How collaboration and strategy drive progress in commodity supply chains

Rethinking long-term contracts in procurement

• Aligning business and farmer needs: Many groups highlighted the importance of creating “just win-win” models, ensuring mutual benefits for farmers and companies. Long-term contracts provide stability for farmers, enabling long-term planning and investment in sustainable practices, while also reducing risks for companies.
• Cultural and operational shifts: Procurement teams often prioritise immediate cost savings, making it challenging to integrate climate risk considerations. Speakers emphasised bridging the gap by translating sustainability benefits into operational advantages, such as lower costs through bulk purchasing and logistical efficiencies.
•  Breaking down silos: A recurring theme was the need for closer collaboration between sustainability and procurement teams. Integration of climate and sourcing metrics into procurement decision-making can help align goals and incentivise long-term thinking.
•  Flexibility and strategic partnerships: While some companies already maintain strategic relationships with key suppliers, scaling this approach requires engagement with more transactional suppliers. These suppliers may need capacity-building support to transition to strategic partnerships.
• Challenges in forecasting: Groups discussed the complexity of incorporating climate sensitivity and market demand forecasting into long-term procurement strategies. Participants noted that direct contracts can reduce costs by cutting out intermediaries, but flexibility remains essential given the unpredictability of demand.

Designing effective incentive structures

• Short-term versus long-term incentives: While long-term incentives are important, participants emphasised the need for short-term rewards to build trust and drive immediate action. For farmers, land ownership emerged as a critical incentive before introducing broader sustainability goals.
• Tailored communication: Different stakeholders require different messages. For example, farmers may prioritise tangible benefits like stable prices, while C-suite executives focus on risk mitigation and compliance with voluntary and regulatory targets.
• Peer-to-peer learning: Practical, local advice often resonates more than top-down directives from companies. Encouraging peer-to-peer learning among farmers was seen as a powerful way to promote sustainable practices.
• Cross-functional collaboration: Developing cross-functional taskforces that include buyers, R&D, marketing and finance can embed sustainability across business functions. Participants also stressed the need for KPIs aligned with sustainability goals.
• Supporting first movers: Incentivising early adopters can create momentum. Positive reinforcement — “carrots” rather than “sticks” — was cited as more effective in fostering long-term change.

Using compliance and data for collaborative advantage

• Farmer ownership of data: Empowering farmers to own and manage their data emerged as a critical theme. Simplifying data collection systems and ensuring that farmers remain in the driver’s seat reduces administrative burdens while building trust.
• Building trust through systems and technology: Several groups pointed to the importance of reliable, centralised systems for data collection. Examples such as Brazil’s GTA (Animal Transit Guide) system and innovations in Côte d’Ivoire showcased how streamlined national systems can save time and resources.
• Collaboration on compliance: The delay of the European Union Deforestation Regulation was seen as an opportunity for companies to invest in supply chain transparency. Successful collaborations, such as in Vietnam, demonstrate how businesses and local stakeholders can align efforts for compliance and impact.
• Democratising verification: Transparency and trust are critical for effective data use. Empowering local communities to verify and manage their own data can democratise the process and strengthen relationships between companies and suppliers.
• Reducing burden on farmers: Participants emphasised the need to balance compliance requirements with minimising the burden on farmers. Simpler, more efficient systems, alongside trusted third-party verification, can help achieve this goal.

Looking ahead