Why companies need to 'decommodify' to improve supply chain ethics

7 February 2023

Companies need to decommodify and move to a system of “radical transparency” to improve ESG impacts, according to the head of impact at ethical chocolatier Tony’s Chocolonely.

Pascal Baltussen, chief of impact and operations at Tony’s Chocolonely, told the CIPS Procurement Futures conference he saw no reason the company’s ethical sourcing model – under which cocoa farmers are paid more and supported not to use child labour – could not be applied to other industries.

He said the only true way to improve supply chain ethics was to decommodify, by no longer buying inputs in commodity markets and having direct involvement in how they're produced.

He said: “Our model is basic – it's only difficult because it's expensive, but it’s not rocket science. I do think there’s an absolute transferability between what we do and what you can do in other categories.”

Baltussen explained Tony’s Chocolonely’s ethical sourcing model was based on five principles: traceable cocoa beans, higher prices, upskilled farmers, improved quality and productivity, and taking a long-term view.

This has helped them achieve a rate of just 3.9% child labour in their supply chain, compared to the industry average of 46%.

Baltussen said: “If you really want to make an impact in sustainability, and you want to build sustainable commodities, you need to stop using commodities. You need to de-commodify the business, because if you keep buying things on terminal markets, if you keep buying things from traders without knowing where they come from, you’re going to be in the shit. You’re going to have to stop using commodities, and move to an integrated supply chain.

“Maybe not forever, but for the next 15 years if you want to stop using all the things we see on human rights, deforestation and financial discrepancies listed in our supply chains, you’re going to need to stop using commodities as an excuse. 

“Commodities are not built for sustainable transformation. We need to stop focusing on price, together, and stop using the commodity market, which is fraught with speculators, and hedge funds, and pension funds that artificially drive up the price of commodities anyway.”

Baltussen explained Tony’s was not hiding labour abuses, but rather exposing them through what he called “absolute radical transparency”. This, he claimed, was the only way to move past the discovery phase and towards the impact phase.

He added: “Procurement is front and centre of what our company stands for… As a brand, we’re trying to do the right thing, but procurement is so important in making these changes, and our procurement practices are the core of why this business exists. I think it can be that way for many companies.”

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