Strategy Report

Annual Report 2016

Introduction

Contents
1
8
Group CEO perspective
Highlights
ABOUT OLAM
Established in 1989, Olam traded cashews from Nigeria to
14 Business model
16 Economic India. Today Olam is a leading agri-business operating from
38 Social seed to shelf, supplying food and industrial raw materials
64 Environment to over 22,900 customers worldwide. Our team of 69,8001
86 General information employees across 70 countries has built leadership positions
in several of our 18 platforms, including cocoa, coffee,
cashew, rice and cotton. We source from 4.33 million farmers
About this report and their communities. We are listed on the Singapore
Exchange (SGX) and are among the top 30 companies
This Annual Report has 3 chapters. These can by market capitalisation.

be read independently; however, for the

purpose of compliance they are intended
to be viewed as a single document.
OUR PURPOSE
Growing Responsibly describes how we do business.
We ensure profitable growth is achieved in an ethical,
socially responsible and environmentally sustainable manner.
Strategy Report This is integral to our business model.
Strategy Report
Annual Report 2016

This chapter offers narrative about

our performance, strategy and
market factors. Information has
been grouped into 3 sections,
OUR GOVERNING
i) economic, ii) social and
iii) environment.
It can be read independently
OBJECTIVE
To maximise long-term intrinsic value for our
as an Executive Summary continuing shareholders.
or as part of the full report.

Governance Report
Annual Report 2016
Financial Report
Annual Report 2016
OUR VISION
To be the most differentiated and valuable global
agri-business by 2040.

Governance Financial
Report Report

These are available to download at olamgroup.com/investor-relations

along with additional information or can be requested in print
from [email protected].

Cover image
Harvesting wheat for our dairy herd, Russia. 1
Employees includes full-time, seasonal, contract and temporary workers.
Group CEO perspective

PROGRESS IN A YEAR OF
UNPRECEDENTED GLOBAL CHANGE
2016 was an exceptional year. The ascent of populism, waning of the forces of
globalisation, continued sub-par global growth, monetary policy exhaustion and
the digital revolution presented many challenges for businesses to navigate.
These challenges underscored the need for businesses to stay the course with a
clear and focused strategy, while at the same time acting on their capacity to
rapidly adapt and remain relevant in times of such unprecedented and unexpected
change. I believe Olam achieved this difficult and delicate balance in 2016.
We responded to these challenges by sharpening our focus and strengthening our
efforts to accelerate the delivery of value to our shareholders. We made specific
investment choices and capital allocation decisions in 2016 that will shape our
future and ensure our continuing success. To this end, we continued expansion of
our operational footprint – further growing our upstream plantation investments
in almonds, coffee, palm and rubber and making new plantation investments in
adjacent businesses such as pistachios, walnuts and black pepper.
p16
ECONOMIC

CONTENTS:
18 Group COO’s review
24 Edible Nuts, Spices and Vegetable Ingredients
26 Confectionery and Beverage Ingredients
28 Food Staples and Packaged Foods
30 Industrial Raw Materials, Ag Logistics and Infrastructure
31 Commodity Financial Services
32 Value chain review and analysis
36 Principal risks and uncertainties

p38
SOCIAL
We rely on our people to grow our business
responsibly. Our operations impact communities
around the world. We strive to ensure that
impact is positive for the long-term.

CONTENTS:
42 Livelihoods
48 Labour
56 Food security and nutrition
60 Food safety and quality

Sunny Verghese
Co-Founder and Group CEO
p64
ENVIRONMENT
Perhaps more than any other sector, agriculture faces
huge environmental challenges that are interlocked and
complex. At a global scale, our operations and those of
our suppliers are at risk of climate change, poor soil
quality, and water scarcity, which in turn impact on global
food security.

CONTENTS:
68 Land
74 Water
80 Climate change

olamgroup.com 1
Overview

Group CEO perspective

“Our theme, ‘Maximising We made a significant commitment

to enter the animal feeds business in
Cocoa, Coffee, Grains, Spices and
Vegetable Ingredients (SVI) and Cotton.
Value and Purpose’, Africa. We successfully integrated
transformational and strategic
In this cluster, we continued to build
leadership positions in these priority
reflects the need to acquisitions such as the erstwhile businesses. During 2016, 4 of our 6
ADM Cocoa business, McCleskey Mills, business units in this cluster – Edible
balance being both Brooks Peanut Company and the Nuts, Coffee, Cocoa and Grains –
a value creating wheat milling and pasta assets from
the BUA Group during the course of
performed strongly from a financial
standpoint while at the same time
and purpose-driven the year. With this, we demonstrated
our ability to manage our business
improving their competitive and
leadership positions in these markets.
business concurrently in-line with our strategy and with these SVI and Cotton also improved their

in order to build an wider global trends and challenges

shaping the world we all live in.
competitive position but did not achieve
their financial performance goals, with
enduring and In many ways, this year’s Annual underperformance in our United States
tomato processing business affecting
Report is an extension of these trends,
sustainable business.” representative of the need to provide SVI, and underperformance in our
consistent transparency, while United States cotton operations affecting
engaging with and delivering our Cotton business.
information and insight to an Cluster 2
ever-broadening and important Our Cluster 2 businesses, (Edible Oils,
community of stakeholders. Rubber, Dairy, Packaged Foods and
This year our Annual Report narrative Commodity Financial Services), which
combines all 3 aspects of our include mostly gestating assets where
economic performance, our people we are establishing proof-of-concept
and social impact, as well as our and selectively scaling, continued to
environmental stewardship into 1 move towards becoming value
‘book’, providing insight into elements contributing. Our Dairy business moved
of our business important to our decisively forward with a significant
stakeholders. Our theme, ‘Maximising reduction in losses in our Uruguay Dairy
Value and Purpose’, reflects the need farming operations, material
to balance being both a value creating improvement in our Russian farming
and purpose-driven business operations and strong out performance
concurrently in order to build an in the supply chain segment of our
enduring and sustainable business. Dairy business.
Cluster 3
Business performance
For Cluster 3 (Rice, Wood Products and
While it was a tough year for the Sugar), where we seek to remain asset
agri-sector as a whole and our light and maximise returns, Sugar and
performance did not meet our goals in Rice performed exceedingly well, while
some respects, Olam performed well there was some underperformance in
relative to many of our industry peers. our Wood Products business, even
We made good progress as we though that business was profitable.
executed our plans in the first year of
our refreshed 3-year strategic plan Cluster 4
(FY16-FY18). In Cluster 4 which includes Fertilisers
As explained in my CEO Review last and Gabon Special Economic Zone
year, we strategically prioritise our (GSEZ), where we are working to
portfolio into 4 clusters, with each partially sell down our stakes or
cluster having a set of common monetise select assets, GSEZ
business imperatives. In addition, we exceeded expectations for the year.
also prioritise and treat Africa as a We continue to engage with potential
separate vertical with a special focus, strategic partners with a view to
given our Africa footprint and operating deconsolidate our Fertiliser business.
capability which is unique in Africa
our industry. Africa made a strong contribution to our
Cluster 1 overall performance for the year with
Our Cluster 1 businesses comprise broad based performance from all
6 platforms, including Edible Nuts, sub-regions where we are present,
including West Africa, Central Africa,

2 Olam International Limited Annual Report 2016

South and East Africa, as well as Strengthening this Core is akin to research, built new product development
Middle East and North Africa. Cocoa, strengthening the core of your body – capabilities and distribution capabilities
Coffee, Cotton, Edible Nuts and Grains the central set of muscles that helps a in terms of reach, effectiveness and
businesses in Africa all performed body maintain its power, balance and cost. Similarly, in the Commodity
better than plan in posting these record overall health. This has helped us build Financial Services business, we are
results from the region. This vindicates leadership positions in our core building asset management capabilities
the special emphasis that we have business over time, and in 2016 we and investing in developing third-party
placed on Africa and reflects our have continued to strengthen this Core. fund raising capabilities for the future.
‘winability’ there. In the last few years, we have We have also decided to selectively
A detailed performance review and analysis can expanded from this Core into New invest in Ag Logistics, including elevation
be found on pages 18-35.
Cores in adjacent markets and value and port facilities in Russia, Ukraine and
Strategy review chain steps including selective Gabon as this is an enabler to our core
expansion into upstream plantations business of trading and supply chain
Our strategy rests on the power of a
and farming, selective downstream management. In many of these cases
repeatable model centred around a
expansion into branded Packaged we provide the base/captive load to
strong core business, namely, supply
Foods business and entry into the keep these facilities utilised given our
chain management of agricultural raw
Commodity Financial Services own trading volumes in these locations.
materials and ingredients built around
business. In each case we have Over the course of 2016, we became
deep capabilities that include farmgate
leveraged some of the key capabilities acutely aware of how digital
sourcing and origination capability,
in our core business while adding technologies are fundamentally
deep customer relationships, strong
specific new capabilities that are transforming the way we farm, live, work
research and trading capability,
required for us to succeed in the New and consume. Digital is changing not
manufacturing capability, inland and
Cores that we are developing for the only the way that we operate as
marine logistics capability, robust risk
future. For example, in the upstream companies, but also significantly
management skills, cost management
expansion, we are investing to develop changing the way we interact with our
and operational excellence capability,
world class farming capabilities and service providers, farmer suppliers,
African footprint and operating
being a leader in sustainability, customers, communities, civil society
capability and a unique entrepreneurial
including environmental and social and our employees. We have paid
culture. We have continuously
stewardship. In the downstream particular attention to developments in
deepened, refined and adapted these
Packaged Foods business, we have this area and set up a ‘Digitalising Olam’
capabilities over time and combined it
invested in building new capabilities in Task Force (DTF) to enable us to seize
in our business model in a way that has
brand building and category the opportunities that this presents.
allowed us to repeat this over and over,
management, developed deep We are evaluating 8 initiatives including
from 1 product (cashew) to now 47
customer insights through market a Farmer Services platform, Customer
products over the last 27 years.

Our ‘Current Core’ and Future ‘New Cores’

Supply Chain and Selective Midstream
Global origination and sourcing, Primary and value added processing,
Inland and marine logistics, Merchandising, Trading,
Value-added solutions and services,
Risk Management

Selective Upstream Selective Downstream

Perennial tree crops, Branded consumer
Broadacre row crops, New Core #1 New Core #2 products and distribution
Dairy farming, Selective Packaged Foods business
Forest concessions Selective (PFB, Africa)
Downstream
Upstream
(PFB, Africa)

Core
Supply Chain
and Selective
Midstream

New Core #3
Digitising Olam: New Core #4 Commodity Commodity
Digital Financial Services
Farmer services platform, customer
(CFS)
Financial Services:
services platform, supply chain
platform, sustainability platform, farm Asset/Fund Management,
of the future, factory of the future Market Making,
Volatility Trading and
Risk Management Solutions

olamgroup.com 3
Overview

CEO Perspective

Aligning the organisation to execute our strategy

Vertical Assets Horizontal Assets Diagonal Assets

and Capabilities and Capabilities and Capabilities
Driven at the BU level Shared by Glue that secures
• Deep product all businesses µ2QH&RPSDQ\¶EHQH¿WV
knowledge • Strategic planning • Intangibles
• Deep market insights • Risk management skills (shared purpose,
• Strong presence in • Talent management governing objective,
critical origins capabilities vision, spirit,
culture, values)
• Strong supplier and • Treasury and Financing
customer relationships capabilities • Tangibles
(Global Assignee
• IT Talent Pool, common
• Shared services operating procedures,
common performance
management processes)

Services platform, Supply Chain of the same language and processes, we At Olam, we believe increasingly, it is
Future, Farm of the Future, Factory of are able to develop state of the art the companies that are clear about their
the Future, Trading of the Future, capability on these common processes purpose that will be successful in the
Sustainability platform and Farm across the businesses creating future. Our purpose of Growing
Management Services. Five prototypes ‘horizontal value’. This frees up the Responsibly inspires everything that we
are under development and we are business teams to focus on their core do at Olam. Growing Responsibly
excited with the opportunities that activities with regard to managing their underpins the fact that we are clearer
these initiatives represent in upstream farming investments, their than ever that Olam must be both a
transforming our business and core supply chain and trading ‘value maximiser’ and a ‘purpose
potentially disrupting our industry. business, and dealing with their maximiser’ at the same time. We do not
Through these initiatives, we want to customers where the business units see these 2 objectives as being in
create a ‘digital first’ culture in Olam. can clearly add more value. conflict with each other and is therefore
not an ‘either’, ‘or’ but a ‘both’ choice
Aligning our organisation to execute our Our third objective is to create
for us.
strategy ‘diagonal value’ that helps us extract
Given this strategy, we have designed ‘One Company’ benefits and which We are seeing businesses starting
an organisational model that will allows us to act as both a single to shift from the dominant model of
enhance our capacity to execute this company and different businesses at the last 50 years that focused on the
strategy. This is best understood the same time. Diagonal assets help primacy of the shareholder and
against the backdrop of various kinds vertical assets create horizontal value therefore focused on shareholder value
of assets and capabilities that our and help horizontal assets create maximisation. While that will continue
business has and the specific value vertical value. The various elements of to remain an important deliverable
they create. In this regard, our first the ‘Olam Way’, including our shared going forward, we also need to
objective is to ensure that we improve core purpose, shared governing pursue a concurrent purpose-driven
the performance of our business units objective, our shared vision, our shared model emphasising social and
and increase their ‘vertical value’. For spirit, our shared culture and values, environmental stewardship that will
example, our farmgate procurement and our core competencies, provide enable us to create an enduring
network and deep customer the glue that allows us to extract ‘One and sustainable business.
relationships are vertical assets. Company’ benefits where the whole is We have always balanced investing
greater than the sum of the parts. for the long-term while delivering
Our second objective is to design an
organisation that will help us create on our short-term commitments to
Our purpose is our enduring focus continue to earn the right to grow.
‘horizontal value’ through shared
The macro changes that the world is To this end, we have successfully
services, including Strategic Planning
experiencing including the emergence realigned our shareholder base with
and Budgeting, HR, Finance and
of a post-globalisation era, potential shareholders who understand and
Accounts, Treasury, Investor Relations,
challenges to free trade and open support our long-term strategy,
Company Secretarial Services,
markets, accelerating geo-political notably with Temasek Holdings
Legal, M&A, Risk, Internal Audit and
uncertainty and continued capital and Mitsubishi Corporation as our
Compliance, Market Compliance,
superabundance have long-term 2 major shareholders.
Manufacturing and Technical Services,
implications for how businesses are led,
IT, Corporate Responsibility and Olam touches people’s lives every
organised, managed and financed
Sustainability, Tax and Corporate day from our customers and the
going forward.
Communications. By ‘commonising’ consumers who use our products
and ‘standardisation’, adopting the to the communities where we live and

4 Olam International Limited Annual Report 2016

work, and the interface with the natural Food Safety (see page 6 for how these resulting in a reduction of total number
environment as we produce or source relate to our goals and policies). These of OLC farmers compared to 2015.
our various agricultural commodities. are fundamental to our vision of Nevertheless, the training and
For example, we believe that 1 in 3 achieving end-to-end sustainable investments made into their
chocolate bars that people consume supply chains by 2020, for which we communities have equipped the exiting
are made from cocoa beans handled have laid out clear, time bound goals. OLC farmers to progress with their
by Olam, the amount of peanuts Reviewing our progress in 2016, we new buyers.
sourced and processed by Olam could have continued to improve our safety We continue to pursue and adopt
serve 7.6 billion peanut butter record and our carbon and water international certification standards
sandwiches, we harvest and process footprints, while the Olam Farmer where available, such as FSC1 and
enough tomatoes to top 3.2 billion Information System is providing RSPO2, while also strengthening our
pizzas annually, and the quantity of rice unparalleled insights into the internal policies, standards and codes
supplied by Olam could feed each smallholder landscape which means with input from our stakeholders. This
person in the world with 3 servings. we can target our interventions with this year, for example, we are launching
Our carbon footprint, water footprint group all the more efficiently. In turn, our Global Forest Policy. We engaged
and waste footprint in providing these this is helping to create an increasing in a constructive dialogue with an
goods and services is something that number of enduring partnerships with NGO on our Palm and Rubber
we are concerned about and we are customers, NGOs, development plantation operations in Gabon and our
focused on improving their efficiency. In finance institutions and donors under third-party palm oil sourcing in Asia
this regard, our sustainability strategy the Olam Livelihood Charter (OLC) and reached an agreement that
is fully aligned with the United Nations programme as we pursue our mutual bridged our differing positions on
Sustainable Development Goals goal of catalysing farmer livelihoods by these operations.
(SDGs) which set out a vision for improving their crop yields and quality
ending poverty, hunger, inequality and Working with our peers
of the crops produced. We accomplish
protecting the earth’s natural this by providing farmers better market Even in a highly competitive sector like
resources. These SDGs provide us with access, micro-finance, farm inputs and ours, we have always felt that ambitious
a framework and guide our actions so extension training. All of these sustainability goals to tackle the major
that we can participate in creating a initiatives help farmers, particularly the developmental challenges that confront
better world that we all aspire to. younger generation, see agriculture as our sector cannot be achieved by
Focusing on issues that matter most a viable career. There has been some operating in siloes or on our own. I am
churn in the number of farmers encouraged that so many of our peers
With this in mind, in 2016 we continued share this belief. At Olam’s Building
to drive our approach to sustainability participating in our OLC programme in
2016. Thousands of new farmers Sustainable Futures Forum in 2016, the
by focusing on 7 material areas: ground-breaking Global Agri-
Livelihoods, Land, Water, Climate joined the OLC this year, while some
others are no longer in our programme, business Alliance (GAA) was
Change, Labour, Food Security and launched. This pre-competitive,
voluntary, CEO-led private sector
initiative demonstrates a growing
commitment to establish collaboration
and partnerships to help solve the
seemingly intractable problems facing
our sector including food and nutrition
insecurity, water scarcity, impact of
climate change and growing inclusively
within planetary boundaries. While the
enormity of these challenges cannot
be underestimated, this industry-wide
effort to solve them will hopefully result
in making a significant impact in
tackling these major developmental
challenges. It will also offer
considerable new opportunities to
companies, not just in terms of
enhancing customer stickiness as they
look to us to help solve their supply
chain issues and protect their
reputations, but also unlock new
streams of income. The recent report
of the Business and Sustainable
Development Commission (BSDC)
Olam Farmer Information System manages the first mile of the Olam’s supply chain, giving unparalleled insight released in January 2017, highlighted
and transparency.

olamgroup.com 5
Overview

CEO Perspective
Our material areas
The table below shows how our material areas and goals are embraced by a framework built on policies which then drive
our standards, procedures and technical controls.

HOW ARE WE GROWING RESPONSIBLY?

Sustainability goals

Material areas Social Environment

Food Food
Climate
Livelihoods Labour Security and Safety and Land Water
Change
Nutrition Quality
page 42 page 48 page 56 page 60 page 68 page 74 page 80

Pledge Supporting Providing a safe Improving Improving food Selecting and Responsible use Adapting to
thriving workplace access to safety and managing of water for our climate risks
communities where affordable food quality across land responsibly own needs and
everyone’s our business without opportunities for
rights impacting the Olam and
are respected needs of others communities

Goals Goal 1: Goal 3: Goal 5: Goal 6: Goal 7: Goal 8: Goal 9:

Economic Zero-harm Food security Safe and Sustainable Sustainable Reduced
opportunity workplace and nutrition reliable foods for development water use GHG emissions
and inclusion our customers and use of
land-based
ecosystems

Goal 2: Goal 4: Goal 10:

Good health Respect for Increased
and well-being workers’ rights resilience to
climate-
related risks

Policies
Health
and Safety
Quality and
Environment
Food Safety
Human
Resources1

Standards

Farmers
Olam Livelihood Charter

Plantations
Olam Plantations, Concessions and Farms Code

Suppliers
Supplier Code Supplier Code

Factories
and worksites QEHS 2 QEHS 2
Standards Standards

Delivering
through Customers, Investors, Farmers, Donors/Foundations, NGOs, Governments, Industry Associations
partnerships

1
In progress.
2
Quality, Environment, Health and Safety.
6 Olam International Limited Annual Report 2016
Note: the goals have been renumbered in 2016.
that addressing these sustainability
challenges could potentially generate
down our stakes in our Cluster 4
businesses while Africa will continue to
“Addressing these
significant economic opportunities for
enlightened businesses, possibly
remain as a separate vertical focus. sustainability
adding as much as US$12 trillion to the
We will continue to live and
demonstrate Olam’s 3 key brand values challenges could
global economy. of being an unrivalled expert, a change
agent and transformer, and finally a
potentially generate
People are our differentiator
The year in review demonstrated again
trusted partner in our industry. We significant economic
believe focus on these elements
that we have an extraordinary and remains crucial to our success in a opportunities for
dedicated team at Olam, across the
breadth and depth of our businesses
world where change is a constant.
enlightened businesses,
around the world. Retaining and
attracting the best talent remains a
Chairman transition possibly adding as
Mr Kwa Chong Seng stepped down
priority. Our talent development from Olam’s Board as its Non-Executive much as US$12 trillion
programme and the introduction of our
Aspire performance management
Chairman and Independent Director on
31 December 2016. Chong Seng’s
to the global economy.”
system – saw us take the bold step of tenure, first as Deputy Chairman from
removing employee ratings entirely to October 2014, and then as Chairman
focus on the appraisee’s development from October 2015 made a deep
by ensuring a rewarding and engaging impact on Olam’s strategy and
workplace – are helping us to build business. During this period, he played
essential skills across our teams. We a critical role in forging the strategic
are focusing on managers having partnership with Mitsubishi Corporation
‘continuing conversations’ that are which is expected to accelerate Olam’s
‘future focused’ with their team growth. He also oversaw several
members for developing their organic and inorganic growth initiatives
capabilities and creating the basis for that helped Olam to build market
their retention and long-term leading positions in its prioritised
career planning. platforms. On behalf of Olam’s Board
In 2016, we further strengthened the and Management Team I would like
functions that create the horizontal to express our deepest gratitude
value that help unify each of our to Chong Seng for his stewardship,
vertical businesses. The ‘Olam Way’, guidance and motivation of the Board
our culture, values and purpose also and the Management Team during
create ‘diagonal assets’ that bind these his tenure.
vertical and horizontal assets together. I I am also pleased to welcome Mr Lim
firmly believe we are now at a point Ah Doo as our new Non-Executive
where we can proudly say that we have Chairman and Independent Director
built a unique organisation that not only with effect from 1 January 2017.
supports but also enhances our Ah Doo has extensive experience
delivery of our business and in banking, natural resources,
sustainability objectives. infrastructure development and
emerging markets from both a banker
The year ahead and operator standpoints. His deep
In 2017 we will be entering the second knowledge, insights and proven
year of our 3-year strategic plan. leadership will undoubtedly benefit
We continue to see significant Olam. The Board and I are delighted to
opportunities for profitable growth have Ah Doo on board to lead Olam
in the agri-sector despite ongoing through its next phase of growth.
volatility. The major themes and
priorities for our business will not
change significantly in the coming year.
We will continue to invest in building
leadership positions in our 6 prioritised
platforms in Cluster 1, establish
proof-of-concept and selectively scale
our Cluster 2 businesses, remain asset
light and maximise returns in our
Cluster 3 businesses and partially sell Sunny Verghese 1
FSC – Forest Stewardship Council
Co-Founder and Group CEO 2
Roundtable on Sustainable Palm Oil

olamgroup.com 7
Overview

Highlights

FINANCIAL AND PERFORMANCE

HIGHLIGHTS
Volume Sales volume by segment Sourcing volume by region
’000 MT
(‘000 Metric Tonnes) (‘000 Metric Tonnes)
10.9%
Edible Nuts, Spices and 24.7%
11.5%
Vegetable Ingredients 1,569.7
Confectionery and 29.4%
Beverage Ingredients 1,687.5 11.7%

Food Staples and

Packaged Foods 9,496.1
Industrial Raw Materials, 14,415.8 14,415.8
Ag Logistics and Infrastructure 1,662.5 (2015: 12,506.7) (2015: 12,506.7)

Asia, Australia and Middle East 29.4% 27.4%

Africa 18.6%
Europe 27.4% 65.9% 18.6%

Americas 24.7%

Revenue Sales revenue by segment Sales revenue by region

S$ million
(S$ million) (S$ million)
Edible Nuts, Spices and 13.5%
Vegetable Ingredients 3,981.1 23.0%
19.3% 32.8%
Confectionery and
Beverage Ingredients 7,711.0
Food Staples and
Packaged Foods 6,110.8
Industrial Raw Materials, 20,587.0 20,587.0
Ag Logistics and Infrastructure 2,784.1 (2015: 19,052.6) (2015: 19,052.6)

