Smallholder farmers, who produce a third of the world’s food, are gaining visibility as a vital source of the data companies need to meet increasingly stringent traceability requirements

<p id="bbd6" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">Smartphone platforms can shed light on grower operations.</p>
<p id="0ca3" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">The push to improve transaction-level traceability is illuminating a section of global agricultural supply chains that, up until now, has remained in shadow.</p>
<p id="227a" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">Smallholder farmers, who produce a third of the world&rsquo;s food according to the&nbsp;<a class="af mx" href="https://www.fao.org/news/story/en/item/1395127/icode/" target="_blank" rel="noopener ugc nofollow">United Nations</a>, are gaining visibility as a vital source of the data companies need to meet increasingly stringent traceability requirements.</p>
<h2 id="fc81" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj"><strong class="lh fp">Growers in the dark</strong></h2>
<p id="e146" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">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.</p>
<p id="5a40" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">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.</p>
<p id="dae7" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">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.</p>
<p id="d339" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">These growers are generally engaged in &ldquo;informal&rdquo; economies where business practices familiar to enterprises in developed countries &mdash; like paying taxes &mdash; 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.</p>
<h2 id="6322" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj"><strong class="lh fp">Digital dawn</strong></h2>
<p id="08c0" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">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&rsquo; informal supply chains.</p>
<p id="65d5" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">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 &mdash; providing the transaction-level data needed to comply with increasingly stringent traceability requirements.</p>
<p id="f4ef" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">For example, tech company&nbsp;<a class="af mx" href="https://www.agunity.com/" target="_blank" rel="noopener ugc nofollow">AgUnity</a>&nbsp;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&nbsp;<a class="af mx" href="https://www.pempem.io/" target="_blank" rel="noopener ugc nofollow">PemPem</a>&nbsp;generates transaction-level data while enabling smallholder farmers to access commodity price information and a platform that can reduce the cost of transportation services.</p>
<h2 id="d125" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj"><strong class="lh fp">Global gains</strong></h2>
<p id="07f2" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">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.</p>
<p id="162f" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">Buyers, including large manufacturers in developed countries, could also benefit from data streams that can be used to analyze &mdash; and hence improve &mdash; the performance of supplier growers.</p>
<p id="6e46" class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph="">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.</p>
<p class="pw-post-body-paragraph lf lg fo lh b li lj lk ll lm ln lo lp lq lr ls lt lu lv lw lx ly lz ma mb mc fh bj" data-selectable-paragraph=""><em>This article is also published on the <a href="https://medium.com/@supplychainplanet/751cbd3bacdd" target="_blank" rel="noopener">Supply Chain Planet blog</a>. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.</em></p>

Traceability tech lights up smallholders in food supply chains

Has the epic story of climate change, in which humanity is the protagonist, reached its ignition point?

