United Plantations gets the best out of people and palm fruit

Healthwise

Published: Monday August 26, 2013

BY ALVIN UNG

Back to basics: Since the 1920s, water buffaloes have been used on the Jendarata plantation to transport oil palm from the field to the rail carts.

A plantation company goes the extra mile to care for the land and its workers, and is rewarded manifold.

AS our bright-red Mercedes-Benz four-wheel-drive screeched to a halt, Datuk Carl Bek-Nielsen, the blue-eyed and blond-haired chief executive of United Plantations, leaped out of the driver’s seat. 

He headed straight to a labourer standing next to a train laden with oil palm fruit, and rattled off: “Semua baik? Bagaimana isteri? Keluarga sihat?”

The Indonesian harvester took a step forward, nodded vigorously to all three questions, and smiled broadly. 

At first, I didn’t think much of that exchange. Here was a CEO making small talk: how are you, and how is your family. But as I observed Bek-Nielsen talking to the rank and file in his company, I gradually realised there was something much bigger going on. In the kernel of that ordinary encounter lay a seed that reveals the greatness of United Plantations (UP). 

'I'm really big on pruning' says Bek-Nielsen. 'A pruned tree results in a cleaner field so that harvesters can work faster. A pruned tree creates better angles to spot ripe fruit, and makes it easier to cut down the fruit bunches.'

To understand the significance of that exchange, you need to know five things that sets UP apart from other oil palm plantations – and possibly all other companies in Malaysia.

The first is that this publicly listed company is led and controlled by two Danish brothers. Carl, 40, the chief executive director, is the personification of Malaysia: he speaks fluent English, Malay and Tamil, and understands Cantonese. He is also fluent in German and Danish. 

Martin, the younger brother, is executive director of finance and marketing at UP. 

The brothers stand upon the shoulders of the company’s founders who were among the first in Malaya to grow oil palm on a large scale in the 1920s. After the war, the company brought in superior planting materials which were used to breed improved palm varieties that enabled Malaysia to leapfrog Africa in palm oil production. By 1951, UP was producing 20% of Malaysia’s palm oil. 

Today, UP is a mid-sized company, dwarfed by the likes of Sime Darby and Felda Global Ventures. Nevertheless, UP still has the highest yield of palm oil per hectare – nearly 50% more than the average plantation in Malaysia. It has been listed in Forbes as one of the best small companies in the world; the Ministry of Plantation Industries and Commodities has also recognised it as the best managed estate.

From young, the brothers lived on the estate. Whenever they got injured or got bitten by dogs or monkeys, they were treated by the same doctors who treated the estate workers. They worked as cadet planters at UP before leaving Perak to study agriculture in Denmark. 

They met their respective Danish girlfriends there, and both succeeded in wooing the women back to rural Perak. The brothers rose the ranks and eventually succeeded their father, Tan Sri Børge Bek-Nielsen, dubbed the oil palm king of Malaysia.

The strong family bonds lead us to the second reason why UP is different from almost any oil palm plantation today: the Bek-Nielsen brothers have a sense of place. Even today, their lives are rooted in rural Perak.

“I know these roads better than any manager,” Carl Bek-Nielsen told me as we zoomed along Jendarata estate about 90 minutes’ drive from Teluk Intan. “As kids, Martin and I used to play in the estate and hunt for monitor lizards and pythons. I love this land. I spend 80% of my time on the plantation. This is my home. That’s the key difference between us and many other plantations.”

Bek-Nielsen told me that not long ago, he spotted a crack on the ground that snaked between a row of oil palms. Cracks are a sign of impending drought. Concerned, he followed the crack for one kilometre. I was astounded. Who on earth follows a crack on the ground? But Bek-Nielsen told me the story like it was all in a day’s work for a plantation CEO. 

A guest worker picking up palm fruits which have fallen out of the cart during transferring in the field. These palm fruits are transported to the mill via rail tracks.

Because he grew up here, Bek-Nielsen has done everything that needs to be done on the estate. He has done lab work, dug holes in the ground, transferred seedlings into the nursery, sprayed the palms with insecticide, pruned the fronds, harvested the fruit, and operated the milling machines. Having a sense of place makes you care about everything you do. 

