New Dawn Traders began in 2012, with the opportunity to sail aboard the Irene of Bridgewater to transport olive oil from Portugal to Brazil. Despite this being a failed mission, this voyage opened the door to future success.

With the cost of living rising, and supermarkets dominating supply chains with “cheap” options, it’s easy to think the idea of transporting coffee and produce by sail cargo is an unrealistic one. However, over the past 12 years, consumer demands have shifted dramatically, and many businesses now place sustainability at the heart of their operations.

Creating a more sustainable and ethical supply chain is proving its worth against all odds. The Vermont Sail Freight Project, the Sail Transport Network in the United States, the Greenheart Project in Fiji, TOWT in France, Holland’s Fairtransport, and B9 Shipping are just a few of the pioneering initiatives in sail cargo.

The focus is on British, Irish, and Dutch shores, where independent coffee roasters such as Farm Hand Coffee, based in Dublin, and Yallah Coffee, based in Cornwall, have teamed up with sailors to connect communities on both sides of the Atlantic.

It’s not every morning — or even throughout the day — that we think about the impact of our cup of coffee. But in my opinion, it would be quite mind-blowing to open my coffee jar every day and know that it had travelled thousands of nautical miles to reach me.

When spending company funds with large multinational corporations, local communities and farmers certainly miss out on the economic benefits.

As a final consumer, or as a business, it’s impossible not to feel much more connected to the process and the people behind the product when coffee, tea, or any other commodity is shipped by sail. After all, our coffee only reaches us thanks to a crew going with the wind.

• Inês Coutinho, digital editor, Tea & Coffee Trade Journal.
  Keep in touch via email: ines@bellpublishing.com Twitter: @TCTradeJournal or LinkedIn: Tea & Coffee Trade Journal

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4C, the sustainability certification scheme for the coffee sector, introduces its new Regulation for 4C certified EUDR Coffee in response to the obligations faced by importing and exporting operators under the EUDR which will be fully implemented by 30 December 2024. The obligations entail the establishment of a robust due diligence system, providing information on encompassing product details and traceability, geolocation specifications, deforestation-free production practices, legality of production, and comprehensive risk assessments.

What sets 4C apart is its strategic collaboration with Global Risk Assessment Services (GRAS), seamlessly integrating state-of-the-art risk assessment procedures such as high-resolution satellite image interpretation for forest and deforestation monitoring, complemented by an extensive data set covering national legislation, human rights, claims by indigenous peoples, corruption indices, and information on law enforcement. This unique approach, combined with the already incorporated traceability platform, allows every coffee batch to be traced back to its origin with all relevant data. 4C provides the necessary information, risk assessment, and risk mitigation crucial for the Due Diligence Statement required by the EUDR.

4C certification focuses on good agricultural and management practices, including requirements on economic, social and environmental conditions for coffee production and processing in order to establish credible sustainable and transparent supply chains.

The documents for 4C certified EUDR Coffee are now available on the 4C website. They comprise the Regulation for 4C certified EUDR Coffee v.1.0 and the Self-Assessment and Self-Declaration templates which provide a tool for 4C certified groups of farmers to assess their risks with regard to relevant national and international laws and declare their conformity, as well as the Guidelines for Geodata collection v.1.0. The 4C system will be monitored and revised according to any further guidance and requirements to be provided by the authorities of the European Union.

The application of 4C certified EUDR Coffee is available for all 4C Units in 2024 before being integrated into the revision of the 4C System in 2025. Thus, from 1 January 2025 all 4C certified coffee will be required to comply with these additional EUDR criteria. In February 2024, 4C will conduct a series of introductory webinars to facilitate the understanding of the new Regulation for 4C certified EUDR Coffee for all 4C System users. The dates will be announced shortly.

By choosing 4C, companies can be confident that their supply chains meet the highest standards of compliance, laying the foundation for sustainable, trustworthy, and fair coffee and cocoa sourcing.