<p class="reader-text-block__paragraph">In his excellent book&nbsp;<em>The</em>&nbsp;<em>Science of Storytelling</em>&nbsp;(William Collins, 2019), renowned writer and teacher Will Storr explains how good stories have an ignition point.</p>
<blockquote>
<p class="reader-text-block__paragraph">&ldquo;It&rsquo;s that wonderful moment in which we find ourselves sitting up in the narrative, suddenly attentive, our emotions switched on, curiosity and tension sparked,&rdquo; says Storr. An unexpected change in the plot often triggers the ignition point &ldquo;that sends tremors through the protagonist&rsquo;s flawed theory of control.&rdquo;</p>
</blockquote>
<p class="reader-text-block__paragraph">Has the epic story of climate change, in which humanity is the protagonist, reached such a plot-twisting moment?</p>
<h2 class="reader-text-block__paragraph"><strong>Multiple fault lines</strong></h2>
<p class="reader-text-block__paragraph">The &ldquo;flawed theory of control&rdquo; Storr refers to in his book renders the protagonist vulnerable to the jarring change that sends the plot hurtling in another direction and to its ultimate conclusion.</p>
<p class="reader-text-block__paragraph">Such theories abound in the climate change story. An example is that the crisis is a hoax dreamed up by capitalist haters. Some people believe that humanity will adapt as the climate breaks down or that some miraculous solution will emerge because it always does. Ignoring climate change, assuming it is a tall tale spun by scientists, various forms of self-interest, and the idea that self-destruction is humanity&rsquo;s inevitable and justifiable fate are other variations on the theme.</p>
<p class="reader-text-block__paragraph">In each case, the flawed theory is deeply ingrained in the protagonist&rsquo;s model of the world. As Storr explains in his book, it is very difficult to change such beliefs, so great stories conjure gripping changes that shake the protagonist to the core of their being.</p>
<h2 class="reader-text-block__paragraph"><strong>Headlines as harbingers</strong></h2>
<p class="reader-text-block__paragraph">It can be argued that we are now experiencing this type of change. Record-breaking heatwaves and rain deluges frequently make headline news worldwide. Dramatic images of polar ice melting add to our discomfort. Climate-related horror stories involving loss of life and property are becoming increasingly common.</p>
<p class="reader-text-block__paragraph">These disturbances have significant shock value, but are they, individually or collectively, compelling humanity to respond in fundamentally different ways to climate change? In other words, do they qualify as ignition points?</p>
<p class="reader-text-block__paragraph">The consensus among climate experts is negative. Yes, the world is responding to the crises in myriad ways, such as switching to renewable fuels and developing circular supply chains. However, whether these actions will produce the speedy step change required to reverse climate breakdown quickly enough to avoid catastrophic consequences is still being determined. The protagonists&rsquo; flawed theories appear to be holding firm.</p>
<h2 class="reader-text-block__paragraph"><strong>Breaking the impasse</strong></h2>
<p class="reader-text-block__paragraph">What unexpected changes might crack these belief systems? A moonshot technology-based solution developed by some supranational organization, perhaps. In his book&nbsp;<em>Hothouse Earth: An Inhabitant&rsquo;s Guide&nbsp;</em>(Icon Books, 2022), Bill McGuire, Professor of Geophysical &amp; Climate Hazards at University College, London, UK, maintains that forcing the fossil fuel industry to curtail methane emissions by withdrawing subsidies and clamping down on new fossil fuel exploration represents a good start.</p>
<p class="reader-text-block__paragraph">But broader change is needed to challenge embedded model flaws.</p>
<blockquote>
<p class="reader-text-block__paragraph">&ldquo;In order to limit the consequences of the climate chaos heading our way, the honest truth is that, of every decision taken, of every choice made &ndash; by individuals, local authorities, businesses big and small and governments &ndash; the question must be asked: is this good for the climate?&rdquo;</p>
</blockquote>
<p class="reader-text-block__paragraph">says McGuire.</p>
<h2 class="reader-text-block__paragraph"><strong>Happy ever after?</strong></h2>
<p class="reader-text-block__paragraph">We are some way from such a global mindset. What ignition point might be capable of triggering it? Something akin to the sight of twisters wreaking havoc in downtown Los Angeles, as depicted in the movie&nbsp;<em>The Day After Tomorrow</em>? The cumulative impact of relentless climate-induced upheavals as Mother Nature takes the gloves off might do the trick.</p>
<p class="reader-text-block__paragraph">The outcome for humanity, the protagonist, could be a happy ending, a tragic ending, or a &ldquo;bittersweet mixture of the two,&rdquo; in the words of Will Storr.</p>
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<p><em><span class="Decorator_root_1gA9b Decorator_em_1lccW">This article is also published on the <a href="https://www.linkedin.com/pulse/where-climate-change-storys-ignition-point-ken-cottrill%3FtrackingId=LK4N0ZjCrTfrtkDfnF%252FGkw%253D%253D/?trackingId=LK4N0ZjCrTfrtkDfnF%2FGkw%3D%3D" target="_blank" rel="noopener">author's blog</a>. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.</span></em></p>
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Where is the climate change story's ignition point?

