Migros Palm Oil Sustainability – Case Study

An article in a newspaper in 2001 about the unsustainability of the palm oil production had spurred the senior management at Migros to delve into the challenges facing the palm oil production from the Asian countries of Indonesia, Borneo and Malaysia.

At the time, palm oil’s numerous industrial applications were well known – from cosmetics to food, however…

…the ecological problems associated with its production were not as commonly known.

There was a risk attached – how would consumers react to such an article?

The reputation of the retailer could be at risk. Now Migros had decided to look into the issue and find a long term solution to the deforestation problem attached to the palm oil production.

How did Migros react?

Migros, which was founded in 1925 as a cooperative and over time became the largest retailer in Switzerland, receiving awards such as the “Most Responsible Retailer”, react?

Sometimes bad publicity can’t be all that bad! Any company will have 2 options in such a scenario:

  • To remain quiet and be defensive, or
  • Pursue an action-based strategy

Migros chose the latter and began forming alliances with critical players in order to not only keep the profits and margins going, but also to build trust and be seen as a responsible organization.

So, Migros built a 5 point action-based strategy to develop a sustainable supply chain in the procurement of palm oil:

  • Building an integral standard: In partnership with WWF Switzerland, Migros developed a global standard for sustainable purchasing of palm oil.
  • Communicating the same to the consumers was a challenge: It did this in 3 phases: Migros allowed WWF and other NGO’s to present its palm oil project as a role model, by reporting about it in its own media and by educating consumers by working on a nation wide poster campaign.
  • Identification of suppliers: Migros was willing to pay a surcharge to those suppliers who fulfilled their sustainability criteria
  • Minimizing the costs for purchasing sustainable palm oil: Migros did this via 2 strategies – by raising the prices of margarine and by developing new products replacing the use of palm oil with sunflower oil
  • Including more partners in the project: Besides WWF, it also identified ProForest, an independent assessor of the palm oil plantations.

Round Table on Sustainable Palm Oil (RSPO)

Initiated by Migros and WWF, RSPO was first formed in 2003 and has since developed into a not-for-profit global, multi-stakeholder initiative on sustainable palm oil. It has been described as the world’s toughest standards for sustainable agriculture production and has been variously adapted for other crops. RSPO Certification is a seal of approval that the palm oil used in the product is produced in a sustainable manner.

Analysis

  • From Reactive to Proactive approachMigros first started on sustainable journey as a reaction to the newspaper article and feared its reputation at stake. The path it later took is a typical example of how an organization can take a proactive approach towards building and implementing sustainability strategy.
  • Building a StrategyHowever, Migros could’ve played a defensive tactic and remained a silent spectator in the area of sustainable palm oil procurement and production. But it decided to take the challenge head-on and build a strategy that would allow for the sustainability of future palm oil consumption.
  • First-mover advantage – Having this advantage worked in Migros’ favor as it found out that there was no global standard on sustainable palm oil production and partnering with WWF and other NGO’s turned out to be blessing in disguise.
  • Forming alliances – Migros moved slowly and carefully in forming alliances and identifying its suppliers and partners.
  • No hasty runs –  Migros didn’t rush into the leadership position and risk itself coming directly in the line of fire of activists and those very NGO’s that partnered with it.
  • UNGCMigros joined the UN Global Compact. This UN initiative embraces ten principles based on the generally acknowledged values of good corporate management.

The strategies employed by Migros can be termed as somewhat conservative. They first walked the talk and then called for a joint action by corporate, including top companies like Cargill and Unilver and various stakeholder groups.

How in your opinion can companies reach for sustainable palm oil production?

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