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The global coffee supply chain is teeming with latent economic opportunities – hidden within the intricacies of market access, quality improvement, pricing dynamics, enhanced traceability, and logistical coherence. Standing prominently against this backdrop emerges the direct trade model, holding the promise of redefining how green coffee buyers and sellers interact.

While the direct trade model paints a picture of a stronger value chain – one where producers and buyers connect directly, fostering transparency, traceability, and quality – the reality often diverges from the ideal. Beneath its vast potential lies a labyrinth of challenges that render the value chain as intricate mazes fraught with complexities, fragmentations, and inefficiencies ultimately curtailing participation in international trade. Though the broad expanse of international trade beckons many, less than one percent of eligible green coffee buyers source directly from origin. This low percentage underscores a poignant truth: the allure of direct trade, while strong, is often overshadowed by the perceived risks, dissuading many smaller businesses from embarking on the direct-to-origin journey.

The lure of direct trade sourcing

Direct trade arose as an answer to the conventionally fragmented coffee supply chain, long criticised for its opacity and lack of traceability. In the traditional model, coffee producers often have less negotiation power, less profit, and find it more difficult to engage with quality control or sustainable production systems.

Why is direct trade gaining traction? Several compelling reasons drive this shift:

• Enhanced Quality Control: Direct trade encourages a closer relationship with producers, enabling buyers to have more control over the quality of coffees contracted.
• Increased Economic Margins: By cutting out superfluous intermediaries, producers often receive a better price for their products, leading to a more equitable distribution of profits.
• Transparent Traceability: Knowing exactly where the coffee comes from allows buyers to guarantee the authenticity and sustainability of their products to consumers.
• Strengthened Relationships: Direct trade fosters long-term relationships between producers and buyers, leading to predictable forecasting and sales.
• Narrative and Branding: Being able to share a direct, authentic narrative about where the coffee originates can significantly enhance a brand’s appeal in today’s consumer market.

The multifaceted world of risks

As the direct trade model gains popularity, it’s paramount to recognise that this amplifies the exposure of smaller businesses, on both sides of the supply chain, to an array of risks. The gravity of these challenges underscores the necessity for an all-encompassing risk mitigation strategy, especially for those eager to establish direct trade channels with suppliers at origin.

Sourcing from origin necessitates a clear understanding of the associated risks:

• Seller Credibility: Initiating business relationships with sellers at origin means dealing with potentially unfamiliar entities. While many sellers are honest and genuine, there is always a risk of encountering unscrupulous players, leading to potential financial and reputational damages.
• Trade Inexperience: Without a deep understanding of international trade dynamics, companies can easily make blunders. This is not merely about paperwork — it is also about understanding international business etiquette, negotiation nuances, and trade regulations, all of which can significantly impact trade outcomes.
• Regulatory Labyrinths: Every country has its unique set of rules and regulations for exports and imports. Navigating these constantly changing terrains requires a firm grasp and timely updates, or businesses risk incurring penalties or facing shipment delays.
• Logistical Lags: The journey from origin can be a long one. Between milling, storage, and multiple transportation stages, there’s ample scope for delays. A hiccup at one stage can cause cascading delays down the line, jeopardising quality and significantly increasing logistics costs.
• Quality Perils: Coffee, being a perishable product, has a critical vulnerability window. From improper storage causing mold to contamination during transit, quality control requires vigilant oversight at every step.
• Pricing Swings: The global coffee market is susceptible to fluctuations due to weather patterns, political instability, or economic shifts. These swings can affect both buying and selling prices, demanding proactive financial strategies.
• Communication Barriers: Differences in language, cultural nuances, and time zones can create a breeding ground for miscommunications. Clear, consistent communication is pivotal to keep all stakeholders aligned.
• Tracking Troubles: In a world where consumers demand transparency, a lapse in traceability can have repercussions. Ensuring clear tracking from origin to final delivery is not just a logistical need but also important in preventing product loss or swaps.
• Securing Payments: As businesses venture into new territories, they face varied banking systems and payment norms. Guaranteeing secure, timely payments is a task that demands diligence and adaptability.