Many companies are rethinking their supply chains to make them more resilient and responsive to changing market demands

David

<div class="fh fi fj fk fl">
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<p id="c6c2" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">The uncertain economic and political outlook might persuade some companies to dial back their efforts to improve the sustainability of their supply chains. Some enterprises may even be more amenable to bolstering their sustainability credentials with greenwashing.</p>
<p id="bb75" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">Our extensive research shows that both courses of action are ill-advised. The pressure from various stakeholders&mdash;notably investors &mdash; to increase the sustainability of supply chains has grown steadily over the last three years and shows no signs of abating. Moreover, global crises have a way of bringing supply chains and sustainability to the fore.</p>
<h2 id="f192" class="nq nr fo be ns nt nu nv nw nx ny nz oa mo ob oc od ms oe of og mw oh oi oj ok bj" data-selectable-paragraph=""><strong class="al">A panoply of other issues and uncertainty</strong></h2>
<p id="d626" class="pw-post-body-paragraph mf mg fo mh b gm ol mj mk gp om mm mn mo on mq mr ms oo mu mv mw op my mz na fh bj" data-selectable-paragraph="">Companies are grappling with the likelihood of an economic recession, increasing layoffs, persistent inflation, an unending war in Ukraine, and the prospect of a presidential election in 2024.</p>
<p id="06ac" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">Pushback against green investments is another source of uncertainty. For example, US Senate Energy Committee Chair Joe Manchin, a supporter of fossil fuel interests, recently&nbsp;<a class="af oq" href="https://www.reuters.com/world/us/democratic-sen-manchin-threatens-legal-action-over-treasury-ev-battery-guidance-2023-03-29/" target="_blank" rel="noopener ugc nofollow">threatened court action</a>&nbsp;over plans by the US Treasury to publish guidance on electric vehicle tax credits. Lawmakers in the state of Wyoming have said they want to&nbsp;<a class="af oq" href="https://thehill.com/homenews/state-watch/3815311-wyoming-lawmakers-propose-ban-on-electric-vehicle-sales/" target="_blank" rel="noopener ugc nofollow">ban electric vehicles</a>&nbsp;to protect the oil and gas industry.</p>
<p id="876d" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">In addition, companies are busy managing the transition to a post-pandemic world. In March of this year, the Federal Reserve Bank of New York declared that global supply chains have&nbsp;<a class="af oq" href="https://www.reuters.com/business/ny-fed-says-supply-chain-pressures-normalized-february-2023-03-06/" target="_blank" rel="noopener ugc nofollow">returned to normal</a>&nbsp;after three years of turmoil caused by the Covid-19 pandemic. As a result, many companies are rethinking their supply chains to make them more resilient and responsive to changing market demands.</p>
<h2 id="59b7" class="nq nr fo be ns nt nu nv nw nx ny nz oa mo ob oc od ms oe of og mw oh oi oj ok bj" data-selectable-paragraph=""><strong class="al">Unrelenting pressure to make supply chains more sustainable</strong></h2>
<p id="73f2" class="pw-post-body-paragraph mf mg fo mh b gm ol mj mk gp om mm mn mo on mq mr ms oo mu mv mw op my mz na fh bj" data-selectable-paragraph="">Given these pressures, it is perhaps understandable that sustainability in supply chains slips down enterprises&rsquo; list of priorities. However, the&nbsp;<a class="af oq" href="https://sscs.mit.edu/" target="_blank" rel="noopener ugc nofollow">State of Supply Chain Sustainability</a>&nbsp;report, published annually by the MIT Center for Transportation &amp; Logistics and the Council for Supply Chain Management Professionals, shows that the importance of such investments is not diminishing.</p>
<p id="31b4" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">Over the four years of the survey&rsquo;s existence, we have collected almost 10,000 responses from supply chain professionals worldwide. We&rsquo;ve also conducted dozens of interviews in multiple languages with supply chain leaders from various countries and industries to give context to the data we collect.</p>