Asia, Australia and Middle East 32.8%

29.7%
Africa 15.9% 28.3%
37.5% 15.9%
Europe 28.3%
Americas 23.0%

Invested capital and EBITDA Invested capital and EBITDA Invested capital and EBITDA
by business segment by value chain segment
(S$ million) Invested (S$ million) (S$ million)
capital EBITDA
Edible Nuts, Spices and 100 (%) 16,649.0 1,202.8 100 (%) 16,649.0 1,202.8
Vegetable Ingredients 3,642.7 331.8
Confectionery and 80 80
Beverage Ingredients 6,109.5 407.3
Food Staples and 60 60
Packaged Foods 4,522.1 330.2
Industrial Raw Materials, 40 40
Ag Logistics and
Infrastructure 2,220.9 135.2
20 20
Commodity Financial
Services 153.8 (1.6)
0 0

Upstream 3,764.2 79.2 Invested EBITDA Invested EBITDA

capital capital
Supply chain 6,537.7 503.5
Midstream and downstream 6,347.1 620.1

8 Olam International Limited Annual Report 2016

For the 12 months ended 31 December (S$ million)
2015
2016 Restated % Change
3UR¿WDQG/RVV6WDWHPHQW
Sales Volume (’000 Metric Tonnes) 14,415.8 12,506.7 15.3
Sales Revenue 20,587.0 19,052.6 8.1
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) 1 1,202.8 1,085.2 10.8
Earnings Before Interest and Tax (EBIT) 1 849.3 818.6 3.8
Profit Before Tax 1 433.4 (27.3) N.M.
Profit After Tax and Minority Interest 351.3 (114.9) N.M.
Operational Profit After Tax and Minority Interest 1 363.8 295.6 23.1
Per Share
Earnings Per Share basic (cents) 11.5 (5.2) N.M.
Operational Earnings Per Share basic (cents) 1 11.5 11.0 4.9
Net Asset Value Per Share (cents) 190.8 179.7 6.2
Net Dividend Per Share (cents) 2 6.0 6.0 –
Balance Sheet
Total Assets 23,468.9 20,854.9 12.5
Total Invested Capital 16,649.0 14,374.7 15.8
Total Debt 13,670.5 12,293.9 11.2
Cash and Cash Equivalents 2,144.0 2,143.2 –
Shareholders’ Equity 5,398.3 5,079.1 6.3
Cash Flow
Operating Cash Flow Before Interest and Tax 1,243.5 1,150.8 8.1
Net Operating Cash Flow After Changes in Working Capital and Tax 1,015.8 154.9 555.8
Free Cash Flow to Firm (418.1) (2,062.6) (79.7)
Free Cash Flow to Equity (765.8) (2,540.9) (69.9)
Ratios
Net Debt to Equity (times) 3 1.99 1.96 0.03
Net Debt to Equity (times) adjusted for liquid assets 3 0.73 0.73 –
Return on Beginning-of-period Equity (%) 6.1 (3.0) N.M.
Return on Average Equity (%) 5.8 (2.8) N.M.
Return on Invested Capital (%) 4.0 3.0 1.0
EBITDA on Average Invested Capital (%) 7.8 8.4 (0.6)
Interest Coverage (times) 4 2.0 1.0 1.0

Note: The results for 2015 have been restated due to changes to accounting standards pertaining to Agriculture (SFRS 41) and Property, Plant and Equipment
(SFRS 16) that came into effect from 1 January 2016. Please refer to the General Information on page 86 for details.
1. Excludes exceptional items.
2. Total dividend of 6.0 cents per share for 2015 was declared for the 18-month fiscal year 2015 from 1 July 2014 to 31 December 2015. Proposed final dividend
of 3.0 cents for 2016 is subject to shareholders’ approval at the 22nd Annual General Meeting.
3. Before Fair Value Adjustment Reserves.
4. EBIT on total interest expense.

olamgroup.com 9
Overview

Highlights

Sales volume Earnings Before Interest, Tax, Profit After Tax and Minority Interest
(‘000 Metric Tonnes) Depreciation and Amortisation (S$ million)
(S$ million)

16,000 15,542.1 1,500 600 597.2

13,924.5 14,021.9 14,415.8 500

12,506.7 1,200 1,199.9 1,129.0 1,202.8
12,000 400 405.5
1,062.9 1,085.2
345.8 351.3
900 300

8,000 200
600 100

4,000 0
300
-100

0 0 -200 (114.9)
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated Restated Restated
1,650.3 1,657.7 1,527.2 1,549.2 1,569.7 308.5 346.7 360.5 393.5 331.8
1,580.1 1,592.8 1,437.1 1,689.5 1,687.5 322.6 268.5 275.6 284.0 407.3
8,920.4 10,450.7 9,356.4 7,904.9 9,496.1 296.0 378.2 295.2 212.1 330.2
1,773.7 1,840.9 1,701.2 1,363.1 1,662.5 143.5 218.6 215.6 185.1 135.2
(7.7) (12.1) (17.9) 10.6 (1.6)

Sales revenue Invested capital Operational Profit After Tax

(S$ million) (S$ million) and Minority Interest
(S$ million)

25,000 20,000 400

372.0 363.8
17,500 16,649.0 350 343.9
20,587.0
20,000 18,966.8 20,040.0 19,771.9 19,052.6
15,000 14,374.7 300 294.3 295.6

15,000 12,500 11,412.2 11,560.7 250

10,865.6
10,000 200
10,000 7,500 150

5,000 100
5,000
2,500 50

0 0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated Restated Restated
2,764.8 3,465.0 3,692.3 4,227.2 3,981.1 3,049.2 3,610.0 3,363.6 3,463.0 3,642.7 Operational Profit After Tax and Minority Interest is Profit
5,363.2 4,968.0 5,721.8 6,859.6 7,711.0 1,913.9 2,346.6 3,246.9 5,680.9 6,109.5 After Tax and Minority Interest excluding exceptional items
6,311.8 7,406.1 7,187.3 5,391.2 6,110.8 3,691.3 3,612.8 3,075.1 3,230.6 4,522.1
4,525.6 4,199.5 3,170.6 2,574.6 2,784.1 2,193.9 1,839.4 1,872.0 1,917.5 2,220.9
1.4 1.4 (0.1) 0.0 0.0 17.4 3.4 3.2 82.6 153.8

10 Olam International Limited Annual Report 2016

 Key
Edible Nuts, Spices and Vegetable Ingredients
Confectionery and Beverage Ingredients
Food Staples and Packaged Foods
Industrial Raw Materials, Ag Logistics and Infrastructure
Commodity Financial Services

Earnings Per Share Return On Equity Number of customers

(cents) (%)

25 24.0 18 24,000 22,900

20 15 15.2
20,000
15 16.1 13.7 12 12.0
16,000 16,200
14.7 11.5 9.3
10 13.6 11.0 9 11.0 13,800
13,600
11.5 9.3 12,000 12,300
5 11.5 6 6.5 6.4
7.2
8,000
0 3 6.1

-5 0 4,000
(5.2)
-10 -3 (3.0) 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated Restated Restated
Earnings Per Share (cents) Return on Beginning-of-period equity Figures for 2012-2014 are computed based on 30 June
Operational Earnings Per Share (cents) Return on Beginning-of-period equity excluding year-end basis
exceptional items

Shareholders’ equity Net asset value per share Top 25 customers’ share
(S$ million) (cents) of total sales revenue
(%)

5,500 5,398.3 200 25 23.7

190.8 23.0
5,079.1 21.0
5,000 180 179.7 20

167.3 17.0
4,500 160 153.9 15
13.0
4,167.4
4,000 140 141.3 10
3,759.7
3,500 3,452.3 120 5

3,000 100 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated Restated Restated
Figures for 2012-2014 are computed based on 30 June
year-end basis

olamgroup.com 11
Overview

Highlights

2016 SOCIAL AND

ENVIRONMENTAL HIGHLIGHTS
Olam endeavours to generate economic prosperity, contribute positively to social
welfare and manage our stewardship of the environment in a sustainable way,
so as to assure the creation of real long-term value for all.

Our Guiding Principles “For anyone investing in the agricultural

• Improve the livelihoods of farmers sector, understanding the social and
and communities through initiatives environmental aspects of the business
that enhance productivity is fundamental – Olam’s activities
and returns. depend on the quality of soil, the
availability of water, and dedication of
• Unlock mutual value with all of our
people to grow, harvest and process
stakeholders through collaboration.
crops. How we strive to mitigate our
• Understand and mitigate our footprint on the environment is a matter 32,954 new farmers in 9
environmental footprint.
• Ensure a safe, healthy and
of keen interest on the part of many countries registered on Olam
stakeholder groups while also being a
productive workplace for our people. direct reflection of how we conceive Farmer Information System
• Participate in professional our corporate responsibilities. to bring the total to more
associations to further develop Combining sustainability reporting with
our key goals. business performance in the Annual than 65,000 farmers across
Report is thus an important step. We 13 countries
hope it will help all stakeholders
Read more in the Livelihoods
to obtain a holistic view of our section of this report
business, showing just how far the
Olam teams go to drive change and
grow responsibly. to transform communities and build
partnerships. The Board’s CR&S
“Our Corporate Responsibility and Committee meets quarterly to review
Sustainability (CR&S) agenda is how our thematic agenda is being
organised around several major implemented across Business Units
themes, including land management, around the world with the paramount
labour and community development objective of developing a sustainable
issues. In 2016, Olam’s Board of business for investors and stakeholders
Directors visited Nigeria. This gave the alike. We remain cognisant, however, of
Board an excellent opportunity to see operating in less than perfect social
how our objective of growing and regulatory environments. Provision
responsibly is being translated on the of health and education services to
ground into specific initiatives designed local populations is occasionally
lacking. In some places, the regulation
of access to public commodities, such
as water, remains deficient.
The challenge for Olam is to identify
ways to help mitigate these issues and
ensure the sustainability of our
business.”
Jean-Paul Pinard
Chair of the CR&S Board Committee

12 Olam International Limited Annual Report 2016

 Lost Time Injury 92 entries received 82% relevant top tier
Frequency Rate reduced by for the Olam Prize for food processing
30% following 50% Innovation in Food Security facilities certified
reduction in 2015 BRC / FSSC 22000

Read more in the Labour Read more in the Food security and nutrition Read more in the Food safety and quality
section of this report section of this report section of this report

Over 30 partnerships to 190,000 people in Over 26 billion

improve the livelihoods of Africa reached under servings of fortified
more than 300,000 farmers the Olam Healthy food developed in Africa
under the Olam Livelihood Living Campaign
Charter (OLC)
Read more in the Livelihoods Read more in the Livelihoods Read more in the Food security and nutrition
section of this report section of this report section of this report

29% Improvement on 31% Improvement on Launch of the Global

our FY15 carbon footprint our FY15 Irrigation and Agri-business Alliance
from Olam’s own operations Process Water intensity at the Building Sustainable
for Olam’s own operations Futures Forum convened
by Olam
Read more in the Climate change Read more in the Water Read more in the Food security and nutrition
section of this report section of this report section of this report

olamgroup.com 13
Overview

Business model

WHERE WE PARTICIPATE AND HOW WE WIN

Value chain Selective upstream Supply chain
• Perennial tree crops • Global origination and sourcing
• Broadacre row crops • Primary processing
• Dairy farming • Inland and marine logistics
• Forest concessions • Merchandising

Smallholder farmers
0,//,21

Outgrower programme
Buying agents

Olam-managed
plantations, concessions
and farms Sourced raw
0,//,21
Where we participate

Products: almond, HECTARES materials in 2016

coffee, cocoa, dairy,
palm, peanut, pepper,
pistachio, rice, rubber, Investment in
walnut and wood agri-research 14.4
0,//,21
MT

Large-scale
farmer suppliers 36,600

Product platforms
Edible Nuts, Spices and Edible Nuts
Vegetable Ingredients Spices and Vegetable Ingredients

Confectionery and Cocoa

Beverage Ingredients Coffee

Food Staples and Dairy

Packaged Foods Grains and Animal Feed
Edible Oils
Rice
Sugar and Sweeteners

Industrial Raw Materials, Cotton

Ag Logistics and Wood Products

Infrastructure Rubber
Fertiliser

Commodity Risk Management Solutions

Financial Services Market-Making, Volatility Trading and Asset Management
Trade and Structured Finance

At the grower end, we ‘out-origin’ our competition by

Strategy Competitive buying from the lowest level of aggregation possible.
At the customer end, we offer value added solutions and
strategy VHUYLFHVLQFOXGLQJWUDFHDELOLW\FHUWL¿HGUDZPDWHULDOV
The pathway to achieving our vision risk management solutions, vendor managed inventory
How we win

solutions etc.

Core We have built distinctive capabilities in 4 areas:

1. Business Specific skills (Origination, Trading, Processing and Logistics).
competencies
2. Growth Enabling skills (Talent Management, M&A1, Risk Management and Capital Raising)

People We attract and retain talented individuals whom we engage and inspire.

1 2
Mergers and Acquisitions. GSEZ including ports and infrastructure.

14 Olam International Limited Annual Report 2016

 Selective mid/downstream
• Trading • Value-added/manufacturing
• Value-added solutions • Branding and distribution (Africa)
• Risk management

Primary processing Food safety, quality

plants in origin assurance, research and
development and recipe
development

Value created
3/$176

Sales and 3/$176

marketing, trading
Secondary processing plants in origin
or closer to the customer

Risk management and

value-added services

Packaged foods manufactured and

marketed to consumers across
multiple African countries

Packaged Foods

Gabon Special Economic Zone2

We focus on building leadership positions We grow market share in our

Portfolio in niche commodities. We selectively Growth core business and then expand
integrate across the agricultural value into adjacent businesses that
strategy chain, including upstream, supply chain strategy share customers, channels,
Core, mid-stream and down-stream with costs and capabilities with our
a special emphasis on Africa. existing business.

3. Privileged Assets and Networks (Sourcing Network, Customer Network)

See our highlights
on pages 8 to 13

4. Stakeholder Management capability

They live our values, are passionate, responsive, reliable, ambitious,

pioneering and innovative – creating a true source of competitive advantage for Olam.

olamgroup.com 15
ECONOMIC
CONTENTS:
18 Group COO’s review
24 Edible Nuts, Spices and Vegetable Ingredients
26 Confectionery and Beverage Ingredients
28 Food Staples and Packaged Foods
30 Industrial Raw Materials, Ag Logistics and Infrastructure
31 Commodity Financial Services
32 Value chain review and analysis
36 Principal risks and uncertainties
Economic

Group COO’s review

STEADY PROGRESS IN 2016 ON IMPROVED

OPERATIONAL PERFORMANCE AND
STRONG STRATEGY EXECUTION

Key highlights
Financial performance
In 2016, Olam achieved a PATMI of
S$351.3 million as against a negative
S$114.9 million in the previous year,
primarily due to improved operational
performance and the absence of the
exceptional losses that we had in 2015.
The exceptional losses in 2015 had
come largely from fair value losses on
our equity investment in PureCircle,
which was due to a conservative
interpretation of an accounting
treatment, with no change to total
equity (including reserves) or cash flow.
The remaining portion of the
exceptional losses was a result of
deliberate actions to optimise
operations for future growth, including
the buy-back of higher cost debt and
restructuring cost for the Dairy
operations in Uruguay. The buy-back of
higher cost debt, which was part of our
debt optimisation efforts that continued
into 2016, resulted in a net exceptional
loss of S$12.5 million for this year.
Stripping out these exceptional items,
operational PATMI showed a strong
23.1% year-on-year growth to
S$363.8 million, compared with
S$295.6 million in 2015.

A. Shekhar,
Executive Director and Group COO

18 Olam International Limited Annual Report 2016

S$ million 2016
2015
Restated % Change “Strong growth from
Volume (’000 MT)
Revenue
14,415.8
20,587.0
12,506.7
19,052.6
15.3
8.1
the Confectionery and
Net gain/(loss) in fair value of biological assets
EBITDA
14.1
1,202.8
(51.9)
1,085.2
N.M.
10.8
Beverage Ingredients
Depreciation and amortisation
Net finance costs
(353.5)
(403.5)
(266.6)
(448.9)
32.6
(10.1)
and Food Staples
Taxation (94.3) (89.3) 5.6 and Packaged Foods
Exceptional items
PAT
(12.5)
339.1
(397.0)
(116.6)
N.M.
N.M. segments
PATMI
Operational PATMI
351.3
363.8
(114.9)
295.6
10
23.1
demonstrates that our
Note: Results are for the 12-month financial period ended 31 December. strategy of accelerating
Sales volumes increased 15.3% as Foods was up 55.7% from investments and
most segments registered higher
volumes, while revenues grew 8.1%
S$212.1 million to S$330.2 million.
Edible Nuts, Spices and Vegetable
addressing specific
year-on-year despite higher volumes, Ingredients was down 15.7% from areas of
with lower prices of some commodities, S$393.5 million to S$331.8 million and
offsetting price increases in others. Industrial Raw Materials, Ag Logistics underperformance
Earnings Before Interest, Tax, and Infrastructure was also down
27.0% from S$185.1 million to
to strengthen our
Depreciation and Amortisation
(EBITDA) grew 10.8% year-on-year to S$135.2 million. Commodity Financial
Services (CFS) went down from
leadership positions
S$1.2 billion, driven by growth in
Confectionery and Beverage S$10.6 million to a loss of S$1.6 million. in these segments
Ingredients and Food Staples and
Packaged Foods, which offset lower
Our EBITDA was achieved on a higher
invested capital of S$16.6 billion, which
is working.”
contributions from other segments. increased mainly due to the acquisition
EBITDA from Confectionery and of wheat milling and pasta
Beverage Ingredients was up 43.4% manufacturing assets in Nigeria, and
from S$284.0 million to S$407.3 million peanut shelling assets in the USA,
while Food Staples and Packaged as well as various organic growth
initiatives both in upstream and

Earnings Before Interest, Tax, Invested capital

Depreciation and Amortisation (S$ million)
(S$ million)
1,500 20,000

1,202.8 16,649.0
1,200 1,199.9 1,129.0 16,000
1,062.9 1,085.2 14,374.7
900 12,000 10,865.6 11,412.2 11,560.7

600 8,000

300 4,000

0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated
EBITDA/IC (%) 10.7 10.8 9.8 8.4 7.8 Working
capital 6,202.2 5,840.2 6,017.2 7,652.8 8,852.8
Fixed
capital 4,663.4 5,572.0 5,543.5 6,721.8 7,796.2

olamgroup.com 19
Economic

Group COO’s review

“We reduced our midstream value chain integration.

Working capital has also increased on
Executing on our strategic plan
2016-2018
interest costs despite account of our volume growth,
compounded by higher commodity
We continued to execute on our
a higher asset base prices, especially in cocoa, coffee and
refreshed strategic plan going into
2018 through targeted organic and
cotton during the year.
and will continue to The EBITDA on average invested
inorganic investments. During the year,
we announced that we will invest
optimise our capital capital ratio (EBITDA/IC) was 7.8%, US$150.0 million to set up 2
down from 8.4% in the year, after the state-of-the-art animal feed mills,
structure as we focus S$2.2 billion total increase in poultry breeding farms and a hatchery
on targeted invested capital. to produce day-old chicks in Nigeria.
The first mill is expected to be
investments in our Strategic partnership with Mitsubishi
Corporation
commissioned in the second half
of 2017.
prioritised platforms In 2015, we entered into a strategic During the year, we completed
and ensure that our partnership with Mitsubishi Corporation
(MC) to collaborate in mutually
several acquisitions:

gestating assets reach beneficial business opportunities in

• 100.0% interest in Amber Foods,
which owns wheat milling and pasta
Japan and across the world. MC is also
their full potential.” our second largest shareholder with
manufacturing assets in Nigeria,
for US$275.0 million;
20.3% interest in our company. In April
2016, we achieved our first partnership • 100.0% interest in Brooks Peanut
milestone by forming a 30/70 joint Company at an enterprise value of
venture MC Agri Alliance (MCAA) to US$102.1 million (post working
import and distribute sustainable, capital adjustments on closing);
traceable agricultural products and • palm and palm oil assets from SIAT
food ingredients, including coffee, Gabon for approximately
cocoa, sesame, edible nuts, spices, US$24.6 million through Olam Palm
vegetable ingredients and tomato Gabon (OPG), the 60/40 joint venture
products, for the Japanese market. between Olam and the Republic
MCAA commenced operations on of Gabon;
1 October 2016. • remaining 50.0% interest in Acacia
Investments (Acacia) from its joint
Olam and MC have also set up a
venture partner for US$24.0 million;
partnership committee to explore
and
initiatives across platforms and regions
in which we should collaborate. In • 100.0% interest in East African coffee
addition to the 2 new Directors specialist Schluter S.A. for
representing MC, Mr Katsuhiro Ito and US$7.5 million.
Mr Yutaka Kyoya, who joined our Board Some of these investments will be
in late 2015, we also have a few senior discussed in further detail in the
managers from MC joining our global business segments that follow.
management team as part of our
partnership agreement.

20 Olam International Limited Annual Report 2016

Summary of financial
and operating results
Balance sheet analysis
In 2016, our total assets amounted to
S$19.3 billion, comprising S$8.2 billion
of fixed capital, S$8.5 billion of working
capital and S$2.1 billion of cash. These
were funded by S$5.8 billion of equity,
S$6.0 billion of short-term debt and
S$7.7 billion of long-term debt.
Compared with 2015, our overall
balance sheet grew by S$1.7 billion
due to the acquisition of the wheat
milling and peanut shelling assets and
working capital increase, as well as
other capital expenditure (Capex)
investments.
Working capital rose by S$222.1 million
compared with 2015 with the increase
in volumes after the acquisition of
these businesses, as well as with
higher prices of commodities, including
dairy, sugar, cotton, cocoa and coffee.
Working capital efficiency stayed
largely flat at 150 days as at end-2016
as higher inventory days, advances to
suppliers and receivable days were Following the acquisitions of MMI (2014) and Brooks (2016) Olam has become the most vertically integrated
compensated by longer trade supplier in the US peanut industry with strategic assets in shelling, blanching and ingredients in the most cost
creditor days. competitive peanut origin.

