MARFRIG GLOBAL FOODS S.A.
Marfrig Global Foods S.A. (Marfrig) is a Brazilian multinational corporation and the second largest animal protein provider worldwide, ultimately purchasing cattle from around 30,000 direct suppliers and up to 90,000 indirect suppliers in the Amazon and Cerrado biomes alone. In February 2021, &Green and Marfrig announced the conclusion of a USD 30 million 10-year sustainability-linked loan facility.
&Green’s financing will be used by Marfrig to enable and implement a no- deforestation requirement across its entire supply chain in the Amazon and Cerrado biomes, covering all tiers of farms it is associated with, i.e. covering the entire life cycle of the individual cows which ultimately end up in Marfrig’s slaughterhouses. Concrete milestones and targets have been set with Marfrig to first reach full traceability and then to be able to concretely demonstrate no deforestation. &Green has structured the loan in such a way as to incentivize Marfrig to reach targets even more quickly than agreed, with a step-down in interest rates being possible.
KEY PERFORMANCE INDICATORS
&Green chose to support Marfrig to build momentum around sustainable and inclusive production models in Brazil: cattle ranching is seen as the sector with the greatest impact on Brazilian forest and natural habitat loss, caused by the conversion of forests to pastureland.
&Green’s investment aims to bolster Marfrig’s commitment to address cattle-driven deforestation, pioneering as the first Brazilian meatpacker to meaningfully commit to trace and monitor indirect suppliers. Given that traceability and monitoring of upstream cattle producers are especially challenging in Brazil due to the fragmentation and informality of the sector, Marfrig’s commitment serves as a potential proof of concept for the country’s meat industry, by applying no-deforestation supply chain criteria to both direct and indirect suppliers. In addition to supply chain management, this transaction links cattle production to long-term forest protection.
By establishing an inclusive, sustainable, and deforestation-free cattle supply chain, Marfrig commits to achieve more than 1 million hectares of forest protected, while also restoring natural forest in key areas. Cattle suppliers will have continued market access and benefit from the sharing of best management practices. Marfrig has furthermore committed to pastureland restoration across smallholder farms. &Green believes that inclusion of all producers is key to ensure no-deforestation compliance and transform business practices.
TECHNICAL ASSISTANCE FACILITY
&Green has partnered with IDH on a Technical Assistance Facility (TAF) dedicated to support &Green’s prospective clients to become investment-ready, maximize (and monitor) their environmental and social impact post &Green investment, and potentially support in managing and reducing key risks. The TAF also has the mandate and ambition to stimulate learning and sharing lessons to allow other players in the agri-sector to innovate.
To maximize Marfrig’s impact post-investment, the TAF is supporting the development of an approach towards suppliers who do not meet Marfrig’s purchasing policy (and thus have previously been blocked from supplying to Marfrig) to become compliant. This is part of the efforts from Marfrig to be inclusive instead of just exclusionary in its approach, i.e. help all to become compliant and only exclude those who show no willingness to become sustainable. The TAF, implemented by IDH, is also supporting a model for Marfrig’s engagement with indirect suppliers to sustainably intensify their production.
Furthermore, IDH and Marfrig started a pilot in 2021, covering 25 properties, to promote the restoration of forests in the Amazon biome, and establish a business model for the expansion of the project to reach at least 90 properties in the coming years, addressing the restoration commitments made by Marfrig under its LPP .
The post-investment TAF provided to Marfrig exemplifies how &Green promotes social inclusion of suppliers and financial incentives as means towards compliance with traceability and no-deforestation production requirements.
LOOKING FORWARD TO 2022
Besides progress in achieving traceability with indirect suppliers in the Amazon and Cerrado biomes, Marfrig also aims to have all direct suppliers in high-risk areas of the Cerrado traced.
Purchase-and-control criteria is a key pillar of the Marfrig approach towards traceability and ultimately no-deforestation claims. Marfrig will finalize this approach for the Cerrado in 2022 in consultation with relevant stakeholders, including civil society.
PROTOCOL FOR SCREENING
Another big step in 2022 will be to finalize the protocol for screening, approving, and rejecting suppliers in both the Amazon and Cerrado biomes. While suppliers will be made accountable for complying to Marfrig’s purchase and control criteria in 2-3 years only, the protocol is developed as early as possible to inform suppliers about these rules and give them an opportunity to work towards compliance, starting from 2022.