Video: How Do Commodity Suppliers Go Sustainable?

Social and environmental responsibilities are rarely at the top of mind when suppliers are racing to the bottom of the price curve. That’s why sustainability is hard to come by in commodity industries.  But a small giant in New Zealand is changing all that, at least when it comes to wool.

Dave Maslen is global partnership and sustainability manager at the New Zealand Merino Co. (NZM). In this video interview (after the jump), he shares the story of how Merino brings traceable, sustainably-produced wool to market by working directly with farmers and the value chain. Traditionally, farmers sell their wool in the spot commodity market. This makes for fluctuating and unpredictable prices, and significantly impacts on the sustainability of both the grower and the value chain. To change this dynamic, NZM facilitates the purchase of wool from farmers through multi-year supply contracts, targeted at sustainable pricing for growers, value chain and brands alike.

This is managed through a program called ZQ Merino.  In return, participating farmers adhere to environmental, social, wool quality and animal welfare standards on their wool production systems. Because this is transacted via direct contract, NZM is also able to confirm traceability of the wool back to the individual farm. Having contracts is of significant importance to growers, allowing them to make prudent and informed decisions regarding breeding and genetics, farm management, capital expenditure, and farm succession (i.e. passing the farm on to their younger generations).

NZM partners with high-end wool apparel brands that value sustainable wool and links them to growers. Leadership brands including Ibex, Smartwool and Icebreaker, take advantage of this sustainable model as it provides a guarantee that the wool will meet technical specifications and sustainability performance ‘standards’ year on year, providing confidence of supply, confidence of quality, and confidence in the ethics and responsible farming practices applied by contracted growers.

ZQ Merino Standards are set to confirm environmental and social responsibility, animal welfare, and fibre quality. They are audited by AsureQuality NZ  to take account of the vast and ecologically diverse farming systems from which NZM sources the Merino fibre. Key to ZQ Merino standard is the requirement for growers to provide for the five animal welfare freedoms at all times, including no mulesing, a painful procedure sometimes used to reduce the risk of parasite (fly) infestation. These aspects are audited using a government owned, independent third-party auditor to confirm grower compliance.

The approach is working.  The New Zealand Merino company was a finalist of New Zealand's International Business Awards in 2013.  Its farmer network raise healthy, happy sheep that live in some of the most stunning natural environments in the world. Commodity markets the world over can take a lesson from NZM on how to set up the right incentives to turn a price driven market into a quality and sustainability driven one.

How do Commodity Suppliers go Sustainable? from Connie Kwan on Vimeo.

Connie Kwan is a Product Manager and Entrepreneur in Silicon Valley, CA.  She holds an MBA in Sustainable Management from Presidio Graduate School, and covers stories about triple bottom line businesses and projects.    Follow her on Twitter @ConnieMKwan