AAK sustainability report 2018

35 The main finding was that the traditional coconut supply chain is long and complex because the growing areas are far away from the mills that extract the oil from the dried coconuts (copra). Middlemen connect the farmers with the mills and deliver important logistical services. We have identified three main areas that need attention in the coconut supply chains. Based on Proforest’s recommendations from the supply chain risk assessment we have developed a coconut supply chain risk mitigation plan. The plan will be tested on a pilot scale in 2019 and brought to full scale in 2020. The three key pillars for our risk mitigation plan are: Progressing on responsible sourcing of coconut oil As stated in our Policy for Responsible Sourcing of Vegetable Oils, in AAK, we actively include smallholders in our supply chains. In order to simplify the supply chain for the farmers and to ensure traceability we have started a direct sourcing project in Indonesia. Here our partner mill collects the copra directly from the village level, as a means to ensure that a bigger share of the value goes to the farmers. We will continue to work with this project in 2019 and develop it even further. Supplier engagement Smallholder impact Traditional coconut supply chain Individual smallholder farmers Middlemen providing logistical services connecting the farmers to the mill Group of smallholder farmers AAK and mill directly picking up copra from farmers and providing training and equipment AAK initiated the direct sourcing project Coconut oil mill AAK AAK's direct sourcing supply chain AAK is the co-development company, closely working together with our customers and also closely monitoring trends in the markets. Coconut oil is a preferred ingredient for many plant-based appli- cations like vegan ice cream or cheese. However, in 2018, together with one customer, AAK discovered that the vegan community was highly concerned that monkeys could have been involved in the harvesting of coconuts. It is a common practice, mainly in Thailand and Malaysia, that pig-tailed macaques are trained to pick coconuts from the trees. This means that coconut oil coming from a supply chain where monkeys are involved in the harvesting process cannot be classified as vegan anymore by the standards of The Vegan Society. AAK has been working closely together with our suppliers in 2018 to develop a supply chain that can verify that no monkeys have been involved in the harvesting process. Therefore, we are now able to provide products that can achieve The Vegan Society’s trademark on end products. Vegan coconut oil Market uptake