3rd Quarter 2024: Our active stewardship illustrated

Following up on a meeting with the company in 2023, on the topic of biodiversity, we asked the company for updates in their biodiversity targets and to encourage them to improve their disclosure on social and environmental audits and set targets for recycled wood pulp.

In July 2024 we held a videocall with the company’s ESG and Investor Relations representatives.

We focused on the company’s top 3 commodities:

• Palm oil: the company already had good traceability to mill through the RSPO certification, and they maintained their palm oil certification at 100% during the year. They acknowledge the complexity of the palm supply chain due to its size, but we noted that the company was reliant on certification mechanisms for compliance with upcoming anti-deforestation regulations (e.g. EUDR).

• Paper Packaging: Overall they use high content of recycled paper packaging in their products. They explained that the figure can fluctuate due to supply problems, but overall it remains 80/20 on recycled vs. virgin and they plan to keep this consistent.

• Wood Pulp: the company says that consumer demand for virgin wood pulp in toilet and tissue paper is high. They add that alternatives such as bamboo are still in trial phase and they are unsure about the scalability of these products but they are looking into it. The company once again mentioned their reliance on third-party certification for deforestation free wood pulp.

Following no progress after the engagement with the company, we have decided to downgrade the company’s Environmental START rating from B to C.

In May 2024, the BBC published an article stating that the company had been involved in child labour in its Jasmine supply chain in Egypt. We engaged with the company to understand which actions the company took to eliminate child labour in their supply chain, whether they strengthened their controls following this incident, and how they effectively manage human rights risks in their supply chain.

In September 2024, we held a videocall with the company’s human rights manager and an investor relations representative.

We engaged on the following topics:

• Child labour in the Jasmine supply chain: the company identified the issue before the BBC report came out and already initiated corrective measures. These include short and longer-term measures. Short term measures involve removing children from the fields, and setting up a child referral programme. Longer-term measures include working with the local government to change laws to make identification of child labour easier, and changing the payment structure for suppliers.

• Supplier audits: the company audits suppliers based on risk approach. They pay for the initial audits, and have a vigilance plan in place for suppliers who require actions following the audits. The company also mentioned working with SEDEX to reduce auditing fatigue.

• Living wage commitments: They are working on onboarding their strategic suppliers on a commitment to pay employees living wages. They also said that they are pushing other companies and peers to pay their suppliers living wage.

Following the engagement with the company, we were satisfied that they are managing the risk of child labour in the Jasmine supply chain effectively. We have kept the START rating under the social pillar as B to reflect the existence of the risk, and we will continue to monitor the company and engage where necessary.