Use of funds Source of funds Cash-to-cash cycle

(S$ million) (S$ million) (Days)
20,000 19,304.7 20,000 19,304.7 150 149 150
17,613.6 17,613.6
16,000 16,000 148

12,000 12,000 146

8,000 8,000 144

4,000 4,000 142

0 0 140
2015 2016 2015 2016 2015 2016
Restated Restated Restated
Fixed capital 7,340.5 8,169.5 Long-term debt 6,781.7 7,687.5
Working capital 8,295.6 8,517.7 Short-term debt 5,512.1 5,983.0
Cash 2,143.1 2,144.0 Non-controlling interests 240.5 235.9
Others (165.8) 473.5 Equity and reserves 5,187.0 5,797.1
Fair value reserve (107.9) (398.8)

olamgroup.com 21
Economic

Group COO’s review

Cash flow analysis Cash flow summary

2015
We recorded substantially higher net S$ million 2016 Restated Change

operating cash flows of S$1.0 billion for Operating Cash Flow (before Interest and Tax) 1,243.5 1,150.8 92.7
2016 compared with S$154.9 million a Changes in Working Capital (227.7) (995.9) 768.2
year ago. Free Cash Flow to Firm 1HW2SHUDWLQJ&DVK)ORZ 1,015.8 154.9 860.9
(FCFF) improved significantly from a Tax paid (48.4) (127.8) 79.4
negative S$2.1 billion in 2015 to a Capex/Investments (1,385.5) (2,089.7) 704.2
negative S$418.1 million in 2016 as Free Cash Flow to Firm (FCFF) (418.1) (2,062.6) 1,644.5
improved net operating cash flows Net interest paid (347.7) (478.4) 130.7
were met by a significant reduction in Free cash flow to equity (FCFE) (765.8) (2,540.9) 1,775.1
net Capex. Net Capex was S$1.4 billion Year-on-
2015 Year 2014
as a result of the acquisition of the S$ million 2016 Restated Change Restated 2013 2012
wheat milling and peanut shelling Operating Cash Flow (before Interest
assets, and continued investments in and Tax) 1,243.5 1,150.8 92.7 1,148.3 1,144.9 969.3
upstream and midstream assets. Changes in Working Capital (227.7) (995.9) 768.2 (766.2) (98.2) (55.0)
Similarly, Free Cash Flow to Equity 1HW2SHUDWLQJ&DVK)ORZ 1,015.8 154.9 860.9 382.1 1,046.7 914.2
(FCFE) also improved from negative Net interest paid (347.7) (478.4) 130.7 (411.5) (485.0) (434.6)
S$2.5 billion a year ago to a lower Tax paid (48.4) (127.8) 79.4 (65.6) (64.3) (44.1)
negative of S$765.8 million in 2016. Cash from divestments 32.0 249.8 (217.8) 468.4 95.6 90.4
)UHHFDVKÀRZEHIRUHFDSH[LQYHVWPHQWV 651.7 (201.5) 853.2 373.4 593.1 525.9
As the table shows, our Free Cash Flow
Capex/Investments (1,417.5) (2,339.4) 921.9 (455.7) (913.2) (1,553.3)
before Capex and investments is back
Free Cash Flow to Equity (FCFE) (765.8) (2,540.9) 1,775.1 (82.3) (320.1) (1,027.4)
to positive territory at S$651.7 million in
2016 and higher than that achieved in
the last 3 years prior to 2015. Gradual reduction in cost of debt for new issuances
Date Description Tenor Effective Coupon

Optimising our debt portfolio 5 April 2016 US$300.0 million senior notes 5-year due 2021 4.50%
14 April 2016 US$325.0 million RCF 1-year due 2017 –
Our ongoing debt optimisation efforts, US$325.0 million RCF 2-year due 2018
which started in 2014 and continued 19 April 2016 US$175.0 million IFC loan 5-year due 2021 –
into 2016, further helped lower our 17 May 2016 ¥5.5 billion (US$50.0 million) 5-year due 2021 3.85% (US$ post-swap)
effective borrowing rate from 4.8% in 21 July 2016 US$500.0 million perpetual 5-year due 2021 5.35%
2015 to 3.5% in 2016. This resulted in a capital securities
reduction in net interest expense of 8 September 2016 US$150.0 million (tap on 5-year due 2021 4.367%
S$45.5 million despite an increase in US$300.0 million notes)
net debt of S$1.4 billion during the 13 October 2016 US$400.0 million RCF 1-year due 2017 –
US$800.0 million RCF 2-year due 2018
year. Various initiatives were taken to
US$800.0 million RCF 3-year due 2019
optimise the tenor and cost of debt by
6 December 2016 US$175.0 million fixed rate notes 5-year due 2021 3.90%
buying back higher-cost debt and by
reducing the overall tenor of the
debt portfolio. Borrowing mix
(%)
Our credit spread across all tenors has
come down. Spreads across 100
short-term bilateral banking lines and
revolving credit facilities came down 80
while higher-cost, medium-term debt of
the US$500.0 million 6.0% Convertible 60
Bonds due 2016 was repurchased.
We were also successful in bringing 40
down the proportion of working capital
funded by medium and long-term debt. 20
This is now within our target of covering
25.0% to 35.0% of working capital 0
needs through medium and long-term 2015 2016
sources of funds.
Bilateral banking lines 26.7 21.6
Bank syndication 42.5 44.2
Debt capital markets 30.8 34.2

22 Olam International Limited Annual Report 2016

Gearing Net debt increased by S$1.4 billion as
compared with 2015 while our equity
2015
S$ million 2016 Restated Change position (before fair value adjustment
Gross debt 13,670.5 12,293.9 1,376.6 reserves) grew by S$610.1 million to
Less: Cash 2,144.0 2,143.1 0.9 S$5,797.1 million after we issued the
Net debt 11,526.5 10,150.7 1,375.8 US$500.0 million Perpetual Capital
Less: readily marketable inventory 5,909.2 5,232.9 676.3 Securities in July 2016. As a result, net
Less: secured receivables 1,381.4 1,155.8 225.6 gearing increased to 1.99 times from
Adjusted net debt 4,235.9 3,762.0 473.9 1.96 times in 2015. Adjusting for readily
Equity (before fair value adjustment reserves) 5,797.1 5,187.0 610.1 marketable inventories (RMI) and
1HWGHEW(TXLW\ %DVLF 1.99 1.96 0.03 secured receivables, our net gearing
1HWGHEW(TXLW\ $GMXVWHG 0.73 0.73 – would be 0.73 times, unchanged from
the year before.
Liquidity
(S$ million as at 31 December 2016)
Liquidity
20,000 We maintained sufficient liquidity to
meet our working capital and capital
7,393 16,827
expenditure requirements, with a total
15,000
13,671 of S$16.8 billion in available liquidity as
at 31 December 2016, including
10,000 1,381 unutilised bank lines of S$7.4 billion.
5,909

5,000

2,144
0
Cash and short-term RMI Secured Unutilised Available Total
fixed deposits receivables bank lines liquidity borrowings

Long-term debt 7,688

Short-term debt 5,983

Segmental review and analysis

Sales Volume (’000 MT) Revenue EBITDA Invested Capital (IC) EBITDA/IC (%)
Segment 2015 2015 2015 2015 2015
S$ million 2016 Restated 2016 Restated 2016 Restated 2016 Restated 2016 Restated
Edible Nuts, Spices and
Vegetable Ingredients 1,569.7 1,549.2 3,981.1 4,227.2 331.8 393.5 3,642.7 3,463.0 9.3 11.5
Confectionery and
Beverage Ingredients 1,687.5 1,689.5 7,711.0 6,859.6 407.3 284.0 6,109.5 5,680.9 6.9 6.4
Food Staples and
Packaged Foods 9,496.1 7,904.9 6,110.8 5,391.2 330.2 212.1 4,522.1 3,230.6 8.5 6.7
Food Category 12,753.3 11,143.6 17,802.9 16,478.0 1,069.2 889.6 14,274.3 12,374.5 8.0 13.2
Industrial Raw Materials,
Ag Logistics
and Infrastructure 1,662.5 1,363.1 2,784.1 2,574.6 135.2 185.1 2,220.9 1,917.5 6.5 9.8
Commodity Financial
Services (CFS) 1$ N.A. – – (1.6) 10.6 153.8 82.6 (1.4) 24.7
1RQ)RRG&DWHJRU\ 1,662.5 1,363.1 2,784.1 2,574.6 133.6 195.7 2,374.7 2,000.1 6.1 18.3
Total 14,415.8 12,506.7 20,587.0 19,052.6 1,202.8 1,085.2 16,649.0 14,374.7 7.8 8.4

Note: IC excludes:
(a) Gabon Fertiliser Project (31 December 2016: S$224.8 million, 31 December 2015: S$209.8 million); and
(b) Long-term Investment (31 December 2016: S$148.4 million, 31 December 2015: S$269.2 million).

olamgroup.com 23
Economic

Group COO’s review

EDIBLE NUTS, SPICES

AND VEGETABLE INGREDIENTS

Key highlights for the year

Earnings Before Interest, Tax, Invested capital Products

Depreciation and Amortisation (S$ million) • Almonds
(S$ million) • Cashews
400 393.5 4,000 • Hazelnuts
360.5 3,610.0 3,642.7
346.7
331.8 3,363.6 3,463.0 • Peanuts
320 308.5 3,200 3,049.2
• Pistachios
240 2,400 • Walnuts
• Sesame
160 1,600
• Beans (including pulses,
80 800 lentils and peas)
• Capsicums
0 0
• Tomatoes
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated • Garlic
EBITDA/IC (%) 11.0 10.4 10.3 11.5 9.3 Working
capital 1,391.8 1,850.4 1,587.1 1,415.0 1,421.0 • Onions
Fixed • Pepper
capital 1,657.4 1,759.6 1,776.5 2,048.0 2,221.7
• Paprika
• Chillies
Volume Invested capital • Cumin
1,569,700 S$3,642.7 • Turmeric
Metric Tonnes million • Curry powder
• Other spices
Revenue EBITDA
S$4.0 S$331.8 More information available
billion million online @ olamgroup.com

24 Olam International Limited Annual Report 2016

Peanut processing, USA. Hazelnuts being selected and checked according
to size and quality, Turkey.

The Edible Nuts, Spices and Vegetable Compared with 2015, invested capital
Ingredients segment had a marginal in the segment increased by
volume increase of 1.3% in 2016 as S$179.7 million. The increase in fixed
improved volumes from the Edible Nuts capital came from the acquisition of
platform, particularly peanut volumes, Brooks. Overall working capital
which grew due to the consolidation of increased slightly due to higher
results of the acquisition in the USA, inventory in peanuts and tomatoes,
and cashew volumes, were offset by offset by lower working capital in
lower tomato paste volume. Segment almonds due to lower prices. As a
revenues, however, fell by 5.8% mainly result, EBITDA to average invested
because of lower almond and tomato capital (EBITDA/IC) for the segment
paste prices. declined from 11.5% in 2015 to 9.3%
EBITDA declined by 15.7% in in 2016.
2016 mainly due to a lower contribution
from the almond and tomato
processing businesses. All other
businesses in the segment performed
better than in 2015.
The almond business, which mainly Onion processing, USA.
comprises upstream operations, was
impacted by overall lower prices in
2016. Almond prices, however, were
higher in the second half of 2016
compared with those during the first
half of the year.
The tomato processing business
continued to experience margin
pressures arising from weak demand,
depressed market prices and higher
raw material cost compared with 2015.
The impact is expected to continue into
the first half of 2017.

olamgroup.com 25
Economic

Group COO’s review

CONFECTIONERY
AND BEVERAGE INGREDIENTS

Key highlights for the year

Earnings Before Interest, Tax, Invested capital Products

Depreciation and Amortisation (S$ million) • Cocoa
(S$ million) • Coffee
450 6,500 6,109.5
407.3 5,680.9
360 5,200
322.6
270 275.6 284.0 3,900
268.5
3,246.9
180 2,600 2,346.6
1,913.9
90 1,300

0 0
2012 2013 2014 2014 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated
EBITDA/IC (%) 18.5 12.6 9.9 6.4 6.9 Working
capital 1,615.4 1,855.4 2,745.4 4,329.7 4,568.7
Fixed
capital 298.5 491.2 501.5 1,351.2 1,540.8

Volume Invested capital

1,687,500 S$6,109.5
Metric Tonnes million

Revenue EBITDA
S$7.7 S$407.3 More information available
billion million online @ olamgroup.com

26 Olam International Limited Annual Report 2016

Olam cocoa processing operation, Côte d’Ivoire. Cocoa butter being extracted from liquor, Holland.

Sales volumes in the Confectionery and Compared with 2015, the segment
Beverage Ingredients segment recorded an increase in invested
remained largely flat during the year. capital of S$428.6 million, in particular
Although Coffee volumes were up and the working capital requirements as a
Cocoa processing volumes were result of higher coffee and cocoa
higher year-on-year due to a full year prices. Fixed capital increased in-line
consolidation of results of the acquired with the expansion in upstream
Cocoa Processing assets, supply chain activities in Tanzania and Brazil and
volumes in Cocoa declined as most of soluble coffee capacities in Vietnam
these became captive feedstock for and Spain.
processing. Supply chain volumes EBITDA/IC for the segment improved
were also affected by reduced cocoa marginally from 6.4% in 2015 to 6.9%
bean supply and quality for most of the in 2016.
year due to adverse weather conditions
in West Africa.
Revenues were 12.4% higher than
2015 due to the increase in the sales of
value-added cocoa products (cocoa
cake, powder, liquor and butter) as well
as the increase in prices and sales
volume in Coffee.
EBITDA grew by 43.4% as both Cocoa
and Coffee had stronger contributions.
Cocoa’s increase in EBITDA was due
to the consolidation of the results of the
acquired Cocoa Processing assets,
which performed better than
expectations due to improved product Olam’s coffee plantation in Tanzania.
ratios. However, these results were
offset by the lower contribution from the
supply chain business. Coffee
achieved higher EBITDA in 2016 from
the green coffee supply chain and
soluble coffee business in Vietnam
and Spain.

olamgroup.com 27
Economic

Group COO’s review

FOOD STAPLES
AND PACKAGED FOODS

Key highlights for the year

Earnings Before Interest, Tax, Invested capital Products

Depreciation and Amortisation (S$ million) • Animal feed
(S$ million) • Dairy
400 378.2 5,000 • Grains
4,522.1
330.2
• Wheat
320 296.0 295.2 4,000
3,691.3 3,612.8 • Corn
240 212.1 3,000 3,075.1 3,230.6 • Barley
• Soybeans
160 2,000
• Packaged foods
80 1,000 • Edible oils
• Palm oil
0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 • Soybean oil
Restated Restated Restated Restated
• Sunflower oil
EBITDA/IC (%) 9.4 10.4 8.8 6.7 8.5 Working
capital 1,670.9 1,088.2 708.7 915.0 1,498.3 • Rice
Fixed
capital 2,020.3 2,524.6 2,366.4 2,315.6 3,023.8 • Sugar and sweeteners

Volume Invested capital

9,496,100 S$4,522.1
Metric Tonnes million

Revenue EBITDA
S$6.1 S$330.2 More information available
billion million online @ olamgroup.com

28 Olam International Limited Annual Report 2016

Rice milling to remove the husk and bran, Nigeria. Filling palm seedling bags at the nursery, Gabon.

Food Staples and Packaged Foods Overall invested capital increased by

segment volumes increased by 20.1% S$1.3 billion compared with 2015.
mainly due to higher volumes from Fixed capital went up mainly due to the
Grains’ origination and export acquisition of wheat milling assets and
operations as well as the wheat milling construction of animal feed mills in
operations post the acquisition of BUA Nigeria, expansion of wheat milling
Group’s wheat milling assets in Nigeria. capacity in Ghana, and continued
The Rice, Sugar and Dairy businesses investments in palm plantations in
also recorded an increase in volumes Gabon. Working capital also moved up
as compared with the previous year. with higher volumes in Grains
Revenues grew by 13.3% in and Sugar.
2016 mainly due to volume growth and As a result of the strong performance
higher dairy, rice and sugar prices, part in EBITDA, EBITDA/IC for the segment
of which were offset by the adverse improved markedly from 6.7% in 2015
currency impact on Packaged to 8.5% in 2016.
Foods’ revenues.
The segment reported a robust 55.7%
growth in EBITDA as all platforms
recorded an improvement in EBITDA
over the prior year. Operations which
underperformed during the prior year
showed strong improvements in 2016.
Olam’s palm oil refinery in Beira, Mozambique.
The edible oil refining and distribution
operations in Mozambique including
those of Acacia performed better than
in 2015. Rusmolco was profitable for
the year while the dairy farming
operation in Uruguay recorded
significantly improved operating
metrics and hence better results
compared with 2015. Packaged Foods
posted improved performance despite
facing headwinds during the year from
currency volatility as well as the
disruption of dairy and beverage juices
production in Nigeria after a plant fire
in April 2016.

olamgroup.com 29
Economic

Group COO’s review

INDUSTRIAL RAW MATERIALS,

AG LOGISTICS AND INFRASTRUCTURE

Key highlights for the year

Earnings Before Interest, Tax, Invested capital Products

Depreciation and Amortisation (S$ million) • Cotton
(S$ million) • Fertiliser
• Rubber
250 2,500
• Wood products
218.6 215.6 2,193.9 2,220.9
200 185.1 2,000 • Gabon Special Economic Zone (GSEZ)
1,872.0 1,917.5
1,839.4
The Industrial Raw Materials, Ag Logistics
150 143.5 135.2 1,500 and Infrastructure volumes grew by
22.0% as a result of larger Cotton
100 1,000 volumes in 2016.
Revenues were up 8.1% compared with
50 500
2015 as lower sales of Wood Products
moderated the growth in revenue in
0 0
this segment.
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated However, despite increased GSEZ
EBITDA/IC (%) 6.5 10.8 11.6 9.8 6.5 Working contribution, overall segment EBITDA
capital 1,507.7 1,043.6 974.2 911.9 1,212.7 for the year declined by 27.0% due to
Fixed margin pressures in Cotton and
capital 686.2 795.8 897.8 1,005.6 1,008.2
Wood Products.
Overall invested capital grew by
S$303.4 million compared with 2015
Volume Invested capital due to increased working capital in
1,662,500 S$2,220.9 Cotton from higher volumes and prices.
Metric Tonnes million Fixed capital remained unchanged as
reduced fixed capital in GSEZ offset the
increase in investments in Rubber
Revenue EBITDA plantations in Gabon.
S$2.8 S$135.2 As a result of reduced EBITDA and higher
billion million invested capital, EBITDA/IC declined from
9.8% in 2015 to 6.5% in 2016.

30 Olam International Limited Annual Report 2016

COMMODITY FINANCIAL
SERVICES

Key highlights for the year

Services
• Market-Making and volatility trading
• Asset management
• Risk management solutions
• Trade and structured finance
The Commodity Financial Services
segment or CFS registered an EBITDA
loss of S$1.6 million in 2016 versus
S$10.6 million in 2015.
Compared with 2015, invested capital
in this segment rose by S$71.2 million
with most of it deployed in the
funds business.

EBITDA Invested capital

S$(1.6) S$153.8 More information available
million million online @ olamgroup.com

olamgroup.com 31
Economic

Group COO’s review

VALUE CHAIN REVIEW AND ANALYSIS

Overview
Sales Volume (’000 MT) Revenue EBITDA Invested Capital (IC) EBITDA/Avg IC (%)
Segment 2015 2015 2015
S$ million 2016 2015 2016 2015 2016 Restated 2016 Restated 2016 Restated
Upstream 455.6 433.2 798.4 1,167.2 79.2 154.9 3,764.2 3,074.8 2.3 5.2
Supply Chain 9,863.1 9,370.2 10,496.2 13,080.4 503.5 599.9 6,537.7 4,851.9 8.8 12.3
Mid/Downstream 4,097.1 2,703.3 9,292.4 4,805.0 620.1 330.4 6,347.1 6,448.0 9.7 6.5
Total 14,415.8 12,506.7 20,587.0 19,052.6 1,202.8 1,085.2 16,649.0 14,374.7 7.8 8.4

Note: IC excludes:
(a) Gabon Fertiliser Project (31 December 2016: S$224.8 million, 31 December 2015: S$209.8 million); and
(b) Long-term Investment (31 December 2016: S$148.4 million, 31 December 2015: S$269.2 million)

Gestation mix (2016)

Invested capital EBITDA/ EBITDA/ EBITDA/
(S$ billion) IC (%) IC (%) IC (%)
3.8 2.3 6.5 8.8 6.3 9.7

Upstream Supply Chain Mid/Downstream

Invested EBITDA/ Invested EBITDA/ Invested EBITDA/
Capital IC (%) Capital IC (%) Capital IC (%)
Gestating 1.0 (2.2) – – – –
Partly contributing 0.7 1.2 – – 3.4 9.9
Fully contributing 2.1 5.1 6.5 8.8 2.8 9.5
Expected EBITDA/IC Expected EBITDA/IC Expected EBITDA/IC
Target at steady state: at steady state: at steady state:
15-18% 10-13% 13-16%

A total of S$1.7 billion in Upstream and S$3.4 billion in Mid/Downstream

investments are still gestating (not yielding any EBITDA) and partly contributing
(not yielding to full potential yet).

32 Olam International Limited Annual Report 2016

 “As at end-2016, about 50.0% of the capital
invested in the Upstream and Mid/Downstream
parts of our value chain was either gestating or
partly contributing. Hence, there will be significant
growth coming from these investments that
have not started to yield or are not yielding to
their full potential.”
Upstream
The Upstream segment registered a EBITDA Invested capital
year-on-year volume growth of 5.2%, (S$ million) (S$ million)
mainly coming from almonds and
Coffee. Revenue and EBITDA declined 250 4,000 3,764.2
by 31.6% and 48.9% respectively
in 2016. 208.8 204.9
200 184.4 3,200 3,074.6
The revenue decline was primarily 2,707.5 2,830.4
150 154.9 2,400 2,366.7
on account of lower almond prices.
EBITDA was dragged down by
reduced contribution from almond 100 1,600
79.2
plantations in Australia and the USA as
well as Wood Products, although this 50 800
was partly offset by improved
performance in NZFSU. 0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Invested capital in the segment Restated Restated Restated Restated
increased by S$689.6 million from EBITDA/IC (%) 8.7 8.2 6.6 5.2 2.3 Working
2015, mainly on account of higher fixed capital 340.9 322.6 304.0 358.9 481.2
capital invested in almond, Coffee, Fixed
Palm and Rubber plantations. EBITDA/ capital 2,025.8 2,384.9 2,526.5 2,715.7 3,283.0
IC declined from 5.2% in 2015 to 2.3%
in 2016 on higher average invested
capital but lower EBITDA.
Of the S$3.8 billion invested capital
in 2016, about S$1.7 billion was in
gestating or partly contributing assets.
These are primarily the Palm and
Rubber plantations in Gabon, Rice
farming business in Nigeria, as well
as Coffee plantations in Brazil, Zambia,
Tanzania and Laos which were both
gestating and partly yielding
investments.
The S$2.1 billion fully contributing
assets delivered a lower EBITDA/IC of
5.1% on a higher asset base in 2016
compared with 2015. These assets
now include NZFSU and Rusmolco
which were treated as partly
contributing assets in 2015 and had
not yet reached their full potential
in 2016.

Preparing the soil for the planting season, Nasarawa Rice Farm, Nigeria.

olamgroup.com 33
Economic

Group COO’s review

Supply Chain
The Supply Chain segment recorded a EBITDA Invested capital
5.3% increase in volume due to growth (S$ million) (S$ million)
from Grains, Rice, Dairy and Sugar
trading, offsetting the reduction in 800 7,000
Cocoa as much of its volumes were 6,537.7
700.2
channelled for cocoa processing. As a 640 652.0 608.8 599.9 5,600 5,260.1
result of lower Cocoa volumes, revenue 4,842.1 4,936.3 4,851.9
declined by 19.8%. 480 503.5 4,200

EBITDA declined by 16.1% arising from

lower contribution from the Cotton, CFS 320 2,800

and Cocoa supply chain due to the

shift in bean volumes to captive 160 1,400
processing. However, invested capital
in the segment rose by S$1.7 billion 0 0
owing to larger working capital in 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated
Coffee, Cotton and Cocoa beans
EBITDA/IC (%) 12.4 13.9 12.5 12.3 8.8 Working
carried as feedstock for processing. As capital 4,584.8 4,156.8 4,396.6 4,230.3 5,749.8
a result, EBITDA/IC dropped from Fixed
12.3% in 2015 to 8.8% in 2016. capital 675.3 685.3 539.7 621.6 787.9

Farmer spreading cocoa beans to dry in the sun, Côte d’Ivoire.

34 Olam International Limited Annual Report 2016

Mid/Downstream
The Mid/Downstream segment EBITDA Invested capital
recorded a strong growth of 51.6% (S$ million) (S$ million)
and 93.4% in volumes and revenues
respectively. The growth in volumes 700 8,000
was driven by larger volumes of 620.1
processed Cocoa products and flour 560 6,400 6,448.2 6,347.1
from wheat milling. Revenues were up
as a result of these higher volumes. 420 4,800

EBITDA surged by 87.7% due to strong 330.4 3,862.6 3,794.0

315.3
280 290.9 3,200 3,238.8
contribution from Cocoa processing,
226.5
wheat milling in West Africa, soluble
coffee processing, peanut shelling as 140 1,600
well as sugar and palm refining. This
was partly offset by the drop in 0 0
contribution from tomato processing. 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Restated Restated Restated Restated
Invested capital was lower by EBITDA/IC (%) 9.0 8.2 8.2 6.5 9.7 Working
S$101.1 million for the year on account capital 1,276.5 1,360.8 1,316.6 3,063.7 2,621.8
of higher fixed capital investments Fixed
being offset by lower working capital. capital 1,962.3 2,501.8 2,477.4 3,384.5 3,725.3
The increase in EBITDA lifted EBITDA/
IC from 6.5% in 2015 to 9.7% in 2016.
About S$3.4 billion of invested capital
was partly contributing, generating a
significantly higher EBITDA/IC of 9.9%
compared with the previous year. This
was due to the addition of the Cocoa
processing assets and the acquired
wheat milling and pasta manufacturing
assets well as Brooks, all of which had
performed very well during the year.
The fully contributing assets achieved
an EBITDA/IC ratio of 9.5%, slightly
below that for 2015 due to the
underperforming tomato
processing business.
Quality control checks at Crown Flour Mills, Nigeria.

olamgroup.com 35
Economic

Group COO’s review

PRINCIPAL RISKS AND UNCERTAINTIES

Olam has a rigorous risk management framework, designed to identify and assess the likelihood
and impact of risks and to manage the actions necessary to mitigate their impact. The process
identifies risks from a top-down strategic perspective and a bottom-up business perspective;
overall responsibility to monitor and assess risk lies with the Risk Office.

