[Alexia Stumpf]

Consider the following situation of an organization seeking verification under MRV:

• Number of direct suppliers is 6.374 located as follows:

  • Transition Cerrado/Atlantic Forest 86

  • Amazon 145

  • Caatinga 7

  • Cerrado 5.931

  • Atlantic forest 205

The company operates an SAP system to manage its commercial transactions and register suppliers, among other functions. All the suppliers in the Cerrado region have known traceability information.

1. How would you organize the sampling of the verification activities associated with this client?

2. What evidence/check in your view is satisfactory to guarantee the avoidance of double counting?

3. What checks would you make to confirm that no triangulation (selling commodities from other areas as if they were produced in a given region) is occurring?

[Han Zhan]

Answer:
A site visit, document review and interviews.
sampling approach as follows: Number of suppliers Less than 50, Sample size is 20% of the total number of suppliers; Number of suppliers Less than >50, Sample size is Square root of the total number of suppliers.

Supplying farms should be grouped by geographical location and/or risk for the calculation of the sample size. All geographical regions should be included and therefore the sample should be increased if necessary. The final sample size is to be rounded upwards.
All suppliers directly connected to agricultural commodity production and/or related products. The final sample size is to be rounded upwards.
For very high-risk and high-risk regions the values indicated in Table 1 shall be used; for medium-risk regions reduce 15% of the suppliers that should be accessed (rounding upwards), and for low-risk regions reduce 30% of the suppliers that should be accessed (rounding upwards).

• environmental embargoes or crimes;
• slave and child labour;
• conflicts with indigenous or traditional communities;
• deforestation.

[Isabel Nepstad]

Question 1.
Since the total number of suppliers is 6374, the sampling size would be the square root of 6,374, which is 79.84
To organize the sampling approach, suppliers will be grouped by geographical region, and also consider the risk. For example, since there is more traceability information available for the Cerrado, this helps to better manage the risks.
All sampling will include a site visit, document review and interviews.

Question 2.
To avoid double counting, request to review the SAP system, check all transaction history to ensure the volumes match up to the records. For suppliers in regions with known traceability, such as the Cerrado, cross check the traceability records are accurately linked to each transaction.

Question 3.
To confirm that no triangulation is taking place, on-site visits can help ensure that the production is occurring in the location that is being reported and it is the correct product. This can also allow to cross-check the production capacity with the recorded volumes. Geographical location and satellite imagery can also help to check and verify the information.

• This reply was modified 15 hours, 5 minutes ago by Isabel Nepstad.

[Gustavo Leite]

I would start like this

– For fewer than 50 suppliers, the sample size will be 20% of the total number of suppliers.
– For more than 50 suppliers, the sample size will be the square root of the total number of suppliers.

Supplier farms should be grouped by geographic location and/or risk level to determine the sample size. All geographic regions must be represented, and the sample size should be increased as necessary. The final sample size should be rounded up to ensure comprehensive coverage.

All suppliers directly involved in the production of agricultural commodities and related products will be included, and the final sample size must be rounded up accordingly.

2- The operator must ensure that within their SAP system, it is possible to trace each production batch from start to finish, and that no data changes can be made without an approval workflow. They must also present a mass balance with the methodologies used, along with records of goods received and shipped. Internal audit processes for verifying and ensuring compliance with these procedures are valid to strengthen the links in the supply chain

3- For this verification, it is crucial to understand how the geographic traceability of the cargo is conducted and how the operator controls this information. Satellite imagery can also be used to check if the area has the capacity to produce the volume being shipped. Contracts with transport companies, along with shipping and delivery records, are also important to ensure that the service provider is compliant with legal requirements, helping to prevent cases of diversion.

[Gustavo Fernandes]

1- The correct method in this case would be the square root approach, given that the number of farms exceeds 50. Considering the risk analysis, I would separate the regions.

2- To ensure there is no double counting, I would review transaction reports and records in the SAP system to ensure each transaction and supplier is accurately recorded and not duplicated. I would reconcile the total number of suppliers with the traceability data to ensure the accuracy of the information. Additionally, I would verify that the traceability data sources are distinct and that there is no overlap of information between different regions.

3- To ensure no triangulation is occurring, I would review the documentation for the commodities to confirm that products are correctly identified with their region of origin. I would check the traceability system to ensure that the origin of the commodities is well-controlled and compare transactions and records in the SAP system with the traceability data to identify any discrepancies. Additionally, interviews with suppliers could help uncover any errors or inconsistencies regarding the shipment information.

[Alice]

The calculation has to be per biome

Transition Cerrado/Atlantic Forest 86 Sub Sample 10
Amazon 145 Sub Sample 13
Caatinga 7 Sub Sample 2
Cerrado 5931 Sub Sample 78
Atlantic forest 205 Sub Sample 15
Totral SAMPLE 118
118 suppliers to be verified.

Take aways
• Information around risk would be necessary as For very high-risk and high-risk regions the values indicated in Table 1 of the standard are to be used while for medium-risk regions the values (after applying the table) can be reduce in 15% (rounding upwards), and for low-risk regions the can be reduce 30% (rounding upwards).
• Sampling of supplier conducted per biome and, as above, related risk.
• Include sample size calculation and list of management system documentation /programs that would be checked
o The companies may have developed several programmes, to guide and monitor their raw material suppliers, promoting the understanding and application of sustainability principles to rural activities, with continuous training and sharing of good management practices. In general, the following actions are commonly observed: -Distribution of manuals or booklets on socio-environmental practices and legal aspects, delivered by staff who have close contact with producers. -Projects in the field, through on-site visits, where monitoring and training are carried out on properties/farms. -Adherence to the codes of conduct of purchasing companies, where suppliers commit to socio-environmental policies to be part of the supply base.
o Procedures for collection and use of geospatial data
o The organization must have an internal procedure to ensure that no double counting is occurring. The procedure should be checked to confirm to be adequate to the operations of the organizations. Randon checks should be made to product lots confirming the procedures are working correctly and that no double counting is occurring.
o Actions to minimise triangulation basically may include: 1) The distances between the suppliers’ farms is a criterion that can be analysed. For example, if a supplier has more than one unit and one of them is blocked, the other must be located at a distance that would be make triangulation economically unfeasible due to the cost of transportation). A risk analysis is carried out on a case-by-case basis, using the supplier data for area and average yield. 2) A productivity analysis of the area or region. If the volume is above the area’s estimated productivity ceiling, this may indicate triangulation and generates a blockage.

• This reply was modified 2 hours, 1 minute ago by Alice.

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