FGV Annual Report 2020

Sustainability Matters SUSTAINABILITY MATTER: TRACEABILITY, RESPONSIBLE SOURCING AND SUPPLY CHAIN MANAGEMENT At FGV, we recognise that we have both the responsibilities and opportunities to drive change through our supply chain management. We believe traceability is an essential element of our business and is instrumental in fulfilling our commitment to responsible sourcing. Our traceability efforts continued with collaborations with all strategic partners to trace the origin and chain of custody of all materials used for our operations, and assess their sustainability risks. In addition, we stepped up information dissemination and communication with suppliers for proper end-to-end traceability. FGV is committed in ensuring all raw materials are procured from sustainable sources aligned to our GSP commitments. We have also embarked on efficient supply chain management, aiming at reducing our operating costs. Our efforts include strategic sourcing with better negotiated transactions and improved internal processes. With that, we saw 10% savings in our procurement costs. Our GSP 4.0 that took effect in November 2020 requires all suppliers to be aligned to FGV’s sustainability requirements and practices. In relation to this, FGV has been conducting familiarisation sessions to suppliers. Supply Chain Management amid the COVID-19 PANDEMIC The COVID-19 outbreak and the Government movement restrictions affected our Consumer Products Division. It saw delays in the delivery of raw materials and packaging supplies; and in March 2020, deliveries halted altogether. As a result, our factories were unable to meet the demand for cooking oil. To overcome cooking oil shortages, FGV’s Group Procurement Division stepped in and found alternative sources of supply, and in this way, avoided the risk of poor supply chain management. This corrective action saw FGV sourcing bottles, cartons and nylon pouches from alternative suppliers. Following this experience, FGV adopted a policy of awarding tenders for any raw material or packaging material to at least two suppliers. This will mitigate the risk of shortages of FGV consumer products in the marketplace to ensure secured supply. In relation to our traceability effort, there was a delay in the validation of traceability data. For most of the year, communication with our FFB suppliers took place in the form of emails and telephone communications while traceability data was restricted to desktop validation. As for our logistic business, COVID-19 movement control restrictions affected our haulage and travel services. Also, there was the risk of congestion in warehousing facilities due to CPO exports exceeding demand from importers, with the closure of ports in our primary CPO markets. There was also a delay in six (6) ongoing strategic development projects. With the need of social distancing, FGV implemented the Integrated Logistic & Distribution System (ILDS) mobile application for drivers as a precautionary measure; the application can also trace the location of drivers of FGV vehicles. 108 FGV HOLDINGS BERHAD Annual Integrated Report 2020