The Enterprise Risk Management or controls in place; residual risks are Scorecard is reviewed and updated for
framework defines 51 individual risks those that remain after mitigations to presentation to the Board Risk
across 11 categories. Each risk is the inherent risks are taken into Committee on a quarterly basis.
continually evaluated for each business account. Each risk is assessed for The following table lists the individual
on both an inherent and residual basis. likelihood of occurrence and impact risk factors in each of the categories,
Inherent risks are the threat an activity and overseen by one of the Board and describes the key controls and
poses if there are no mitigating factors Committees. The Enterprise Risk mitigations for each.

Risk Key controls and mitigation %RDUG&RPPLWWHHRYHUVHHLQJVSHFL¿FULVN

Trading risks
• Price Risk Trading risks are controlled by regular monitoring of positions Read more about the Board Risk Committee’s
• Basis Risk using industry-standard metrics. The annual risk budgeting responsibilities and members on page 16 of the
• Structure Risk process defines position and risk metric limits to control Governance Report.
• Arbitrage Risk exposures.
• Derivative Risk
• Liquidity Risk Olam hedges price risk on the world’s commodities exchanges,
both through derivatives and tendering.
Operational risks
• Credit Risk1 Field operating control and primary sourcing infrastructure is in 1.
Read more about the Board Risk Committee’s
• Counterparty Risk1 place in every country where Olam operates. responsibilities and members on page 16 of the
• Stock Risk2 Governance Report.
• Quality Risk2 Olam’s credit/counterparty rating system defines credit limits and
2.
• Systems and Controls Failure controls, promoting fragmentation of credit exposure on short Read more about the Audit Committee’s
Risk2 tenors. responsibilities and members on page 17 of the
• Fraud Risk2 Governance Report.
• Project Execution Risk3 Insurance is taken to provide inventory cover as well as credit
• Asset Utilisation Risk3 defaults. 3.
Read more about the Capital and Investment
Committee’s responsibilities and members on
page 20 of the Governance Report.
Currency risks
• Transactional Currency Risk4 Olam operates in many geographies and is therefore exposed to 4.
Read more about the Board Risk Committee’s
• Translational Currency Risk5 many different currencies. G7 currency hedging is performed by responsibilities and members on page 16 of the
a centralised Treasury function and local currency limits in the Governance Report.
origins and destinations are assigned to accommodate
5.
operational requirements. Read more about the Capital and Investment
Committee’s responsibilities and members on
page 20 of the Governance Report.
Agricultural risks
• Weather Risk Olam employs advanced crop-monitoring technology and Read more about the Corporate Responsibilities
• Pests and Diseases Risk agronomy experts, irrigation facilities, flood control measures and and Sustainability Committee’s responsibilities
• Agronomy/GAP (Good crop insurance. and members on page 21 of the Governance
Agricultural Practices) Risk Report.
Political and sovereign risks
• Asset Nationalisation Risk Olam has deep-seated presence in many of the countries in Read more about the Board Risk Committee’s
• Selective Discrimination Risk which it operates, built over many years, and has consequently responsibilities and members on page 16 of the
• Forced Abandonment Risk gained substantial knowledge of local practices. Olam maintains Governance Report.
• Duty/Tariff and Export/Import global political risk and terrorism risk insurance.
Ban Risk
• Terrorism/Kidnapping Risk

36 Olam International Limited Annual Report 2016

Risk category Key controls and mitigation %RDUG&RPPLWWHHRYHUVHHLQJVSHFL¿FULVN
Reputational risks
• Food Safety/Hygiene and Reputational impact is often just one of several negative impacts Read more about the Corporate Responsibility
Product Recall Risk that can arise from poor practices. Olam has put in place a suite and Sustainability Committee’s responsibilities
• Health and Safety Risk of policies, codes and standards to guide actions and behaviours. and members on page 21 of the Governance
• Social Risk – Labour These include the Olam Code of Conduct; the Olam Crisis Report.
• Social Risk – Livelihoods Escalation Procedure; the Olam Plantations, Concessions and
• Environmental Risk – Land Farms Code; the Olam Livelihood Charter; and the Olam Supplier
• Environmental Risk – Water Code.
• Environmental Risk – Climate
Change
• Environmental Risk – Food
Security
Regulatory and compliance risks
• Market Compliance Risk6 Olam’s Market Compliance Office is a global function whose 6.
Read more about the Board Risk Committee’s
• Bribery/Corruption Risk7. primary role is to ensure that we are fully compliant within all responsibilities and members on page 16 of the
• Transfer Pricing Risk7. external regulation. Governance Report.
• Taxation Risk7.
• Other Regulatory Risk7. 7.
Read more about the Audit Committee’s
responsibilities and members on page 17 of the
Governance Report.
&DSLWDOVWUXFWXUHDQG¿QDQFLQJULVNV
• Interest Rate Risk Olam has a strong base of long-term shareholders. The company Read more about the Capital and Investment
• Funding Liquidity/Margin Call maintains strong banking relationships providing committed Committee’s responsibilities and members on
Risk banking lines, thereby assuring good liquidity. page 20 of the Governance Report.
• Credit Metrics Risk
• Activist Investor Risk
• Short Seller Attack Risk
1DWXUDOSHULOV
• Pandemic Risk Olam maintains insurance cover against risk of natural disasters, Read more about the Board Risk Committee’s
• Fire Risk such as flood, fire, earthquake and storms. responsibilities and members on page 16 of the
• Flood Risk Governance Report.
• Earthquake Risk
• Hurricane/Typhoon/Storm Risk
Other
8.
• Key Person Risk (succession Succession plans are in place to provide a second line of Read more about the Human Resource and
planning)8 leadership from with the company’s Operating Committee and Compensation Committee’s responsibilities and
• Cybersecurity Risk9 Management Committee. Olam employs IT security experts, as members on page 14 of the Governance Report.
• IT Risk9 well as having in place IT cybersecurity infrastructure.
9.
Read more about the Audit Committee’s
responsibilities and members on page 17 of the
Governance Report.
Strategic risks
• Strategic Risk All strategic risks are overseen by the offices of the CEO and Read more about the Board’s responsibilities and
COO, and by the Executive Committee. members on page 2 of the Governance Report.

olamgroup.com 37
SOCIAL
We rely on our people to grow our business
responsibly. Our operations impact communities
around the world. We strive to ensure that
LPSDFWLVSRVLWLYHIRUWKHORQJWHUP
CONTENTS:
42 Livelihoods
48 Labour
56 Food security and nutrition
60 Food safety and quality
Social

This section explores our achievements and challenges in 4 of our

material areas which focus particularly on social impacts: livelihoods,
labour, food security and nutrition, and food safety and quality.

Livelihoods Labour Food security Food safety

42 48 and nutrition and quality
56 60

40 Olam International Limited Annual Report 2016

“We will continue to build and implement robust andd
effective frameworks, equip our teams with the right
ht
skills and work with the business leaders to ensure
everyone recognises their accountability.”
Dr Christopher Stewart
Head of Corporate Responsibility and Sustainability

Q&A with Dr Christopher Stewart, Head of A less talked-about issue is the challenge of managing a
workforce on plantations in highly rural areas of developing
Corporate Responsibility and Sustainability countries. In Gabon and Tanzania, the majority of our
workers have never held formal employment and many are
How did Olam perform against its social goals in 2016? functionally illiterate. This makes it challenging to instil both
Our vision is end-to-end sustainable supply chains by 2020, their rights and responsibilities: for example, it takes time to
which is a huge challenge but we are making headway. teach safety processes in places where no such culture
Safety improves year-on-year; we are reaching more exists. Creating a positive work ethic (including dealing with
smallholder women; have made progress on a major absenteeism), and instilling safe behaviours are as essential
programme to grant security of land tenure for cooperatives as capacity and skills building. Identifying and promoting
in Gabon; and have advanced nutrition and crop local leaders is invaluable in encouraging fellow workers to
diversification initiatives. uphold our standards. Disputes can occur, which is why
we have made considerable efforts to establish worker
Which social issues are stakeholders most representation groups.
concerned with?
Many crops we sell are grown in emerging markets, which
Will you be changing your strategy in 2017?
brings well-known risks. Customers, NGOs, financial No, we have a clear strategy with 4 overall objectives:
institutions, donors and others want to know how we • mitigate sustainability risks to the business, environment
manage them, so engagement happens across products, and society
geographies and functions. • promote increased volumes of sustainably sourced and
Issues raised in 2016 include: the ongoing efforts to processed products
eradicate child labour in third-party supply chains, including • use land and water resources efficiently and minimise
cocoa and oil palm; and ending the forced mobilisation of GHG emissions; and
workers in Uzbekistan for the cotton harvest. • promote better livelihoods, good labour practices and
However, many of these issues are closely connected to food security.
wider issues such as rural poverty, lack of community To achieve these, we will continue to build and implement
infrastructure or government policies so cannot be robust and effective frameworks, equip our teams with
addressed in silos. Equally, solutions require a multi- the right skills and work with the business leaders to ensure
stakeholder approach which is why we seek to collaborate everyone recognises their accountability. Monitoring,
with peers and other partners. We have over 30 partners for reporting and communicating are essential for us to measure
the Olam Livelihood Charter (OLC) programmes alone. and improve performance: we are already seeing the
benefits of the new data collection system we implemented
What social challenges do you face in 2017? in 2015. And, finally, forging effective partnerships makes our
We need smallholders to see farming as a viable livelihood business stronger, more competitive and more effective
so we can secure supplies. Therefore we need to help them at scale.
improve incomes through better yields and quality. Setting up
training sessions for smallholder farmers in Good Agricultural
Practices is the easy part. Implementing them in the field is
harder, requiring ongoing community engagement and
cultural sensitivity. More information can be found on sustainability progress in our
GRI Report and Olam Livelihood Charter on olamgroup.com.

olamgroup.com 41
Social

Our material areas

LIVELIHOODS
Olam depends on 4.33 million farmers, as well as wider agricultural communities,
for our volumes. We need them (especially the younger generation) to view farming
and rural processing as viable sources of income. We focus on catalysing economic
opportunity, inclusion, and good health. We call this ‘unlocking mutual value’.

Highlights for the year

Key 2016 focus areas

• Continue to support large and
small-scale farmer suppliers,
in particular through the OLC
• Promote gender equality

302,552 55,192 190,000

and opportunity
• Encourage good health and
wellbeing among communities
Smallholders embraced Women farmers People reached under and workers
by the OLC the Olam Healthy
Living Campaign Key sector collaborations
and commitments
• Sector initiatives include
CocoaAction, WCF Cocoa
Livelihoods Programme, Sustainable
Rice Platform, and Partnership for
Gender Equity (Coffee)
• Over 30 partnerships to

19 US$161.58m
Total financing to
32,954 improve livelihoods

We are guided by
Countries with New farmers in 9 countries • Olam Livelihood Charter
OLC initiatives OLC smallholders registered on Olam Farmer
• Olam Supplier Code
Information System to bring
the total to more than 65,000 • Olam Environment Policy
farmers across 13 countries • Olam Sustainable Palm Oil Policy
• Olam Code of Conduct
Relevant SDGs • UN Global Compact

42 Olam International Limited Annual Report 2016

While external factors such as weather can improve yields, productivity Olam Cocoa trainer, Benson Kelesin from Baianga Village, Papua New Guinea, shows farmers
training is crucial. Jose Norbey Sanchez, one of the 562 Colombian coffee from the Wadao group how to prune cocoa trees up to the height of 3 metres using an
farmers who has received training since 2015, almost doubled his yield of extended pool pruner. One of our project officers, Schola Jenkihau, is monitoring the field
green coffee per hectare in 2016. officer’s training skills.

Understanding life for rural where not all support may be required. Empowering women and improving
communities in emerging markets Our full 2016 OLC report can be found coffee quality in Brazil
on olamgroup.com/resources.
Olam buys from around 36,600 In many communities where Olam
large-scale and 4.3 million small-scale works, women have vastly unequal
farmers. While all face many of the
On the ground support strengthened decision-making power, control over
same issues – from climate change to by collaboration household spending, and access to
financial shocks – smallholders are Around 850 field officers work year education, finance, land and inputs.
much more vulnerable. round with smallholder communities. Yet if women participated equally in
Partnerships are crucial for harnessing the global economy, annual global
Crops such as cashew, coffee and
expertise and achieving scale. In 2016, GDP would increase 26% in 10 years
spices grow best in developing
we had over 30 customer, NGO, (McKinsey Global Institute 2015).
countries in Africa, Asia and South
certification, trade, foundation and
America where GDP is low and rural Coffee’s biennial cycle can mean yields
development organisation partners
infrastructure, including electricity, vary widely from year-to-year, impacting
helping us to deliver 44 OLC initiatives
running water and roads, is poor. These farmer income. New techniques can
(see olamgroup.com for a full list of
farms are small (the biggest equate counter this, but not everyone is open
partners, associations and
to just 6 football pitches (5 hectares) to change. Our field officers in
memberships). We also work with
but are typically much smaller) and Carlópolis, Brazil, recognised that
many certifying bodies and, in 2016,
farmers often have limited access to women’s involvement in post-harvest
24% of OLC tonnage was certified.
education and finance. All of this processing significantly improved
impacts on how much the farmer can quality. Working with the International
Helping farmers in Papua New Guinea
grow and earn. Women’s Coffee Alliance and the
Since 2014 in Madang, Olam Cocoa Government’s Department for Family
Olam Livelihood Charter (OLC) and Rainforest Alliance have been and Social Development, training with
– 6 years of impact working with cocoa farmers to improve women’s groups was held in 15
sustainability standards, which has locations. Three of the 77 women
In 2010, we identified 8 economic, improved yields, quality and
social and environmental principles to involved won an award from IAPAR,
traceability. Challenges in 2016 the Agriculture Institute of Paraná
help smallholder communities become included low rainfall, ongoing problems
commercial rather than subsistence State, for the quality of their coffee.
with poor transport infrastructure, and
farmers. These were enshrined in the educating farmers due to low literacy
OLC which today supports around levels. The implementation of Good
302,552 smallholders. Due to a change Agricultural Practices and ecosystem
in strategy, we are no longer directly restoration has helped the
buying from 66,000 smallholders in programme’s 1,784 farmers, who also
Zambia. However, many other received a premium for their
programmes are either on track for certified volumes. Read more in the Gender Hub on
OLC status or operate in communities olamgroup.com.

olamgroup.com 43
Social

Our material areas: Livelihoods

Teaching cotton farmers to count

If farmers cannot count, it is difficult
for them to manage their finances.
In Côte d’Ivoire, Olam cotton subsidiary
SECO runs literacy courses in remote
farming communities to teach basic
reading, writing and maths to those
who did not have the opportunity to
attend school. Between 2012 and
2016, the courses were attended by
624 women and 1,095 men.
This support is part of a much wider
OLC programme, certified by Cotton
Made in Africa, which in 2016 received
a ‘highly commended’ recognition
under the Unilever Global Development
Award, supported by Business Fights
Poverty. The judging panel reported the
programme has “the potential to Rice farming families in Nigeria gaining access to finance.
impact an entire industry and
admirably demonstrated an effective
and sustainable business model”.
Bypassing middle men Helping to link farmers
In February 2017, the programme to unlock mutual value to banks
was highlighted by the Business and While we have had direct farmer In its efforts to improve food
Sustainable Development Commission1 relationships for cashew in Africa, security and reduce rice imports,
in a film hosted on the Economist Films in Vietnam we have previously been the Nigerian Government has
website2 within the Global Compass sourcing through buying agents. established a number of financial
series. Over 1,060 farmers are now being schemes to help farmers invest and
Read similar case studies for other trained and certified under Lagrai improve yields. These are supported
products at olamgroup.com. The Water, Cashew Producer Cooperative. by various banks, International Fund
Land and Climate Change sections of In addition to the Fairtrade premium for Agricultural Development (IFAD),
this report are also closely connected and pre-financing from Olam, USAID and the Nigerian Ministry
to farmer livelihoods. the farmers (and Olam) will benefit of Agriculture. As part of our
financially by eliminating the smallholder outreach programmes
middlemen, whilst full traceability we have been hosting meetings
confers multiple benefits. across the villages to help farmers
access the finance on offer.
Overall, we have trained over
3,500 smallholders in Good
Agricultural practices.

More information available

at olamgroup.com

“The SECO programme

Why we encourage smallholders to form cooperatives
has the potential to Working with cooperatives simplifies our logistics. We avoid collecting crops
impact an entire from individual farmers in rural locations, and peer-pressure helps keep up
good practices. Cooperatives help us understand where to focus investment,
industry and admirably such as in warehousing for the crops. For the farmers, they have greater

demonstrated negotiating power and benefit from group training.

Cooperatives also play a crucial role in rolling out the Olam Supplier Code.
an effective and For those farmers with low literacy, we provide pictorial posters for display
on cooperative buildings, while cooperatives are also empowered to sign
sustainable business on behalf of the farmers, auditing to ensure compliance. The challenge
model”. now is reaching farmers who are not yet organised into farmer groups
and have very low productivity, which some NGOs have rightly highlighted
1
as a concern. This requires a multi-stakeholder approach.
businesscommission.org
2
films.economist.com

44 Olam International Limited Annual Report 2016

Peanut harvesting in Georgia, USA. Cashew picking, removing the nut from the fruit. Smallholder farmer preparing cocoa beans for natural
fermentation.

Continuing to invest in processing

Setting up processing in emerging Measuring programme success
markets brings benefits to Olam and
In September and October 2016, a survey was undertaken with 416 cocoa
communities. Cashew processing
farmers in Côte d’Ivoire.
offers significant levels of employment
for women, often in regions where there 98% 70%
is little alternative – we employ 15,000 of cocoa farmers report being are satisfied with the payment for
people in 20 cashew processing units satisfied or very satisfied with the cocoa and 21% are very satisfied.
in Africa and Asia, around 80% of training provided.
whom are women. In 2016, a new
facility in Vizag, India, has generated 58%
direct and indirect (contract) 79% of cocoa farmers believe they
employment for 750 women. of cocoa farmers report an increase are wealthier this year than the
in the amount of money earned from previous year.
Investing in processing close to the
cocoa since they started working
farmers means they see a ready
with Olam.
market for their crop and want to sell
to Olam. It also reduces transport and
80%
of farmers have been trained
environmental costs for our business.
Examples include cashew processing
81% on health and safety at the farm.
of cocoa farmers report an increase
in Côte d’Ivoire and Mozambique and
in the amount of cocoa produced
our sugar and spices processing
since they started working 79%
in India. of farmers have been trained
with Olam.
on good labour practices.
Supporting economic inclusion
in developed nations Olam Farmer Information System provides unparalleled transparency
Olam recognises that large-scale A real game-changer in the next few years will be the Olam Farmer
farmers can also face cash flow and Information System (OFIS), which manages the ‘first mile’ of Olam’s supply
crop challenges. So, for example, we chain. Working with smallholder farmers and mobile technology, we survey
support many tomato, garlic and onion and register their farms and local social infrastructure. OFIS is also able
growers with improved varieties that to collect and analyse transaction data from the farm onwards, as well
our teams have developed. We also as all farmer training records. This data means that users have unparalleled
strive to be a good counterparty. transparency into our smallholder supplier network and sustainability
initiatives. It allows us not only to give more farmers tailored support but to
Chuck McGlamory at the Doster Peanut
monitor and learn which interventions – such as training via farmer schools
Company, a buying point owned by
versus demonstration plots – have the biggest impact on yield improvements
Olam subsidiary McCleskey Mills in
and other outcomes. In just 2 years, OFIS has registered over 65,000 cocoa,
Georgia, USA, explains that, during the
coffee and rubber farmers in 13 countries around the world.
harvest season, as many as 30 peanut
growers can be sending their volumes
daily which need inspecting, quality
testing and unloading: “We ensure that
each grower is treated equally no
matter what volume he supplies,
otherwise we lose the right to become
his buyer of choice.”

olamgroup.com 45
Social

Our material areas: Livelihoods

Ensuring access to safe water Encouraging employees to put their

and sanitation health first
Olam is addressing water, sanitation Our focus on health is not just for rural
and hygiene (WASH) access for communities. Increasingly, we see the
employees in the workplace, impacts of poor nutrition and sedentary
particularly in plantations in highly rural lifestyles across both developed and
emerging economies. Discussions developing nations.
with other agri-business and forestry In the USA, our team embraced the
companies within the World Business 2016 World Health Day theme of Beat
Council for Sustainable Development Diabetes, inviting a nutritionist to the
(WBCSD) uncovered the need for office to speak about diabetes,
further sector-specific WASH guidance launching a walking club, and hosting
in agricultural settings. a ‘Hidden Sugar Demo’ unveiling the
To support the development of initial high sugar levels in the most commonly
guidance and explore opportunities for consumed foods.
best practice development, a member Meanwhile, in Tanzania’s Dar es
of the WBCSD’s water team undertook Salaam head office, a nutritionist
a 1-week learning mission to Olam’s delivered a wellness talk on how to
palm oil plantations in Gabon in choose and keep a healthy lifestyle.
June 2016. Voluntary medical check-ups were
Olam wood subsidiary, Congolaise Industrielle des
Bois, distributing mosquito nets. The plantations employ more than provided and a blood donation station
6,500 people, primarily from rural was set up courtesy of a local
Helping to deliver good health villages which have no running water. blood bank.
and wellbeing in Olam operations A baseline assessment was conducted The Zika virus also emerged in
and rural communities in collaboration with local staff, South and Central America in 2016.
Life expectancy in developing countries mapping WASH provisions already put We immediately issued guidance
remains low, compounded by poor in place, and identifying action points. to employees and we are pleased
nutrition and lack of access to During the mission, it was revealed that to report that nobody was impacted.
healthcare. This is not just a large part of absenteeism was In addition to personal protection,
unacceptable for the affected attributed to water-related and employees were advised to empty,
individuals and their families, but has water-borne diseases. clean or cover containers that can
a direct economic cost for the The action points are being developed hold water, such as buckets, flower
individual and the country. into a work plan for implementation pots or tyres, so that places where
In 2016, we continued to roll out the during 2017, which will provide mosquitoes could breed
Olam Healthy Living Campaign. additional focus on sanitation provision, were removed.
Teams in numerous countries held along with employee awareness-raising
sensitisation sessions on how to on hydration and heat stress.
prevent malaria, diarrhoea and other
common diseases. World Malaria Day
on 25 April was a focus of activity, and
by the end of the year we had reached
104,000 people in Africa with
sensitisation, screening and treatments:
• Republic of Congo Wood Products
team, Congolaise Industrielle des
Bois, distributed treated mosquito
nets to personnel
• Côte d’Ivoire Cocoa and Tanzania
Coffee distributed nets to cocoa
cooperatives and their communities
• Ghana Cocoa donated malaria
treatment drugs to local
health services.
At our own large-scale palm and
rubber plantations in Gabon, we have
built modern, well-equipped clinics
(staffed by a permanent medical team)
providing free healthcare to over In 2016, Olam reached 106,700 people with HIV and AIDs awareness and prevention workshops, which included
6,500 employees. this workshop with cashew communities in Koboko village, Côte d’Ivoire.

46 Olam International Limited Annual Report 2016

Progress on goals
±REMHFWLYHV 2020 target 2016 achievement 2XWORRNIRUWDUJHW
*2$/(FRQRPLFRSSRUWXQLW\DQGLQFOXVLRQ 0DWHULDODUHD/LYHOLKRRGV

6PDOOKROGHUIDUPHUVDUH Bring 1 million hectares under the 302,552 farmers over 671,784 ha On target
supported through the Olam OLC with an estimated 500,000 (Due to a change in business strategy, we are
/LYHOLKRRG&KDUWHU 2/&  farmers. no longer sourcing directly from 66,000 OLC
principles cotton farmers in Zambia).