This sense of stewardship leads us to the third thing that sets UP apart from most companies: it goes that extra mile to care for its people. 

Besides the palm oil mills and refineries scattered throughout 12 estates in Perak, UP properties have 26 Hindu temples, five mosques, three churches, two group hospitals, a few primary schools, four rainforest sanctuaries, a home for the elderly, and even a bakery. The Bernam Bakery produces Danish-style bread and pastries using top-notch Lurpak butter. (The Danish cookies are the best I’ve eaten in Malaysia.)

Everywhere we went, I saw playgrounds, football fields and badminton halls. Although the company’s land bank of 40,000 hectares in Malaysia is relatively small, UP typically spends about RM40mil annually on human capital development. Last year, 61 children of estate workers were given scholarships to study in universities.

UP has been regularly building new houses for staff at the cost of RM270,000 for a 1,560 sq ft semi-detached, three-bedroom home for a typical family. The Bek-Nielsen brothers designed the houses themselves. The kitchen has stainless steel cabinets and sinks; the living room has tiled floors and gypsum moldings along the ceiling.

At a clinic, I saw a dozen men who were waiting to be x-rayed; the diagnostic machines were top-grade. At another estate, there was a sign which said that the total time an average worker called in sick over a period of seven months was 0.17 hours.

Then an epiphany hit me. Every bunch of ripe fruit that is pressed into oil converts into yield. So if a worker calls in sick or feels dispirited because of a family problem, yield goes down. But if he is motivated – and the grounds are kept trim and neat for him to work with ease – he is more likely to pick up all the ripe fruit. Yield goes up. That is the correlation between caring for people and high yield of oil palm.

This leads us to the fourth thing that sets UP apart from most companies: when you can push people to their highest potential, you can hit that sweet spot in innovation. Some of UP’s best innovations are decades-old. Besides tractors, they use the water buffalo. 

The Bek-Nielsen family built a few primary schools in support of the education of the estate workers' children.

They depend on a 525km network of railway tracks to bring the fruit to the mill. And they do remarkably simple things, like laying down a tarp on the ground while transferring fruit bunches from a trailer into the train. That way you can still pick up loose fruit from the ground. 

“I’m really big on pruning,” said Bek-Nielsen. A pruned tree results in a cleaner field so that harvesters can work faster. A pruned tree creates better angles to spot ripe fruit, and makes it easier to cut down the fruit bunches.

At one point, Bek-Nielsen stood rooted to one spot among the trees and preached about the glories of pruning for 10 minutes. “Can you see? It’s like a cathedral here,” he said, waving his arms. “It’s beautiful here!”

Bek-Nielsen is a bit like Steve Jobs when it comes to obsessing about machines. A few years ago, he and his staff spent several thousand man hours ripping apart a motorised cutter called a “cantas” used to harvest oil palm fruit. The machine kept breaking down. So they began substituting the parts. They modified the engine. Then they changed the blade. They changed the carburetor, then they changed the bearings.

“We split the machine apart into separate components, identified the weak links, and then we found more sturdy components,” Bek-Nielsen said. By the time they were done, almost everything inside the cantas was new, sturdy and reliable.

In their never-ending quest to develop the highest oil extraction rate and oil yield per hectare, they have found that size or speed isn’t always better. That is why UP has more than 300 people doing research in breeding, agronomy, crop protection and tissue culture.

“Our focus right now is finding the balance between yield and oil-to-bunch,” a scientist told me, as I took notes and nodded knowingly during my tour of the tissue culture lab, soil lab, leaf lab and seed production unit. “We should always make a concerted effort to be the most efficient producer of palm oil in the world,” Bek-Nielsen said. 

Harvesting of fresh fruit bunches.

The Government is also doing likewise. Pemandu has focused on productivity, value-addition and sustainability in crafting initiatives for the palm oil industry. “Palm oil is indisputably the most productive edible oil crop and we continue to improve on increasing productivity without unnecessarily expanding hectarage,” said Ku Kok Peng, director of Palm Oil & Rubber National Key Economic Area (NKEA) at Pemandu. 

