In the world of agricultural commodities, there’s a lot of focus on traceability at the moment. Demand-side requirements, both voluntary and regulatory, are driving an industry-wide pre-occupation with traceability to source. The EU Deforestation Regulation (EUDR) will require traceability to farm as part of the due diligence assessment for major commodities including soy, coffee, cocoa, beef, leather and palm oil. Traceability risks becoming an end in itself, rather than something that takes us to delivering the impact on the ground and sectoral transformation that we need to see.
So why do we need traceability? In our work we want to identify the origin of an agricultural product in order to understand how it was produced. Downstream consumers want to know about production conditions – deforestation, child labour and land rights are typically in question. Increasingly we see traceability linked to the climate agenda and claims; if you want to account for your Scope 3 emissions – the carbon emitted in your production process - you need to know what’s happening in your supply chain. So, traceability matters.
However, if you want to act, to change conditions of production – avoid deforestation, eliminate child labour, ensure land rights are respected – traceability is only useful to the level where you can take action. Beyond that, it easily becomes a distraction and something that can use of a lot of time and money that could be spent addressing issues at the local level. And that often means interventions beyond a single supply chain.
Where is the right level? We believe companies – and regulators – should be taking a risk-based approach to encourage investment at the appropriate level of action.
For example, if you’re trying to avoid beef from recently deforested land entering the supply chain, and you’re sourcing from a region with no cattle-related deforestation (or no forest), such as Uruguay or Scotland, complete traceability is not critical. Even if you identify the origin as an area with deforestation, driven not only by the commodity you buy, but also other factors like land speculation, subsistence farming or mining, full traceability and action at the individual farm or plantation level alone won’t prevent deforestation. That needs to be addressed at the landscape level, through community and farmer engagement, government action, education, incentives and legal enforcement.
In sugar production, we see companies seeking full traceability beyond the mills to eliminate forced labour from their supply chains. But if forced labour is systemic across a region, no supply chain is guaranteed to have excluded it. Mills change suppliers, or purchase on the spot market from untraced farms. A systemic issue needs a systemic response at a level that actually addresses the problem.
And that useful and feasible level of traceability varies by commodity, region and supply chain dynamics.
For palm oil, traceability to the mill provides an opportunity to address several issues: the mill itself, and how it relates to and supports its independent or scheme producers. The mill can be the most appropriate level to engage producers and take action on several sustainability issues. Working with independent smallholder producers who are not linked to a mill can be more difficult. Knowing the individual farmers’ plot is less important for achieving change than tracing to the village, because to effect real change you need to work with the community, association or leadership.
Traceability should be seen as a means to an end. It’s an important building block and helpful to enable companies to engage at a level that supports real change to production practices. Once it becomes an end in itself, pursued mainly for legal compliance purposes, it risks simply excluding non-compliant producers instead of promoting changes in practice.
Real sectoral transformation demands a change in mindset (and perhaps in regulation too) that promotes supply chain responsibility for being part of the solution, employing traceability to a level that enables action at the appropriate scale.
Proforest Insights are drawn from our 25 years of practical experience in responsible sourcing and production of agricultural and forest commodities. This Insight is part of a series by Proforest’s senior leadership. The full series is available here.