1.2. Suppliers comply with 100% of priority products covered All priority products are working with suppliers On target
the Olam Supplier Code by the Supplier Code: cashew, to implement the Supplier Code.
cocoa, coffee, cotton, hazelnut,
58% of priority product volumes procured by
palm and rubber.
origins in FY16 are covered by the Olam
Supplier Code.

1.3. Women are economically Support 100,000 women to access 55,192 women farmers under the OLC. On target
empowered within our supply economic opportunities, including
Côte d’Ivoire cotton: 688 “farmers’ wives” –
chain female farmers, processors,
vegetable projects and business training
distributors, and workers supported
or employed by Olam. Côte d’Ivoire cocoa: 800 “farmers’ wives” –
fortified cassava projects and business training.
Around 11,600 women employed in the cashew
supply chain in emerging markets.
Data collection process being reviewed
regarding other women empowered,
e.g. distributors.

(OLPLQDWLRQRIFKLOGODERXU No breaches in compliance reported 1 breach of Olam child labour standards on On target
or observed in audits. plantations was identified by Internal Audit.
Corrective action has been taken to ensure legal
age restrictions are observed, and that
age-appropriate roles are assigned.
At the time of writing the FLA had not issued its
audit report for the 2016 hazelnut harvest.
No breaches were identified by the FLA in the
cocoa monitoring.

1.5. People have improved 750,000 beneficiaries, including an 302,552 farmers have benefited from livelihood Behind target
livelihoods potential through estimated 500,000 smallholders, support through the OLC.
enhanced skills, economic plus other beneficiaries of
Appropriate metrics for assessing beneficiaries
UHVRXUFHVDQGLQIUDVWUXFWXUH capacity-building, cooperative
of Olam’s projects (including dependents of
support, school support, access
OLC farmers, and non-OLC livelihood projects)
to finance, producer goods, and
will be explored in 2017.
economic infrastructure initiatives.
*2$/*RRGKHDOWKDQGZHOOEHLQJ 0DWHULDODUHD/LYHOLKRRGV±VRPHRYHUODSZLWK/DERXU

(QVXULQJSURYLVLRQRIDFFHVV 100% of Olam’s direct operations Leading the development of guidance on On target
to health, water and sanitation are compliant with the Olam WASH employee WASH access in agricultural and
LQIUDVWUXFWXUHDVDPLQLPXP Standard. forestry operations with WBCSD. WASH field
meets the Olam WASH Standard study conducted in Olam’s palm plantations,
Gabon by Olam and WBCSD.
Learnings to be implemented in FY17 and rolled
out to all Olam plantations.

2.2. People have improved health Olam Healthy Living Campaign Reached 190,000 people in Africa. On target
and wellbeing positively impacting on 250,000
people, including community
beneficiaries of health, water and
sanitation infrastructure, health
education campaigns, HIV testing,
health check-ups, access to
insurance initiatives, and
similar services.

olamgroup.com 47
Social

Our material areas

LABOUR
We depend on the engagement, motivation and safety of our workforce to create
responsible growth. Equally, we are working with suppliers to ensure that human
rights are respected in their supply chains.

Highlights for the year

Key 2016 focus areas

• Employee engagement
and talent development
• Zero-harm workplace
• Human rights across our own

69,772 95 203,696
and third-party supply chains

Key sector collaborations

Full-time, seasonal, New managers trained in OLC farmers trained in and commitments
contract and the CEO Core Process good labour practices • CocoaAction – help eradicate
temporary workers child labour
• International Cocoa Initiative
Workforce Gender diversity of full-time Managerial talent by region • Fair Labor Association (FLA)
employees partnership to eliminate
5% 5% exploitation in the cocoa and
50% 50% 26% 74% hazelnut supply chains
2% 41%
12% We are guided by
3% • UN Declaration on Human Rights
• ILO Declaration on Fundamental
32%
Principles and Rights at Work
Full-time 35,045 Men • Olam Plantations, Concessions
Seasonal, contract Women Africa 961 and Farms Code
or temporary 34,727
Asia 734 • Olam Health and Safety Policy
Australia 67 • Olam Supplier Code
Europe 283 • Olam Livelihood Charter
Relevant SDGs Middle East 37 • Olam Code of Conduct
North America 112
• Fair Labor Association
South America 112
affiliate membership

48 Olam International Limited Annual Report 2016

Employee engagement
Q&A with Joydeep Bose, President and Global Head,
Human Resources

How do you see the role of One way is through our signature In this way, they receive feedback
HR at Olam? processes that cut across all and can reflect on what went well,
parts of the organisation. These and what did not, drawing on the
We focus on working shoulder-to-
are high-impact initiatives that strengths and experiences of others.
shoulder with business heads and
differentiate us from our competitors.
the leadership team. HR has the
responsibility to manage the
Our Core Process brings together How do you maintain engagement
talent-related risks of our business
new managers, usually within their among your employees?
first 6 months, to have a 4-day We measure engagement rates
and foster the Olam values. At the
training session with our CEO1. In every 2 years. Currently, it is at 77%,
same time, with guidance from our
these sessions, Sunny, and other down from 83%. We believe it has
CEO and the leadership team,
leaders in the organisation, take them dropped because our teams have
we are focusing on how we want to
through the business and Olam’s had to navigate strong commodity
shape the organisation going forward
values and culture. We have close headwinds, plus acquisitions can
– from a cultural perspective as
to a dozen signature processes to be unsettling.
well as ensuring we have a set
build a shared experience across
of lasting shared values and vision One way in which we have been
various aspects of our business.
for the company. addressing this is through our
In 2016, 95 employees attended
Core Process sessions. revamped performance management
How important is culture? framework Aspire, which no
It is not a soft, touchy-feely matter but How do you develop leadership? longer has ratings, so that staff
rather a fundamental part of our conversations can happen without
Leadership for Olam embodies the
business. We realised early on in our any anxiety.
3 major elements of our culture.
journey that our unique culture was Aspire is geared towards making the
When we assess an employee’s
what has driven and will continue to employee the chief beneficiary of the
leadership ability, we look at
drive our business growth, allowing performance management process
whether he or she is risk-taking,
us to gain a competitive advantage – not the organisation or his or her
entrepreneurial, and has an
in the marketplace. boss. Aspire aligns feedback on
ownership mindset in taking
This unique culture included, firstly, accountability for outcomes. performance across the business,
being very entrepreneurial; secondly, taking into account personal
In our industry, you can get buffeted
demonstrating a high level of stretch development and career progression.
by external challenges outside your
and ambition; and thirdly, ensuring The process responds to 3 key
control. But it is important for our
every individual in the company questions for employees. Firstly,
leaders to deliver, regardless of
takes strong ownership of their work. am I doing a job that is meaningful?
what is happening around them.
These factors have underpinned our Secondly, how am I currently
success so far and we believe this With that in mind, we create an
performing in my role and what
very same culture will propel environment for employees to display
can I do to improve? Thirdly, what
us forward. leadership values, to blossom and to
does the future hold for me in the
succeed. When we hire employees,
company? The process begins with
Considering Olam is so diverse and we look for ‘fit’ and aptitude for these
discussions at the beginning of the
large, how do you align the culture values. Some people prefer working
year between the individual and the
across the entire organisation? in a very top-down environment, but
manager on the meaning of the
that’s not Olam.
It comes down to a unifying culture individual’s role. Throughout the
and vision – both of which are Empowering employees is a key rest of the year, we will have
very clear. We want to be the engagement driver. Within a safety regular conversations on the
most valuable and differentiated net, we typically give responsibilities progress against their targets.
agri-business globally. This has earlier than at other organisations
This system has been in place for a
been well received by the entire – such as defining financial and
year and a half, and we believe it will
organisation. We also ensure that all decision-making terms.
help our employees engage more
employees in the company, whether We also support our leaders with the company in the future.
they are from Colombia or Singapore, throughout their career journey with
should have a similar experience a strong mentoring culture. Managers
working in the organisation. at all levels are trained to coach
and have constant communication
sessions with their reports.

1
Sunny George Verghese
olamgroup.com 49
Social

Our material areas: Labour

“When we assess an Global gender breakdown in our primary workforce (%)

employee’s leadership
Africa Asia Australia
ability, we look at
whether he or she
is risk-taking, M F M F M F
entrepreneurial, and
has an ownership 81 19 55 45 75 25
mindset in taking
accountability for Europe Middle East North America

outcomes.”
M F M F M F

65 35 90 10 71 29

South America

Nurturing regional talent

Wherever possible, we are committed
to employing locally and building
M F
capacity, although it can be a
challenge in emerging markets.
We invest from the ground up and, over
78 22
the years, we have built a robust early
career hiring and training programme.
In 2016, we hired more than 50 trainees
across Africa in Sales, Manufacturing
and Finance. We believe that this pool
of talent will be our pipeline for the
future. The Africa Finance Trainee (AFT)
Programme is one such initiative and
is designed to provide meaningful
experiences through exposure to a
variety of Olam operations. In 2016,
we recruited 8 qualified accountants
from Kenya and Cameroon.
Catalysing change in Africa through
scholarships
Olam’s scholarship programme
supports up to 10 African post-
graduates each year to study
at Harvard Business School, the
London School of Economics and
Political Science, INSEAD and the Bankole Makanju is a Master of
Lee Kuan Yew School of Public Policy. Business Administration
Our ambition is to see these graduates Student at the Harvard Business
School in Massachusetts. Read
catalyse change through business, his article on olamgroup.com,
economic development and good “How to maximise Africa’s
governance in Africa. demographic dividend”.

50 Olam International Limited Annual Report 2016

 Designing top class courses and an academy
The Almonds team in Australia worked with HR and one of the largest
education providers in Australia – TAFE – to develop a tailored diploma
course for the Irrigation Controllers and Operations Supervisors. Run over
1-2 years, it is based on specific job competencies and provides the field
teams with a development pathway leading to a recognised qualification.
It has been well received by the teams and in 2016 it led to Olam being
recognised by the TAFE as its ‘Employer of the Year’.
October 2016 marked a milestone for the Manufacturing and Technical
Services (MATS) function with the launch of its virtual Academy – a purpose-
built learning platform. The comprehensive curriculum is intended to help
increase knowledge and skills, and ultimately help employees improve their
personal performance and prepare for the next career opportunity.

Almonds Australia TAFE Certificate IV graduates who

have completed the diploma course for Irrigation
Controllers and Operations Supervisors.

Our shared values

Our 6 values and everyday behaviours build a distinctive culture, shaping how
we work, and set the standard for what it means to be part of Olam

Entrepreneurship Stretch and Ambition Mutual Respect and

We dare to dream Our passion for Teamwork
doing more We treat each other the
way we want to
be treated

Rob Wheatley (right), Vice President, Almonds,

receiving the Employer of the Year Award from
Ownership Integrity Partnerships the Sunraysia TAFE Institute in Australia.
We take responsibility as We stay true to what we We strive to develop
if we were the founders believe, say and do positive and long-term
of the business relationships with
our partners

Ensuring a safe workplace developed a new Safety Induction 2014). This data now starts to include a
Olam is committed to providing a Programme. Some emerging market wider view of the Olam world and
healthy and safe workplace for our countries do not have the same includes some key primary upstream
employees, contractors and visitors. regulatory frameworks for safety so we processing plants, warehouses and
Our vision of embedding a ‘zero harm must be constantly vigilant and reinforce plantations in addition to the 69 core
culture’ is delivered through safety the importance of safe behaviour manufacturing plants which are known
leadership and embodied in ‘Our including regular audits and review. as Tier 1 (See the goals table for the
Shared Values’. Our top 100 facilities now report specific targets for processing and
leading and lagging safety indicators Olam-managed plantations, concessions
By the end of 2016, most employees and farms.) Unfortunately, while it was
had received training through our and we are progressively extending this
to all our key sites – processing, our lowest incident fatality rate in 5 years,
internal programme ‘A Safe Olam’ we experienced 4 fatalities in 2016,
which is based on the elimination of warehouses and plantations. Whilst
still not where we want to be, we are which all took place in Africa. Three were
unsafe conditions and unsafe due to non-observance of safe working
behaviours. The remaining employees making steady progress in changing
behaviours and reducing safety practices, and the fourth was due to a
had localised focused training relating road accident. All incidents are fully
to specific risks and hazards. For new incidents. The Lost Time Injury
Frequency rate was reduced to 0.43 in investigated and any action
or returning seasonal workers, we have points addressed.
2016 (from 0.60 in 2015 and 1.15 in

olamgroup.com 51
Social

Our material areas: Labour

Respect for diversity from the 2,000-strong team. At the end productivity and what the customer,
Although diversity has always been of 2016, the union had made a formal and ultimately the consumer, is willing
encouraged in Olam, we recognise representation to the Ministry of Labour to pay. We operate in accordance with
that we did not have a formal policy or over the redundancy process. However, all payment laws but, rather than just
strategies for implementation. By 2020, the independent advisory body on relying on the minimum wage, we
all businesses with more than 100 labour affairs (Le Conseil National du are exploring productivity-based
employees must have a documented Dialogue Social) cleared our process incentives to make our operations
and reported diversity strategy. A draft as fair and correct. more sustainable and better able to
withstand competition. This in turn
policy with strategy guidance is Wages and incentives for workers
currently being reviewed. secures jobs in the region.
A considerable proportion of Olam’s
workforce are engaged in relatively Indeed, this has been recognised by
Respect for workers’ rights low-skilled plantation work or manual to the Government in India, where the
Our commitment to human rights semi-manual processing. These are Labour Department has classified the
is guided by the United Nations often located in regions that have had cashew industry under productivity-
Declaration of Human Rights, the ILO very little structured work experience, linked wage to help motivate workers.
Declaration on Fundamental Principles which can mean that, after payment, a This is definitely helping to improve
and Rights at Work and related few workers may not return until they productivity as seen in our 3 cashew
international covenants. have spent their wages. Couple this processing facilities at Amalapuram,
with high labour needs for products Janakiramapuram and
We commit to the following labour Gajapathinagaram. We are paying
practices across our supply chains: such as cashew (we employ around
15,000 people in processing across our workers above the Government
• Compliance to relevant labour Asia and Africa) and we have to stipulated wages over unit of output.
national laws and international balance wages with the cost of
agreements (covering wages,
working hours and conditions,
freedom of association, collective
bargaining, no discrimination, gender
and age equality)
• A grievance mechanism accessible
to all workers without retribution
More HR information can be found in
• An accessible communication our GRI Report on olamgroup.com.
framework of policies for
the workforce
• The application of these
requirements to contracted, seasonal
and migrant workers where relevant.
As with any business, restructuring is
sometimes necessary. Whenever this
occurs we seek to ensure that
employees and their representatives
are given notice of any significant
changes. This may vary between
countries and also on the significance
of the change, so it might be 2–4
weeks or a few months. Based on data
from our key operating countries, at the
end of 2016, about 30% of our primary
workforce were covered by collective
bargaining agreements. In early 2017,
Olam Gabon signed a collective
bargaining agreement with our palm Members of the USA GROW initiative at their mentoring mid-point event.
and rubber plantation workers – over
9,500 people. Globally Reaching Olam Women (GROW)
Following the introduction of GROW’s mission is ‘women driving a globally inclusive work environment’.
mechanisation to increase output With 116 members (both women and men) in the USA, the employee
and efficiency at our Bouaké cashew resource group and mentoring programme spans all business units and
processing facility in Côte d’Ivoire, our functions. In 2016, the group expanded into Côte d’Ivoire and Uganda.
team met with union and government Areas of focus include communication, time management, negotiation skills
representatives regarding the and calculated risk-taking.
redundancy of around 150 employees

52 Olam International Limited Annual Report 2016

Addressing human rights Tackling exploitation of adult workers Update on Uzbekistan cotton
in third-party supply chains
issues in third-party A number of investigations by NGOs
Cotton is a key source of income
for Uzbekistan. In recent years,
supply chains into the palm industry have uncovered the country has made progress in
Olam’s sourcing network of over human rights abuses. In 2016, we eradicating child labour from its
4.33 million farmers, of whom the vast reduced our suppliers from 48 to 14 cotton harvest, thanks to a programme
majority are smallholders in emerging based on our Supplier Code risk supported by ILO and the World Bank.
markets, means that eliminating poor factors. Although our Supplier Code However, the international community
labour practices in our supply chains is clearly stipulates that third-party continues to be concerned by reports
an ongoing focus. Poor practices suppliers should ensure human rights of civil servants being forced to pick
include the potential for: are protected, we are updating our cotton due to a lack of mechanisation.
policies in 2017 to include the explicit Along with other international cotton
• Forced adult labour merchants, Olam has chosen to
industry term ‘no exploitation’ and will
• Child labour roll out third-party verification of mills maintain our sourcing (at low levels)
• Poor management practices, such as at risk. and attempt to influence positive
not providing protective equipment change in the supply chain. As well
or unfair working hours or pay. as lobbying collectively with our peers,
we will be stepping up engagement
with the ILO and the World Bank
directly in 2017 to maintain momentum
in changing labour practices.

See page 70 for more information For more information on these issues,
on the palm supply chain. please contact [email protected] or visit
olamgroup.com/sustainability.

Unlike other major cotton growing origins, Uzbekistan does not have mechanised harvesting for its fields so the cotton must be hand-picked.

olamgroup.com 53
Social

Our material areas: Labour

Olam trainers demonstrate safe pesticide handling practices to smallholders. Since the Aviv coffee plantation in Tanzania started employing villagers, pupils have
increased from 50 to 80 at the Lipokela school as parents can afford to send them.

How we tackle child labour NGOs such as the International Cocoa • Training farmers in good labour
The UN Food and Agriculture Initiative, and industry peers, to practices through the Olam
Organization (FAO) defines child labour progressively eliminate these abuses Livelihood Charter (203,696 in 2016)
as “work that is inappropriate for a in agricultural supply chains. • Helping farmers to increase yields
child’s age, affects children’s Olam follows, and expects its through the provision of pre-finance,
education, or is likely to harm their suppliers to follow, the table below agri-inputs and training in Good
health, safety or morals. It should be as a direct reference to ILO Convention Agricultural Practices, enabling them
emphasised that not all work carried No. 138 defining child labour by the to hire adult labour
out by children is considered child following categories: • Identifying child labour risk factors
labour. Some activities may help Minimum age for admission to employment or work through the Olam Farmer Information
children acquire important livelihood Developed Developing System and collaborating with
countries countries
skills and contribute to their survival governments and partners to provide
Regular work 16 years 16 years access to schooling and long-term
and food security. However, much of
Hazardous 18 years 18 years
the work children do in agriculture is availability of teachers
work
not age-appropriate, is likely to be /LJKWZRUN 15 years 15 years
• Scaling-up initiatives by working
hazardous or interferes with children’s (or 14 years with partners including customers,
education. For instance, a child under subject to foundations, governments
the minimum age for employment who exceptions and NGOs.
allowed by the
is hired to herd cattle, a child applying
pesticides, and a child who works all
ILO or national Tackling child labour in cocoa and
law)
night on a fishing boat and is too tired hazelnut production with the Fair
to go to school the next day would all This is clearly stated in the Olam Labor Association (FLA)
be considered child labour”. Supplier Code, which is being rolled As an affiliate member of FLA, we have
Olam is against all forms of child out across our supply chains, setting programmes to help eradicate child
exploitation and the use of forced out minimum and non-negotiable labour from cocoa and hazelnut supply
or trafficked labour, respecting standards to which all our suppliers chains in Côte d’Ivoire and Turkey. For
and abiding by the ILO conventions must adhere. Signing our Supplier 2016, FLA conducted audits at 3 cocoa
No. 182 on the Worst Forms of Child Code represents a commitment to cooperatives in Côte d’Ivoire with no
Labour and No. 138 on the Minimum follow the fair employment practices instances of child labour identified. We
Age for Admission to Employment and in compliance with all applicable local believe this is due to the consistent
Work. In addition to ensuring this is government rules and regulations messaging and support we give to
applied across all of our direct regarding Child Labour Laws, and an farmers about child labour.
operations (plantations, farms and understanding that regular audits will Since one of the root causes of child
processing units), Olam works be carried out. In addition, Olam labour is lack of money, Olam Cocoa
proactively with others, including our undertakes a raft of measures to has intensified support to women’s
suppliers, governments, specialist mitigate the risk of child labour; associations. We assist them in
these include:

54 Olam International Limited Annual Report 2016

developing income-generating
activities such as fortified cassava
nurseries (see page 57 for more
information). This year, we will extend
the activities to poultry and animal
production, as well as literacy and
savings and loan schemes.
Turkish hazelnut farmers have larger
farms than traditional smallholders in
Africa and Asia, but they still require
Olam Livelihood Charter support,
particularly in terms of environmental
and social practices. Migrant labour
moving through Turkey to support the
harvests brings increased labour risks,
from child labour to fair payment for
adults. The FLA monitors the success
of our awareness and remediation
programmes. The FLA report from the
2016 harvest monitoring will be
available later in 2017.

Olam field staff use picture aids to help smallholders understand child labour issues.

Progress on goals
±REMHFWLYHV 2020 target 2016 achievement 2XWORRNIRUWDUJHW
*2$/=HURKDUPZRUNSODFH 0DWHULDODUHD/DERXU

3.1. Eliminate serious incidents Reduce LTIFR to 0.3 in Olam LTIFR was further reduced to 0.43 in our 69 On target
processing operations Tier 1 processing plants, a 30% year on year
(50% reduction from 2015 actual). reduction.

Reduce LTIFR in Olam-managed Primary focus in 2016 has been in the On target
plantations, concessions and farms expanding palm and rubber plantations
by 50% from baseline determined in Gabon, with new professional resources,
in 2016. extensive training, several audits and corrective
actions. This has significantly improved the focus
on safety behaviours with positive benefits. It is
too early to quantify the improvement in lagging
indicators.

6XVWDLQKHDOWKDQGVDIHW\ All locations routinely report unsafe Olam Imperative 3 Reporting, Recording, On target
behaviour change programme acts and unsafe conditions, and Review and Compliance Checklist has now
near misses. been rolled out to all key locations, so leading
and lagging safety indicators will be routinely
reported from Q1 2017. Leading indicators
include unsafe acts and near misses.
*2$/5HVSHFWIRUZRUNHUV¶ULJKWV 0DWHULDODUHD/DERXU

2ODPFRPSOLHVZLWK,/2 No moderate or severe breaches of We identified 4 cases in processing operations Behind target
principles compliance reported or observed where ILO principles were breached. These
in audits. related to non-compliance on statutory dues,
working hours, minimum wages, and overtime.
One breach of Olam child labour standards on
plantations was identified by Internal Audit.
Corrective action has been taken to ensure legal
age restrictions are observed, and that
age-appropriate roles are assigned.

4.2. Diversity strategies are 100% of businesses with >100 Draft policy undergoing review. Behind target
implemented employees to have a documented
and reported diversity strategy.

olamgroup.com 55
Social

Our material areas

FOOD SECURITY AND NUTRITION

Olam’s focus is on improving access to safe, affordable and nutritious food
for our farmer suppliers and in the workplace, so that their dietary needs
and preferences are met. This enables them to live an active and healthy life,
which in turn supports productivity and livelihoods.

Highlights for the year

Key 2016 focus areas

• Continue to support smallholders
with crop diversification for improved
income and food security
• Increase nutrition training for

226,030 26 billion 92
communities through partnerships
• Increase fortification of food stuffs
in Africa
Smallholders trained Servings of Entries received for the
in Good Agricultural micro-nutrient fortified 2016/2017 Olam Prize Key sector collaborations
Practices (GAP) foods in Africa for Innovation in and commitments
Food Security • Hosted the Building Sustainable
Futures Forum in Singapore
• Jointly launched the Global
Agri-business Alliance which
will focus in particular on SDG 2:
‘End hunger, achieve food security
and improved nutrition, and promote
sustainable agriculture’
• Member of Champions 12.3 on
food waste

We are guided by
• Olam Livelihood Charter
• Commitment to continuous
engagement with communities
Relevant SDGs around our developments
to understand needs
(FPIC1 procedures)

1
FPIC – Free, Prior and Informed Consent.

56 Olam International Limited Annual Report 2016

 By 2030 we will need
to feed 8.3 billion
people, over 1 billion
more than today.
Left unresolved, our
inability to solve
food insecurity will
constrain our ability
to feed a growing
world while leaving
millions in poverty.
“The project is beneficial for the ladies because it provides financial support through the tuber sales. With this
support we can assist our husbands to pay our children’s schooling and better manage the household expenses.”
Awa Ouattara, Mebifon Women’s Association, in a Côte d’Ivoire cocoa growing community.

