Intel Corporation (INTC) Earnings Call Transcript & Summary

[Audio Gap] [ how visibility ] boosts resilience and ensures accountability. My name is Deborah Dull. I'm thrilled to be your moderator for today's discussion. Throughout the session, you will, of course, hear from these 3 incredible speakers with me. You'll also have a chance to answer a few poll questions, which we'll put throughout the session, which is always interesting to see who's in the virtual room together and your perspectives on a few topics. You also have the chance to ask questions any time throughout today's session. Along the bottom of your screen, you should see a Q&A button and you can submit those and we'll take those as they fit into the conversation. So let's get started. Panelists, a question to each of you. Please introduce yourself and let's get stuck in. Please share one unpopular opinion, the elephant in the room or maybe a surprising insight that you've discovered about human rights and supply chains that might challenge conventional thinking. Kate, we'll start with you, please.

Hi, everyone. My name is Kate Stritzinger. I'm the Director of Impact at Fairtrade America, which is the U.S. branch of Fairtrade International, the certification that you can find on things like Ben & Jerry's ice cream or Fyffes bananas in the U.K. I'm so excited to be here to join you today. And I would say the unpopular opinion or perspective that I want to share today is poverty is the root of the problem where we've been paying, especially in the realm that Fairtrade works in, right, coffee, bananas, cocoa, we've been paying globally prices that are unsustainable, that are below production for decades. And until we address that problem, any other band-aid on top is not going to fix the root of the issue, and it's just going to continue to exacerbate the issue. So that's my hard take. Human rights are directly connected to poverty.

Fantastic, and we'll unpack that together, of course, how much visibility matters if in the end, we actually have enough visibility to some of these underlying challenges that we'll talk about more. Catherine, welcome. Thank you for joining us. Over to you, please.

Hi, everyone. I'm Catherine Tyson with Intel, the global semiconductor manufacturer, where I lead our responsible minerals efforts as well as our broader supply chain, ESG regulatory compliance work. And I'd say, I'll lean more into the surprising insight of that, that I think surprised me when I first started, particularly in semiconductor supply chains, is that traceability, which is a very popular term now, is not always possible for -- depending on where you sit, depending on what your supply chain is. Some of that is -- there's a huge gap between aspiration and reality, and that it's more helpful sometimes -- oftentimes actually, to think in terms of supply chain transparency instead.

Well, I'm excited to look at the difference between those 2. I thank you again for joining us. Hugo?

Thanks. My name is Hugo Hays. I work for Fyffes. We're an exporter of bananas, pineapples, melons and watermelons. I'm based in Costa Rica, and I'm responsible for the responsible supply chain. And well, something we come across a lot is cultural barriers, to be honest. And most of our markets are in the EU and Europe and North America, so developed markets, and most of the production we have is in developing countries or countries that are in Latin America. And we come across this a lot is the mentality where they say, well, this is a colonial mindset, all these human rights and things that are coming our way are still coming from the old colonial masters, which is a barrier and a challenge that we have to overcome and to take it down to the human rights discussion about we're all the same. We're all in the same framework. So thanks.

Fantastic. Thank you, again, all 3 of you for joining us. I have really been looking forward to this conversation, especially since the prep call we all were able to have together. Let's get our first poll question up as we start this discussion. And that poll question is, what do you see as the biggest barrier to implementing traceability principles in your supply chain? We'll leave that up during this question, and then we will be able to see the results as we unpack the topic together. And Catherine, I'm going to start with you actually. And the question for the 3 of you, given that complete visibility is nearly impossible, like you just mentioned in complex supply chains that have lots of different nodes between planet and user, how do you prioritize where to focus first? And can you unpack the difference between transparency and visibility, which you just introduced in your introduction?

Yes, absolutely. Well, I'd say, I think a concept that maybe a number of us are going to talk about, but also I think, gets a lot of airtime is that when you're dealing with complex supply chains, inherently, you have to undertake a risk-based approach in order to even determine what you're prioritizing and what's worth drilling into. And a lot of that, I think, just speaking at really high level here is that if I'm using electronics sector as an example, looking at broadly where is your supply chain moving through, what are the broader maybe industry level or country present risks that are relevant that need -- that might be spiking in certain areas, whether that's in your Tier 1 or even in the kinds of raw materials that you're sourcing. And then using that as a good basis on which to then drill down and figure out what am I specifically exposed to, connected to and need to really dedicate my resources to addressing. And then I think to your second question on what's the difference between traceability and transparency because I think sometimes they're spoken about a bit interchangeably. Traceability very discretely is having like a supply chain node-by-node view of where everything is moving at all times from where your materials originate, whether that's a ground or it's a recycling plant to the end consumer product that's being produced. That sounds pretty doable, but it's incredibly complex, especially in our sector and in a number of others. Supply chain transparency on the other hand, is more, I think, a looser concept around let's actually encourage opening up and sharing and disclosure of information of who is in a supply chain of just even broader strokes of where things are moving. But I think most importantly, actors themselves being transparent around what are the risks they're exposed to and how they're trying to address them, whether or not they've met with perfect success at the time of disclosure.

