Smartphone platforms can shed light on grower operations.
The push to improve transaction-level traceability is illuminating a section of global agricultural supply chains that, up until now, has remained in shadow.
Smallholder farmers, who produce a third of the world’s food according to the United Nations, are gaining visibility as a vital source of the data companies need to meet increasingly stringent traceability requirements.
Growers in the dark
Over the next few years, various national laws and directives will come into force that require companies to map their supply chains and verify that they meet environmental, social, and governance (ESG) standards.
Consider, for example, legislation introduced by the European Union to combat deforestation. Under the new law, companies must submit a due diligence report that specifies the origins of imported commodities down to the individual growers as well as information that confirms the supply chain is free of deforestation.
Providing this level of data is a major challenge for importing companies, particularly when charting the output of smallholder farmers in developing countries at the base of the commercial pyramid.
These growers are generally engaged in “informal” economies where business practices familiar to enterprises in developed countries — like paying taxes — are not followed. Business is often transacted informally, without the need for digital records. The involvement of multiple intermediaries and the practice of aggregating outputs from many regional growers have also frustrated efforts to improve the traceability of commodity crops such as cocoa, coffee, and palm fruit.
Additionally, smallholders have lacked the expertise, capital, and motivation to invest in digital tools, especially those who survive on subsistence farming. However, like any farmer, smallholders have a vital interest in maximizing the profitability of their operations. Now, this incentive, coupled with smartphone technology, is shedding light on smallholders’ informal supply chains.
The idea is to equip growers with relatively inexpensive smartphones that provide information such as weather forecasts and pricing details that help them increase crop yields and make their operations more efficient. Giving growers more market information can also help them to negotiate better prices for their crops. At the same time, smartphones record their business dealings — providing the transaction-level data needed to comply with increasingly stringent traceability requirements.
For example, tech company AgUnity equipped vanilla farmers in a remote area of Papua, New Guinea, with smartphones that digitize record keeping and give the smallholders access to farming information as well as services such as microfinance and healthcare. The technology supports similar projects for cocoa and coffee growers in other developing countries. A mobile trading platform developed by PemPem generates transaction-level data while enabling smallholder farmers to access commodity price information and a platform that can reduce the cost of transportation services.
Digitizing smallholder supply chains also has broader implications. These systems serve to integrate micro-growers into global supply chains by giving them a window into commodity markets and the ebb and flow of international commerce.
Buyers, including large manufacturers in developed countries, could also benefit from data streams that can be used to analyze — and hence improve — the performance of supplier growers.
Traceability rules will increase the burden on companies to prove that their extended supply chains meet higher ESG standards. But one of the paybacks could be more visibility into their supply base.
This article is also published on the Supply Chain Planet blog. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.