Olam’s role in food security Promoting crop diversification to Small changes in Cameroon rice
Around 500 million smallholders increase incomes and food access logistics make a big impact on
produce 80% of all the food consumed Just as a balanced diet is nutritionally food waste
in Asia and Sub-Saharan Africa. Yet, as diverse, so a healthy livelihood Cameroon currently imports over 80%
a sector, agriculture has the highest shouldn’t be overly reliant on one crop. of its rice. In 2012, Olam’s rice team
incidence of families living below the Encouraging farmers to diversify crops put in place protocols to reduce losses
poverty line. Given that many of our helps to stagger income and spread across the segments of the supply
products (aside from rice, dairy and risk. It is also good for the soil. Farmers chain under its control:
wheat) could be termed as niche can grow other crops for cash or for
• Stronger bags
ingredients, or raw materials such as family needs. In Côte d’Ivoire, a cocoa
rubber, our role in driving food security • Ensure re-bagging of torn bags
programme, with various customer
might not seem obvious. But our close partners, is supporting women to grow as soon as possible
working relationships with farmer cassava, a food staple. In 2016, we • Labour training for bag handlers
suppliers, and our expertise across the helped 11 women’s groups establish • Laying tarpaulin underneath
value chain, enable us to equip farmers nurseries from 5,000 vitamin A fortified bagging operation
and their communities with the high-yielding cassava plants. These • Maintaining pallet quality
knowledge and tools for sustainable nurseries can now each produce • Surprise audits.
and profitable agriculture, including 50,000 cassava plants every year.
staple food crops. From 2012 to 2016, losses in logistics
We plan to support a further 9 groups
reduced from 1.25% to 0.8%. The
in 2017.
amount of edible rice saved equates
to around 2 bowls each for the
23 million people of Cameroon.

Olam’s priorities to increase global food security

• Increase productivity on smallholder farms • Improve water usage/irrigation efficiency
• Increase productivity on large-scale farms while • Invest in research to improve farm productivity
catalysing food production in the region through • Reduce land degradation through zero till farming
outgrower programmes • Support policy frameworks that seek inclusive and
• Better nutrition through education, crop diversification, sustainable growth for all countries
and producing healthy packaged foods • Lead private and public partnerships to enable
• Reduce immediate post-harvest losses and food waste initiatives to scale up and replicate.
• Invest in agri-infrastructure

olamgroup.com 57
Social

Our material areas: Food security and nutrition

Educating farmers about nutrition Fortifying foods in Africa Oil palm is native to the West and
Smallholder communities need support One of the most cost-effective Central African regions. Palm oil is an
beyond yield improvements, and that strategies to improve nutrition, essential part of many traditional
includes nutrition education. fortification is sometimes mandatory, African cuisines. In early 2016, our
Vegetables and protein-rich foods grow such as for our wheat processing in refinery in Mozambique started
in most regions but smallholders often Nigeria and Ghana; however, often the fortifying palm oil with vitamin A.
don’t understand the benefits of a choice lies with the manufacturer. 74% of children under 5 in
balanced diet. Pilot modules started in Mozambique are vitamin A deficient,
In 2016, our Packaged Foods and with negative impacts on growth,
Côte d’Ivoire were expanded in 2016. Grains businesses produced over immunity and development.
26 billion servings of fortified foods. Recognising palm oil as a strong
Promoting nutrition in the workplace These included: delivery for vitamin A, in November
Many adults eat at least 1 meal a day at 2016 the Government of Mozambique
• 419.6 million servings of fortified
work, which makes it a logical place for made fortification mandatory.
Milky Magic and All Milk biscuits
health intervention.
• 25.6 billion servings of fortified
In 2016, as per our Goals, we wheat flour in Ghana, Nigeria,
continued to develop and review an Senegal and Cameroon
internal Standard to apply to the • 42.86 million servings of fortified
Global Nutrition for Growth Compact. tomato paste.

Land tenure and food security in Gabon

GRAINE1 is a pioneering JV initiated by the Government of Gabon. Its twin goals
are reducing reliance on imported food – 60% is imported – and supporting
rural livelihoods (33% live at or below the poverty line). The Government
identifies, allocates and transfers parcels of environmentally and socially
suitable land to cooperatives (with title certificates). Olam manages the project,
providing technical expertise and supporting cooperatives with training and
improved planting stock, inputs and logistics to manage profitable plantations
for palm oil and food crops such as cassava, banana, tomatoes and pepper. By
the end of 2016, almost 16,000 people in over 775 cooperatives had signed up
to the scheme. In terms of starting to grow produce, around 2,400 members
(of whom 61% are women) had planted bananas and cassava.
Jean Lirois Anizok, from the Earth Promise
Jean Lirois Anizok is from the Earth Promise Cooperative which has 18 women Cooperative.
and 25 men. They have 30 ha which by the end of 2016 had been planted with
8.17 ha of bananas and 13 ha of cassava.
“GRAINE is a good programme for rural people because it brings work and income for the people. We have seen
changes in our lives: the money means we can send our children to school and feed our families. It should extend
to all other villages and embrace more crops for planting, especially sweet potato, yam, corn, peanuts and so on.”

Watch the film about the GRAINE project See the Land section on the due diligence process
at olamgroup.com. to avoid deforestation by smallholders.

1
GRAINE, which means ‘seed’ in French, stands for ‘Gabonaise des Réalisations Agricoles et des Initiatives des Nationaux Engagés’ (Gabonese Initiative for
Achieving Agricultural Outcomes with Engaged Citizenry).
2
70,000 ha to be developed for palm plantations and 8,000 ha for food crops.

58 Olam International Limited Annual Report 2016

The second Olam Prize for Innovation Creating the future we want
in Food Security launched – learning from experts and
Sponsored with our international collaborating with peers
scientific partner, Agropolis Fondation, In September 2016, Olam convened
the US$50,000 prize rewards an more than 300 delegates in Singapore
outstanding research project for its to attend the Building Sustainable
potential impact on the availability, Futures Forum (BSFF). Our intent was
affordability, accessibility or adequacy to gather our peers across the
of food. Over 90 applications have agri-value chain to identify areas for
been received and the winner will be collaboration in alleviating global
announced in 2017 on olamgroup.com. hunger and nutrition as part of the
The winner of the 2014/15 Prize SRI SDGs. We recognise that solving food
International Network and Resources security without depleting natural
Center (SRI-Rice) used the funds to resources or impacting climate change
develop an international network of can only be achieved by harnessing Marking the beginning of the Global Agri-business
System of Rice Intensification (SRI) our collective strengths. Alliance.
researchers in 45 countries. A key highlight of the BSFF was the
The platform facilitates collaboration launch of the Global Agri-business
across borders on the SRI Alliance (GAA), also initiated by Olam.
methodology that enhances rice Its aim is to collectively address
productivity, water conservation, sustainability, social, labour and
livelihoods, soil health, and crop environmental issues where the
resilience to climate stress. agri-sector has a shared responsibility.
The first meeting of the GAA in
December 2016 initiated a series of
working groups which will tackle the
systemic issues identified by the sector.

Watch the panel videos of the BSFF at

olamgroup.com. For more on the GAA visit
globalagribusinessalliance.com.

Progress on goals
±REMHFWLYHV 2020 target 2016 achievement 2XWORRNIRUWDUJHW
*2$/)RRGVHFXULW\DQGQXWULWLRQ 0DWHULDODUHD)RRG6HFXULW\

5.1. Workers are educated on, and Conduct nutrition education or Olam Workplace Nutrition Guidelines drafted Behind target
FDQDFFHVVQXWULWLRXVIRRGV access initiatives for the workplace and under final review.
for 100% of target businesses, to be
Olam Healthy Living programme implemented in
determined in the Standard.
19 businesses across Africa. This initiative
targets improved health and nutrition for workers
and communities.

,QFUHDVHGDYDLODELOLW\RI Produce 40 billion servings of Over 26 billion servings of fortified biscuits, flour On target
PLFURQXWULHQWIRUWL¿HGIRRGV micronutrient fortified foods. and tomato paste (Africa).

olamgroup.com 59
Social

Our material areas

FOOD SAFETY AND QUALITY

Ensuring our ingredients and products are delivered to customers without
contamination or adulteration is the bedrock of our quality and
compliance programmes.

Highlights for the year

Key 2016 focus areas

• Improving traceability in the
supply chain
• Supporting smallholders to
improve quality

1.36m MT US$32.24m 57,884

• Enforcing HACCP1 and pursuing
certification for top tier
processing facilities
Product volumes sourced Paid in premiums to Smallholders received
under the Olam Livelihood OLC smallholders training on reduction We are guided by
Charter (OLC) and optimisation of • Olam Quality Policy and Food
synthetic fertilisers Safety System
• Good Manufacturing Practice (GMP)
• Hazard Analysis and Critical Control
Points (HACCP)
• BRC/FSSC 22000
• International food safety regulations

6.4m 82% 1 st
Seedlings distributed to Of relevant Tier 1 food Cashew processing
OLC farmers (e.g. cocoa, processing facilities facility in India to get
coffee, cashew) for certified to BRC/ BRC certification
improved quality FSSC 22000

Relevant SDGs

1
HACCP – Hazard Analysis Critical Control Point,
a preventative approach to physical,
chemical and biological hazards.

60 Olam International Limited Annual Report 2016

Drying floors or mats for these chilli peppers in India prevent contamination from the Rusmolco: our dairy teams provide high quality feeds for the cows, and regularly
soil, yet many smallholders do not have the funds to buy one. check water for nutrient quality, heavy metals, or any other contaminants that
might affect animal or human health.

Integrated supply chains enhance coffee and black pepper are sourced Applying internationally recognised
food safety from a vast, fragmented network of processing standards across
hundreds of thousands of smallholder the world
The safety and quality of our products
farmers in remote parts of the
are non-negotiable for our business. A large part of our processing footprint
developing world.
We operate highly integrated supply is in emerging markets, which do not
chains working with smallholders to Tracing products back to individual necessarily have the same regulatory
provide training, seeds and other farmers is challenging – often the frameworks for Quality, Environment,
inputs. This is coupled with the highest quantities they produce are too small to Health and Safety as developed
standards of quality and be marked and processed as a nations – for example, a lack of
microbiological control at our separate batch in a factory and there Occupational, Safety and Health
processing plants in origin, and in are middlemen involved in buying norms, or a regulatory authority with
destination markets, reducing food and selling. strict standards. Perception of risk and
safety risks. This structure also means Through the OLC, we strengthen legal compliance can sometimes be
we can more easily accommodate traceability by buying directly from the relatively low as consequences may
changes in regulation, such as the farmer groups. By helping them to be limited due to weak enforcement.
Foreign Supplier Verification Program, improve their agricultural practices, Olam therefore instils international
which requires importers of food we also help them to improve product standards and behaviours across our
products into the USA to undertake integrity and quality. This includes global operations. By the end of 2016,
verification programmes to ensure using natural methods of pest control Cocoa, Coffee, Dairy, Rice, SVI and
preventative controls for supply chains and organic fertiliser coupled with Sugar businesses had achieved
outside the country. This is part of the judicious pesticide use. Under the 100% BRC/FSSC 22000 certification.
Food Safety Modernization Act, which Olam Livelihood Charter, almost 95,000 This means that 82% of relevant top
was implemented in the USA in 2016. small-scale farmers were trained tier food processing facilities are now
specifically on Integrated Pest BRC/FSSC 22000 certified.
Ensuring product integrity through Management (IPM). This focuses on
traceability Primary processing units are governed
natural methods of pest control, such
by our mandated QEHS policies,
Traceability is of increasing importance as planting maize as a border crop,
standards and codes of practice.
to our customers who want to know using other crop and pheromone traps,
In addition to self-audit, they are
about the products they are buying: and deploying hygienic drying
subject to regular audits by regional
where they are from, who grew them, techniques that minimise contamination
Environment, Health and Safety
and under what conditions. Many of of the harvest.
managers and customers.
our products such as cocoa, chilli, In 2016, 1.34 million metric tonnes of
product under the OLC were traceable.

olamgroup.com 61
Social

Our material areas: Food safety and quality

Continuous training for the highest

Following international standards food safety standards
In processing, we employ the systematic preventative approach called Olam is committed to ensuring
Hazard Analysis Critical Control Point (HACCP). It addresses physical, employees receive ongoing training,
chemical and biological hazards across the operation as a means of particularly with regard to food safety.
prevention rather than relying on finished product inspection. Some of the One example is Olam SVI’s annual
hazards we manage include the adulteration of raw materials, processing Continuous Excellence (CE) Workshop
contamination by foreign bodies or pathogens and labelling errors. This organised by the Innovation and
approach enables us to determine key controls over processes and Quality (IQ) team. The one and a
concentrate resources on activities that are critical to ensuring safe food. half day workshop was attended by
53 team members from operations and
Quality and Assurance teams from
SVI’s global plant locations, who
shared best practice and learnings.
A combined mock recall exercise was
completed with 4 different scenarios
taken on by cross-functional teams
from Supply Chain (Planning and
Customer Service), Legal, Finance,
Engineering, Plant Operations, QA
and IQ. The exercise rehearsed
decision-making processes in
timebound situations. The 2016 Olam
SVI 6 Star Award for excellence in
contributions towards food safety
and quality was awarded to Olam SVI’s
Gilroy plant in California (garlic) and
the Key Food Ingredients (dehydrated
vegetables) plant in China.

The Nutrifoods biscuit factory in Ghana produces 3 popular biscuit brands for consumers – Royal King
Cracker, Royal Milky Magic and Perk Milk Shortcake.

In 2016, the Packaged Foods Business universal recognition and credibility.

(PFB) was working towards FSSC Both Ghana facilities have now
22000 accreditation for 2 sites – the achieved FSSC 22000 certification with
Nutrifoods Biscuit factory and the Tasty Nutrifoods being the first biscuit factory
Tom tomato paste plant in Ghana. in West Africa to do so.
In Nigeria, both the tomato paste and In India, Olam’s integrated
noodles facilities successfully semi-mechanised cashew processing
completed the first surveillance audit. facility at Vizianagaram was honoured
The FSSC 22000 certification is a with the National Award for Food Safety
Global Food Safety Initiative (GFSI), 2016 by the Confederation of Indian
which provides thought leadership and Industry. This was in recognition of its
guidance on food safety management holistic approach in establishing,
systems, helping to embed best running and managing the Food Safety
practice and build customer and Quality Systems. The plant is the
confidence. GFSI benchmarks the first and only cashew plant in India to
various food safety standards against a get BRC certification (A grade) from
basic set of criteria, which enables receipt of raw cashew nuts to
production and packing. Fresh garlic harvested by our Gilroy plant, USA.

62 Olam International Limited Annual Report 2016

Keeping it natural AJ11PK, a new, black cocoa powder
Increasingly, consumers are looking for that has no added sodium (Sodium is
clean, natural and healthy products. As traditionally added as an alkalising
well as sourcing individual ingredients, agent during processing for dark
Olam SVI also makes own label recipes cocoa powders to achieve the
for customers such as salsas. In 2016, desired colour).
Olam SVI achieved non-GMO1 and Developed for the Brazilian and South
gluten-free certifications. American markets, this cocoa powder
In October, as part of the celebrations aligns with the Pan-American Health
commemorating the 70th anniversary of Organization (PAHO) policy to reduce
Olam Cocoa’s Joanes brand in Brazil, dietary salt intake among South
and the opening of the new Cocoa American consumers.
Innovation Centre, we launched

Opening of Olam Cocoa’s Innovation Centre, Brazil.

AJ11PK black cocoa powder, innovative because sodium has not been added to achieve the colour.

Progress on goals
±REMHFWLYHV 2020 target 2016 achievement 2XWORRNIRUWDUJHW
*2$/6DIHDQGUHOLDEOHIRRGVIRURXUFXVWRPHUV

)RRGSURFHVVLQJIDFLOLWLHV 100% of relevant processing facilities 82% of relevant top tier food processing On target
PHHWLQWHUQDWLRQDOTXDOLW\DQGIRRG to be FSSC 22000 or BRC certified. facilities are FSSC 22000 or BRC certified.
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1
Overall, Olam International does not encourage Genetically Modified crops entering our food supply chains.

olamgroup.com 63
ENVIRONMENT
3HUKDSVPRUHWKDQDQ\RWKHUVHFWRUDJULFXOWXUHIDFHV
huge environmental challenges that are interlocked and
FRPSOH[$WDJOREDOVFDOHRXURSHUDWLRQVDQGWKRVHRI
RXUVXSSOLHUVDUHDWULVNRIFOLPDWHFKDQJHSRRUVRLO
quality, and water scarcity, which in turn impact on global
IRRGVHFXULW\
CONTENTS:
68 Land
74 Water
80 Climate change
Environment

This section explores our achievements and challenges in 3 of

our material areas that focus on environmental impacts:
land, water and climate change.

Land Water Climate change

68 74 80

66 Olam International Limited Annual Report 2016

“Maintaining sustainable yields and growing our
business means that we have to act as responsible
stewards of the environment and encourage third-
parties to do the same.”
Dr Christopher Stewart
Head of Corporate Responsibility and Sustainability

Q&A with Dr Christopher Stewart, Head of Which environmental issues were stakeholders
particularly interested in?
Corporate Responsibility and Sustainability As an organisation that sources from thousands of farmers in
Olam is a member of the UN Global Compact. How do you developing countries, many of the issues in our supply
chains are social problems, linked to poverty and lack of
fulfil Principle 7 of taking a precautionary approach to
services, rather than strictly speaking environmental – but
environmental challenges? clean water, fertile land and climate suitability are essential
As a global agri-business we, and our suppliers, are for these communities to thrive. Climate-Smart farming and
dependent on the earth’s natural resources. Maintaining Water Stewardship practices are examples of the ways we
sustainable yields and growing our business means that we are responding to these concerns.
have to act as responsible stewards of the environment and
As we have moved upstream, stakeholders are increasingly
encourage third-parties to do the same. Our own operations
asking us to demonstrate a much broader form of
must avoid or mitigate potential negative impacts, therefore
responsibility, taking on community development and
all investment cases for any new developments must
large-scale conservation issues within the landscapes where
undergo environmental and social impact assessments and
our plantations are sited. Social contracts that recognise
implement the relevant management plans. For our existing
community land rights are the key platform for our continuous
operations, we are guided by our Risk Scorecard, as well as
engagement plans, upheld by robust grievance procedures.
a suite of Policies, Codes and Standards. Our Governance
Eliminating deforestation from palm and rubber supply
structure ensures that we adhere to these principles and that
chains was raised by the NGO Mighty Earth in 2016 (see the
we undertake regular audits and gap assessments.
Land section of this report), whilst deforestation is
How did Olam perform against its environment goals increasingly recognised as a major issue in the cocoa sector.
Building on our existing upstream policies, in 2017 we have
in 2016?
developed a Global Forest Policy to eliminate unsustainable
Our carbon footprint for our own operations continues to practices across all our supply chains.
improve. We are also making good progress with our
Climate-Smart Agriculture training programmes for We have tried to ensure that the majority of the points raised
smallholders, and we have undertaken ground-breaking by stakeholders have been addressed in this report.
work on water stewardship, for example in coffee.
We increased the overall tonnage covered under the Olam
Supplier Code (OSC). The Code covers social, as well as
environmental requirements, and we’re updating it in 2017 to
reflect the evolution of our global policies. More information can be found on sustainability progress in our
Managing the impact of our third-party supply chains is a GRI Report and Olam Livelihood Charter on olamgroup.com.
3-step process: firstly, we need to complete the roll-out of our
Supplier Code; then we need to verify that suppliers are
upholding the Code; and finally, we must work with suppliers
to address any issues that we identify in this process. This
can be straightforward when we have direct engagement
with the supplier but it is much more challenging when we
are procuring through a third-party, as we don’t have the
direct link to producers. With a supplier base of more than
4 million smallholder farmers, verifying that each one is
upholding the Code is impossible. Our big challenge this
year is how to combine risk assessment, partnerships and
pre-competitive verification platforms to ensure compliance
with the Code, building on the extraordinary development of
remote sensing technology and traceability systems.

olamgroup.com 67
Environment

Our material areas

LAND
The land required to supply the 14.4 million metric tonnes of product in 2016 is
estimated at just under 10 million hectares. This is slightly larger than the size of
Hungary1. Ensuring the sustainable development and use of land-based ecosystems
in both our direct and indirect supply chains is therefore a continuing imperative.

Highlights for the year

Key 2016 focus areas

• Protect High Conservation Value
ecosystems and High Carbon
Stock Forests
• Ensure community rights and

58% 4th 120,464

participative decision-taking
• Reduce indirect impacts on land
from third-party farmers
Of priority product volumes Most transparent company Smallholders trained in and suppliers
procured by origins in globally according to soil fertility
FY16 are covered by the the Sustainable Palm Oil Key sector collaborations
Olam Supplier Code2 Transparency Tool (SPOTT)3 and commitments
• UN Guidelines on Responsible
Land Tenure
• 4th year Forest Footprint
Disclosure – B
• Member of the Natural
Capital Coalition

179,991 130,157 10,474

Smallholder hectares GPS Smallholders trained on Individual farm
mapped under the forest conservation, management plans for
Olam Farmer Information including the impact of cocoa smallholders
System (cocoa) converting forest through generated under OFIS
burning, along with other in 2016
Climate-Smart
Relevant SDGs Agricultural practices 1
9.3 million hectares.
2
Cashew, cocoa, coffee, cotton, hazelnut,
palm and rubber.
3
Compiled by the Zoological Society of
London (ZSL).

68 Olam International Limited Annual Report 2016

Estimated breakdown of land footprint
Under Olam management Within the Olam Livelihood Charter Under third-parties
Olam-managed land
• Natural forest concessions
(Republic of Congo)
• Almond orchards (Australia
and USA)
• Dairy (pasture and grain
in Russia and Uruguay)
• Planted coffee plus High
Conservation Value (HCV)
set-asides (Laos, Brazil,
Tanzania and Zambia)
• Planted palm plus HCV
set-asides (Gabon)
2.4 0.67 6.67
• Planted rubber plus HCV
MHa* MHa* MHa*
set-asides (Gabon)
• Cocoa plantation (Indonesia)
• Rice farm (Nigeria)
• Black pepper plantation (Brazil)

* Million hectares

Land stewardship Coffee plantations in Tanzania and

Olam has always understood that we Zambia gain Rainforest Alliance and Pursuing international
have significant responsibility in terms UTZ certification standards and certification for
of land and biodiversity stewardship, Subsidiaries Aviv in Tanzania and the upstream developments
coupled with ensuring that the rights Northern Coffee Corporation Ltd (NCCL) We are guided by:
of communities are upheld. This in Zambia now meet the growing demand
• Olam Plantations, Concessions
responsibility is also a business benefit, for single-estate, certified, traceable
helping to ensure we do not jeopardise and Farms Code
volumes. Aviv is a 2,000 ha plantation
our own operations through soil • Olam Sustainable Palm Oil
with over 1,025 ha of planted Arabica
degradation, loss of pollinators and Policy (updated in 2016)
coffee and a wet mill processing
increasing global temperatures through facility. Protected areas, including • Olam Global Forest Policy
the loss of carbon sequestration by buffer zones, represent over 15% of the (new in 2017)
forests. Many issues relating to land are land under Aviv management. • Olam Environment Policy
also interconnected with livelihoods, • Olam Health and Safety Policy
NCCL is situated at Kasama, in
water and climate change. • Olam Code of Conduct
Zambia’s Northern Province, and has
planted over 1,825 ha. A further • Certifications including FSC®,
Land under our direct control ISO, Rainforest Alliance,
1,400 ha of conservation areas are
Our selective integration into being protected. Volumes for both RSPO and UTZ
plantations, concessions and farms plantations will be supplemented with • International standards
began in 2010. From the start, we smallholder coffee programmes, which including Alliance for Water
recognised that they would only be will be supported for future Stewardship (see page 76),
successful if they adhered to strict certification efforts. IFC, Sustainable Natural
environmental and social criteria. Most Rubber Initiative
of our operations are in rural areas of (SNR-i) Standard
developing nations. Each locale has its • International
own challenges, and we have learned Labour Organization
many lessons along the way. However,
by working with expert partners and
listening continually to our
stakeholders, we are seeing our
operations have positive impacts.

olamgroup.com 69
Environment

Our material areas: Land

In Nigeria, our 10,000 ha rice farm and extensive network of smallholders grow rice for the domestic market.
Our team has discovered the rare Northern Carmine Bee-Eater and has taken steps to preserve areas of bush,
engaging with smallholders to ensure they do not disrupt the habitat.

