provides approaches to source in a smallholder-inclusive way.
This Terms of Reference (TOR) outlines the scope of work for a consultant to guide the transformation towards more inclusive procurement practices in the palm oil industry.
Key Objectives
The primary focus is on understanding existing procurement practices, particularly those impacting smallholders, and proposing improvements to foster inclusivity and equitable value distribution. The ultimate goal is to contribute to improved livelihoods and the realization of a living income for smallholder farmers. The consultant will conduct a comprehensive analysis of current practices, identify gaps and challenges, and recommend on how procurement practices in the palm oil sector need to be transformed, towards supply chain transparency and smallholder inclusion.
This assignment aims to guide the transformation of procurement practices in the palm oil industry. This requires a more detailed understanding of current practices in the various steps of the palm oil value chain including the first trades of FFB between smallholder and dealer, collection center or mill, the practices on crude oil trade, and finally the procurement practices by FMCG and Retailers and any additional external drivers such as government procurement policies and across all steps in the supply chain, there is a potential influence from corporate financiers and investors. To this end we want to zoom into the trading practices of various actors in the palm oil value chain. The consultant will support this by providing strategic recommendations, fostering sustainable procurement practices, especially for smallholder inclusion towards living income.
Next Steps
- Evaluation of the proposals by the evaluation committee. The evaluation committee will evaluate the proposals based on the selection criteria as published in this ToR.
- Decision on selection of the Applicants.
- Inception meeting with the selected Applicants.
For more information on the assignment and deliverables please consult the terms of reference below and submit your proposal inclusive all documents mentioned in the ToR no later than 27 February 2025 to Tran Quynh Chi (chitran@idhtrade.org), and Marieke Leegwater (marieke.leegwater@solidaridadnetwork.org).