Eliminating deforestation from cocoa supply chains in an ethical and comprehensive way is a challenging yet critical task. It will require collaboration between industry, government, cocoa farming communities, and scientists. Commodity traders, the intermediary nodes in the supply chain linking farmers to consumers, are important but often underappreciated actors in this regard.
To shed greater light on this ‘missing middle’ of the supply chain, Sophia Carodenuto and Janina Grabs have been studying the role of commodity traders in implementing sustainability commitments. Funded by the Canadian Research Council SSHRC, our research project aims to foster cross-sectoral collaboration while providing information about how sustainability objectives such as deforestation-free cocoa can be operationalized in practice. Our research has confirmed that traders are critical partners in implementing the downstream commitments of chocolate retailers and manufacturers. But traders are also shaping the content and delivery of sustainable sourcing practices in the cocoa sector, creating their own sustainability programs that have varying degrees of external oversight. This comes with opportunities and risks.
We argue that traders exhibit multiple comparative advantages in becoming lead actors for sustainable commodity production due to their ability to act as connectors and translators, both vertically along the value chain and horizontally between different types of commodities. Given the considerable resources and investments into specific sourcing geographies, traders may be place-bound champions of sustainable supply chain initiatives. However, there are also risks and potential disadvantages of relying on traders for the implementation of sustainability solutions. Traders arguably have inherent conflicts of interest when it comes to sustainability expenditures if the return on investment is not considered high enough. Further, if sustainability requirements further consolidate the relationship between traders and farmers (which in many cases is already exclusive in practice if not on paper), farmers may be placed at heightened risk of losing precious bargaining power.
In June 2022, we brought together over 30 traders and academics to discuss this research agenda and collectively define the core research questions and knowledge gaps surrounding the role of traders as sustainability governance actors. We collectively agreed on three themes that should be the focus of future collaborative research in this area:
Diversity of trading companies and entrepreneurs
Traders come in a variety of shapes and sizes, from trading giants that move millions of containers of goods across the world (e.g. Olam, Cargill) to small-scale intermediaries who work closely with producers to aggregate and connect raw commodities to markets. Understanding the typology of actors and their relationships with each other will help to define where and how public policy can help to level the playing field or provide the necessary capacity building or enforcement.
Defining sustainable trade
The cocoa sector faces multiple inter-related challenges. For example, achieving a living income for cocoa farmers is seen as an indispensable prerequisite for zero deforestation cocoa. There is a need for a common vision for how these multiple challenges can be addressed in a comprehensive yet practicable way. Given their long-term experience at origin, traders can play a key role in defining sustainability in a practicable way.
Data sharing, traceability and transparency at scale
Transparency surrounding precise cocoa origin and farm-level indicators is an important first step in achieving sustainability. Yet, traceability and transparency can be costly and sometimes only possible in differentiated specialty markets. Investments in transparency must have clear benefits to identify levers to improve on-the-ground impacts for producers, communities, and ecosystems.
With this group we are currently developing best practices to overcome common challenges and we would love to hear from you if you’d like to contribute. Please find out more at tradersandsustainability.com