Please welcome to the stage.
Ana Selena Habibi, co-founder and co-CEO of SEED Trace and Unwin Schrieber,
co-founder and CEO of KOA. For a conversation with Bloomberg's
Monica Cooper and. Great to have you with us.
And we'll get started in a second. Just a reminder to please send in your
questions. We'd love to hear from you and send in
your questions. We'll try our best to get to as many of
them as we can. So we're here to talk about supply chain
transparency. And you both have the same goal.
You want to increase transparency along supply chains.
Your company see trades and provides a platform that helps make this possible
and your company. And you use Anna's platform to increase
transparency. And let me begin with you by launching
Sea Trace. What were you trying to solve for?
Mm hmm. Yeah.
Thank you. Well, with Sea Trace, we try to rethink
traceability and transparency from a sustainability angle.
So until now, I think we've been asking ourselves when we talk about
traceability, when was the product where.
Right. That was the question we were asking.
Where does it come from? When was it where?
And I think it's time to ask what's the impact along the supply chain as well,
and ingrain that into the way we think about it.
And that's what we try to do. So we focused very much on collecting,
assessing and then also sharing relevant social and environmental data along the
supply chain. And I think transparency kind of is.
Just the backbone of any conscious decisions that we have to make for the
environment and for the people. And I think we think of transparency a
lot towards consumers. But we need transparency between
businesses. We need it along the supply chain so
that we can make conscious choice as both towards B2B partners in our
operations and as consumers. And we are trying to enable that with
our platform and the way we work. And then you work with cocoa farmers in
West Africa, which is where 80% of the world's cocoa production happens.
Why did you decide to use CE trace? Yeah, so maybe let me first explain a
little bit what we do. So we work in coconut through we have
two factories in Ghana and the second largest producer of cocoa in the world.
And if you look at the cocoa fruit itself, actually the cocoa beans, what
we saw here or see here, the commodity prices of this are actually the kernels
of fruit, which is 75% bigger. So right today, only 25% of the entire
fruit are utilized. And we have developed a process how the
cocoa pulp around this cocoa beans, which actually are kernels of a fruit,
are utilized and similar like you would use the orange juice around the orange
kernels. And that's what we turn into.
Choose, concentrate and powder and sell as be to be played into the ingredient
industry. And with this, we can reduce food waste
and we can increase the income of the smallholder farmers, which we work with
by 30% by not fighting over the cake of this expensive cake now, but making
bigger so that everybody can benefit. And why are we working with citrus is we
have this new ingredient, right? We have a fascinating ingredient that
has so much positive impact. And what we believe as an ingredient
provider, we not only have to provide a great, tasty ingredient, unfortunately,
we don't have it here because it didn't come in time, but we were trying to get
the juices, basically. So that's always the best about the
product to try it. But next to taste it has to be a great
story that consumers excite and where consumers as well want and are able to
trust the brand. And that's exactly where citrus is
offering the perfect solution. Because with citrus, we can show exactly
where the product is coming from, which impact was made, for which farmer 100%
transparent, 100% visible for the consumers through a QR code.
I think we're going to see this later in life because that's how you can
experience best. But that's why we choose to work citrus.
And citrus for us in this case is a value proposition as part of the
business, right? The one value proposition is the taste.
The other position is a great story and doing this transparent and trustworthy.
And that's where citrus offers a perfect solution.
So I think let's bring up the QR code and I think that'll help you understand
how exactly it works for you all. You know, point your phones towards
that. And meantime, while they're getting that
up and can you can you explain how this works and what they're going to see that
the payments to farmers are reflected on this app, right?
Mm hmm. Yeah, exactly.
So I think it's it's really nice that we can bring this sort of tangible example
together here to the stage. And specifically, how we tackle the
challenges here is that with citrus, we verify the direct payments that commits
to smallholder farmers, so we trace them.
If we look at the data credibility, which is a really, really big aspect for
us, of course, first of all, we can look at the traceability.