Yes, that's great. Thank you for explaining the difference between those 2. When we think about what some call a digital thread, it's something from NIS, which is one of the standard organizations. Can I pull a digital thread and see something go all the way through a supply chain. And to do that, of course, we have to know where our supply chain goes. And sometimes we do and sometimes we don't. But Hugo, you've got an interesting case where you often do have a relationship directly with farmers. So you get to see from planet to user more or less where your supply chain goes. How do you tackle this idea of visibility? Can you really see everything that's going on? Do you have a wish list in order to help your team prioritize where they spend their time?

You're right. We have a fairly flat supply chain where it's a product that doesn't get transformed. It's a banana from when it comes off the system all the way to the consumer's table. So it does obviously have ripening, for example, but cooling, et cetera. We do have some complications where we work a lot with small holders. Fairtrade will attest to that. We were one of the first proponents of Fairtrade and bananas many years ago. And that means normally working with tiny, tiny producers or producers who have very small plots. And so it's difficult to get to see them all. You want to have a relationship with everybody and to be able to see that product. And this way, we work through cooperatives in that way. And those cooperatives bring those suppliers together. But what we're facing challenges is in when we're approving new suppliers, trying to see all the due diligence that we want to do with them because it's so many of them, it's a lot of volume of data and how to manage that. So we're looking at different technological tools to manage that. But it's -- everybody is doing bananas, everybody is fairly focused in the same way. So in that way, when we're going down to suppliers of fertilizers, agrochemicals, et cetera, then it gets quite complex because it usually leads back to producers across the world. So -- and when we're looking at deforestation, we don't -- we are not covered by the EUDR rules, for example, but our pallet producers might be or the paper that goes into our cardboard boxes would be as well. So that's another supply chain.

Right. Even a simple supply chain where we think, like you said, a banana comes out of the ground as a banana and everything else that goes into your supply chain, fertilizer supply chains are pretty complicated, for example, packaging can be a challenge. Kate, would love to hear from you. Can you take a moment and define Fairtrade for us and give the guidance that you give organizations around this idea of prioritizing around the complexity in a supply chain?

Absolutely. So Fairtrade, one word, that's the organization that I work for. There's kind of different variations. So the one that I work for has our arm in the air that you can see on lots of products worldwide. We -- how we define ourselves is really -- we are an organization co-led by producers. So producers have 50% of the voting power. And that together, we create the Fairtrade standards that everyone across the supply chain adheres to from beginning to end, and they're all audited. So we're a third-party certification system at its core. But we're also -- we also go beyond certification, provide direct support to producers. So that's what we are as an organization. But fair trade 2 words is like the idea of trading fairly or this broader movement, which is like a really beautiful and robust thing. The advice that I would give, knowing that these communities that we're working with these supplier communities, they have tremendous expertise and knowledge, and they know how to solve their own problems better than we ever could. So kind of matching the need or the risk with the opportunity that exists, like is it going through cooperatives? Is it working with the certification to make sure you're working with firms that align with your values? And then like your organizational strengths as well because there are areas that it makes sense for you to lead on and to be on the front edge of the charge. And there are probably other areas that it might make more sense for you to collaborate with other organizations that are already doing the work, knowing that every certification or every additional added layer that we put on suppliers is additional cost for them, labor for them and all of that. So kind of I would assess it in that way and use the tools that exist out there, like Fairtrade, we have risk maps, so you can go by country and region and see like what the particular human rights issues are in that area and decide whether you want to do that or not, where you want to focus. We, as an organization, don't shy away from the hard stuff, the areas that have a lot of issues. So like you can get cocoa not just from places in Latin America, but from West Africa where the human rights situation is more dire.

Very interesting, and thank you for unpacking that. I want to move to our next question, which is really about how much can we leverage across industries for best practices. And you've answered a little bit of that, but I want to stay with you for a moment because you had said that from beginning to end that standards are adopted and that's audited. In order to do an audit, of course, we need to know where to go audit, and understanding even where our supply chain flows can be a big challenge. So as we get our results from our first survey up on the screen, we'll unpack those in just a moment. But wanting, Kate, for you to explain how is it that you're able to go about these audits? And then I'll ask the other panelists a similar version of this question on how do we learn, what is transferable across industries and what isn't.