A social team engages regularly with Engaging with communities It is not possible to monitor the land
semi-nomadic tribes living in the forest Our aim is for all land developments management processes of all these
concessions. to have a positive impact on local farmers, so we prioritise high-risk
communities. Firstly, because it is the products (cashew, cocoa, coffee, palm,
Managing natural forests and rubber) and use the Olam
right thing to do and, secondly,
In the Republic of Congo, Olam Livelihood Charter and Olam Supplier
because we hope local people will
subsidiary Congolaise Industrielle Code to extend our reach of influence.
want to work with, or grow crops for,
des Bois (CIB) manages over Specific product policies, such as the
Olam. Social conflict is
2 million hectares of natural forest Olam Sustainable Palm Oil Policy, state
counterproductive and costly to
of which about 1.3 million specific product criteria to be followed.
resolve. We use the internationally
hectares are FSC® certified1 In 2017, we will launch a cross-
recognised Free, Prior and Informed
– one of the world’s largest commodity Global Forest Policy, and
Consent process (FPIC) at the start of
contiguous FSC® certified tropical strengthen and clarify the requirements
all new developments, and engage in
hardwood concessions. Our most of our Supplier Code for all third-party
a continuous process of engagement.
recent concession of around party suppliers. Please see olamgroup.
671,000 hectares, also leased We also undertake Social Contracts or com for more information.
from the Republic of Congo, Long-term Village Development Plans.
is set to achieve certification
See page 72, our ‘Focus on Gabon’
Verifying our third-party palm
by 2018. for examples of initiatives. supply chain
1
Licence numbers: The palm supply chain is one of the
CIB Kabo – FSC-C128941;
CIB Pokola – FSC-C014998; Responding to grievances most complex and challenging to verify.
CIB Loundoungo – FSC-C104637. Grievance procedures are important Partnerships and collaboration are
for dealing with any complaints. essential for verifying that suppliers
We investigate and take appropriate are upholding our requirements.
Protecting biodiversity action. If a complaint is submitted via We are working with the World
a third party, we also investigate. For Resources Institute (WRI) and its
Plants, birds, insects and mammals all
example, the NGO Brainforest stated Global Forest Watch Platform to help us
help to create the ecosystems upon
in a report released in December 2016 identify high-risk mills, which we will
which we depend, so protecting
that some communities felt they had verify according to the time-bound
biodiversity by minimising our impact
not been adequately informed about targets as stated in our 2020 road map
and safeguarding areas of habitat is
the GRAINE programme in Gabon. in our Palm Policy. Any mills found to be
vital. All new developments are subject
These complaints were not made sourcing from areas identified as being
to independent Environmental and
to Olam despite much ongoing medium or high risk from poor
Social Impact Assessments, and we
engagement and we have not been production practices will be assessed,
are committed to managing our farms
able to identify the individuals and potentially removed. As highlighted
and plantations according to best
concerned. Read more about GRAINE in our October Interim Progress Report,
practice. It should be noted that
in the food security section of we had already reduced our supplier
we limit the use of WHO Class
this report. base from 48 in 2015 to 14 in 2016.
1A and 1B chemicals to
exceptional circumstances. Given the technical aspects and
Land under the control of suppliers
complexity of the palm supply chain,
About 75% of land producing crops we encourage stakeholders to go to
for customers is under the control olamgroup.com for our strategy and
of others. FAQs. We also welcome all contact for
more information via [email protected].

70 Olam International Limited Annual Report 2016

Committed to growing and sourcing with farmers in the downstream Gabon for our rubber plantation, this is
sustainable rubber supply chain to SNR-i stakeholders to allow time for both parties to support
in mid-2016. a multi-stakeholder process to develop
Unlike the palm sector, the rubber
further specific criteria for responsible
industry does not have a certification
scheme so, in addition to applying our
Responding to Mighty Earth agricultural development in countries
In December 2016, the NGO Mighty that have most of their land covered by
own internal standards, we have been
Earth issued a report with allegations forests. It does not imply that we agree
supporting the natural rubber industry
of deforestation in our Gabon palm and with Mighty Earth’s allegations on our
in the development of an international
rubber plantations, and third-party Gabon operations, which we believe to
sustainability standard.
palm oil sourcing business. We have been developed to the highest
In January 2015, the International published a full technical response, environmental and social standards
Rubber Study Group (IRSG) launched accepting many positive applicable in the national context.
the Sustainable Natural Rubber recommendations related to We firmly believe that we have
Initiative (SNR-i), which is a self- transparency in the third-party supply demonstrated a different and more
assessment standard covering chain but refuting the claim that our sustainable model for our plantations
5 main criteria: Gabon developments had not taken a and will be hosting stakeholder visits in
• Support improvement of productivity responsible approach. 2017. For more context, please see
• Enhance natural rubber quality overleaf, as well as the response on
We met with Mighty Earth in January olamgroup.com from Professor Lee
• Support forest sustainability 2017, and then published a joint White, Director of Gabon’s National
• Water management statement with a series of actions on Parks and the UNFCCC Forests and
• Respect human and labour rights. behalf of both parties to increase Agriculture negotiator for Gabon.
mutual understanding and achieve
In February 2016, we assessed our
greater transparency.
operations against the proposed
SNR-i standards and completed the This includes Mighty Earth suspending
self-declaration. In addition, Olam its current palm and rubber campaign
presented a comprehensive for a year, and its complaint to FSC
sustainability framework that covers regarding Policy for Association
upstream operations and engagement (see our statement on olamgroup.com).
It should be noted that, while we have
agreed to pause development in

Progress on goals
±REMHFWLYHV 2020 target 2016 achievement 2XWORRNIRUWDUJHW

*RDO6XVWDLQDEOHGHYHORSPHQWDQGXVHRIODQGEDVHGHFRV\VWHPV 0DWHULDODUHD/DQG

3URWHFWLRQRIHFRV\VWHPVKLJK 100% of Olam-managed plantations, Due Diligence, Environmental and Social Impact On target
FDUERQVWRFNIRUHVWVDQGKLJK concessions and farms to have Assessments (ESIA) completed for all
FRQVHUYDWLRQYDOXHIRUHVWV implemented their Land plantations currently in operation.
Management Plan.
A Global Forest Policy is in consultation Q1 2017.
Full response to Mighty Earth regarding
allegations of deforestation available on
olamgroup.com.

1RFRPPXQLW\EDVHGFRQÀLFW 100% of Olam-managed plantations, Free Prior Informed Consent, Social Contracts On target
on Olam-managed plantations, concessions and farms to have and Grievance Procedure were established and
FRQFHVVLRQVDQGIDUPV implemented their FPIC process and achieved for all new Olam plantations in Gabon
their Social Action Plan. since 2011.
Formal Grievance Procedures are in place for
established coffee plantations in Tanzania,
Zambia and Laos.
A gap analysis will be conducted in 2017 to
ensure suitable processes are in place to avoid,
mitigate and manage any potential conflict
across all upstream operations.

7.3. Reduce indirect land impacts 100% of third-party supplier volume All priority products are working with suppliers On target
IURPWKLUGSDUW\IDUPHUVDQG complies with the Supplier Code to implement the Supplier Code.
suppliers based on a prioritised product
58% of priority product volumes procured by
approach.
origins in FY16 are covered by the Olam
Priority products: cashew, cocoa, Supplier Code.
coffee, cotton, hazelnut, palm, rubber.

olamgroup.com 71
 Environment

Our material areas: Land

FOCUS ON GABON
Setting the standard for responsible plantation
development in Africa
All of our palm and rubber plantation How we approach sustainable palm • Engage the local communities to
developments are in joint ventures plantation development in a highly ensure that they agree with our
with the Republic of Gabon. The forested country analysis and with the project
Government was looking for a business • Validate our assessments through
• Select broad areas in landscapes
partner to help develop an agricultural broad-based consultations with
that are far from national parks and
economy, to reduce its reliance on NGOs and experts
where the natural environment has
finite oil and gas exports and food • Create positive social and economic
already been degraded
imports (60%) and create jobs (33% impact in the local communities
live at or below the poverty line) as well • Within specific sites, ensure that
through employment, capacity
as support cooperative smallholder we identify the land that is of High
building, and rural
programmes. From our side, Olam Conservation Value (HCV) for
infrastructure development
recognised that Gabon had ideal biodiversity, community or
cultural reasons • Ensure we are 100% RSPO1
agri-climatic conditions and soil for compliant from new planting through
growing oil palm and rubber, and that • Prioritise the ‘least value’ land for
to mill completion with no burning for
the Government shared our strong development and invest heavily
land clearance
sustainability ethic. in conserving the high value areas.
We actively manage these HCV • All of the above applies to the
As Gabon is 88% forest cover, the smallholder programme GRAINE.
areas, helping to prevent poaching
Government decided to make available Cooperatives receive ongoing
and illegal hunting
a small percentage of its most training in environmental practices
degraded forests for large-scale including the conservation of forests.
agriculture, which has already
provided thousands of jobs.

Bitam
Minvoul

Oyem

Médouneu Mékambo
Cocobeach 1
Mitzic Roundtable on Sustainable Palm Oil
Makokou

Libreville Ntoum Ovan

Kango

Booué Main road

Ndjolé
ORG Bitam

Okondja Aboumi
SOTRADER GRAINE
Lambaréné
Port-Gentil
Lastoursville
Onga OPG Makouke (ex Siat)

Akiéni
OPG AAwala and Mouila lot 1, 2 & 3
Fougamou Iboundji
Koulamoutou National parks
Natio
Omboué Mimongo Moanda Ngoujok Lékoni Forest
Mandji
Mouila Mbigou Pana Franceville Bongoville Savannah and grassland
Bakoumba
Guietsou
Boumango
Malinga
Gabon is 88% forest with the remainder being largely
Moabi infertile savannah or swamp. Our total planted area
Gamba Tchibanga
Mabanda for palm and rubber represents less than 0.25% of
Gabon’s land area. Over 50% of each shaded area
Mayumba
indicating the location of a plantation is protected as
Moulenghi Binza
High Conservation Value forest.
Ndindi

72 Olam International Limited Annual Report 2016

 carried out by local populations
(including support for smallholder
farmers and a fresh produce market)
• Priority hiring of local populations
on an equal skills basis.
Olam has supported social projects
in the villages at a cost to date of more
than 1.3 billion CFA (> US$2 million),
addressing priority needs such as
schools and educational materials,
teacher housing, dispensaries, water
Our palm and rubber plantations in Gabon conserve large blocks of high-value forests, connected with natural
pumps, solar lighting, a fresh produce
corridors to create an ecological network, protecting essential core habitat and allowing free movement of
wildlife within the landscape. market, road maintenance, bridges,
and various sports and leisure facilities.
Environmental mapping: our First new palm development in Africa
technical approach to achieve RSPO certification
Olam uses plane-based laser imaging The Awala plantation of 6,822 ha lies
technology known as LiDAR for within a 20,000 ha lease, the remainder
large-scale, high resolution mapping of which is actively managed by
of our concessions to support spatial Olam Palm Gabon for conservation
planning of plantations, conservation of biodiversity and forest carbon,
areas and buffer zones. and protection of water catchments,
LiDAR allows us to map the terrain in fulfilment of RSPO requirements.
(slopes, elevation, streams, rivers and At the time of certification, Awala
water bodies), and provides rich boosted Africa’s RSPO certified
information on the vegetation cover production hectares by 30%. Once
including biomass and carbon fully developed, the Mouila plantations
estimates. These can be ‘ground- (Lots 1-3) will achieve certification
truthed’ (checked by collecting by 2021.
information from the features at the
location) by field observations made Helping villages to thrive –
through traditional biodiversity surveys, Olam Rubber Gabon
allowing accurate large-scale mapping As with our palm operations, Olam
of land cover types. Rubber Gabon has signed social
contracts – there are 3 contracts with Cameras monitor apes and elephants in the forest
24 villages (Bitam – 7 villages, around our palm plantations in Gabon. At the start of
Bikondom – 7 villages, and Minvoul development we had commissioned independent
– 10 villages). The Social Contract experts to conduct great ape surveys and consulted
extensively with the Gabon National Parks Agency, and
is based on 3 pillars: NGOs such as WWF and the Wildlife Conservation
• Development of basic Society, to share best practice. We created a
connected network of High Conservation Value
social infrastructure
habitats for apes totalling 55,000 ha. These areas are
• Establishment of a programme to directly connected to adjacent forests, allowing free
support income-generating activities movement of animals through the landscape.

“When I visited Gabon in 2015 with the leading team of scientists involved
in the High Carbon Stock Study, I was hugely impressed by the overall
approach adopted by Olam in developing its concession areas, by the level
As a result of our Environmental and Social Impact of engagement with local communities in implementing the RSPO’s new
Assessment Surveys for rubber, we were able to Planting Procedures, and by the methodology it used to minimise emissions
identify 12,000 ha of plantable lands on the flatter of greenhouse gases from forest conversion. I saw for myself how Olam is
hills, favouring wherever possible the rattan scrub, developing a new model for palm plantations in the 21st century. One that is
but also including some areas of secondary forests.
The best-quality habitats (maturing and high-biomass
climate positive, and ecologically and socially integrated.”
forests), as well as all wetlands, have been protected Sir Jonathon Porritt,
in an extensive, well connected network of core
habitat and buffer zones (approximately 13,400 ha of Co-Founder Director of Forum for the Future
conserved terra firma forest, including some village and Co-chair of the High Carbon Stock Science Study
use areas, and 11,500 ha of swamp forests and
wetlands). A strict no-hunting policy has been put in
place to ensure that these forests gradually recover
from historical over-hunting.

olamgroup.com 73
Environment

Our material areas

WATER
Water plays a crucial role in global food security and is essential for the
resilience of Olam’s international agri-supply chains. Water scarcity is
already an issue in many world regions. Successful companies of the
future will be those which plan ongoing operations and investments with
water at the centre – costing it into their business plans, modelling
future availability and collaborating with local stakeholders for equitable
access and usage.

Highlights for the year

Key 2016 focus areas

• Mapping exposure to water stress
• Supporting smallholders vulnerable
to water scarcity
• Implementing processing plant

1st 27,370 31%

improvement plans

Key sector collaborations

Agri-business globally Farmers benefited from Improvement in irrigation and commitments
and first business in Africa water stewardship and process water1 per • Appointed to the Board and
to have a site achieve programmes tonne of product (intensity) Technical Committee of the Alliance
the Alliance for Water for Olam’s own operations for Water Stewardship
Stewardship Standard for FY16 versus FY15
• Member of UN CEO Water Mandate
for Aviv Coffee Plantation
and California Water Action
in Tanzania
Collaborative
• Completed 4th year Carbon
Disclosure Project (CDP) Water
Module: B- (Ind ave: C)

We are guided by
• Water risk and footprint assessments
included in all new investment cases
• Enterprise Risk Scorecard
• Olam Environment Policy
• Olam Livelihood Charter
• Olam Supplier Code
Relevant SDGs • Olam Plantations, Concessions and
1
Irrigation and process water is from surface and Farms Code
groundwater sources. Olam’s own operations • Water Footprint Network’s
are plantations, concessions, farms and Tier 1
processing and manufacturing plants. Assessment Tool
• Alliance for Water Stewardship
Standard

74 Olam International Limited Annual Report 2016

FY16 value chain water footprint Mapping our wider water risks
3
Our water footprint for FY16 was 82 billion m (comparable to 33 million Olympic In 2016, we mapped our exposure to
swimming pools2), estimated using the Water Footprint Network’s Assessment Tool. current water stress. Using the World
Resources Institute Aqueduct risk
mapping tool, we screened OLC
Rainwater Surface and Groundwater programmes, our upstream farming
75.5 billion m3 6.4 billion m3 and plantations operations and our
1% secondary processing facilities. This
99% enables us to implement enhanced
1.7% water management and water
98.3% 0.1%
0.3% stewardship approaches.
3.9%
7.9% 96% Globally, we aim to implement the
91.8% Alliance for Water Stewardship
Standard at all processing sites and
58.6b m3 75.5b m3 3.2b m3 6.4b m3 their supply chains in medium to
2015 2016 2015 2016 extremely high water risk locations, and
continue to manage low to medium risk
sites through ISO 14001.
0% processing 0% processing 0.3% processing 0.1% processing
1.7% Olam-managed 1% Olam-managed 7.9% Olam-managed 3.9% Olam-managed Helping smallholders reduce water
plantations, plantations, plantations, plantations, while improving yields
concessions and farms concessions and farms concessions and farms concessions and farms
98.3% supply chain 99% supply chain 91.8% supply chain 96% supply chain
Although many smallholder crops are
naturally rain fed such as cocoa and
cotton, others such as rice and sugar
Total value chain water intensity increased by 1.6% from 4,265m3 per tonne of are renowned for water consumption,
either because they are thirsty or
product in FY15 to 4,331m3 per metric tonne of product in FY16. This is due to
because water is used liberally in
greater volumes of perennial crops such as coffee and cashew that consume production methods. And with weather
more water. impacts (either from climate change or
Additional comparative data available for FY14 at olamgroup.com/sustainability/water. El Niño) bringing much drier weather in
certain areas in 2016, the rain fed
crops require extra moisture.

Water risk screening of top tier processing and manufacturing plants using the World Resources Institute Aqueduct
Water Risk Atlas tool.

Overall water risk

Low risk (0-1)
Low to medium risk (1-2)
Medium to high risk (2-3)
High risk (3-4)
Extremely high risk (4-5)
No data

Definition
Overall water risk identifies areas with higher
exposure to water-related risks and is an
aggregated measure of all selected indicators
from the Physical Quantity, Quality and
Regulatory and Reputational Risk categories.
Sources: WRI Aqueduct 2014

2
Pool volume of 2,500 m3

olamgroup.com 75
Environment

Our material areas: Water

Overall water risk results for

OLC products
Through the OLC and other initiatives,
we train farmers to develop water
management plans that mitigate risk
and minimise adverse impacts on
water supply. In 2016, we reached over
100,000 smallholders with water
conservation education and support.
Over 8,600 were supported specifically
with water infrastructure such as
bore wells.

Olam Livelihood Charter farmers

in areas of water risk
(%)
The dam at the Olam Aviv coffee plantation in Tanzania holds 1.5 million m3 and is part of the Integrated
100
Water Management Plan for the Ruvuma river basin. In the background is the Olam Aviv Arabica coffee plantation
with shade trees.
80

60
Water reduction in India sugarcane (AWS) certification. This strengthened
production our existing efforts to adhere to global
best practice in collaborative water
40 In India, cultivating 1 kg of sugar cane
management, and helped to ensure
can require between 1,500 and
long-term water security for the
20 3,000 litres of water. With the support
300,000 people living in the Ruvuma
of partners IFC, Hindustan Unilever
River Basin.
0 Foundation, Solidaridad and New
Cocoa Coffee Cotton Sugar Rice Edible Holland, Olam’s smallholder OLC With the assistance of Water Witness
and spices nuts programme in Maharastra and Madhya International, the International Water
Low Pradesh, which began in 2013, has Stewardship Programme (IWaSP),
Low-medium reached around 20,500 farmers across GIZ and SGS, we have worked in
Medium-high 22,500 ha of land. Overall productivity partnership with water users including
High has increased by 15% while thanks communities in the Ruvuma River
Extremely high to water stewardship programmes, Basin. Collaboratively, we developed
about 62 billion litres have been saved a scenario plan for extreme weather
(water avoidance) over 3 years. In events such as droughts, ensuring the
2016, the initiative was awarded the fair use of water in times of scarcity
Most Notable Project of the Year by or water stress. The process helped
the Confederation of Indian Industry. increase transparency, providing
added reassurance on quality and
Ensuring our operations do not water-footprinting for customers.
impact on the water security of Additionally, we provided further Water,
others, Olam is the first agri-business Hygiene and Sanitation (WASH)
globally to achieve AWS certification facilities for coffee plantation workers.
In 2016, our Aviv coffee plantation in
southern Tanzania became the first
agri-business site in the world to
achieve Alliance for Water Stewardship

76 Olam International Limited Annual Report 2016

The Lemoore tomato processing facility in California has made considerable progress on reducing water consumption and food waste.

olamgroup.com 77
Environment

Our material areas: Water

“Committed to growing
responsibly, Olam was
already addressing
water risks.
Implementing the AWS1
Standard in Tanzania
has strengthened that
effort and advanced
collaboration in pursuit
of long-term water
security in the region.
The example of Olam’s With almond plantations in both the northern and southern hemispheres, Olam offers customers year
implementation of the round supply.

Standard will be a Precision irrigation through cutting Minimising water in California

edge technology processing
springboard for rolling In our almond orchards in the USA and At our Lemoore tomato
out AWS across Africa, Australia, technology helps us monitor
plant health and needs in real-time,
processing plant:

as well as providing enabling optimum irrigation efficiency.

• 584,830 metric tonnes of tomatoes
produce 92,942 metric tonnes of
In 2016, this technology helped to
critical learning for the reduce water use by up to 10%
tomato paste and 56,831 metric
tonnes of diced tomato per season
global AWS network.” while maximising growth rate and
maintaining non-stress conditions for • This requires about 596,744,593
the tree. litres of water per year
Adrian Sym, • During the paste evaporation
We use Phytech Plantbeat technology
AWS Chief Executive process, 6,042,658 litres of water a
which combines sensor hardware
installed in the field with data analysis day are removed from the tomatoes,
and algorithms to predict exact and used in the factory to reduce
irrigation requirements across the farm, demand for further water inputs
up to 5 days in advance. Instead of • A closed-loop condensate return
having to wait to see water stress and cooling system reduces water
impacting the tree, we can irrigate at and energy consumption
the first sign of stress, thus protecting
• This water is discharged to Westlake
the tree and improving water efficiency.
Farms and used to grow alfalfa
• Zero landfill for food waste –
all tomato pomace and vine
material is received by Gilton
Resource Recovery.

1
AWS – Alliance for Water Stewardship.

78 Olam International Limited Annual Report 2016

Rather than let domestic wastewater seep into the ground or down the drain, the Olam Palm Gabon team assessing a buffer zone of low density forest. Buffer zones
team at the Kochi spices processing plant in India treat and use it to irrigate the are areas preserved between a plantation and a river. They ensure that any fertiliser
garden. The trees – including coconut and jackfruit – are flourishing as water from run-off, for example, doesn’t enter the watercourse.
the 30 KL water treatment plant, recycled each day, is sprinkled over the garden
which is used by the 450 workers to spend their breaks. The coconuts are auctioned
off every few months at a fraction of the market price.

Improving wastewater management We incorporate all activities that could In our factories we have wastewater
for farms and factories affect wastewater quality into our quality standards for the water we
Integrated Water Resource discharge. It goes without saying that
In our farms and plantations, water can
Management plans and our Soil all Olam locations must comply with
run off the surface of the land, washing
Management plans. their legal licence to operate.
away valuable top soil, nutrients,
fertilisers and insecticide, which in turn In our plantations, we use remote In 2016, we did not receive any
can then impact on the quality of sensing, sophisticated modelling and environmental fines for water
nearby watercourses. ground surveys to map streams, rivers management.
and seasonal wetlands, which we
protect with a system of interconnected
buffer zones.

Progress on goals
±REMHFWLYHV 2020 target 2016 achievement 2XWORRNIRUWDUJHW

*RDO6XVWDLQDEOHXVHRIZDWHUUHVRXUFHV 0DWHULDODUHD:DWHU

,QFUHDVHGZDWHUXVHHI¿FLHQF\ New science-based water targets for Partnership developed to set science-based On target
in Olam’s direct operations 2020 to be developed in 2017. targets for Olam-managed plantations,
concessions and farms.

10% reduction in process water Partnership developed to set science-based On target

intensity in Olam Tier 1 factories from targets.
2013 baseline.
Improved water metering at 100% of factories.
Supplementary science-based
Baseline and target to be reviewed in light of
targets to be developed on a water
improved data from metering and business
risk basis.
restructuring.

,QFUHDVHGZDWHUXVHHI¿FLHQF\ 100% of priority supply chains to On track for OLC volumes. Started
in priority supply chains have Water Resource Management
OLC programme water risk mapping completed.
plans.
Extend risk mapping to non-OLC in 2017.