So who do we collect the information from and what moments do we collected in
the moment that it is actually paid or half a year later?
And so, of course, that's already an aspect.
The way we store it. Security is an aspect.
But the great thing in this project is that we do not only trace it and analyze
and make it transparent, but we actually verify it.
And how do we do that? Because co-op's not in cash, but with
mobile payments, and that allows us to actually verify through an API that we
have with Africa's biggest telecommunications provider, MTN, and
that the money really arrived with the right person and the claimed amount.
Now the moment the payment is made is reflected here and it's it's automatic
because it's a mobile payment. And so there's nobody entering any data
to say this payment was made on a particular date in a particular time.
So there's no room for human error or anything.
Yeah. So basically we, we have an API and of
course earpiece system. So the moment that they trigger the
payment, we receive a claim saying, hey, we have paid this amount to that person
for that. And then we say, great, we have it in
the right moment from the right source. But anyone could claim that in their own
system, Right. So then in addition, we have the layer
of verification for the payment provider.
And I think another aspect that Onion already highlighted in the beginning is
that we do that. But what we also do is give this
information and verify data to the customers of COA.
So the B2B partners, the producers, like you can see here from Source cleanly,
who actually can then use that data again for our purposes to actually
understand their own impact through the purchase that they made and also use it
if they want to in communications and enrich the information on cocoa farmers
earning more as a result of this sort of cocoa farms are earning more because we
have this this cake which we make larger, right.
So like this I think is always a perfect example, is that of fighting over the
cake of the cocoa beans. We make the cake larger and create win
win win situation through our business model.
Right. And so that's that's where the farmer
earns more definitely already on this however as well, like how can they earn
more through raises? They don't earn directly mustard seed
rice, but through us selling the product and through not only providing an
ingredient but also a value proposition that in the end consumer excites and
that the consumer motivates to buy a purchase and be trustworthy towards the
brand of the brand, towards the consumer that is then creating this extra impact.
So I think on one hand, yes, all
activities, but on the other hand, indirectly through the works he is
doing, it's enhancing brand loyalty and thus purchase decisions.
So you're solving for payments and increasing transparency around payments.
But the cocoa industry has been rocked by several scandals over the last couple
of years. Deforestation is one of them.
The use of China's labor is something that keeps coming up when we talk about
the cocoa industry. Is there a world in which sea Trace
could help increase transparency around the issues of deforestation and the use
of child labor? Yeah.
Yeah. So I think maybe the first thing that's
important to highlight is that we would never claim that we can solve it all by
ourselves, that for sure there are many things we
cannot replace, right? So for instance, people in audits on the
ground, we cannot replace that as a technical solution.
But of course what we do factors into these aspects.
So for instance, a lot of the the big cocoa companies or chocolate producers,
they have programs in place to secure living incomes, which is very closely
related to the topic of child labor, because you need to make sure that
families earn enough money so that they can live from it so that the children do
not have to go to it. So what we do with some of our customers
is that we track the KPIs to measure wherever people can live from the money
that they earn. So that obviously factors into the child
labor aspect as many others. And it's a very complex field because if
you want to calculate a living income of a person, it's not enough to know how
much they earn and put it next to a global benchmark that is maybe two or
three years old, you actually need to collect a lot of additional information
about the household, about other incomes that they have, about the costs that
they have. So that's one aspect.
And with regard to the second one that you highlighted with deforestation, of
course, because we focus on the first mile data collection and on primary data
collection and actually knowing where the products come from, collecting the
polygons of the farms. The data is part of what we do in the
first my collection, and that then allows companies to do the deforestation
risk analysis. But again, we are not the geospatial
focused company. We would partner with other
organizations that focus on the satellite imagery to make the risk
analysis. We feed them with the primary data and
then we give our customers the risk analysis.
I want to bring up Unilever now, as many of you would in this audience, would
know that Unilever, which for a very long time has been the poster child for
sustainability and ESG issues, recently announced that they're going to roll
back some of their sustainability targets.
This is not a good message for people like you.