The risk mitigation toolkit

In conventional trade frameworks, intermediaries often shoulder many of the inherent risks. However, small buyers aiming to source directly from the origin step into a realm where they must confront and navigate a diverse spectrum of challenges and uncertainties themselves.

Addressing these challenges head-on with a strategic toolkit is paramount:

• Sourcing Diversification: Spreading sourcing across multiple suppliers can safeguard against unforeseen disruptions. Sourcing through a variety of channels, such as direct trade and spot coffees, can mitigate dependency risks.
• Vigilant Vetting: It is not just about finding a supplier; it is about partnering with the right one. Rigorous identity assessment, such as trade license verification, and previous trade references can offer insights into a seller’s reliability.
• Pricing Transparency: Pricing terms, such as Free on Board (FOB), influences associated risks and costs of the coffee contract. Trade organisations such as the International Coffee Organization (ICO) outline glossaries of trade definitions. Clear and open communications during pricing negotiations can prevent future disputes and foster trust.
• Quality Contingencies: Contracts can be drafted with clauses that clearly outline quality expectations and the recourse available should these not be met. This not only safeguards the buyer but also sets clear expectations for the seller. Organisations like ICO have contract templates that can be used as guidelines when drafting this agreement with the seller.
• Quality Oversight: Regular inspections, sample testing, and third-party quality assessments can ensure that the product maintains the desired standard throughout its journey from origin. Contracting Pre-Shipment Samples (PSS) before the coffee is exported can offer additional protection against quality discrepancies.
• Smart Sourcing: Instead of placing large, infrequent orders, consider ordering smaller quantities more frequently. This offers an opportunity to develop a relationship with the supplier over time and reduces stock holding risks.
• Optimised Logistics: Instead of shipping sea freight, consider air freight which accommodates smaller volumes and can safeguard against quality degradation through its fast delivery timeline.
• Hedging Risk: Hedging and trade insurance policies can offer protection against unforeseen events and financial loss, be it shipment loss, quality degradation, or payment defaults.

Forging ahead: collaborative commerce

Direct sourcing from origin is often a voyage into uncharted territories — the horizon is full of potential, but without the right tools and strategies, it is easy to get lost in the vast seas of international trade complexities. One must tread with a blend of caution and strategy. While establishing direct ties with suppliers creates a more transparent supply chain, it also demands a profound understanding of logistics and regulatory landscapes. In such scenarios, enlisting expertise can be the guiding star.

Seeking collaboration with trusted trade partners transforms the journey. It turns the solitary expedition into a collaborative odyssey, distributing the challenges and risks of global commerce. In this digital age, customised technology platforms tailored for international coffee trade stand out as unique powerful allies. These platforms, equipped with features like predefined trade document templates, quality controls, and shipment tracking, revolutionise the way we manage trade risks. Technology isn’t just a tool; it’s a strategy enabler.

As we reflect upon the vast landscape of the coffee trade, it is clear that the world stands on the brink of a transformative shift. The direct trade model, with all its promises and challenges, represents not just a business strategy, but a holistic approach to reshaping the way we view commerce: prioritising transparency and equity. The road ahead is not without its obstacles, but with collective commitment and the fusion of traditional methods with innovative technologies, we can usher in an era where direct sourcing can become the gold standard.

In our shared pursuit of unlocking the immense possibilities within the coffee sector, let us remember to sow the seeds of collaboration and innovation, fostering global connections and ensuring a brighter future for the world of coffee.

• Brianna Dickey is the founder and CEO of CropConex, a software platform designed to unlock economic opportunity across our global agricultural supply chains. Starting in Ethiopia, the New York-based startup seeks to increase efficiency and liquidity in agricultural trade. The platform integrates the value chain in one convenient location, connecting green coffee buyers, producers, and logistics service providers with digital tools to increase efficiency, traceability, and profitability. Prior to CropConex, Dickey has worked on supply chain enablement and optimisation programs across Colombia, Ethiopia, Honduras, Tanzania, Costa Rica, and Panama. She may be reached at: hello@cropconex.com.

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