I mean so Fairtrade is a voluntary certification to get -- to have a product be certified here in the U.S. It has to have every step of the supply chain certified. So that means that like the brands themselves are putting pressure on their suppliers to get certified and vice versa along the chain. So how we're able to actually do the audits? We have a -- there's a second body that exists called FLOCERT. They're actually the ones doing the auditing piece themselves. We set the standards. They do the audits. It's basically like not checking your own homework. And that's how we're able to do every step of the chain. At the end of the day, it's still voluntary. So there's a lot of open space and a lot of opportunity for more folks to opt into our system. But they -- as part of being certified, they're agreeing to these audits. So on the producer side, that looks like a lot more detailed, a lot more site visit oriented, seeing how pesticides are being managed or used or not used, all of the paperwork of pricing and all of that. And then on the brand side, it's more paperwork, making sure that like the thing you're claiming is certified is actually certified.

Perfect. Catherine, I'll move to you now to talk about what you're able to glean from others. And before I do, I'll just highlight the results of this audience poll. So not a problem, not a barrier to traceability is lack of endorsement from senior management, which is great to see. Tied in second place is an increased cost and accuracy of data. And the cost, I often marvel when a strategy to more visibility is to use more systems upstream, but as we get upstream in our supply chain, of course, the maturity level often goes down from our suppliers, not always the case, but as we get more and more tiers back towards the planet. There's more done on paper. There's more done by smaller producers, and we want smaller producers engaged because that pushes more money into communities. But they're not going to have the most technologically advanced solutions often. So here comes our top barrier to traceability is insufficient collaboration with suppliers and partners, which is really what we're starting to unpack a little bit together. So Catherine, over to you. And again, what are you able to do? What's unique? You have a hugely complex supply chain you manage? So there's a lot unique about you, but have you been able to share any learnings or -- across different industries together?

Yes. I think it actually really -- I think this question comes really well from the results of that poll because I think just broad electronics and part -- and really, frankly, any industry that was using a handful of materials about 10 years ago or more at this point. We're the first to have some really codified requirements around upstream traceability around what you then had to do around human rights due diligence in a really concrete sense. So we were, as an industry, not only just electronics and everything that flows into that, but aerospace and automotive and retail, anybody that was sourcing conflict minerals at that time, which just as a point of reference, refers to gold, tin, tantalum and tungsten all really were faced with the same challenge at the same time of having to be able to make some kind of determination as to yes or no, I'm getting these materials from the Democratic Republic of the Congo or from one of the neighboring nations. So we really kind of came into this journey and have been able to, frankly, build a lot off of how we work across different industries that are using some of the same core materials and really approach that collectively and even getting an understanding of what the upstream looks like. And I think building upon that, ultimately identifying that a really there are thousands of mines in the world. There are thousands upon thousands of actors in between a mine and even where it gets to someone that I think is considered more midstream like Intel because of what we make. So how do we drill this down? How do all of us try and even identify what's the last point of traceability or even what's the smallest number of actors and the most meaningful use of resource to begin engaging with on not only socializing expectations around transparency, but even just then concretely going to what are the core conflicts and human rights issues that we really want to gain insight into and begin addressing in a meaningful way. So a lot of that is just because we are using the same materials. A lot of us have to adopt the same kinds of approaches, and we have luckily, a lot of industry collaboration that's been built off of that in terms of some of the reporting tools that are used across all companies that are requesting this discrete set of information, specific audits that are really tailored to that particular supply chain to not only clarify chain of custody, I think where that's really zeroed in on is the smelter and refiner, which is defined as the pinch point for those materials in particular. So that was -- and really kind of setting what are the common set of expectations that we all have because there's law and there's legal requirements in place, but also from a practice base, then subsequently, what is the responsibility of downstream companies and also equally important, what is our -- really our leverage to do anything. And I think it's continued to really necessitate that a lot of supply chain work, particularly in the upstream for electronics does rely on a collective approach that shares across multiple industries. And I know it's certainly been interesting to, I think, particularly a lot of -- there's been just a broadening of scope of everything that we need to be considering from like mine to chip to really, I think, begin exchanging across agriculture and apparel because we have some of the same core sets of requirements, albeit I think when you're dealing with like an organic commodity versus something that is not, some of your approaches are just different necessarily.

Yes, absolutely. Responsibility of downstream players, what a question that we could unpack probably for a couple of hours together. What is the responsibility of any of our supply chains really to do the right thing and have responsible business that's in your title, Hugo, and I'm interested to hear if we go back, for example, to the fertilizer example that you had already mentioned and an adjacency that you have with the chemical industry, often demonize, frankly, for a lot of the work that they do. But at the end of the day, we need chemists to help us come up with a lot of these solutions. And the chemical industry has a consortium called Together for Sustainability. The largest players are all part of that. And what they're trying to do is make life easier on their partners. So they don't have 55 or 60 different requests for similar information at slightly different times and slightly different formats. So as someone downstream from them, Hugo, I'm curious if you're able to see some of these learnings and leveraging across different industries?

