Direct Trade and the Sustainable Future of Hemp
Here at X-Tract Vermont, we envision a future for the hemp and cannabis industry that is ethical and sustainable. We fully believe that the Direct Trade model is a unique and underappreciated sourcing model that could provide a framework for the future we imagine.
We believe that education is a crucial component of our industry, so we’ve put together this piece to discuss what exactly Direct Trade is, and how it can benefit both hemp growers and processors.
What is Direct-Trade?
As defined on the direct-trade.org website, “Direct Trade refers to a stronger value chain with less intermediaries. Direct Trade connects suppliers (farmers) with buyers (manufacturing companies), without any intermediaries, in a way that they become dependent on each other´s success, ethics, and professionalism. Direct Trade is more than Fair Trade as it does not depend on grants or fines, but rather on really sharing the value created by the products sold by the company”
Direct Trade is a business model that allows for farmers and growers of all sorts to engage in a mutually beneficial relationship with their buyers that focuses on decreasing the number of middle-men involved in the process.
As the name suggests, these relationships are direct and traditionally involve site visits both by the buyer/processor and the farmer/grower to each other’s facility or farm when possible.
These visits allow for transparency between both parties, as well as providing an opportunity for discussion of how to support and further the relationship between the two.
Direct Trade vs Fair Trade
Unlike Fair Trade, Direct Trade is NOT a certification program and does not have fines, fees, or dues related to participation. Whereas Fair Trade is a highly-regulated program, Direct Trade is a business model for sourcing goods that has no external regulations.
A study comparing 315 Nicaraguan coffee farmers examining how various standards compare in terms of impact on farmers found that while Fair Trade has a significant impact on the development of coffee farms infrastructure, Direct Trade has a higher impact on increased wages and overall quality of life.1Ruerd Ruben Guillermo Zuniga, (2011),”How standards compete: comparative impact of coffee certification schemes in northern Nicaragua”, Supply Chain Management: An International Journal, Vol. 16 Iss 2 pp. 98 – 109Permanent link to this document:http://dx.doi.org/10.1108/13598541111115356
However, Fair Trade and Direct Trade are not necessarily competing with each other in terms of creating positive outcomes for farmers and growers of all sorts. When comparing the two, you’ll find that there is significant overlap in the goals that they are trying to achieve.
How has Direct Trade evolved?
Much like Fair Trade, the roots of Direct Trade are in the coffee industry. Direct Trade came into popularity as a method for sourcing coffee beans for specialty grade coffee of high quality. Positive outcomes of Direct Trade coffee led to the adoption of the model by the chocolate industry.
Direct Trade in the chocolate industry has been adopted by a wide range of small to medium-sized chocolate businesses and chocolatiers who strive to develop truly sustainable and ethical sourcing of their cacao.
It’s become clear through the coffee and chocolate industries that Direct Trade is an effective way to sustainably source goods from farmers and growers that are traditionally underpaid for their goods, and exploited by the traditional supply chain.
However, there have been criticisms raised over the Direct Trade model in the past that need to be considered
Criticism and contention
One main point of contention when it comes to discussing Direct Trade is if a company can be considered to be engaging in Direct Trade if they use any intermediary services. It’s a tricky question and often depends on many variables that vary between circumstances.
It’s important to remember that not all farmers or growers can afford the necessary documentation and resources to be able to handle exportation on their own, in which case they may have a preferred exporter that they work with.
The point of Direct Trade is to have a relationship that is accessible and beneficial to both parties, and in some circumstances, that may mean including an approved or preferred intermediary service.
A leading criticism of Direct Trade is the fact that it is a trust-based system with no external regulatory bodies, which could allow for companies to claim they are participating in Direct Trade practices when they aren’t.
While this is a fair concern, there is the opportunity for exploitation or misrepresentation among any sourcing system, and the potential for bad actors should not be a condemnation of an entire system.
Why use Direct Trade in the hemp industry?
The Direct Trade model has the potential to become the future of sustainable hemp agriculture practices. By participating in Direct Trade, processors can not only guarantee that they are working with a high-quality product -– growers can rest assured that they are going to be paid a premium price for their yield.
The transparency that is inherent to the Direct Trade model can also be leveraged by investing in technology such as blockchain, which can be further established to provide extreme traceability.
A major benefit to Direct Trade relationships that can benefit the hemp and cannabis industries is that the emphasis on transparency allows for assurance of ethical treatment of all stakeholders. By attending farm visits, processors are able to ensure that those working on the farm are being treated fairly, respectfully, and being compensated appropriately for the work.
Another reason to consider the Direct Trade model for sourcing is that it helps to foster a sense of community between growers and processors. Establishing long-term relationships allows for the continuation of the cannabis industry because growers can be sure that they will have someone to process their yield, which can help to avoid a bottleneck in the supply chain.
Do you have questions about working with us to process your hemp biomass into high-quality CBD oil? Reach out via our contact form and a member of our team will get back to you as soon as possible.