Plantation companies are now encouraged to improve yield genome and good agricultural practices, mechanize harvesting, and increase oil extraction rate, Ku added. 

While the Government has committed nearly RM300mil to support projects that create high-value food and health products, Ku said that the Government’s focus on “productivity upstream is precisely calculated to produce higher yield on less land.”

It was at the research centre that Bek-Nielsen revealed the three biggest factors for high yield:

> High quality seeds (which UP sells by the millions to the industry);

> A fantastic agronomic setup combined with research and milling;

> Disciplined managers who actually spend time in the field.

This laser-focus on spending time on the ground was drummed into Bek-Nielsen’s head by his father from young. This leads us to the fifth thing that sets UP apart from any other company: a shared sense of history.

Bek-Nielsen and his brother, Martin, learned how to run the company from their larger-than-life dad and UP veterans such as Ho Dua Tiam and Loh Hang Pai who form part of the executive team. During my visit, the plantation workers, managers and even the estate doctor told me that Bek-Nielsen reminds them of his father. That was unsurprising. 

After all, the two brothers spent decades growing up, living and working on the same estate as their father and mother.

Weeks after my visit, I sat down and read The UP Saga written in 2003 by Oxford-based historian Susan M. Martin. I came across a passage that surprised me:

“His employees appreciated his compassion and his care for their needs.... He was known for his energy and dedication, regularly putting in 15-hour days. He preferred to manage by walking around, flying around or driving around. 

The company’s many visitors would be invited to go along for the ride, traveling at a startling speed along the dusty estate roads and frequently pulling to a halt. He would leap in and out of his bright red Mercedes four-wheel drive, inspecting points of interest and chatting to the workforce, while his visitors looked on in awe.”

The author was describing Tan Sri Børge Bek-Nielsen. But the passage felt uncannily familiar to me: the words describe both father and son – right down to the bright-red Benz.

And therein lies the greatness of United Plantations. The spirit of the company’s founders lives on in the next generation. When Bek-Nielsen drove me at high speed, pulled to a halt, and chatted to the workforce, he was continuing his father’s legacy.

In three brisk questions – “Semua baik? Bagaimana isteri? Keluarga sihat?” – Bek-Nielsen was probing into his workers’ welfare. Like his father, Bek-Nielsen saw himself less as a CEO than as a custodian of his people’s physical, social, psychological and familial well-being. He was also a custodian of their lives and stories.

“I love this company because it has this history. History is made up of people. We stand on the shoulders of those who came before us. There is no one single person who can take credit. It is our duty to be good custodians of that history, and to pass it to someone who is worthy to take up that baton,” Bek-Nielsen said.

http://www.thestar.com.my/Lifestyle/Features/2013/08/26/United-Plantations-gets-best-out-of-people-and-palm/

There's gold in green

Monday August 26

BY ALVIN UNG

Strong and steady: The water buffalo is still used to transport oil palm from the field to the rail carts. These animals are said to have better efficiency and need much less maintenance.

Welcome to the world of sustainable palm oil practices.

CAREFULLY I entered the killing fields. Skulls and bones crunched underneath my feet.

“You’re walking on a graveyard,” Carl Bek-Nielsen, the CEO of United Plantations (UP), told me as I squinted against the noonday sun to get a glimpse of the mass murderers. But the barn owls were gone.

Welcome to the world of sustainable palm oil where nature, human ingenuity and technology are harnessed to fight pests, improve yield and transform effluent into energy. UP has been at the forefront of this monumental effort to balance environmental health with bottom line growth.

In August 2008, UP became the first company – leading the way for nearly one thousand companies so far – to be certified by the Roundtable on Sustainable Palm Oil (RSPO), the world’s flagship certification body for the industry. That has made UP a poster boy for sustainable oil palm practices in Malaysia, and in the world.

UP’s prominence has made the company a lightning rod for attacks from environmental organisations concerned by how oil palm plantations in South-East Asia have destroyed rainforests and wildlife.

A field worker pruning the palm trees. Pruning is said to increase the productivity of the trees.

