Fair and environmentally conscious purchasing

We work a lot with suppliers of raw materials, packaging materials, and services such as transport. All our suppliers have to comply with our Supplier Code of Conduct, which contains requirements with respect to human rights, animal welfare, and the environment.

The Supplier Code of Conduct contains rules of conduct on suppliers’ responsibilities in relation to business integrity, the environment and communities, workers, and animal welfare. We only work with suppliers who meet our requirements. Seeing as we do a lot of business with European suppliers, many of the potential risks are already covered by laws and regulations. Suppliers are asked to sign the Supplier Code of Conduct every three years. We conduct supplier audits to monitor compliance with the requirements we have set. In case of non-compliance, we engage with the supplier and draw up an improvement plan to implement solutions in the short term. During the Covid-19 period, we conducted fewer audits than we would normally, or in some cases we conducted them remotely. In 2021, we resumed normal auditing activity, and we have more audits lined up for the coming year.

In 2022, we will be starting with due diligence as part of our International Corporate Social Responsibility (ICSR). Due diligence will give us greater insight into risks to people and the environment that we are, directly or indirectly, involved in through our business activities. Due diligence is an ongoing process, meaning that we will evaluate these risks on a continuing basis and respond as and when necessary to push back these risks. An initial step in this due diligence approach is to identify risks to people and the environment across our entire supply chain. We do that for all the raw materials, goods, and services we procure, taking stock of where potential risks are in our supply chain. Wherever we identify potentially high risk, we proceed with a more in-depth risk analysis or a supplier audit. We would do that, for example, for raw materials from countries where protection of human rights and the environment is not always a given. Where necessary, we will revise the Supplier Code of Conduct to rule out potential risks.

In 2021, all the palm oil and soy lecithin we used in our milk powders were certified as 100% sustainable. The palm oil we procure is mass balance certified through the Roundtable on Sustainable Palm Oil (RSPO).

This means that palm oil producers in Indonesia, Malaysia, Colombia and Costa Rica are tested against criteria such as the prevention of deforestation, responsible use of plant protection products, and good working conditions. We incorporate palm oil into our fat filled milk powders. In these products, we replace milk fat with vegetable fat, while retaining the nutritional value. This ensures a lower cost price and makes our products more easily accessible. Our aim continues to be RSPO certification for the full 100% of the palm oil we procure, whereby our preference is to, in consultation with customers, work towards segregated certification. This means that the certified palm oil is kept physically separate across the whole supply chain. Segregated procurement increases transparency, which helps us improve collaboration and eliminate risks.

In some of our products, we use soy lecithin to make our milk powder easily soluble in water. Since late 2015, we have been exclusively using ProTerra-certified 100% responsible soy lecithin. This means that the soy beans are cultivated in accordance with sustainability criteria, in our case in Brazil. Those criteria include the protection of workers, local companies and vulnerable areas, and deforestation-free production.

As part of our due diligence approach, we will in the coming year identify all risks to people and the environment posed by the high-risk raw materials we use. The first step is to take stock of raw materials that involve high risk. This will at least look at palm oil, soy, coconut oil, and cocoa. We use coconut oil for blends of milk powder and cocoa, as an ingredient for the chocolate industry. Our goal for 2022 is to gain greater insight into these risks. Based on these insights, we will put together an action plan to make our raw material usage yet more sustainable.

MMC transport

Our Mobile Milk Collection (MMC) carriers drive some 2.5 million km per year to bring our dairy farmers' milk to our factories. We try to limit fuel consumption and greenhouse gas emissions as much as possible by means of smart planning and by using tank lorries with better fuel economy.

In 2021, our MMC carriers have taken significant steps to further reduce carbon emissions. Carbon emissions from transport, per kilogram of milk, were down 34.5% on 2013 levels. This means that our goal of a 20% reduction (compared to 2013) by 2022 has already been achieved. Carbon emissions were reduced mainly through additional measures taken by our carriers, such as the use of newer and cleaner lorries. A number of these carriers are also applying carbon offset mechanisms.

Other transport

In order to reduce carbon emissions from the transport of our finished products, we have been using water-based transport options to get our export containers to the port. Since 2021, we have been transporting all our export containers by inland waterway vessels to the ports of Rotterdam and Antwerp, unless this option is not available. In some cases, our carriers have no other option than to revert to road transport, such as to deliver containers to the port by a specific time, so as to ensure they arrive at our customers on time. Last year, the availability of containers and space on (sea-going) vessels continued to be a challenge. The impact of the Covid-19 pandemic on global container logistics was still felt in 2021 and transport costs increased. Despite these conditions, we managed to keep up the share of inland waterway transport in our total transport in Gorinchem and Scharsterbrug. In Gorinchem, 91.2% of our finished products were transported by water (compared to 93.6% in 2020). In Scharsterbrug, 87.3% of all transport was by water (compared to 85.7% in 2020).

