Charoen Pokphand Foods PCL

CP Foods has policies and processes in place to identify and mitigate overall supply chain risks, and the company acknowledges the risk of deforestation, illegal fishing and human rights issues in its supply chains. CP Foods also has specific commitments to zero deforestation (by 2025) and traceability (by 2030) for key raw materials for certain business units and locations. However, it does not disclose any comprehensive sustainability or traceability commitments for the seafood and aquaculture feed ingredients (apart from fishmeal) the company produces or procures.

CP Foods’ Sustainable Sourcing Policy and Supplier Guiding Principle, last approved by the board in February 2023, states the company’s expectations in terms of environmental protection and human and labour rights. While the policy mentions traceability, it only states that suppliers are required to certify that products do not “reduce natural resource abundance” and meet quality and safety standards, rather than referring to full-chain, digital and interoperable traceability systems. All new suppliers are required to acknowledge this policy. New suppliers (only in Thailand and Vietnam operations) are also required to complete a self-assessment questionnaire, which is consistent with the above policy and includes an assessment of ESG risks and consideration of the supplier’s traceability process.

CP Foods’ Supply Chain ESG Management Approach outlines an annual self-assessment process for suppliers and ESG audits for all critical suppliers and those with a high non-compliance risk score. , The company reports to have achieved its target to conduct human rights due diligence on all of its operations, joint ventures and business partners every 3 years.

CP Foods has also made some specific commitments to identify and mitigate supply chain risks:

• In its Biodiversity and Zero Deforestation Commitment for maize, soy, palm oil, and cassava by 2025, the company lists digital traceability systems, satellite images, connection of the supplier’ traceability databases and sourcing of certified raw materials as means to achieve these commitments.
• CP Foods commits to achieve 100% traceability to plantation/fishery sources for maize, soy, palm oil cassava and fishmeal by 2030 for its Thailand, Cambodia, Philippines, Malaysia, Laos, Vietnam, and India feed operations and food business in Thailand and Vietnam.
• For fishmeal, the company states it is aware this is a raw material that is at risk of sustainability issues, such as illegal fishing or forced labour in the supply chain. To mitigate these risks, CP Foods describes a policy (without a target date) to procure MarinTrust certified by-product or by-catch fishmeal. In contrast to other key raw materials such as maize, the company does not disclose any details of traceability systems in place for fishmeal and only refers to certifications. The company states that it “does not operate a fishing business and does not own fishing vessels.” Even for ships that CP Foods does not directly control, having full-chain traceability in place will help the company to ensure the legality and sustainability of all seafood and feed ingredients it sources.

CP Foods recognises the role of traceability in identifying supply chain risks for the terrestrial feed ingredients. However, it appears CP Foods is solely relying on certifications to mitigate these risks for fishmeal, and does not disclose details for other seafood commodities it procures. We encourage CP Foods to clarify how the risks of IUU, overfishing, habitat conversion and human rights issues are identified and mitigated for the overall seafood business.

All sources of information are available in the company assessment PDF.

CP Foods has a group-level Food Traceability Policy with a commitment to establish a “precise and timely digital traceability system” across its value chain in all business units. This policy applies to all countries of operations and to the animal feed production process, farm operation, food processing, logistics, warehouses and distribution centres. It also states to include raw materials, food additives, ingredients and packing “where relevant.”

While this traceability commitment meets leading practice criteria by covering “all value chain” for all business units and locations (therefore implicitly seafood and feed ingredients), it does not specifically mention seafood and marine feed ingredients, both of which the company has significant exposure to. Furthermore, the most recent public disclosure (2023 Sustainability Report) does not make any reference to the group-level Food Traceability Policy, but only refers to the 2030 traceability commitment restricted to the key raw materials for certain locations of feed and food business. This commitment does not include the wild-caught or farmed seafood CP Foods produces or procures, or all feed ingredients in all locations. We encourage CP Foods to clarify that its traceability commitment covers all seafood and feed ingredients and to disclose the wider traceability commitment in its annual reporting.

All sources of information are available in the company assessment PDF.

CP Foods’ aforementioned Food Traceability Policy does not outline an implementation timeline nor does it state whether the aim is to have interoperable traceability systems in place. While it does outline requirements for full-chain traceability for terrestrial feed ingredients, it does not do so for marine ingredients.

