Sustainability is a major preoccupation of commodity trading companies. In an industry built around truthworthy and long-lasting business relationships, sustainable development is much more than a concept. Rather, it stands for what is put into practice every day on the ground.
As is to be expected for a industry as diverse as the global commodity trading industry, sector- or commodity-specific best practices have been developed.
For traders, the sustainability imperative can be driven by different factors. While in mining and extractive industries an important challenge is respect for the surrounding environment, in the case of agricultural commodities sustainability is most often associated with the sharing of improved farming or processing techniques. For high-demand products such as specialty coffee or cocao, sourcing quality implies working hand in hand with local producers and striving to establish a win-win-win situation for producers, traders and consumers alike.
A closer look at the FAO's Principles on Responsible Investment in Agriculture
The Food and Agriculture Organisation (FAO) of the United Nations, through its Committee on World Food Security (CFS), has developed and adopted in October 2014 a set of principles on Responsible Investments in Agriculture and Food Systems.
Responsible investment in agriculture and food systems is essential for enhancing food security and nutrition and supporting the progressive realisation of the right to adequate food in the context of national food security.
The principles encompass the entire range of activities involved in the production, processing, marketing, retail, consumption, and disposal of goods that originate from agriculture and aim to address the four dimensions of food security and nutrition - availability, access, stability, and utilization.
Commodity trading companies can play a very positive role as responsible investment in agriculture and food systems refers directly to the creation of productive assets and capital formation. Through their activities, commodity trading firms already engage in the type of multi-stakeholder dialogue promoted by the FAO and actively assist smallholders and farmers in adopting improved agricultural practices and access world markets, while investing in the storage and processing facilities that are needed.
Traders, fair trade enablers
Commodity trading companies play a vital role in bridging market gaps and structuring the production chain. The strong growth in demand for fair trade agricultural products in recent years meant that physical trading firms were able to work with certification bodies, improving living conditions for producers and enabling them to tap into growth markets with higher margins.
Five concrete examples of industry best practices
The Baseline Common Code is a set of principles and practices that serve to pave the way in the understanding and implementation of sustainability in coffee production and processing
Developed a set of environmental and social criteria which companies must comply with in order to produce Certified Sustainable Palm Oil (CSPO).
STSA is supportive of transparency initiatives for commodity trading and of advancing the transparency discussion. Regarding the Extractive Industries Transparency Initiative (EITI), STSA values its potential to bring transparency of payments to governments for commodity extraction activities in a country and to mitigate related risks for all actors in the commodity value chain. STSA members are already complying with EITI disclosure obligations in countries that required them, for example in Iraq.
At the initiative of STSA, a closed meeting was organized at the occasion of the EITI side-event in Bern in October 2015. During this meeting, a multi-stakeholder working group on EITI and commodity trading was launched, in which STSA and major Swiss commodity trading houses participate.
This working group has identified three main issues:
- The matter of confidentiality clauses imposed by government / SOEs or NOCs to buyers;
- The necessity to standardize the EITI reporting format between countries in order to permit the management and adaptation of information systems to that end;
- The necessity of including governments and state-owned enterprises (SOEs) / national oil companies (NOCs) in the working group, which are currently entirely absent from it.