Yes. I very much advocate for what Catherine was saying about the -- getting something from one sector, which is more advanced and using it in ours. For example, our Sustainability Director comes from the textile industry, and we've learned so much about what they've been doing and bringing it back to us. In terms of the agrochemical manufacturers, they have an association called CropLife, and we work with them quite a lot. We -- they have done a lot to, for example, standardize their labeling, globally harmonized labeling systems, which has helped us a lot. And we use them because food production without agrochemicals would be very difficult and especially in bananas because there are some diseases that you can't control in another way. We do have obviously organic producers, but they are in areas which are drier and not so traditionally used for bananas. But Yes. What happens is with the supply chain, when you're trying to transmit these new concepts and policies across to suppliers is that you find that you end up with the better suppliers, which is an interesting side effect because people who don't speak your same language will leave the room. And actually, the same happens with our clients. We end up with better clients because they give us a higher priority in the tenders, and they give us longer contracts. And we are able to raise issues with them that we may be not able to with others such as living wage, and it's very much become part of the agenda over the last few years, thanks to us and others bringing it to the table. So that is a really positive thing. In terms of the assurance chain, just let me -- like to make some comments there. So voluntary standards, we have over 25 years of -- history of having all our suppliers global GAAP certified. We've got Rainforest Alliance certification, Fairtrade, SMETA, Organic, obviously. What we're finding now is that they are reaching a point where their added value is not as huge as it was before, and they're having to transform. Fairtrade is in this example of how they're, for example, grasping the issue of living wage and living income, which is great. But traditionally, voluntary standards have occupied that space between what the consumer wants and what legislation doesn't yet give them. And legislation in this case, has become the new standard where the CSDDD and the CSRD are the new standards or the new guidelines, which some -- which very few certification or standards, assurance standards are able to fulfill. So it's a gap which has to be filled with consultants, written reports. It's not a yes or no or black and white answer either. So it's in a bit of a disruption right now in that area. So we need to apply more risk-based programs and report-based programs, which is a challenge, to be honest, yes.

Yes, absolutely. Thank you for explaining that. And it is interesting to see where regulation goes and certification and when they are or out or not in sync and where that's going to push the industry towards. I'd like to talk a little bit more about risk and a risk-based approach. It's something that some of you have mentioned so far. And Kate, you mentioned this idea of a risk map. And I'd like to unpack that a little bit and ask each of you your perspectives. We've touched on this just a little bit, but let's go further. Often, we say, gosh, we really don't know what's happening in the supply chain and we don't really have the data, but we do. You've all mentioned you know the high-risk materials. You know the high-risk geographies, and we know that because somebody at some point did the work to give us the data to start with. So we're actually starting at a higher level than we did before. 30 years ago, we didn't have critical minerals that hadn't been defined yet until the electronic industry got together in the '90s and started making standards around that. And look, I said 30 years ago, too, it's kind of 30 years ago. But Kate, I'd like to start with you on risk maps. Can you explain what that is, how you get that data and how you share that across your industry and across other industries?

Certainly. So we have a global impact team here at Fairtrade that is there -- they manage all of our global research. So they're working with researchers of many different -- like on the many different commodities that we work in, most relevant for the U.S. market being cocoa, coffee and bananas, but we do things like flowers and other things globally, tea, sugar, et cetera. So they're keeping an eye on this as well and consolidating that information, I think that's one of the challenges is that all of this research is being done, but it's not necessarily being presented in a way that's usable for someone who has to make very quick decisions about supply chain dynamics and things of that nature. So that's kind of where we step in is like translating this for a variety of audiences that might not have time to read a 90-page document about coffee in El Salvador or something like that. So we have that. It's online. I'm happy to share links for like future references, but that's how we do it. And within our own system, we have producer networks. And so it's about half of the organization in terms of our staffing is actually -- they're working directly with small holder farmers, cooperatives, hired labor in the commodities that we work in, hired labor. So they really are much more connected to what's happening on the ground. So as an example of like how that's been -- we've been able to mobilize that for the risk-based approach with COVID, obviously, the world turned upside down within like a matter of weeks, and there was a lot of changes that needed to happen. And we were able, as an organization to very quickly pivot. So the things that we were able to do -- because we have this existing system, right, with -- that has a minimum price and premium specifically, the premium that producers get to choose how it's used. And the brands are paying this already. So that existed before COVID. We just tweaked the amount that could be used for direct cash transfers. And that was able to add very immediate stability for producers that were dealing with the realities of COVID in real time in terms of labor, in terms of health and all of that. And then while that was already underway, we were able to fund raise about USD 17 million in additional relief and resilience funding and that we were able to distribute over the years. And at the end of the day, like what does that really mean? In our research -- we found that was led by this global impact research group. We found that fair trade households reported less impact from COVID than non-fair trade counterparts by about 12%, which I think is something that we should try to replicate in other spaces. And like COVID was an amazing -- or it was an awful and amazing moment where everyone really had to come together when we realized that with these slower-moving things like legislation changes, I would want to challenge the industry to say, how do we take that mindset of like all hands on deck for these other things? Like what does it look like for an industry to invest in producers when it comes to EUDR and deforestation regulation and making sure that like we're not just going to leave these producers out high and dry to have to deal with the cost of geo mapping, which I don't know about you, but I don't know how to do that, and I wouldn't expect someone else to be able to know how to do that. So that's my thoughts on that.