As noted above, only a portion of CP Food’s seafood supply chain (what it defines as key raw materials) is covered by a time-bound commitment, and only in certain locations. As CP Foods refers to traceability to source plantation/fishery for this 2030 traceability commitment, it is also not full chain to the vessel or the farm for marine ingredients.

While alignment with the GDST standard is not mentioned, CP Foods is a SeaBOS member, which suggests that it has a public commitment to adopt the GDST standards. CP Foods also participated in a pilot conducted by GDST to test interoperable sharing of supply chain data between CP Foods subsidiaries’ systems. This suggests that the company’s commitments are to interoperable traceability systems, which are aligned with the GDST standard. However, CP Foods should clarify this in its public reporting.

CP Foods does not mention the ASC Feed Standard, but has a 2025 target to procure all key raw materials (maize, soy, palm oil and cassava) from areas which have been verified by a third party to be free of deforestation. In its response to the investor letter, CP Foods stated it is currently evaluating the feasibility of adopting the ASC Feed standard, but this has not been publicly disclosed.

We encourage CP Foods to disclose a timeline for its overall traceability commitment covering all seafood and feed ingredients. We also encourage the company to clarify that its commitment is to interoperable traceability systems, which are aligned with the leading practice standards such as the GDST and, where relevant, the ASC feed standard and trace the products back full chain to the vessel, the farm or the feed source.

All sources of information are available in the company assessment PDF.

CP Foods has a time-bound traceability commitment for key raw materials of its feed and Thai/Vietnamese food business, and it describes the implementation of this commitment in its sustainability report. However, the company does not disclose any further details.

We encourage CP Foods to commit to a roadmap for implementing traceability for its overall seafood business, and to disclose key milestones and progress towards these milestones.

All sources of information are available in the company assessment PDF.

In its 2022 Annual Report, CP Foods stated that its entire supply chain is traceable, and described the utilisation of digital traceability systems that ensure a seamless flow of data, enabling traceability of products from the source of raw materials, throughout the food production process, and up until products reach various distribution channels.

These disclosures are not included in the 2023 Annual Report. However, traceability is still mentioned in the company’s mission and with regard to its target of tracing 100% of key raw materials for feed and food business (in specific locations) to plantation/fishery source by 2030.

CP Foods discloses its progress towards this target in its annual sustainability reports. In 2023, 49% of key raw materials were traceable (down from 59% in 2022 due to scope revision). Importantly, operations in China, Taiwan, Russia, Turkey and Poland are also reported to produce feed, but do not fall within this traceability commitment and only Thailand and Vietnam operations are included for key raw materials for food business.

For fishmeal 34% was traced back to fishery and 66% back to processing facilities. As noted above, the company does not disclose any details for traceability systems in place for fishmeal but only refers to certifications. CP Foods does not have any traceability targets regarding the procurement of fish oil.

The company does not report on progress towards its wider traceability commitment, apart from stating that it has implemented a blockchain-based digital traceability system for several products, including shrimp, for Thailand operations.

In its response to the investor letter, CP Foods stated it has achieved traceability to shipping vessels for its supply chains in Thailand, and is currently expanding this to supply chains in other countries. It has yet to publicly report on progress.

While CP Foods discloses some details on the scope and the depth of its operational traceability systems, more detailed and consistent disclosures are needed to understand the progress made towards achieving full traceability covering all seafood and feed ingredients. CP Foods should also consider disclosing the breadth of data collected by the traceability systems, and whether this aligns with the leading standards such as the GDST and, where relevant, the ASC Feed Standard.

All sources of information are available in the company assessment PDF.

CP Foods discloses in their 2023 Sustainability Report that, to ensure transparency and continuous improvement, the company has now commissioned a third-party verification of their Maize Traceability System. CP Foods does not disclose any third-party verification for their seafood or marine feed ingredient traceability systems, nor does it report on non-compliance.

We encourage CP Foods to ensure that traceability systems covering all the seafood business are in place and verified by a third party annually. Cases of non-compliance and specific actions taken to address these should be reported.

All sources of information are available in the company assessment PDF.