8.3. Improved water discharge 100% compliance with wastewater Water discharge limits in place for Olam Tier 1 On target
TXDOLW\IURP2ODP¶VGLUHFW discharge limits. factories.
operations
Monthly reporting on discharge for Tier 1 and
coffee plantations.
Olam’s upstream Farming Community of
Practice established to support the development
of erosion, nutrient and integrated pollution
management programmes.

/RQJWHUPHTXLWDEOHZDWHU 100% of Olam’s direct operations in Olam is first agri-business globally and first On target
access and usage high water risk areas to participate in business in Africa to have a site achieve the
a water stewardship programme. Alliance for Water Stewardship Standard for its
Aviv Coffee Plantation in Tanzania.

olamgroup.com 79
Environment

Our material areas

CLIMATE CHANGE
Climate change has profound effects on agriculture and global food security in
terms of its availability, accessibility and stability of supply. Conversely, agriculture
is a major contributor to climate change. Agriculture, forestry and other land use
are responsible for 24% of global greenhouse gas emissions (GHG). Mitigating
and adapting to climate change is an ever increasing focus for our own operations
and for our farmer suppliers.

Highlights for the year

Key 2016 focus areas

• Reducing GHG emissions from our
own farming and processing
operations1
• Adapting our own farming operations
to build in climate resilience

29% 55,374 6th year • Encouraging our farmer suppliers

and logistics providers to reduce
their GHG emissions and build
Improvement on our 2015 Smallholders trained on Reporting to the
in climate resilience
carbon footprint from Climate-Smart practices Carbon Disclosure Project
Olam’s own operations under the Olam – scored level B
Livelihood Charter
Key sector collaborations
and commitments
• 2nd year as joint Co-Chair of the
World Business Council for
Sustainable Development (WBCSD)
Climate-Smart Agriculture project.
Olam is leading the development of
Priority Area 1: building smallholder/
family farmer resilience
• Presented at the UN Climate Talks
in Marrakesh (COP22) and the 2016
Global Landscapes Forum

We are guided by
• Olam Environment Policy
• Olam Plantations, Concessions and
Relevant SDGs Farms Code
• Paris Climate Agreement
1
Olam’s plantations, concessions, farms and
Tier 1 processing and manufacturing facilities.

80 Olam International Limited Annual Report 2016

“Olam is already actively undertaking valuation studies
in collaboration with other companies and agencies
to determine a viable carbon-pricing framework.”
Chris Brown
Vice President, Corporate Responsibility and Sustainability

Incentivising the internal pricing where a fixed price is

assigned to each metric tonne of
Our Wood Products business in the
Republic of Congo has undertaken
transition to a low carbon emissions which could then be such projects and while the process
economy incorporated into profit-and-loss is lengthy and complex, progress
statements; and finally internal taxes is being made.
If something is free, we will use it which could be levied upon the
indiscriminately. And the global But incentives must also come into
business units for their direct play for the smallholder farmers. How
community has. operational emissions to support do we convince them to take up these
Fossil-fuelled growth, and the investment in clean technologies. ‘new methods’ called ‘Climate-Smart
emission of greenhouse gases that We are already making good Agriculture’ when their family has
accompanies it, has led the world to progress, having consistently cut our been farming a certain way for
climate change that will have major carbon footprint year-on-year, and we generations? Or help them
consequences for millions of people will continue to limit our footprint even understand why they can’t expand
and the natural world around us. as we grow to scale. But even with into the forest next door to grow more
This is why we, despite being a this progress, we know more needs cocoa when their yields are so low
profit-driven company, have called to be done. after decades of under-investment?
for a tax on carbon. Commercial Energy efficiency on its own is not Explaining these concepts to farmers
enterprises must be incentivised to sufficient to limit the global with little or no education can be very
decouple growth from carbon – and temperature rise to 2ºC by 2100, as challenging. Certification premiums
there must be a higher cost to doing described by the Paris Climate are one incentive but not every
‘business as usual’ if companies are Agreement at COP21 in 2015. It may customer wants to pay for
unwilling to change. sound insignificant but given the certification. We must therefore focus
difference between today’s average continually on helping farmers to
Only then can we stimulate a
global temperature and the average increase yields and quality by
concerted effort to increase fossil-fuel
global temperature during the last Ice working directly with them, while
efficiency and, more crucially,
Age is only about 5ºC, it really isn’t. collaborating with peers, NGOs and
encourage innovation into alternative
governments at a country and sector
energies and efficiency measures. Carbon pricing is one way to level. For many farmers, there is no
On our part, Olam is already actively contribute to achievement of this short-term incentive, rather they are
undertaking valuation studies in objective, but there are other options putting their trust in our hands, which
collaboration with other companies that are not mutually exclusive. For is not always easy to carry when
and agencies to determine a viable example, we’re also actively exploring disease or weather means a harvest
carbon-pricing framework. Based on alternative energy, including biomass is not as abundant as hoped.
our work so far, we believe it would be and solar.
But it is clear that incentives, in their
fair to set an initial global tax of We have also called for incentives many guises, are crucial if we are
US$35 – US$50 per tonne. This would including a greater backing for robust to have any hope of preventing that
take into account the social costs and validated financial mechanisms, 2ºC rise.
linked with impacts of greenhouse such as REDD+1 carbon credits to
gas emissions, such as subsidies for stimulate the reduction of emissions
crop failure or for health costs as a from deforestation and forest
result of pollution. degradation.
We are exploring 3 types of carbon This will foster conservation,
pricing: shadow pricing for our sustainable management of forests,
investment cases and business and enhancement of forest carbon
models to test planned projects under stocks, while ensuring that indigenous
a range of potential carbon prices; communities and biodiversity are
1
REDD+ Reducing Emissions from
not impacted. Deforestation and forest Degradation
in developing countries’ scheme.

olamgroup.com 81
Environment

Our material areas: Climate change

In logistics, McCleskey Mills reached a new milestone Modern dairies produce as much manure as they do Solar investment during 2017 in the Ghana biscuit
in its 42-year history – shipping peanuts to several milk. In our Rusmolco dairy operations in Russia, this processing facility will reduce emissions by 56 tonnes
major customers using the rail road. The new bulk ‘waste’ is recycled as nitrogen fertiliser for the soil of Co2 per year. Preliminary feasibility studies have
rail loading facility at Olam Rochelle in Georgia, growing the cow’s feed. Over 120,000 MT of manure is been undertaken for another 4 plants in Ghana.
USA, has reduced the number of lorries per year put to good use replacing over 1,500 MT of chemical
by 699 vehicles, while maintaining all food safety fertilisers each year, reducing GHGs by 2,200 MT CO2e
requirements. per year.

Decoupling carbon from business Olam’s carbon footprint result of our palm plantations in Gabon.
In processing, the intensity has
growth in direct operations
We have seen a 29% improvement on increased due to 8 new processing
As we grow our business, we cannot FY15 in our carbon footprint per tonne facilities made through the ADM
allow emissions from our operations of product produced (intensity). This acquisition at the end of 2015, as well
to grow at the same pace. By 2020, has been driven by our upstream as the Brooks peanut shelling
our target is to reduce GHG intensity productivity and the carbon positive acquisition in 2016.
by 10% (per tonne of product) in
Olam-managed plantations,
concessions and farms; Tier 1 Carbon footprint for Olam-managed plantations, concessions and farms
FY16 FY15 FY14
processing and manufacturing
Scope 1 – All direct GHG emissions 0.70 1.76 1.52
operations; and our marine vessels.
(million tonnes of CO2e)
We do this through:
Scope 2 – Indirect GHG emissions 0.06 0.08 0.06
• Increasing operational efficiency from consumption of purchased
electricity, heat or steam
• Avoiding High Carbon Stock (million tonnes of CO2e)
approach to lands for development Scope 1 + 2 0.76 1.84 1.58
(see the Land section within (million tonnes of CO2e)
this report) )RUHYHU\WRQQHRISURGXFW 0.98 3.54 4.15
• Adopting Climate-Smart Agricultural SURGXFHGWKLVPDQ\WRQQHVRI (72% reduction (15% reduction
CO2e were generated on FY15) on FY14)
(CSA) practices.

Reducing fossil fuels Carbon footprint for Olam’s processing

At processing facilities, ‘Fossil Fuel FY16 FY15 FY14

Flightpaths’ are being developed to Scope 1 – All direct GHG emissions 0.67 0.33 0.38
(million tonnes of CO2e)
promote efficiency and renewable
Scope 2 – Indirect GHG emissions 0.19 0.12 0.18
resources. At the Olam Cocoa from consumption of purchased
processing plants in San Pedro and electricity, heat or steam
Abidjan in Côte d’Ivoire, the cocoa (million tonnes of CO2e)
beans shells/husks are used as Scope 1 + 2 0.86 0.45 0.56
biomass while a proportion is going to (million tonnes of CO2e)
the poultry industry, as the residual fat )RUHYHU\WRQQHRISURGXFW 0.27 0.21 0.26
SURGXFHGWKLVPDQ\WRQQHVRI (27% increase (23% reduction
can be used in animal feed. CO2e were generated on FY15) on FY14)

82 Olam International Limited Annual Report 2016

Promoting Climate-Smart Agriculture
in our supply chain Reporting to CDP1
The majority of emissions associated
with our business are not from our Average CDP scores Average CDP supplier
direct operations. Farmers, especially engagement rating
smallholders, are on the front line of
changing weather patterns with limited
capacity to adapt to its impacts.
Moving to Climate-Smart Agricultural
practices can play a significant role in B B B

addressing global challenges by way

of 3 main pillars: C C C
• Sustainably increasing agricultural
productivity and incomes C- C- C-
• Adapting and building resilience to
climate change
• Reducing and/or removing
greenhouse gases emissions, Total Global Sector Industry Olam Total Singapore Industry Olam
Average 500 Average Average Interna- Average Average Average Interna-
where possible. Average tional tional
Average Average
Supporting healthy, carbon-rich soil
CDP awarded Olam a ‘B’ for climate change, CDP piloted an assessment in 2016 evaluating
Soil is the second biggest reservoir including emissions management, governance the ability of organisations to engage with their
of carbon on the planet after the and strategy, risk and opportunity management supply chain on climate change to incentivise
oceans, and holds 4 times more and verification. significant environmental changes. However,
in 2016 just 23% of companies (which includes
carbon than all the plants and trees in
Olam) reported that they engaged with their own
the world. However, 33% of the world’s suppliers on GHG emissions and climate
soil is moderately to highly degraded change strategies.
due to erosion (as topsoil is washed or
blown away) and nutrient depletion.
Across supply chains, we promote
CDP Forest sector benchmark CDP Water score peer comparision
contour ploughing or contour tillage,
micro-catchments and surface
mulching, as well as crop rotation
to protect the soil and achieve
higher yields.
Nutrient loss is estimated to cost B B B B B B B B
sub-Saharan Africa US$68 billion per
B-
year. Although many smallholders still
cannot afford to buy synthetic fertiliser, C C
globally it is one of the fastest growing
sources of agricultural emissions.
Through the Olam Livelihood Charter,
we help farmers to learn how to
compost and mulch and, where
appropriate, to use synthetic fertilisers. Timber Palm Oil Total Self Industry Consumer Olam
Average Selected Average Staples Interna-
Olam International Companies Average tional
Overall CDP forests average Water Average
Average
Sector Average

Olam International’s performance benchmarked Olam International score relative to companies

against peer companies in the Agricultural responding to CDP Water; companies in the
Production sector and the 2016 CDP Forests sample. regional sample; and sector peers.

1
Formerly the Carbon Disclosure Project.

olamgroup.com 83
Environment

Our material areas: Climate change

Thai rice farmers from the SRP pilot programme in Ubon Ratchathani. Young glyricidia shade tree (smallest leaf) next to young banana (largest leaf)
and young cocoa tree.

Reducing methane emissions environmental sustainability and Creating biodiverse, resilient

About 25% of global man-made business profitability. Our 5-year micro-climates
warming is from methane emissions, commitment will bring the Standard to
Planting leguminous shade trees
including significant proportions from 16,000 farmers in Thailand and
brings many benefits to cocoa and
dairy and rice production. Rice is 10,000 in Vietnam by 2022. We are
coffee landscapes. They increase
unusually water tolerant, so to prevent currently the only private company
productivity and resilience of crops,
weeds and pests, farmers typically to back the Thai Government’s
support biodiversity and natural pest
flood fields. However, not only does this Nationally Appropriate (GHG)
deterrents, help maintain soil quality
use vast amounts of water but as Mitigation Action (NAMA).
and contribute to carbon sequestration
submerged weeds and vegetation rot through reforestation.
they release methane – between 50 Ensuring livelihoods are not
compromised Through the OLC and other initiatives,
and 100 million tonnes each year.
we work to educate smallholders, as
One of the challenges in smallholder
We partnered with UNEP, International shade trees often have been cut down
programmes is gaining farmer’s trust
Rice Research Institute (IRRI), German for firewood or saplings removed
and motivating them to change their
development agency GIZ, Mars and during droughts as they are believed to
traditional ways of farming. For the
others to establish the Sustainable Rice be too ‘thirsty’. In Côte d’Ivoire, in
Ubon Ratchathani project, Olam was
Platform (SRP), and the first projects partnership with local timber
able to reach more farmers by
were vetted using the scientifically- companies and in-line with the new
partnering with the well-known Thai
verified SRP standard in 2016. Rainforest Alliance Sustainable
Rice Department. We also ensured
In Thailand, Olam has partnered with Agricultural Network standards, we
a ‘best price’ and quality guarantee.
Better Rice Initiative Asia (BRIA), GIZ, now encourage cocoa farmers to plant
We engaged a specific miller and
Bayer and the Thai Rice Department 400 forestry and shade trees per
our buyers ensured the farmers could
to roll out a trial project in Ubon hectare. This is a big ask but we are
claim the highest observed paddy
Ratchathani province in northeast seeing improvements. In 2015, the
price to save them from risking a lower
Thailand, which 71 rice farmers joined average planted was 50 per hectare
price at our delivery point.
in its pilot year. The Standard goes and in 2016 it had increased to 100.
beyond methane reduction and helps In 2016, cooperative farmers planted
farmers improve their farm 193,000 leguminous shade trees
management systems, as well as covering 1.9 million hybrid
improve labour conditions, cocoa seedlings.

84 Olam International Limited Annual Report 2016

Progress on goals
±REMHFWLYHV 2020 target 2016 achievement 2XWORRNIRUWDUJHW

*2$/5HGXFHGJUHHQKRXVHJDVHPLVVLRQV 0DWHULDODUHD&OLPDWHFKDQJH

,QFUHDVHGHQHUJ\HI¿FLHQF\ During FY17, developing science- Energy efficiency assessments conducted. On target
based targets for total Olam GHG Twelve Tier 1 processing and manufacturing
emissions from which the 2020 plants with highest potential have been selected
metric will be determined. for implementing ISO 50 001 Energy
Management System.

5.2. Avoided GHG emissions All Olam farms, plantations and Tier 1 Olam Palm Gabon is carbon positive. On target
factories to have implemented their
2020 GHG reduction plans
(1) operational efficiency
(2) Avoid High Carbon Stocks for
land development
(3) Climate-Smart Agricultural
practices.

,QFUHDVHGVKDUHRIUHQHZDEOH 25% of energy derived from Sugar, rice and coffee Top Tier processing and On target
energy renewable and biomass sources at manufacturing sites ≥ 15% renewable and
Olam’s Tier 1 factories (from 2015 biomass energy sources.
baseline – 15%).

*2$/,QFUHDVHGUHVLOLHQFHWRFOLPDWHUHODWHGULVNV 0DWHULDODUHD&OLPDWHFKDQJH 

6.1. Reduced agricultural Implement the Olam 2020 Climate-Smart Agriculture measures On target
YXOQHUDELOLW\WRFOLPDWHULVNVIRU Climate-Smart Agriculture (CSSA) incorporated into OLC principles of
2/&IDUPHUVDQG2ODPPDQDJHG Programme. Environment, Social Investment and
plantations, concessions and Improved Yield.
Resilience impact to be launched in
IDUPV
FY17 as part of WBCSD CSA CSA measures incorporated into Olam
programme. Plantations, Concessions and Farms Code.

olamgroup.com 85
General information

This General Information is intended to help readers understand

the bases of our financial reporting and analysis contained in this
Annual Report 2016.

Important changes Business segmentation and reporting

Change in fiscal year-end to 31 December For financial reporting purposes, we organise our 18
In 2015, the Company (Olam International Limited) changed business platforms into five segments – Edible Nuts, Spices
its fiscal year-end from 30 June to 31 December. With this and Vegetable Ingredients; Confectionery and Beverage
change, the Company’s fiscal year 2015 (FY2015) was an Ingredients; Food Staples and Packaged Foods; Industrial
18-month period from 1 July 2014 to 31 December 2015. Raw Materials, Ag Logistics and Infrastructure (renamed
Starting with 2016 (FY2016), the Company follows a January from Industrial Raw Materials to reflect the principal activities
to December fiscal year. To facilitate like-for-like comparison, of the Gabon Special Economic Zone within the segment);
the financial results for the 12-month FY2016 are presented and Commodity Financial Services. The table below shows
in the Financial and performance highlights (pages 8 to 11) the distribution of platforms across these five segments.
and the Group COO’s review (pages 18 to 35) against those 5 business segments 18 platforms
for the same corresponding 12-month period in 2015, as well
(GLEOH1XWV 1. Edible Nuts (cashew, peanuts,
as 2012 to 2014, unless otherwise indicated.
Spices and almonds, hazelnuts,
The audited statutory accounts on pages 1 to 86 of the Vegetable Ingredients pistachios, walnuts, sesame
Financial Report present the Financial Statements and Notes and beans including pulses,
for the 12-month FY2016 against the preceding the 18-month lentils and peas)
FY2015. The financial statements presented in this section 2. Spices and Vegetable
are therefore not comparable between the two periods. Ingredients (including pepper,
Changes in accounting standards, policies and restatements onion, garlic, capsicums
and tomato)
The Group has adopted all the new and revised standards
which are effective for annual financial periods beginning on &RQIHFWLRQHU\DQG 3. Cocoa
or after 1 January 2016. These include Amendments to FRS Beverage Ingredients 4. Coffee
16 and FRS 41 Agriculture: Bearer Plants and early adoption Food Staples and 5. Rice
of FRS 109 Financial Instruments. As a result of these Packaged Foods 6. Sugar and Sweeteners
amendments, the Consolidated Balance Sheet of the Group 7. Grains and Animal Feed
as at 1 July 2014 and 31 December 2015 as well as the 8. Edible Oils
Consolidated Profit and Loss Account and Consolidated 9. Dairy
Cash Flow Statement for the 18 months ended
10. Packaged Foods
31 December 2015 have been restated. These amendments
and other changes in accounting standards and their impact Industrial Raw 11. Cotton
are detailed in the Notes to Financial Statements. Materials, 12. Wood Products
$J/RJLVWLFV 13. Rubber
DQG,QIUDVWUXFWXUH 14. Fertiliser
15. Gabon Special Economic
Zone (GSEZ including ports
and infrastructure)
Commodity Financial 16. Risk Management Solutions
Services (CFS) 17. Market-making,
Volatility Trading and
Asset Management
18. Trade and Structured Finance

86 Olam International Limited Annual Report 2016

In addition, we report our financial performance on the Other Operating Expenses: Unrealised foreign exchange
various value chain initiatives across three value chain gain/loss and other expenses
segments as follows: 1HW&KDQJHVLQ)DLU9DOXHRI%LRORJLFDO$VVHWV Records
3 value chain segments Value chain activity changes in the fair value of agricultural produce growing on
Upstream Includes all activities relating to bearer plants and livestock
farming (annual row crops), Exceptional Items: One-off, non-recurring items, including
plantations (perennial tree crops), negative goodwill and related transaction costs, gain/loss
Dairy farming and on sale of assets/business, gain/loss on buyback of bonds,
forest concessions impairment loss, finance charges on pre-payment of loans
Supply chain Includes all activities connected and non-recurring business restructuring expenses.
with origination, sourcing, primary Tax expenses associated with these items are also
processing, logistics, trading, presented as Exceptional Items.
marketing (including value-added PAT: Net profit after tax
services) and risk management of
agricultural products and the PATMI: PAT less minority interest
CFS segment Operational PATMI: PATMI excluding Exceptional Items
Midstream Includes all activities relating to EBITDA: Earnings Before Interest, Tax, Depreciation and
and downstream secondary processing, contract Amortisation which includes results of jointly controlled
manufacturing, branded entitles and associates, minority interest, and excludes
distribution, private label activities Exceptional Items
and Ag Logistics and Infrastructure
Invested Capital (IC): Excludes cash and bank balances,
Note: The 2012 – 2016 results for the CFS segment do not include those of
Trade and Structured Finance.
deferred tax assets, fixed deposits, other current/non-current
assets (other than option premiums payable/receivable) and
Definitions of key financial metrics fair value of derivative assets on bonds
The definitions for the key financial metrics are as follows: (%,7'$,& EBITDA on average invested capital based
on beginning and end-of-period invested capital
Sales Volume: Sale of goods in metric tonne equivalent.
There are no associated volumes for CFS and 1HW*HDULQJ Ratio of Net Debt (gross debt less cash)
GSEZ platforms to Equity (before fair value adjustment reserves)
Revenue: Sale of goods and services 1HW*HDULQJ DGMXVWHG  Net gearing adjusted for readily
marketable inventories that are liquid, hedged and/or sold
Other Income: Includes sale of scrap materials,
forward, operating as near-cash assets on the balance
commissions and claims income and fair value gain on
sheet, and secured receivables are supported by letters
investments held for trading. Negative goodwill, gain on sale
of credit or documents through banks
of assets and other non-recurring items which are part of
Other Income in the financial statements are treated as Free Cash Flow to Firm (FCFF): Operating cash flow less
Exceptional Items. changes in working capital, cash taxes, capital expenditures
and investments
&RVWRI6DOHV Cost of goods sold, shipping and logistics,
commissions and claims expenses and the net measurement Free Cash Flow to Equity (FCFE): FCFF less net
of derivative assets interest paid
Overhead Expenses: Employee benefit costs,
manufacturing overheads, travel expenses and other
direct expenses

olamgroup.com 87
General information

Disclaimer Because these forward-looking statements involve risks and

Certain sections of our Annual Report 2016 have been uncertainties, there are important factors that could cause
audited. The sections that have been audited are set out actual reports to differ materially from those expressed or
on pages 1 to 86 of the Financial Report. Readers should implied by these forward-looking statements, including
note that legislation in Singapore governing the preparation among others, competitive pricing and activity, demand
and dissemination of financial statements may differ from levels for the products that we supply, cost variances, the
legislation in other jurisdictions. ability to maintain and manage key supplier and customer
relationships, supply chain sources, currency values, interest
Except where you are a shareholder, this material is provided rates, the ability to integrate acquisitions and complete
for information only and is not, in particular, intended to planned divestitures, physical risks, environmental risks,
confer any legal rights on you. This Annual Report does not the ability to manage regulatory, tax and legal matters and
constitute an invitation to invest in the Company’s shares. Any resolve pending matters within current estimates, legislative,
decision you make relying on this information is solely your fiscal and regulatory developments, political, economic and
responsibility. The information given is as of the dates social conditions in the geographic markets where the Group
specified, is not updated and any forward-looking statement operates and new or changed priorities of the Company’s or
is made subject to the reservation specified in the its subsidiaries’ Boards. Further details of potential risks and
following paragraph. uncertainties affecting the Group are updated in the Group’s
Offering Circular on its US$5.0 billion Euro Medium Term
Cautionary statement Note Programme dated 23 November 2016.
This Annual Report may contain forward-looking statements. These forward-looking statements speak only as of the date
Words such as ‘expect’, ‘anticipate’, ‘intend’ or the negative of this Annual Report. Except as required by any applicable
use of these terms and other similar expressions of future law or regulation, the Group expressly disclaims any
performance or results and their negatives are intended to obligation or undertaking to release publicly any updates or
identify such forward-looking statements. These forward- revision to any forward-looking statements contained herein
looking statements are based upon current expectations and to reflect any change in the Group’s expectations with regard
assumptions regarding anticipated developments and other thereto or any change in events, conditions or circumstances
factors affecting the Group. They are not historical facts, nor on which any such statement is based.
are they guarantees of future performance.

88 Olam International Limited Annual Report 2016

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Olam International Limited
9 Temasek Boulevard
#11-02 Suntec Tower Two
Singapore 038989
Telephone (65) 6339 4100
Facsimile (65) 6339 9755

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