Perfect. Thank you for that. And as we get into more specific examples, I'd like to ask Catherine and Hugo for the same, but let's launch the next poll, which is what state is your supply chain currently in with regards to human rights principles? And we'll ask you to essentially put your organization along a maturity curve, which I think is relevant to the conversation we're having right now. So Catherine, can you share a specific project or an example where you've used this idea of a risk-based approach and some of the learnings, what went well, what didn't go well to the extent that you're able to share?

Yes, absolutely. I think I can speak maybe most concisely about kind of, again, the like nascence of how conflict minerals got started and what that has really done in terms of informing how downstream companies really scale up their activities for other materials that they're now looking at. And a lot of that was essentially finding the most effective way to approach this given limited resources, given really no direct leverage at that point in the supply chain because you don't have contract conditions. Intel and the hundreds of other companies that are sourcing minerals are individually only sourcing ultimately very small quantities because of what's represented in the product that we actually get by the time it comes to us and how it's transformed. But when you take all of that on a collective basis, that has a lot more value. So approaching risk-based approach from a collective industry mindset, getting some international guidance. But what that really meant was looking at the supply chain, finding what are the fewest numbers of actors, but also where is the last point in the transformation of these materials where it is possible to trace back to a mine. And that was what I referenced before for those 4 specific materials. And I think there's some level of like of similarity across other material groups, although the supply chains look a bit different when you're talking about copper and nickel and things like that, where the smelters and often, they range from huge multinational corporations to very small companies. But ultimately, the thing that defines them all is that it is the last point of traceability to a mine site. There are the fewest numbers of actors that are performing that role in the supply chain. And essentially, all you can really glean by the time you figure out where your smelter is, is here are all of the countries or all of the mines they've collectively sourced from, but because all of that gets mixed together at the smelter, that's where, for me, I'm not able to necessarily say this one specific plating that we're using in this chip comes from this specific mine. It's because that part of the supply chain exists. So taking a risk-based approach is really -- that's our -- that's the point at which we want to focus. That's also where there is the highest risk of direct connection to a specific set of conflict issues. So we want to focus on maturing that point of the supply chain in terms of expectations around mapping and transparency and enhanced due diligence that takes place everything from bagging and tagging in mine sites to defining who the in-country exporters are and really clarifying that so that we know and can actually more incisively then request certain risk assessments to be done along this particular road in this particular part of, I don't know, Uganda, for example. That's what really led us to drill into it. And then I think one added challenge to that, it's certainly something that is dynamic because it's just the nature of the world and the nature of risk is that even what is defined as a high-risk area for material sourcing is constantly changing. There are some commonality, but it does require not only the smelters themselves as they're continuing to participate in this supply chain ecosystem that has these expectations, but also downstream companies to constantly be redefining and refreshing their own views of where is conflict taking place, whether that's at a subnational level or an international level, what -- where is forced labor risk spiking in certain conditions of extraction, where is child labor may be on the rise. And even just the things around the stability of governance in the resource extraction sector. Those things are constantly changing. I mean there are even -- I think even the European Union maintains its own list of what they define as conflict-affected and high-risk areas. But ultimately, that fluidity and that ultimate definition and some of the common cores, yes, is what necessitates an ongoing reintroduction and continual monitoring of what is informing, what risk is even taking place from a risk-based due diligence view and what we're then subsequently focusing on for other collective improvements at specific points of extraction in the upstream.

Yes, absolutely. Hugo, earlier, you said, it's not often a yes or no question. And Catherine, I think you've done a really good job explaining why. It might be a few dozen mines feeding into one specific smelting activity, which then goes on out into the world, which could also then be combined with something else. And so we start getting into the concept of mass balance to be able to understand as an ecosystem as a supply chain, what's the characteristics of the materials coming through. And in supply chain, we often talk about constraints in old-fashioned supply chain process mapping, exploiting our constraints. And that's one great example of here's a choke point, a constraint in your supply chain, which might actually constrain your productivity, but you can use it to your advantage by saying like before and after this point, the information we can have about individual digital threads changes. And so let's focus on that piece as one way to prioritize. Hugo, I'm interested from your perspective, is there a specific project that you can share about that you've taken a risk-based approach or another approach and some of the learnings that you -- came out of that?

