A report published by Foreign Policy highlighted that, in the context of the climate crisis, significant shifts have occurred within the commodity trading industry. Commodity traders have become more crucial than ever to markets, regulatory tools, and supply chains that underpin current global climate policies. In fact, industry experts and environmental advocacy groups now argue that the energy transition cannot be achieved without them.

As traders position themselves as key players in the carbon neutrality battle, what can legislators and the public do to ensure their future activities remain under public scrutiny and align with policy goals? What is clear is that no one wants to repeat the mistakes of the past.

Commodity Trading: A Complex and Opaque Sector

Commodity trading is a sector that is difficult to regulate and lacks transparency. It is deeply integrated into global supply chains, which are vital for the energy transition. Switzerland is the world's largest commodity trading hub, with companies operating within its borders accounting for 40% of global oil trades and 60% of metal trading. These companies also control a significant share of the global trade in cocoa, cotton, and other agricultural commodities—many of which contribute to deforestation.

These trading firms have an enormous influence on the sustainable future—not only because they control the global distribution of oil, gas, and metals essential for producing solar panels and battery-powered vehicles but also because they are uniquely positioned to drive the adoption of new technologies and market behaviors influenced by policies. This includes developing low-carbon resources, such as alternative fuels for ships and aircraft, and supporting carbon markets that assign a price to emissions.

The path to carbon neutrality—like any other route through global supply chains—is not one that can be bypassed but rather must be navigated, even by the industry's harshest critics.

A Unique Position of Influence

The special role of commodity traders arises from their hybrid nature, existing somewhere between banks and industrial producers. Like banks, they finance new projects, operate in futures markets, and trade on behalf of clients. However, since the 2000s, they have increasingly acted as investors, acquiring fixed assets such as refineries, mines, railways, roads, and warehouses near ports to meet the unprecedented global demand for natural resources.

As a result, today's major commodity firms span entire supply chains—from production to final sale. They are also involved in all aspects of financing and logistics in between, giving them unparalleled power to shape the types of resources that reach the market.

A Pivotal Role in Global Supply Chains

Florian Wettstein, a professor of business ethics at the University of St. Gallen in Switzerland, told Foreign Policy:

•  “This is one of the fascinating aspects of this sector. They hold a central and key position for many industries, allowing them to dictate the conditions under which other industries purchase commodities.”

Consequently, they have "tremendous power to improve value chains" in the global economy.

For critics, however, the problem is that these companies have historically shown little interest in using this power to align supply chains with humanitarian and political objectives. From the 1970s through the 2000s’ commodity supercycle—when demand for natural resources surged due to China's economic rise and emerging markets—global commodity trading giants operated largely in the shadows.

During these decades, traders amassed unprecedented profits and often acted as lenders of last resort to authoritarian regimes, apartheid states, or sanctioned governments in countries like Chad, South Africa, Iraq, and Iran.

The Shift Toward Transparency

These practices thrived due to the ability of commodity firms to operate under the radar. However, according to Bloomberg journalists Javier Blas and Jack Farchy in their 2022 book The World for Sale, those days are largely over. Still, transparency in commodity trading is a relatively recent development.

In 2011, when Glencore—then the world's largest commodity trading firm—launched an initial public offering (IPO) worth $60 billion, the world was shocked to discover just how wealthy and powerful the industry had become. Documents revealed during this rare IPO shed light on the corruption that had plagued the supercycle years, triggering a media frenzy.

Two Pathways to Influence Climate Action

There are two main ways commodity traders can help their clients respond to public pressure to reduce emissions:

1. Voluntary Carbon Markets

These markets are designed to help major emitters, such as airlines, offset their carbon footprint by purchasing carbon credits linked to projects that reduce emissions elsewhere in the global economy. Participation is entirely voluntary; there are no government regulations mandating involvement. Instead, the incentive comes from corporate social responsibility and sustainability campaigns, often driven by consumer demand for greener products. Such consumer-driven sustainability initiatives impact a company’s bottom line.

2. Regulated Carbon Markets

In contrast to voluntary markets, compliance carbon markets are government-administered systems where companies operating under emission caps must purchase allowances directly from regulators via auctions. The price of these allowances is designed to increase over time as the world moves closer to carbon neutrality. The European Union’s Emissions Trading System (ETS) is a prime example of such a market.

In voluntary markets, however, carbon credits are generated dynamically without a fixed cap on emissions. Instead, real-world projects that either reduce emissions (e.g., adopting renewable energy or improving energy efficiency) or remove carbon from the atmosphere (e.g., reforestation) are converted into credits.

This is where commodity traders come in.

The Role of Commodity Traders in Carbon Markets

Developing voluntary carbon credits requires coordinating multiple layers within physical and financial supply chains:

Producers who need capital and financial incentives to adopt green initiatives.

Verification bodies that determine whether projects qualify for carbon credits and how many they can generate.

End buyers—companies seeking to purchase credits as part of their corporate sustainability efforts.

Traders who facilitate and execute these transactions.Environmental policy advisors and think tanks argue that commodity trading firms, given their unique global reach, can play a pivotal role in developing, financing, and implementing financial tools that support decarbonization efforts—especially in resource-rich yet energy-poor regions of the Global South, where these firms are already deeply embedded.

The Future of Commodity Trading in a Low-Carbon World

As scrutiny over their activities grows, commodity traders have a choice:

They can continue operating with minimal transparency, risking stricter regulations and public backlash.

Or they can leverage their influence to accelerate the green transition, aligning themselves with climate policies and sustainable business practices.If properly incentivized and regulated, these companies could become key drivers in the fight against climate change—rather than obstacles to it.