Can commodity traders make a real impact in achieving sustainability goals?
In March 2020 when the COVID-19 outbreak sent shock waves across the globe, almost every other country declared a lockdown, freezing economic and trade activities. This led to huge chaos and panic among people all over the world, especially for food supplies, resulting in hoarding cupboards with the essentials piling up to meet the needs for months to come. While people were in panic, commodity traders were busy to get the trades back to normal and ensure that this chaos would not last for long by meeting the sudden demand shocks. This was the situation when the supplies were available but stuck in some other part of the world and almost everyone was sure that this situation would be temporary.
World population is expected to grow by 25% to 9.8 billion by 2050 which would mean an increase in food demand thereby putting pressure on existing resources which are already under threat of deforestation and urbanisation. Climate change and impact of human activities on the environment and society is already affecting the ability to meet current food demand (one in five children around the world are stunted in their growth by the age of five due to lack of proper nutrition and access to food). In order to be able to use the same resources to meet the future global food demand it is very important that we not only use it efficiently but also ensure a sustainable approach in using it. This is equally important for energy resources too.
Responsibility towards sustainable products starts from consumers being aware of it and consciously asking for them. This pressurises the manufacturers and retailers to ensure that the products are made from sustainable sources, especially when there is a demand. However, there is very little direct contact between these manufacturers/ retailers and the producers. Hence, commodity traders play a very important role and are the critical link between producers and consumers.
Commodity traders can help achieve sustainability in the complete supply chain and ensure that there are no negative impacts on the environment and society through supply chain activities in the following ways:
Encourage producers to use precision farming techniques: These techniques help farmers use resources in an optimal way. For example, the amount of water and fertilizer used for growing crops are based on a very scientific approach to avoid excessive use. The excessive use of fertilisers leads to contamination of water bodies, depleting soil fertility, carbon emissions (from manufacturing of fertilisers) and are a major source of nitrous oxide in the environment. Such techniques help preserve soil fertility for a long time and thereby avoid farmers venturing for more land through deforestation to increase their farm output. Creating awareness on precision farming/ sustainable practices is possible only through commodity traders who are in direct and regular contact with producers.
Encourage education among thriving communities and discourage child labor: Education of children is of paramount importance in order to ensure that thriving farming communities progress towards better living. This can be achieved only through education and hence children should be encouraged to go to schools. But, most farmers (especially small farm holders) cannot afford to employ labor on their farm and have to then use internal human resources like spouse and children (Estimates of around 98 million children work in farms worldwide). Due to this situation, children often neglect schooling and eventually lose interest.
Commodity traders can create a platform for whistleblowers who can report unsustainable practices and also a collective farming community where groups of farmers help with activities in each other's farm.
Encourage small farm holders and provide them support to meet the sustainability terms: There are some 500 million smallholder farms worldwide and these small farms produce about 80 percent of the food consumed in Asia and sub-Saharan Africa. As these farmers produce smaller quantities, it becomes difficult for traders to achieve economies of scale for shipment. However, if such small farmers are encouraged for a cooperative set up, they can be educated on sustainable farming practices and can be supported for trade through co-operative & commodity traders collaboration. It also benefits commodity traders in ensuring their stable source of sustainable supplies.
Encourage use of technology at producer level in order to bring transparency into the supply chain: Sometimes producers are sceptical of providing information and look at it as an increase in cost. However, if proper communication is passed on to the producers and clear understanding on the incentives that could be gained over the coming years through providing the right information, it will make the process more collaborative and effective. Use of technology, the right technology, can be useful to reduce the cost and time of collecting this information. Technology can be a game changer in achieving sustainability goals.
Tie up with various non profit groups to create awareness on sustainable practices:
Once this information is collected, it needs to be analysed and then with the help of NGOs, various non profit organizations and government agencies, should be used for implementing improvement plans and improving sustainability terms.
Encourage use of shipping lines/ transport lines which use low sulfur fuels: Use of shipping lines which have a good track record, no leakage of fuels in water bodies and use only low sulfur fuels. Maritime transport emits around 940 million tonnes of CO2 annually and is responsible for about 2.5% of global greenhouse gas (GHG) emissions
Encourage manufacturers/ customers to buy sustainable produce even if it is at premium: Carrying out sustainable practices comes with a premium because there are cheaper ways of doing the same work, precisely un-sustainable ways. If we have to achieve the sustainable goals, we have to ensure that it becomes our practice to use only sustainable products. This means that we as consumers will have to pay a premium for it. If we as consumers start using sustainable products, looking at demand, manufacturers would be forced to manufacture them using sustainable sources. This will then be passed on to producers who would then have to ensure that the practices followed are sustainable and getting a premium for the same will not be a challenge as the demand for it comes from downstream. There was 39% increase in the production of certified cocoa beans between 2014-18, amounting to 34,000 tonnes in 2018.
Encourage use of environment friendly packaging right from producer to retailer: Using right packaging which can be recycled/ upcycled is very important in order to reduce waste or any kind of negative impact on the environment due supply chain activities.
Create awareness of various certifications that are available how meeting those standards can help grow their business: There are various agencies and non-profit organisations which provide certifications and labels for sustainable practices that can be used on products that are produced from them. They provide certifications and labels that are based on criteria to protect biodiversity, deforestation, and workers. To list a few agencies/ organisations such as Fair Trade, Organic, Rainforest Alliance, Smithsonian Bird Friendly, UTZ, 4C Common Code, etc.
Commodity traders will be a key link in getting data on sustainability from the ground, considering the reach they have to the last mile producers. The information collected is not only used to see how sustainable the source is, but also for identifying areas that can be improved in order to meet the larger sustainability goal.
This can be further boosted if the right technology is used at the right place. CTRM/ ERP platforms like Minerva help traders to track their trades, manage their risks while meeting the demand for various commodities and also track the carbon footprint created due to each trade. Further, at an organisation level, one can track how the activities conducted by a company are able to achieve various SDGs and which SDGs need to be focused on. It also provides an integrated feature where farmers can directly communicate with traders by providing information on the platform for smooth operations and risk management.
If we have to meet the growing demand for food and energy of a growing population with the same resources that we have today, we have to ensure efficiency in the production process while not forgetting the most important factor of sustainability, so that it can serve next generations and avoid shortages.
With the right use of technology, commodity traders will be able to make a significant contribution in achieving the sustainable development goals across the supply chain of crop commodity trade, thereby helping improve the environment and society as a whole.
We at Satoshi keep sustainability at the core of our work principles and strive to deliver in order to help our customers achieve theirs through our core product Minerva. Contact us at email@example.com for more information.