So we're getting ready for CSDDD, and we've, in the last year, created my department. And so I've moved from another one. And so we're learning as we do it, a lot of it. We're ahead of many other suppliers because we've done -- we've been doing already for the fourth year, a human rights impact assessment, which none of the others have. So that has helped us to learn a lot about our supply chain outside of the traditional view we had regarding certification and what our partners were saying. But -- so what we've developed in the last few months is exactly what Catherine was saying, where you have a list of different scorings that you will give a supplier that look at, for example, obviously, food safety, certifications, their solvency, the tax situation, security because a lot of our supply chains have risk to drug trafficking. And also security is one of the human rights that has been highlighted in our human rights impact assessments as a relevant issue because it's a violent world in some of these countries or there's levels of violence that are higher. And then we look at whether they're a strategic supplier or not. So how much of our supplies come from that supplier that goes into the system as well. How much are we buying from that supplier? Are we buying 100% of their product? Or are they, therefore, at risk of whatever we do will have a big impact on them. Obviously, the environmental risk. So we look at water risk, for example, and the water stress. Anything to do with reputation in the press, we evaluate that as well. And then obviously, the country does give us an indicator, but we want to go by region because, for example, in Colombia, there's big differences between bananas produced in one area and another. The history of the different regions brings a completely different scenario. So then we categorize them into different parts, A, B and C, and they have increased due diligence, enhanced due diligence, the higher risk they are. And one of the things that -- well, cost is a huge issue because bananas haven't increased in value for the last 25 years in real terms. But -- so certifications are a cost. And then now they -- one of the requirements is to have a hotline, a grievance hotline. Now this is a completely new thing to many countries. It's not even legislated. And it's difficult for -- normally, it costs you $40,000 to have a grievance hotline. That's never going to work for a small supplier. So there are solutions out there that the sector needs to come forward with, which we're looking at. So it's one of the problems -- or one of the potential things we have right now that we're looking at, yes.

That's really interesting. Thanks for walking through some of the specifics. I'd like to talk more about the ways to engage different parts of the supply chain, but let's see the results from the poll. I hope we can see, here it comes. So this was the poll we asked about the maturity level of your own supply chain of who's here. And it's an interesting mix, maybe what we would expect. So there are some laggards. Most are what they will call developing, which we'll see. And I think often, you may not know. It's hard to kind of know where our own supply chain sit unless you yourself are working in this team. So it can be a good follow-up for you to go get curious about your own organization. So thank you for participating in that poll. Hugo, as we talk about more on this cost piece, Kate said at the very beginning, at the end of the day, we need to pay people more. And if people are paid more, human rights perhaps could become less of a challenge because people may be in compromised workforce situations because they need some sort of money or they don't have a choice they're required to do that job, whether they're paid or not. And so I'm interested as we think about the cost implications and what we're asking different players to do, again, keeping in mind that as we go up the supply chain, often, they have less money, less margins to sit around and create what are best practices and ways for people to complain or call out risks that are happening or perceived to be happening. So a couple of questions. One, is it always costs more to do the right thing? And then two, as we think through putting in the right levels of, we might call it, security or assurance throughout a supply chain, how do you balance that in your perfect banana supply chain world, I'm interested also at how much should a banana cost, if you know. Break that down some of those costs versus performance themes.

Interesting. Well, maybe just to give an example. So the most common issues that come up in our smatter audit. SMETA is an audit that is an ethical audit, and it's also environmental now in the 4 pillars. And it's based on a platform which is Sedex, which is based on the ethical -- the ETI base values, which is common to also human rights. But -- so these audits bring up different things. And the most common ones are overtime, so excess overtime or you're not registering the time in and time out in a way that the auditor feels is provable. So if they all write the same time, then that means that they're all -- that's impossible because one person is coming in 1 second after and so it's like an argument we always have. But anyway, so overtime is one of the most common. Then there are health and safety issues like fire safety emergencies in an open banana packhouse, which -- but it's been a journey to understand some of the requirements that are for textiles and bring them to bananas. But anyway, for overtime, it costs a lot of money for the producer to pay overtime to workers. And there was -- and there is in peak seasons, overtime that is needed. But we were able to find ways in which we brought down the cost of overtime. So we looked at the issue because sometimes overtime is just a question of not doing things properly or not managing things correctly. So we were able to bring down the overtime by reprocessing in a different way in a more efficient way. And the workers were earning -- were not getting their overtime, but they were having more time off in the evenings and more, yes, less stressful lives, et cetera. And because the productivity remained the same and the wages are based on productivity, then the salary that they were getting during the day in their normal working hours went up. So that's one way in which you can somehow say that these standards or these new requirements bring advantages to the supply chain. But yes, cost is a huge issue, to be honest. But like I said, when you're able to discuss things like living wages with your customers and it's not just swept under the carpet as it doesn't matter to me, then you can start to look for solutions that do bring value to the worker. And the other thing is the grievance hotlines are a shortcut as well because they give you feedback from the worker direct without having to go through interviews, which they might not be able to -- or they might not feel they're comfortable giving you information. It's a journey to get the grievance hotlines to work though, because the technology isn't always helping and also people don't trust the hotlines to start with. So you need to get the ball rolling. But not sure if I answered your question, but I wanted to get that out first, anyway.