In 2021, we managed to significantly increase the use of barge operators in Barneveld for the transport of sea container to the ports. This was a major step. On the whole, transport by water was up to 79% from 67% in 2020, exceeding the 70% target we had set. From our Barneveld site, containers are transported by lorry to a nearby terminal in Tiel, from where they are shipped by water. We also ship export shipments from external parties by water as much as possible. In 2021, 79% of these shipments were transported by water. We used to mainly use road transport for that. Increasing the use of water transport for the shipping of our sea containers will continue to be a focus area for us over the coming years.

In addition to increasing transport by water, we also took other measures to further reduce carbon emissions. We have scaled up the focus on more efficient transport through smart planning, by combining shipments, and by optimising volumes per journey, always in close collaboration with our carriers and customers. This is how we are reducing the number of transport kilometres. We will continue down this path in the coming year.
Reducing carbon emissions from transport per tonne of product continues to be one of our goals. However, total carbon emissions were not calculated last year.

"We are continuously working to make our transport more sustainable."

"We ship our products to more than 130 countries across the globe. Our aim is to do this as sustainably as possible. We transport our export shipments by water as much as possible, whether it be transport by inland waterways to seaports or the main transport to the customer. For transport from our production sites to the ports of Rotterdam or Antwerp, we use transport by inland vessel as much as possible. In Europe, most transport is by road, supplemented by short-sea shipping and freight transport by rail. We are continuously working to make our transport more sustainable."

"Despite the Covid-19 pandemic, which caused a shortage of containers and reduced the reliability of ships’ sailing schedules, we still managed to use inland waterway shipping for a large percentage of our transport to seaports. Thanks to our employees’ knowledge and experience and the good relationships we have built with carriers, we often managed to find a solution. This ultimately enabled us to maintain transport by water in Gorinchem and Scharsterbrug and even increase transport by water from our Barneveld site."

"Our focus is also on reducing the number of transport kilometres. We do this in collaboration with our customers by, for example, combining smaller shipments to load the largest possible volumes in a container or lorry, while always adhering to regulatory and quality requirements. The great thing is that initiatives in this context are initiated by various employees at our Supply Chain department. This really goes to show that everyone at our company is really engaged on the topic of sustainable transport."

"It is and will continue to be a challenge to deliver our products in the most sustainable way possible, on time and at reasonable cost. This is also why we maintain short lines of communication to other departments. Together, we strike a balance between our customers’ preferences and our own requirements for sustainable transport."

Sustainable packaging is a topic of growing attention in society, among our customers, and in government. Our main packaging materials are tin, plastic and paper. These serve an important purpose for the quality and food safety of our product. In collaboration with customers and suppliers, we are working on making our packaging materials more sustainable. First and foremost, the new packaging must not have any adverse effects on our products’ quality and shelf life.

In 2021, we continued to work with one of our customers on a sustainable alternative to our sachets. We now use a thinner aluminium layer for our sachets, which means less material. Various tests were conducted to see if we could make this layer even thinner using physical vapour deposition of aluminium. This turned out to still be challenging due to product shelf life. Over the coming year, we will continue these tests to find a suitable alternative. The aim is to introduce an alternative material into the market in 2022 and thus complete the project.

We are, furthermore, partnering with one of our suppliers to make our milk can caps more sustainable. The new caps are lighter in weight because they contain less plastic. We are also looking into whether the new caps could be partly made of bio-based plastic. Initial small-scale testing returned positive results. In 2022, we will further scale up this pilot.

With these two projects, we have achieved our objective of teaming up with customers and suppliers to work on sustainable packaging. We had talks with our suppliers last year to explore possibilities for joint projects. These talks produced a list of projects for the coming years. We recently launched the first new project, which is intended to reduce our use of wrapping foil. Our aim for the coming year is to launch another new project.

"It is our aim to minimise adverse environmental impact across the entire supply chain and prevent human rights violations"

"Besides Dutch milk, we also use various other ingredients for our products and we do so while respecting the environment and human rights. Therefore, we only buy certified palm oil and soy lecithin, and have done for quite some time now, and we take our responsibility in the supply chain. In our procurement process, we always consider the impact on the environment and human rights to minimise any adverse impact or prevent it altogether."

"It all starts with transparency. Over the coming period, we will focus efforts on mapping out our entire supply chain, i.e. not only our suppliers, but also their suppliers, and the suppliers before them. Only when we know who has handled our raw materials, what their policy is, and where they are based will we be able to make the best possible assessment of potential risks. If any risks are identified, we engage with the suppliers or regulatory bodies, in the same way as we are already doing now for palm oil through RSPO certification, so as to reduce risks and ultimately prevent them altogether."

"A number of ingredients, such as palm oil, soy, cocoa, and coconut oil, are receiving a lot of attention these days because they are known to involve risks such as deforestation and human rights violations. With this in mind, Vreugdenhil will explore options for segregated certification of high-risk ingredients, instead of mass balance certification. This is how we contribute to creating a transparent supply chain where people and the environment are respected."