Many of you know that converting a raw material into a consumer product involves several processes, which are performed by a variety of supply chain actors. I am fortunate enough to have worked with a wide range of such actors in many roles, such as: building sustainability programs from within a global brand (Gap Inc.), advising a vertical stevia manufacturer (PureCircle), auditing and advising initial processors (including African traders) representing global initiatives (Responsible Minerals initiative), and supporting a global merchant’s (Olam International’s) efforts to bring Better Cotton Initiative (BCI) to a new country (Mozambique). I have seen firsthand how various supply chain actors operate and what their capabilities and limitations are.
Today, I would like to look at the role that merchants play in the supply chain, and use my experiences in certain industries to focus in on how they could further help advance global efforts to address the more harmful environmental and social impacts associated with global commerce (e.g. water depletion, forced labor, child labor). In the most basic sense, merchants facilitate the export of raw materials (or commodities) from the country in which the materials were produced to processors internationally. Given the importance of the production of raw materials in their supply chain, merchants may maintain a strong presence and invest financially in the country from which they source commodities. In order to source, transport, and export the commodities, merchants also need to understand the cultural, logistical, and governmental context for each country they work with and in.
Raw materials are often produced in developing countries that pose a high risk of ethical and environmental harm to workers and nearby communities. These are the very regions and commodities in which global ethical or sustainable initiatives are being set up in an effort to address these risks through the application of commercial pressures (e.g. Better Cotton Initiative (BCI) or Responsible Minerals Initiative).
While the burden of schemes and processes to prevent such impacts are more commonly carried by other players (e.g. manufacturers, brands), merchants should exert their influence on setting new standards and amplifying the effects of commercial pressures by being more transparent about the conditions under which their material is produced—or at least by providing basic or consolidated information in order to protect proprietary information.
How would this work? Let’s look at a cotton merchant as an example. This cotton merchant should provide the name or location of the gin from which they source cotton lint bales to its buyers. If the gin is located in a region that poses a risk of harm—such as forced labor—but is not yet participating in an ethical sourcing initiative (e.g. BCI), then the merchant should conduct additional due diligence to determine that the farms that sell their cotton to the gin do not engage in forced labor. The merchant should also train their gin suppliers on how they could conduct some basic due diligence of the producers from which they buy cotton. In addition, the merchant should also implement a chain of custody system to segregate low-risk cotton from high-risk cotton as it is transported, ginned, and baled through their gin suppliers.
The case for expecting more of merchants in the minerals sector is even stronger than in cotton because they often conduct some processing of mineral-containing ore (i.e. concentrating the ore or separating multiple minerals, such as tin and tantalum). These processes often involve mixing different sources of minerals and also provide merchants with an opportunity to add (or even hide) minerals that were produced in mines that may be associated with risks of harm or have not been assessed for risks of harm.
Merchants in mineral supply chains should be held accountable for an appropriate level of transparency and for conducting due diligence of their supply chains, including mitigating any actual or potential risks of harm in the mines from which they source (or their suppliers source). These efforts should include undergoing a third-party assessment similar to the one a smelter or refiner undergoes through the Responsible Minerals Initiative.
While several merchants are already engaged in global ethical or sustainable initiatives, I believe many merchants should contribute more meaningfully to improve ethical and environmental conditions under which raw materials are produced. More specifically, I feel they should do more to assess the presence or likelihood of human rights or environmental abuses, contribute to—or lead – efforts to build capacity of commodity producers (e.g. farmers, miners) to improve yields, implement protections from harm, and provide chain of custody assurances as product travels from origin to export. I also feel that merchants should engage the producing country’s government, with whom many have relationships, to play a bigger leadership role in addressing abuses or harm in their countries. Finally, I would be remiss not to mention that many merchants, in general, have more financial resources than producers, processors or other supply chain actors (with the exception of global brands).
Merchants have “boots on the ground,” sector and local context knowledge, position in the supply chain, and resources that are currently undervalued or underutilized. In all honesty, I feel that without more robust engagement and direct support from merchants, our goal to have fully responsible supply chains with minimal environmental and ethical impacts may never be realized.
Today, I would like to look at the role that merchants play in the supply chain, and use my experiences in certain industries to focus in on how they could further help advance global efforts to address the more harmful environmental and social impacts associated with global commerce (e.g. water depletion, forced labor, child labor). In the most basic sense, merchants facilitate the export of raw materials (or commodities) from the country in which the materials were produced to processors internationally. Given the importance of the production of raw materials in their supply chain, merchants may maintain a strong presence and invest financially in the country from which they source commodities. In order to source, transport, and export the commodities, merchants also need to understand the cultural, logistical, and governmental context for each country they work with and in.
Raw materials are often produced in developing countries that pose a high risk of ethical and environmental harm to workers and nearby communities. These are the very regions and commodities in which global ethical or sustainable initiatives are being set up in an effort to address these risks through the application of commercial pressures (e.g. Better Cotton Initiative (BCI) or Responsible Minerals Initiative).
While the burden of schemes and processes to prevent such impacts are more commonly carried by other players (e.g. manufacturers, brands), merchants should exert their influence on setting new standards and amplifying the effects of commercial pressures by being more transparent about the conditions under which their material is produced—or at least by providing basic or consolidated information in order to protect proprietary information.
How would this work? Let’s look at a cotton merchant as an example. This cotton merchant should provide the name or location of the gin from which they source cotton lint bales to its buyers. If the gin is located in a region that poses a risk of harm—such as forced labor—but is not yet participating in an ethical sourcing initiative (e.g. BCI), then the merchant should conduct additional due diligence to determine that the farms that sell their cotton to the gin do not engage in forced labor. The merchant should also train their gin suppliers on how they could conduct some basic due diligence of the producers from which they buy cotton. In addition, the merchant should also implement a chain of custody system to segregate low-risk cotton from high-risk cotton as it is transported, ginned, and baled through their gin suppliers.
The case for expecting more of merchants in the minerals sector is even stronger than in cotton because they often conduct some processing of mineral-containing ore (i.e. concentrating the ore or separating multiple minerals, such as tin and tantalum). These processes often involve mixing different sources of minerals and also provide merchants with an opportunity to add (or even hide) minerals that were produced in mines that may be associated with risks of harm or have not been assessed for risks of harm.
Merchants in mineral supply chains should be held accountable for an appropriate level of transparency and for conducting due diligence of their supply chains, including mitigating any actual or potential risks of harm in the mines from which they source (or their suppliers source). These efforts should include undergoing a third-party assessment similar to the one a smelter or refiner undergoes through the Responsible Minerals Initiative.
While several merchants are already engaged in global ethical or sustainable initiatives, I believe many merchants should contribute more meaningfully to improve ethical and environmental conditions under which raw materials are produced. More specifically, I feel they should do more to assess the presence or likelihood of human rights or environmental abuses, contribute to—or lead – efforts to build capacity of commodity producers (e.g. farmers, miners) to improve yields, implement protections from harm, and provide chain of custody assurances as product travels from origin to export. I also feel that merchants should engage the producing country’s government, with whom many have relationships, to play a bigger leadership role in addressing abuses or harm in their countries. Finally, I would be remiss not to mention that many merchants, in general, have more financial resources than producers, processors or other supply chain actors (with the exception of global brands).
Merchants have “boots on the ground,” sector and local context knowledge, position in the supply chain, and resources that are currently undervalued or underutilized. In all honesty, I feel that without more robust engagement and direct support from merchants, our goal to have fully responsible supply chains with minimal environmental and ethical impacts may never be realized.
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