You got in there. I still want to know what's my banana bread is supposed to cost me. The cost of eggs is high right now...

Much more than it costs now.

Yes, when we think about -- on our prep call, I'd said, gosh, there's -- it's -- I'm skeptical when I'm able to find, let's say, peel trim for $8.99 a pound that there's no -- there's only the right level of human rights throughout the whole supply chain because some of these costs are really flabbergasting. So Kate, I want to bring this back to you to talk about -- as we think about a living wage, that can mean a lot in different geographies. For example, I spent a lot of my life in Seattle and the poverty level for a family of 4 is $96,000 a year. And if you make less than that, that counts as poverty, but that's very, very different for different parts of the world. And so having an understanding about what is a fair wage, what is sustainable for an entire community, not just one person or family. Can you talk a little bit about that? And I will pose you the same question, does it always cost more to do the right thing?

I mean, more than it currently does. I think until everybody has -- until there's like a certain understanding of table stakes so folks should not be living in extreme poverty like writ large, then like this will always be -- the answer will always be yes. I think in terms of living wages and how do we get there? How do we have like some standards? I mean that's part of what Fairtrade does, right? We have 3 pricing mechanisms. So the Fairtrade minimum price, which is really a floor. So it cannot -- it should not drop below this. So brands sign on to paying at least this price regardless of the fluctuations of the market. On top of that, Fairtrade farmers get a Fair Trade premium. So they invest that in their community on resilience-related like funding areas. So it could be a clinic support making sure that like they have access to -- the clinic has access to clean water or it could be investing in the business. those kinds of things, but they're collectively deciding on how to use that money. It's not a top-down decision, and it shouldn't be because they know what they need best. And then we also have living income reference prices and living wage reference prices for brands that do -- are ready to take that next step. And those are by country and often by region, and we're doing that in collaboration with other certifications and organizations out there that are on the forefront of this, too. So I think that's our role in this is like this is what a standard is because we're doing all of the listening necessary and -- to be able to make those kinds of decisions, which are -- that's a very big process to get people to align on that. I guess, as one example, a couple of years ago, we increased our coffee minimum price, which was a very big deal for us from $140 to $180. And so a pretty massive increase. And we were very steady in our decision about this in part because we interviewed stakeholders from over 40 countries, 540 different stakeholders and 86% of them were producers themselves. So not us deciding what they need, but them telling us. And there were a range of different opinions, but we came to a middle ground and finding that consensus is part of what Fairtrade has to offer. And there are other folks out there doing similar things as we are. We're not like the only solution for everybody. But I would say that like the listening part cannot be overlooked. And when it comes to all of the legislation and things like that, the thing that I would like to see, the world I want to live in is one where we're consulting farmers from the beginning as to what this means and what they need to be able to implement this because it can't be a last-minute decision about, oh, I guess it's going to take a lot of time and effort. Maybe we shouldn't have this implemented at the end of this year, and they maybe meet their requirements before a month before that, if they're going to have to learn how to geo map, learn how to gather all this information. And what I want to see is the power being in the hands of producers. That's what I'm looking for because data is power, so it should sit with producers as well.

Perfect. I'm going to come back to that. But we're nearing our time together. So I'd like to get the last poll question launched, which is about the opportunities for supply chain in 2025. So as that's up in front of you, I -- wanting to come back and talk about can technology help. So we can talk about the different stakeholders we need to bring together in order to get some of this feedback from those closest to the process. And again, if you're an old school supply chain, we're always taught to go to the people closest to the work. Going to gumbo, we might call it. And in this case, the people closest to the work might be at the mine, at the smelter, traditionally very difficult for us to get a hold of them geographically, obviously. But now we have this emerging land of newer technology solutions, often though requiring Internet connection and power and smartphones. So that notwithstanding, I'm curious to hear from all of you on have you had these discussions, where do you see promising pathways on leveraging some of the newest AI to perhaps bring that cost of the hotline down Hugo in your case. So I'm curious, Hugo, maybe I'll start with you. And have you had these conversations? And if so, where do you see some promising futures?

