Sustainability within global trade

Global Trade

It is often argued that global trade is not compatible with sustainable development, but Robin Cave, CEO, Czarnikow believes they can and must align.

We have seen the need for this in recent months as the pandemic has shown us the vulnerability of many systems we rely on. Therefore, it is of upmost importance that green recovery is built into all business practices, and for us this means ensuring our trade activity is integrated with sustainability.

It was from this premise that our sustainability programme, VIVE, was born. Created with our partner Intellync in 2015, it focuses on using data to provide full traceability on global supply chains, welcoming participants at any stage of the supply chain, and encouraging continual sustainable improvement over time rather than a pass/fail binary system.

This week the world’s first fully sustainable, end to end sugar supply chain has been completed through a trade partnership with participants in The VIVE Programme. This is a significant milestone in the history of Czarnikow and commodities trading, as it is the first time that every step of a supply chain has been verified as sustainable.

The development of the programme was driven by a changing market. When our multinational clients asked us to help them source sustainable products for use in the food and beverage industry, we realised there was an opportunity not only to do successful business, but to do it while making an environmental and social impact.

As a supply chain service with over 150 years of experience, we used our strong relationships with clients to interrogate the sustainable requirements for each stage of a supply chain. We realised that to make lasting change we had to do more than simply focus on sustainable agriculture, as had been done before: there was a responsibility to ensure that every stage of the supply chain, from production, logistics, processing, financing and end use, integrates green recovery.

The recent trade, made through a collaboration between VIVE Programme participants, puts this theory into action. 50,000 tonnes of sugar was sourced by Czarnikow from Santa Terezinha in Brazil, shipped by The China Navigation Company, financed by OCBC Bank with a sustainability linked trade facility, processed by Central Sugars Refinery in Malaysia and purchased for manufacture by Fraser & Neave. As VIVE participants, all partners have undergone third party verification to ensure their processes are sustainable. Through their involvement in the programme, we can trace the complex chain with confidence and provide sustainable reporting to end buyers.

This model builds supply chain resilience, drives financial reward and improves sustainability in two key ways:

Firstly, multinational buyers drive demand for sustainable products by committing to enhance traceability and sustainability in their supply chains. Current information about the impact of climate change on the environment has pressured many global brands to make pledges to uphold responsibility when it comes to sustainable sourcing, and we see this increase year on year. They are looked upon with increasing scrutiny by both consumers and investors in a world that can now see the detrimental impact that non-sustainable practices have had for the past half century. Consequently, they are urgently looking to source sustainable products and gain transparency on their supply chains.

Secondly, as demand for sustainable product increases, we see it move ‘upstream’ along the supply chain, stimulating sustainable improvement by supply chain participants at the farm and factory level who are concerned with production. As these participants become more integrated with global trade, and by extension the global economy, they become answerable to the environmental requirements of leading buyers. This drives them to make sustainable change in their processes, which drives commercial advantage by enabling them to access higher sale volumes and environmental advantage as their communities and economies benefit from cleaner surroundings, fairer working practices and a growing economy.

It is clear then that our focus on commercial advantage is of paramount importance. As we see sustainability becoming a priority for consumers, financers, and governments, we must be able to ‘sustain’ the needed development with commercial leverage. Income is one of the greatest barriers to sustainable development, and it is with projects such as this trade that we can deliver financial incentives to those who may not be able to commit to sustainable change without support.

Green finance is already driving market influence. In recent weeks we have seen large investors remove funding from companies engaged in harmful activity involving fossil fuels, deforestation and mining.

By integrating sustainability with global trade we were able, as part of our first fully sustainable trade, to secure funding for sugar costing almost USD$16 million. This reward is simply one example of the sustainable development financial incentives that will become standard as we move into more uncertain times for our planet. We will see the sustainable and commercial advantage of making change now outweigh the cost of moving to embrace new processes, technologies and business models in times to come. We must prepare for a green recovery and that, like our recent trade, requires the collaboration of all sectors involved in global trade.