Digital sustainability tracing in smallholder context: Ex-ante insights from the Peruvian cocoa supply chain

Global demand for sustainable agri-food products creates opportunities for smallholder farmers. But on-farm verification of sustainable practices is costly, making third-party certification inaccessible to many poor farmers. Digital technologies for tracing agri-food products from farm to fork could help: novel traceability systems, based on blockchain technology, can make data about on-farm practices transparently available to downstream stakeholders, enabling them to verify sustainability claims without external audits. There is limited understanding, however, of how such digital tracing systems fit local needs and capacities in smallholder contexts. Through a grounded theory approach, we explore the potential of digital traceability for sustainability monitoring in a case study in the Ucayali region of Peru. Based on interviews with local cocoa sector stakeholders, we identify two major challenges: first, setting up digital traceability systems requires investments that do not seem justified by corresponding increases in income. And second, relying on farmer-supplied data creates the risk of inaccurate information due to insufficient capacity as well as incentives for providing distorted data. Our findings suggest that strong cooperation along the supply chain is needed to ensure adequate return on farmer-side costs and investments. Focusing on sustainability metrics at the community level, in addition to the farm level, may be promising, as these metrics can be reliably collected by external stakeholders and add value beyond existing third-party certification standards. Our case study provides recommendations for local policy makers and supply chain stakeholders to develop inclusive digital sustainability tracing systems with smallholder farmers.