Procurement milestones in 2022

The last three years have been extremely challenging for the procurement and supply chain teams. At the beginning of 2022, with the end of COVID-19 in most of the world, we thought we would be in calmer waters. Then the war started in Ukraine.

Challenging times

In times of stress, the priority for procurement is availability, ensuring we have the right nutrients available at the right location, to ensure supply to our customers can continue uninterrupted. With prices staying at high levels compared to the 'normal' levels of 2019, alternative ingredients and suppliers are our focus, to spread the risk and keep costs down. This has created opportunities for several novel ingredients to become more competitive. With new suppliers and ingredients, we are careful to ensure our quality levels, sustainability requirements and ambitions are met and continuously improved.

We have made a number of specific improvements in 2022:

We have created a specialist team to strengthen our LCA Platform and tackle the Scope 3 Science Based Targets that we have set
We launched our marine sourcing policy, describing in an open and transparent way (as we did for soy and oil palm) what ‘good’ looks like for sourcing marine products, and providing a step plan for our purchasing team
We launched our sustainable packaging handbook, helping us improve our packaging material while maintaining the feed quality and often reducing the overall packaging cost

A call to strengthen collaboration with our suppliers

The procurement team in Skretting has long term partnerships with many suppliers. We develop new markets and ingredients together and aim to grow our joint business every year. The large number of suppliers choosing to join us at AquaVision 2022 demonstrates that Skretting is a trusted and valued partner.

The impact of these strong relationships has been clearly demonstrated in challenging times. Even over the last three years, we have never had to stop operations because of a raw material shortage. Relationships like this are built over years and depend on open communication and trust.

For us to realise our targets, we need our suppliers to take bold steps to curb their carbon emissions and work together, with Skretting and the industry, to tackle these challenges together.

Robert van den Breemer, Procurement Director Macro Ingredients, Nutreco

While the past years have been difficult, unfortunately the years ahead already appear just as challenging. A recession, climate change and the pressure on biodiversity are looming and we need to act. Therefore, this is a call to action to our suppliers, to join us in tackling these challenges. We are seeking five key commitments from our suppliers:

Reduce the carbon footprint of your own operations and value chain

Sign-up for Science Based Targets and take action to stay within the Paris Agreement emission targets

Provide better (primary) data on the ingredients sold

Improve and increase traceability back to country of primary production

Further identify and mitigate the environmental and social risks across the supply chain

For us to realise our targets, we need our suppliers to take bold steps to curb their carbon emissions and work together, with Skretting and the industry, to tackle these challenges together. We are eager to engage, applaud those in our value chain who step up, and will ensure that those who take significant steps in the right direction will see their business with Skretting increasing.

Introducing our new Supplier Sustainability Manager

With 96% of our feed’s total emissions coming from scope 3 ingredients and factors beyond our control, reducing them will require close collaboration with our suppliers. In 2022 we welcomed Job van Mil to the procurement team in his role as Supplier Sustainability Manager to facilitate this collaboration. We would like to use this opportunity to introduce Job and his view on supplier engagement.

As Supplier Sustainability Manager, I support the procurement department to ensure that we reach our ambitious sustainability targets. There are two focus areas for the coming years that require close collaboration with our supply chain partners: due diligence and scope 3 reductions.

It is no longer enough to rely on a signed Supplier Code of Conduct to cover our due diligence, so more sophisticated risk assessments and mitigation methods need to be applied. We strive to accelerate the risk recognition and mitigation process through the roll-out of EcoVadis, which will be a key step in improving our due diligence.

Over 2022, the procurement and sustainability departments collaborated to create a scope 3 program, in which we outline the strategies to reduce our scope 3 emissions. I would like to elaborate on one specific strategy: supplier engagement.

During supplier engagement, the aim is to act as the liaison between procurement, suppliers and our LCA experts to gain a better understanding of the footprint of our ingredients

Only by strengthening the collaboration with our suppliers, not by excluding them, will we truly improve our supply chain sustainability.

Job van Mil, Supplier Sustainability Manager, Nutreco

In conversations with our suppliers, we will request product specific footprint data, also called primary data which reflects the specific productive reality of our suppliers. By collecting primary data in a standardised way, we will be able to identify areas where there is a potential to reduce the ingredient’s footprint.

However, primary data collection is only part of the supplier engagement journey. Skretting, as part of Nutreco, has set Science-Based Targets and we will request the suppliers that contribute most to our scope 3 to do the same. This way we align emission reduction goals for our supply chain with our own and those of our customers.

Building strong connections with the sustainability departments of our suppliers, relevant stakeholders and customers will be an important factor for success for both our scope 3 program and our due diligence. Not solely for gathering data, but also to inspire proactive communication on sustainability issues occurring in the supply chain.

Only by strengthening the collaboration with our suppliers, not by excluding them, will we truly improve our supply chain sustainability.

Flexibility in the use of raw materials – progress and challenges

Following the publication of our 2021 Sustainability Report, we had hoped the raw material situation would ease as the impacts of the COVID-19 pandemic softened. Unfortunately, this has not been the case. The challenges imposed by the pandemic have been replaced with those associated with the ongoing war in Ukraine. Together, Ukraine and Russia are estimated to account for 25% of global wheat exports in 2021, as well as being major producers of sunflower, maize and phosphates. Additionally, the current fishing season in Peru is impacting the marine ingredient market, and the predicted 2023 El Niño will likely worsen the situation.

During raw material scarcity situations, Skretting’s deep understanding of the value of each raw material and the nutritional requirements of fish and shrimp, coupled with our relationships with suppliers becomes invaluable. Since last year, we have successfully introduced nine protein and starch sources, entirely new to Skretting, with more undergoing R&D evaluation. The use of alternative omega-3 oils has also increased significantly from 2021 to 2022 to mitigate the impact of continued fish oil availability and price challenges. Beyond this, we have focused on long term supply security through innovative solutions, such as the use of enzymes to extract as much nutritional value as possible from ingredients, whilst also reducing discharge into the environment.

Moving forward, price will continue to the one of the main challenges

Samuel Eggington, Global Formulation Manager, Skretting

However, aquaculture feed production is not only about understanding the needs from a nutritional perspective, but also from quality perspective. Often feed is transported long distances, meaning maintaining pellet integrity is key. Traditionally, wheat has been used as the primary starch source to support physical quality of feeds, but by applying cross functional knowledge we have been able to successfully replace a relevant part of wheat demand in some geographies with alternative starch sources without impacting on quality.

Moving forward, price will continue to the one of the main challenges. Ingredient prices often follow one and other and so, whilst we may be able to increase flexibility, this is not necessarily reflected as a decrease in overall feed price. This constant focus does, however, ensure security of supply and reduce exposure to price vulnerability of individual ingredients.