Connecting the Dots: The Impact of Traceability on Commodity Markets

Introduction:

Traceability is a powerful force reshaping the world of commodity markets, forging new connections and paving the way for transformative change. In an industry often shrouded in opacity, traceability acts as a guiding light, illuminating the intricate journey of commodities from source to market.

While technology, such as blockchain, plays a pivotal role in achieving traceability, it is essential to recognize that it is not a standalone solution. True progress requires the collective engagement and buy-in of key stakeholders in the commodity market. Regulators, companies, financiers, and customers must join forces, recognizing the shared benefits of transparent and accountable trading practices.

This blog explores the far-reaching impact of traceability on commodity markets, unraveling its implications for stakeholders across the supply chain. From ensuring compliance with ESG standards to enabling greater visibility into supply chains and bolstering operational resilience, traceability acts as a catalyst for positive transformation. Join us on this insightful journey as we connect the dots and explore how traceability is reshaping commodity markets.

ESG, Certifications and Compliance

One key angle through which traceability will offer benefits is through its enabling of achieving Environmental, Social Governance (ESG), certifications, and compliance related goals.

The importance of ESG is increasing drastically in the business world, particularly in Western countries, and a good ESG standing is increasingly becoming a prerequisite for vendor selection or investment. Traceability of the supply chain is a key feeder into validation of ESG compliance and will help you to meet these requirements with speed and accuracy, leaving you more time to focus on other business activities.

Certifications are a key part of the commodities value chain, with suppliers being able to unlock more selling opportunities if they can achieve certain certifications. In effect, increased certifications can increase your overall market size and buyer base, meaning strong benefits for your business. Additionally, with Palmyra’s aim of facilitating more direct connection to the global marketplace, the traceability module aims to enhance a given business’ attractiveness in said global marketplace.

Traceability can also be simplified as “a greater awareness of what is happening at each step of the process” — and as a result, can also aid in compliance and regulatory requirements. Data that is collected and shared can be modified, and allow you to make sure you are complying with applicable (or self-imposed) requirements relevant to your business, with less administrative overhead than before. More and more regulators are beginning to mandate traceability compliance and this will impact a number of businesses. Two of the key players pushing regulation for further transparency include the Food and Drug Administration in the US and the deforestation requirements for the EU.

Resilience and Optimization

Another key value-add from the integration of traceability is improved supply chain resilience, and general business optimization. This is highly relevant for not only a commodity buyer, but also the producers and other stakeholders.

The impacts of COVID-19 and the War in Ukraine both led to immense supply chain shocks. Supply chain shocks put a firm’s competitiveness at risk. Whilst digital traceability is available, it is not implemented everywhere. Integrating these technologies enables companies to better navigate supply chain shocks in the future.

However, it also enables companies to use this additional data to redefine operational excellence due to this data. Companies with this data can make better predictions, simulate various scenarios, and overall optimize their operations, which are key in a relatively lower margin industry like commodity trading. Additionally, this greater awareness of their operations will allow identification of strategic and innovative opportunities, helping companies to continue to grow and compete in a changing world. Traceability will allow a business to out compete and remain agile.

So…does it actually help my business make more money?

Traceability and the need for greater transparency has been discussed at length in the business community for a while. But does it actually make a material difference for them? The short answer is yes, and we have some data to back this up. Leading management consultants Bain & Company in their recent Global State of Traceability survey consulted over 150 senior supply china leaders and found that majority of them consider traceability “very or extremely important.”

Further, a 2019 IBM study, found that 71 were willing to pay an added premium of 37% or more, for companies offering full transparency and traceability. Majority of the consumers also stated the importance for products and brands to provide guaranteed authenticity such as certifications.

Tangible financial opportunities available for businesses that integrate traceability solutions today. To summarise this blog, traceability provides ways to better capture ESG data, remain compliant to regulations and improve businesses ability to manage supply chain shocks and optimize business operations. In our next blog we will cover the various frameworks that exist when integrating traceability data.

Conclusion:
In conclusion, traceability is more than a buzzword in today’s commodity markets. It’s a transformative force that’s reshaping the way businesses operate, driving compliance with ESG standards, enhancing resilience in the face of supply chain shocks, and optimizing business operations. By offering a clear view of the product journey from source to market, traceability is enabling businesses to unlock new markets, enhance their global appeal, and ultimately, improve their bottom line.

As we move forward in this rapidly evolving landscape, businesses that leverage traceability as a strategic asset stand to gain a significant competitive edge. The integration of traceability solutions today presents tangible financial opportunities and paves the way for a more transparent, accountable, and resilient commodity market. Stay tuned for our next blog, where we’ll delve deeper into the various frameworks for integrating traceability data, and how they can further empower businesses in the commodity market.

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