The problem is real. The United Nations Environment Programme (UNEP) has said that the spread of oil palm plantations is one of the greatest threats to forests in Indonesia and Malaysia.

Bek-Nielsen doesn’t deny those facts. “The palm oil industry is not perfect. We have to accept there are things we can do better; it’s simply our obligation,” he said.

UP’s acceptance of culpability on behalf of the industry has led them to become superbly creative in going that extra mile to balance between people, profit and planet.

“We are self-sustaining,” said P. Rajasegaran, 50, a UP group engineer, as I visited one of the spotlessly clean palm oil mills that is connected to an integrated biomass, biogas and fertiliser plant – the first of its kind in the world. “We generate our own power and water,” Rajasegaran said with pride.

All the solid waste and pulp from crushed fruit bunches are burned in a biomass boiler that creates heat, which converts water into steam that runs turbines to generate electricity.

The semi-solid waste is converted into fertiliser. And the most brilliant touch of all: the methane gas from liquid waste and effluent is captured at a biogas plant and turned into steam and electricity.

“We supply power to the staff quarters and bungalows, while surplus electricity is sent to the refinery,” Rajasegaran said.

Thanks to the innovations in plantations such as UP, Pemandu, in its Economic Transformation Plan for Palm Oil, has been pushing for biogas facilities to be installed in all palm oil mills in Malaysia by 2020. So far, 57 biogas plants have been set up, with another 164 being built or planned for.

These strategies make sound sense. But it was not so obvious as recent as seven years ago. Back then, Bek-Nielsen was in Denmark when he was invited to see a farm where they converted pig and cow manure into biogas and energy.

On his flight back to Malaysia, his mind couldn’t stop racing. He knew that effluent generated from the mills – and dumped into manmade lagoons – generated methane that is damaging to the ozone. Furthermore it was a waste not to use all that methane.

“How do I get a biogas plant?” he asked himself.

Back on the Jendarata estate in central Perak, he spurred UP engineers to build a pilot-scale biogas plant at the cost of RM50,000. To his delight, it produced gas. Within six months, and with the help of a Malaysian scientist and a contractor who worked around the clock, they built the first biogas plant which produced 12,000 cubic metres of gas daily – the equivalent of 50 barrels of oil – which met 25% of the refinery’s energy demands. It took UP only seven years to recoup the cost of building the RM7mil plant.

“Thanks to the biogas plants, waste has been converted into something valuable, while minimising environmental footprint,” Bek-Nielsen said.

Not everything requires technology. Some of the best things to create a sustainable business involve harnessing mother nature.

The graveyard of bones I walked through was created by barn owls. Each owl eats 800 rats per year. UP has 2,000 pairs of owls living in owl boxes, one for every 20 hectares.

A 525km network of railway tracks brings harvested fruits to the mill. – United Plantations

The company reduces the use of pesticide by using buckets laced with pheromones that attract and trap a type of rhinoceros beetle that can kill oil palms. The 169,000 bushes of yellow flowers that line the estate roads produce nectar that attracts wasps that eat up harmful caterpillars.

“Compared to rapeseed farmers in Europe, we use five to eight times less pesticide per tonne of vegetable oil produced,” Bek-Nielsen said.

Twenty years ago, UP’s head of human resources introduced to Malaysia the Makuna plant, a fast-growing creeper native to India. Makuna serves three purposes at UP – the roots prevent erosion during the rainy season; the umbrella-like leaves prevent evaporation during the dry season; and the dried-up leaves turn into humus that nourishes the soil with organic carbon and nitrogen.

Despite my initial scepticism about palm oil practices, I came away convinced that the oil palm is an efficient crop. It takes up 1% of the world’s land used for agriculture, yet it produces 32% of the world’s fats and oils to feed 2.2 billion people. Any oil substitute would need more land. So, the key lies in following UP’s strategy – increase yield on existing land.

At the same time, because of palm oil’s connection to deforestation, governments should ban new concessions that clear forests.

“Nature’s first green is gold,” wrote poet Robert Frost. And so it turns out that UP’s green practices – which require significant investment upfront – can yield a golden harvest. Multinationals such as Cargill, Nestle and Johnson & Johnson buy RSPO-certified oil. And global investors have recommended UP stock for that reason.