How worried are you about how this is going to impact people and companies
that are committed to sustainability? So I think if we look at the last four
years, if I look into my entrepreneurialism
journey, I think there were a lot of headwinds coming and so, so much roller
coaster going up and down. And of course, there's a lot of worries
right now, like what do I you know, where do I prioritize my business
activities? But do we have to focus in long term on
being sustainable? I actually don't like the word
sustainable too much. I like the word responsible.
Right. And do we treat sustainability
responsibility as a separate part of the business or as core of our business?
I think that's that's the challenge. You're right.
Because what Unilever did, they really made like this.
Yeah, really step back from the whole approach.
And I can understand it to some extent because if you want to do business the
right way, it's not easy, right? It requires stamina.
You have to continue doing it. However, what is the option?
Right. So and I think one of the big problems
for for Unilever is that they treat responsibility in business as an either
or. You can be profitable or you can be
sustainable. And I think that's one of the biggest
problems and the biggest mistakes we have in management that we say, Oh, my
business has to be profitable, so I cannot do sustainability.
No, it has to be the core of the business model, right?
And that's maybe giving a few examples of my personal career, which I went
through the last 12 or 15 years, is I worked in solar energy already 14 years
ago, and back then I tried to work with the large energy producers in Germany
like RW E and E.ON and so on, right? And when I went there trying to look for
projects together, they laughed at me. They said, Coal energy is the best thing
we can have. It's so cheap, it's so affordable.
Why should I do renewable energies? Well, five years later, they were
bankrupt. But so the question is not do you do
either or or how do I integrate in my business early enough?
And that was energy, right? Energy's very prominent in terms of CO2
and sustainability, but that's in the field of all of our activities.
And I think therefore, the biggest pledge, whoever you talk to in business
is not ask is it either or, but to say how can we make it end and how can we
bring sustainability in the core of the business model and to CEO, CEO
attention. Right.
And the other example now what we had at the screen was chocolate and was cocoa.
For 40 years there was an unsustainable business model for the farmer.
The farmer just didn't earn enough money.
Most of them live well below the poverty line.
And so, of course, at one point they don't continue being business anymore
because you would not run business if you're not profitable as well.
Right. And so they cut down the cocoa trees and
they made galamsey illegal gold mining in Ghana, it's called.
And all of a sudden the chocolate prices or the cocoa prices go skyrocket.
I was just last week or this week at the World Cocoa Conference in Brussels, and
there is no discussion that a lot of the players will not survive this cocoa
price hike because it's just too much. So the business model for cocoa for
chocolate is not working anymore. And so bring this back to the Unilever
case. If we maybe in the short term.
Right. If we want to just pull out profits as
much as possible, yet get rid of ESG and get rid of sustainability and don't take
it the core of your business model. But if you want to be in for longevity
of your business, if you think about returns the next 20, 30 years, there's
no question that we have to do that. Right.
And that's, I think, the the blacklist. But at the same time, I mean, still it
is it does send a message when a company like Unilever rolls back on its
sustainability targets. And I wonder, particularly for Citrix,
is it going to make harder to get funding and support?
MM Yeah, I think we were talking about this also yesterday and I think one of
the challenges that that are may be interestingly reflected in Unilever
making this choice. We also have it and that is that.
The question where the pressure for more sustainability or more socially and
environmentally conscious choices comes from is shifting, right?
Two years ago, three years ago, we were talking a lot about the consumer
pressure. So if you don't build that transparency,
if you don't, you know, communicate, be to see about your sustainability
ambitions, then you're going to lose market share.
And now I think the conversation is turning more and more towards
regulations from the EU. What is happening there?
So I can also imagine that I'm just speculating here, but that the choices
that were made is also because of that, maybe because of the Green Claim
directive, because now the claims that you make towards consumers have to be
evidence backed. And if they are not, and if you're
making false claims, you have higher fines that you might be facing and high
reputational risk higher than it was before.