<p id="0241" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">Every year, we ask our survey respondents to rank the level of pressure that their firm faces to increase supply chain sustainability. We isolate ten sources of pressure, including consumers, regulators, investors, and employees. Most respondents ranked the ten pressure sources as &ldquo;high&rdquo; to &ldquo;very high,&rdquo; with almost every source showing an increase over the years 2020 to 2022. Investors&rsquo; pressure rose dramatically during these years, followed by corporate buyers, executives, and consumers. Our analysis of the 2023 results indicates that this pressure is translating into action. We observed statistically significant relationships between how firms rate pressure from their investors and their declaration of net zero goals.</p>
<p id="eea2" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">Interestingly, four years of our research findings indicate that global crises do not dampen firms&rsquo; commitments to the cause. For two consecutive years, from 2021 to 2022, roughly 80% of respondents reported that their firms&rsquo; supply chain sustainability efforts were undaunted by the global pandemic. In 2023, 70% of respondents said that the projections of global economic contraction ahead did not affect firms&rsquo; commitments to improving supply chain sustainability. The 2023 survey also asked about Russia&rsquo;s invasion of Ukraine on supply chain sustainability efforts. Only 30% of respondents reported an impact &mdash; and among those, 70% said that their firm&rsquo;s commitments to supply chain sustainability increased following Russia&rsquo;s invasion.</p>
<p id="3193" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">Our qualitative research provides some insights that might explain these findings. For example, in our semi-structured executive interviews regarding the Covid-19 pandemic, we heard several respondents describe how the pandemic brought supply chain management &mdash; particularly supply chain transparency and resilience &mdash; to the fore in unprecedented ways. Likewise, global crises seem to spotlight the importance of supply chains, bringing more visibility and bigger budgets to sustainability issues.</p>
<h2 id="2263" class="nq nr fo be ns nt nu nv nw nx ny nz oa mo ob oc od ms oe of og mw oh oi oj ok bj" data-selectable-paragraph=""><strong class="al">No easing of pressure on the horizon</strong></h2>
<p id="29f7" class="pw-post-body-paragraph mf mg fo mh b gm ol mj mk gp om mm mn mo on mq mr ms oo mu mv mw op my mz na fh bj" data-selectable-paragraph="">While economic and political concerns will continue to attract attention &mdash; so will sustainability issues.</p>
<p id="6801" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">The impact of climate change on increasingly severe weather patterns is capturing headlines worldwide. The Intergovernmental Panel on Climate Change (IPCC) issued a &ldquo;<a class="af oq" href="https://www.theguardian.com/environment/2023/mar/20/ipcc-climate-crisis-report-delivers-final-warning-on-15c" target="_blank" rel="noopener ugc nofollow">final warning</a>&rdquo; in March 2023 on the fallout from what it sees as a climate crisis. The warning was part of the IPPC&rsquo;s comprehensive assessment report.</p>
<p id="8852" class="pw-post-body-paragraph mf mg fo mh b gm mi mj mk gp ml mm mn mo mp mq mr ms mt mu mv mw mx my mz na fh bj" data-selectable-paragraph="">As more people become aware of the supply chain&rsquo;s critically important role in any functioning society, they will also make the connection with the critical role supply chains play in a sustainable future. We are confident that this growing awareness will continue to be reflected in the increasing pressure on companies to invest in supply chain sustainability.</p>
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<div role="separator"><em>This article is also published on the <a href="https://medium.com/mitsupplychain/this-is-not-the-time-to-downgrade-supply-chain-sustainability-e731f1f515ce" target="_blank" rel="noopener">authors' blog</a>. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.</em></div>

Ken Cottrill

Ken Cottrill

Traceability tech lights up smallholders in food supply chains

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