“UP’s long history and continued focus on environmental issues mean that, in addition to lower production costs, it outperforms the competition in meeting global food companies’ increasing demands for documentation of origin and environmental impact,” wrote the Danish mutual fund, BLS Capital.

That’s high praise for a company that provides a safe haven for nocturnal killers.

http://www.thestar.com.my/Lifestyle/Features/2013/08/26/Theres-gold-in-green/

Published: Monday August 26, 2013 

Clean and green all the way

BY ALVIN UNG

Carl Bek-Nielsen, CEO of United Plantations.

Living on the plantation is as much a joy and privilege for a CEO, as it is for his estate workers.

AS I drove off the North-South Highway and entered the Lima Blas estate owned by United Plantations, I couldn’t help thinking: “Here I am, going behind enemy lines.”

Globally, many environmental NGOs have declared that oil palm companies are public enemy No.1 for destroying tropical forests, killing endangered species, uprooting local communities, exploiting lax governance, and generating greenhouse gases.

Locally, millions of Malaysians and Singaporeans have breathed in deadly toxins from the haze, partially caused by hot spots in industrial plantations in Sumatra.

Personally, I recalled when the WWF invited me on a boat to see tracts of forest being cleared for oil palm cultivation. In 1998, the Worldwide Fund for Nature (WWF) was campaigning to gazette forests along Sabah’s Kinabatangan River that supported pygmy elephants, orangutans and proboscis monkeys. At that time, I remembered seeing jungle that stretched from horizon to horizon. Ten years later, when I returned to the same area, nearly everything had been replaced by a sea of oil palms. The rate of deforestation was staggering.

So, can any good come out of this large-scale monoculture crop?

I can see why oil palm is necessary. The plant yields more oil per hectare than any major oilseed crop. Once planted, the tropical tree can produce fruit for more than 30 years, providing jobs for poor rural communities and smallholders. Felda is one such success story.

The world needs it. The oil is used for cooking, cosmetics and biofuel. Fifty per cent of the world’s packaged goods contain palm oil. It’s in shampoo, ice cream, lipstick, chocolate, cereals, potato chips, canned soups and baby formula. Oil palm is a crucial crop for Malaysia and Indonesia, which export more than 80% of the world’s oils and fats.

Caring and compassionate: Carl Bek-Nielsen with a resident at the plantation's retirement home. 'We have a duty not to forget the people,' he says.

But the world’s demand for palm oil meant that between 1967 and 2000, the area under cultivation in Indonesia expanded from less than 2,000 sqkm to more than 30,000 sqkm, the Economist reported. I myself saw the before-and-after effects in Malaysia. And yet how could some leading figures in Malaysia’s palm oil industry have the chutzpah to claim that palm oil does not lead to deforestation?

It was with these thoughts that I first met and greeted the chief of United Plantations, Datuk Carl Bek-Nielsen. He asked me what I thought about palm oil. And I told him exactly how I felt.

“I am truly concerned that the oil palm industry will one day receive a tattoo on our forehead. That’s a tattoo that we can’t go to the sink and wash off,” he said gravely, referring to the novel The Scarlet Letter where its protagonist, Hester Prynne, was forced to wear a letter “A” on her dress as a badge of dishonour.

One night, as we waited for dinner to be served in Bek-Nielsen’s modest home in Jendarata estate, Perak, Bek-Nielsen and his brother, Martin, fretted over an August report published in Bloomberg Businessweek which said there was evidence of fraud, human trafficking and violence against workers on plantations owned by Kuala Lumpur Kepong, the world’s fifth largest palm oil producer. (A KLK spokesman replied that the workers involved were not employed by KLK but had been outsourced to a third party contractor.)

“It hurts me here,” Carl said, thumping his chest, “when KLK is attacked because we are all painted with the same brush. It’s wrong that the industry is given a sentence before independent bodies can objectively assess the validity of the accusations.”