And I think something we're seeing that is shifting is we always see this when
when we actually start products with companies, we have different departments
going against each other. But again, like sustainability doesn't
necessarily like marketing because marketing has been claiming things for
many years that aren't really true. But now nobody invests because, well, it
worked. And I think this is something we're
seeing. And honestly, for CE Trace, it also
means that we need to prove that we are flexible and dynamic enough to make sure
that we don't lose our vision and our strategy in building these long term
strategies. Because without transparency in the
supply chain, we always say it's a little bit like sailing without a
compass because you have new regulations coming in, new check boxes that you have
to check. But if you don't have a long term
strategy, that's going to cost you a lot of resources over and over again.
Well, I'm ready to do that as well. And I'm so glad that we have gotten
questions in from the audience. Let's get to some of them.
Meg. How do you ensure that companies adhere
to your guidelines and tenses? Mm hmm.
Yeah, I guess that's towards me. Yeah.
So, of course, the way that we work on data credibility, assuring that it's
true is is a complex framework. Some of the things we can check them and
verify them as we do with the payments for court, because there is an
independent third party that we can involve and integrate.
But that's not always the case. So that's why we have an impact
framework. We also integrate certification audits,
different social and environmental claims that are clustered there
alongside the SDGs, where we can request different documentation or a thumbs up
of a relevant third party. So as I said before, we do not try to
replace people on the ground or audits. And sometimes we talk about confirmed
claims. That would be whenever it's back through
documentation, confirmations from the relevant parties or verified when there
is an independent third party. So I think transparency for us is also
important in being open about that framework and making sure everyone who
uses it understands their criteria. I think we have time for one more.
Have you tried partnering with Fair Trade?
Is there overlap? Again for me.
Yeah. I mean, that's a bigger subject of sort
of facilitating the certifications as well, because the way that they
currently work is companies usually maybe once per year fill out some Excel
sheets and maybe even some PDFs. But all of this data is sort of only
used for the certification and not used by the subsequent actors in the supply
chain or to actually understand the impact on the day to day.
So what we do is that if an organization is Fairtrade certified, of course a lot
of data is already there that we can use and that we use through upload functions
and assessment and we try to put it into the day to day, but we don't directly
collaborate with fair trade. I think we we can squeeze in just one
more. There's a great question about cocoa
prices should be and we have a chocolate shows that and I think if Onion could
get to that, I do have that.
Yeah. Yeah, absolutely.
And you kind of touched on it a little bit, but the question was how with the
price of cocoa being so high, how why are the farmers incomes still so low?
So how do you address the the pricing, the the income for farmers?
Yes, I think it's a very complex topic, let's say that way.
And I try to put it quite easy. Right.
It's simply bargaining power. You have an average size of a cocoa
farmer we work with in West Africa, where most cocoa is coming from is two
and a half hectares, but and they live well below the poverty line, so they
cannot hold back their commodity or something, right?
So like they are just on the mercy of whoever's buying.
And so you have four and a half million of the small to farmers above this.
You have two governments that are involved as well in the sector and
regulation that should do something for the farmers, which they partially as
well do, but as well they have other challenges in developing countries.
And then you have got three traders, three of the bigger traders and around
ten processors in the end that make 95% of the global market.
Right. And if you then ask the markets
or the players, so why do you not just increase the income for the farmers?
They say, yeah, the market doesn't allow it.
Well, the market is 15 people. You can put them around the table, let
them talk with each other, and I'm sure they find a sensible solution.
But I think the pure answer for it is just simply disparity between the world
market price and the price that the farmer eats at the farm gate, which is
now a spread of I think the farm gate price per tonne is around 2009 thousand
tonnes earned in between and $9,000 per ton is earned in between.
And so yes, sure, it's poor ESG of the players in between.
Thank you so much for your questions. And and thank you for being with us
today. And I just want to remind you all that
equality is a key pillar of the Bloomberg newsroom.
So please go to Bloomberg.com slash equality and you can check out some more
of our stories around issues like supply chain transparency.
Thank you very much. Thank you.
Thank you.