So on the poll, the last one, I think, the regulatory one, that's my personal opinion. Where we've seen concrete tools that have been presented to us as useful has been on the due diligence. So there's a company that looks at trade flows and is able to look at -- this is obviously physical, not services, but still, it's quite rich information because they look at who sold what to whom and they go all the way back to whether they were produced in Xinjian or whether they were coming from sanctioned countries just through an instant look -- scan of customs data. And that was really revealing and quite interesting. They're then making it wider to include more issues. But AI in that way has a real impact, I think. And yes, I haven't seen any other -- obviously, the ChatGPT helps us in many other ways, but that's the real case that I've seen, yes.

Great. Catherine, from your perspective, not to put too much pressure on those participating in the semiconductor supply chain, but I have to imagine the pressure for being advanced digitally remains. So I'm curious, the conversations. And again, do you see a promising pathway to using technology to tackle some of these challenges?

Yes. I mean, oh, gosh, that's such a -- that alone could be, I think, just like a whole hour conversation because even just the breadth of different challenges that you're dealing with in the supply chain across different human rights issues, environmental issues in such a complex supply chain. I mean it's huge. I think the short answer is we personally haven't seen that have a massive impact. I think at least from like a factory standpoint, like worker voice is still largely the thing that most people are still pushing to uptick, let alone try and figure out how to apply some kind of AI to that unless you're building something internally. But I'd say really core fundamental -- really core challenge to complex supply chains and particularly those that have significant material transformation like a semiconductor, we are still, in so many ways, trying to tackle outside of some legacy materials, just that core challenge of transparency. And I think there's been a lot of promise or a lot of just excitement around the application of AI to fully map your supply chain. I don't know how much of that, quite honestly, is just met by the reality because even though there's certainly a lot of push, and I do experience this daily of how do we digitize and automate everything that we're doing. To your point, there are still parts of the far reaches of the supply chain that are just like they open up an e-mail account just to plug into the system that we need them to do. They do business by WhatsApp. This is still very much part of the economy, and these are still actors that we have to keep in mind when we're also looking at how AI is going to solve for all of these challenges.

Yes, absolutely. It's a good reminder. And much of the world, more people have access to phones and toilets in the world, but they're dumb phones. They're not smartphones necessarily. And when they do -- our smartphones, it's often treated as computers. So when they find WiFi, they'll get on and they're treated like little miniature computers. So there is a lot that we could impact on that one. But let's see the results of the poll. And then as we do so, I'll ask each of the panelists one final question and as we look in the year ahead. So the results of the poll for the supply chain opportunities, lots on technology development, but also close behind on regulatory frameworks and collaborating across industries, which is great to hear. I am here in Las Vegas right now at the Reverse Logistics Association Conference. It's all about standards and looking about how can we get together across industries. So those bodies and those convenings are really important. So I'd like to ask each of you, if you were to leave the audience with one action item, one piece of optimism or one final parting thought. Kate, I'll start with you, please.

I think I would -- if that could influence your behavior at all, it would be to resist the urge to shy away from human rights issues in your supply chain. There are so many risks and there are so many problems, but you got to start somewhere. And I think being transparent about that is one of the most important things in actually creating change within the many different industries that this affects. So talk about it within your offices, talk about it externally and take a progress, not perfection like mindset to this thing because it's always going to change. So you just need to know where you're going to focus your efforts and your energy at any given time and don't do it alone. Like there are plenty of organizations out there that are trying to support you in this and have the expertise that you don't need to have internally. You can lean on the other actors in the supply chain. So that would be my advice.

Perfect. Thank you very much. Catherine, one final thought from you.

Yes. I mean I think -- I would say kind of on that note, I think there's a lot of very fundamental ways in which how we conceive of supply chain risk and what needs to be managed to that are really just changing right now in very real time. But I think it would be beneficial to -- I think it's really important to, particularly given the regulatory implications right now, particularly just given, I think, a lot of even just the -- I think what's termed reputational issues associated with being perceived to be a dishonest or a poor actor on these challenges that it's really important to as we're transforming our idea of what constitutes supply chain resilience, that human rights risk, that environmental risk is fundamentally a part of that and really does inform what are -- what is the best way to actually manage the risk and avoid a surprises approach and also at the end of the day, avoid, I guess, contributing to activities in the far reach of the supply chain that may even be contrary to companies' own stated policies.

Great. Thank you. And Hugo, the final word from you, please.

Thanks. Well, human rights have been there forever and societies change, they evolve. And we need to use these as the yardstick. It's the right thing to do. If you don't -- if you're not in the conversation, then you're not going to get there. So I think learn the language, learn what this is all about. You need to learn new skills, triangulating evidence, looking at data, breaking out of audits, seeing how to move forward. So yes, the impact is greater when you know what everybody is talking about.

Perfect. Thank you very much. And thank you all for joining us. This has been protecting human rights in the supply chain, how visibility boosts resilience and ensures accountability. Thank you, the 3 panelists, and thank you to the audience for joining us. We'll see you soon at the next Reuters event.