KLK, just like United Plantations, is a member of the Roundtable on Sustainable Palm Oil (RSPO) which is represented by environmental NGOs and businesses in the palm oil trade. The RSPO was an initiative of WWF, which sets high standards for sustainable palm oil. If applied fully, it could make palm oil the world’s most eco-friendly options for vegetable oils. The problem, however, is that some RSPO members are working sustainably, while others are using it merely to divert criticism.

While oil palm companies were voluntarily policing themselves, Bek-Nielsen lamented that green activists in Europe, the United States and Australia were adversarial towards the palm oil industry, which flourishes mostly in Malaysia and Indonesia.

“There must be a level playing field. Most agricultural fraternities should also be exposed to the same principles and barriers as the palm industry. There should be no discrimination,” he said.

“Are we then brushing aside the concerns raised by environmentalists?” I asked.

“Not at all. Our industry needs to do much more in accepting and acknowledging the responsibility of caring for the environment and local societies,” Bek-Nielsen said, as he vigorously stirred a lime juice drink, before passing the glass to me.

“There are two ways you can run a plantation,” he added. “You can be a black sheep and think only of short-term profits. Or you can choose to do it in a sustainable, social and environmental way. We have a duty not to forget the people.”

Wonderful words, I thought to myself, but what’s it like in reality?

As I walked past the kitchen in Bek-Nielsen’s home, I greeted the domestic helper who has served the Bek-Nielsen family for several decades.

From the corner of my eye, I spied the stainless steel kitchen counter that she was using to prepare food for us. I did a double take. These were the same kind of stainless steel countertops and cabinets I saw in the homes of the UP workers when I visited them earlier in the afternoon. That was truly remarkable.

According to the UP annual report, the Bek-Nielsen family and UIEL Group hold a 47.40% stake in UP stock, which makes Bek-Nielsen and his brother wealthy indeed. Yet the brothers have ensured that they and their workers share some basic amenities.

Most of the drugs used in UP’s clinics and hospitals are original, not generic, drugs. “If the medicine is not good enough for my workers, it’s not good enough for me,” Bek-Nielsen’s father used to say.

We drove by the kindergarten where the young Bek-Nielsen used to study with other plantation children. Nearby was a sign that read: United Plantations Berhad Old Folks Home.

“Can we visit?” I asked Bek-Nielsen. After a pause, he said, “Sure.”

The retirement home has a well-kept monastic quality to it. We headed straight to the bathrooms. They were almost as clean as the bathroom I used in Bek-Nielsen’s house. The community room has Astro cable channels on a plasma television.

“These are the people who have given all their lives to UP,” Bek-Nielsen told me as he spoke in Tamil to Naraidu Mathar, 72, who worked at the plantation from 1952 to 2010. He knew all 17 people there and greeted them by name. “If we can’t give back something to them, there’s something wrong with us,” Bek-Nielsen said.

This attention to detail and people has paid off for UP. Plantation analysts noted that UP spends more for employees compared to other plantation companies, yet UP has the lowest production cost for each tonne of palm oil.

Weeks later, I e-mailed Ku Kok Peng, director of Palm Oil & Rubber NKEA at Pemandu, for a national perspective on my visit to UP. “Your United Plantations experience is actually reflective of how most plantation operations are done in this country: productivity-driven and responsible,” he said. “Most palm oil cultivation is done on former rubber and logged over land, and we do not clear forest to plant anymore. At the same time, we must be entitled to use our land to create economic return, especially for our smallholders who account for 40% of our total hectarage.”

“It’s not enough to say we contributed millions to social causes and biodiversity,” Bek-Nielsen said, as we discussed oil palm companies that give to CSR programmes and rainforest initiatives. “You can’t think that issuing a cheque for a good cause can clean you up like going to a confession booth. You have to show you want to clean up your own backyard.”

At the end of my time behind enemy lines, I realised I genuinely liked United Plantations and its blue-eyed chief. There were still plenty of reasons to be wary of the industry and its players. But my perception of Carl Bek-Nielsen had changed: from scepticism to respect, and from enemy into friend.

“Living on the plantation is a real joy and privilege,” Bek-Nielsen told me before I drove off. “You must live on the plantation one of these days.”

http://www.thestar.com.my/Lifestyle/Features/2013/08/26/Clean-and-green-all-the-way/

Healthwise