Sustainable smallholder development, some key points from our recent conference

This year’s theme was “How to empower farmers and deliver business solutions at scale” and we brought together 150 company executives, NGOs and others on  14th-15th March 2017, London to discuss this.

Here are some of what our session moderators found were the main points along with some links to relevant Innovation Forum podcasts on the subject.

(Please note that these are not designed to be records of what was said at any particular session – and no points should be attributed to any one participant)

Unfortunately the formatting below, due to the WordPress blog system not recognising spaces sometimes, is a little disjointed in place. I’ve spent about an hour and half trying to fix it, with limited success. But felt it’s worth publishing anyhow. There’s some useful stuff below, after all.

Capacity building – innovation to help grow smallholder businesses

  • If our objective is active, professional, business-oriented smallholders at scale, we must take a standardised approach to capacity building, particularly with service providers.
  • Regular, quantitative measurement is key, and easier with a standard curriculum.
  • Scale is all very well, but the stability of that scale is just as important.
  • Companies and other actors need to lead on convening and cajoling local, regional and national governments to support smallholder programmes.
  • Government models need to be on the basis of agri-prenuership and basic business skills.
  • Where there are government capacity limitations, business and others need to begin helping fill the gap.
  • Social and environmental integration are highly important; smallholder capacity programmes need to look at the land from different perspectives.
  • Can we effectively measure smallholder behaviour change?
  • Cashflow versus net income measurement is important, and technology is not thecomplete answer to this.
  • The micro-finance gap is huge: some $450bn is needed.
  • Corporate appetites for smallholder risk needs to improve. Timescales and budgets need longer time periods.
  • Are company approaches still too top down for agri-preneurs?
  • Training should be thought of as coaching. ICT can help hugely here.
  • We need to remember that for lots of farmers, farming is not always their main or total source of income. Lots of other non-farm products and services can be, and are, highly relevant (healthcare for example).

    Click here for a podcast with Alan Johnson, senior operations officer, IFC, discussing capacity building challenges for smallholder farmers. These challenges are a major constraint to growth of the agriculture sector, and impact security of supply and traceability for big brands. Johnson explains why IFC believes that boosting the “professionalism” of smallholders, such as through improving access to finance and growing business management capability, is crucial for real impact at scale.

Certification – part of the solution yet part of the problem?

  • Certification is no panacea as we know. For example FSC certifies BBQ charcoal, yet there are big problems with charcoal makers not being paid properly. (Such as for Acacia trees in Namibia.)
  • Certification is seen as a building block to manage risk, but business expectations of what it can deliver is not the same as effective smallholder outcomes.
  • Certification can create conversations that lead to innovation and is a tool in the toolkit for collaboration.
  • Certification is a great way to understand your supply chains but we should focus on better farming, not certification itself, as the outcome.
  • Key question: how easy is it to get non-certified volumes into supply chains?
  • Very different business models post serious challenges for collaboration in certification. Companies also have a “disconnect” problem internally, for example procurement departments versus certification challenges. Cost/price versus sustainability risk.
  • Certification needs to catch up with business expectations – consider the “platform for change” approach.
  • Certification bodies need to take a step back and ask questions such as “do we need 5.5 million cocoa farmers?”
  • Certification schemes can also end up excluding smallholders, ie RSPO breaches and suspensions.Climate smart agriculture – balancing costs and benefits
  • Climate smart agriculture is about a lot more than agricultural practices. While diversification and mixed cropping are important, financial mechanisms such as insurance and access to credit are equally important to include in this conversation.
  • Farmers generally know how to farm so access to the right information and services may be more important than training.
  • It’s important to take a value chain approach. Even if working with only one part of the value chain – eg aggregators – it’s vital to ensure they are connected to the rest of the value chain you may not be working with.
  • Both extensive and intensive forms of agriculture have generated negative impacts on climate.
  • The key question on climate smart agriculture may be whether the market is willing to pay for any extra costs involved.

The business case for smallholders

  • The business case is at the heart of how to engage and improve livelihoods for smallholder farmers.
  • Projects must focus on helping farmers become better business people – there is no point in projects that simply become philanthropy.
  • Companies need to recognise farmers as partners in developing solutions – and, for example, support them to progress farmer-generated ideas.
  • Dealing with the capacity gaps requires a multistakeholder approach, including government (local and national).
  • For farmers, identifying the skills gaps is vital. New skills, such as more advanced agronomy and better use of technology, are needed, while taking care not to lose the old basic farming skills that are essential too.
  • A more institutionalised approach is required to help farmers take advantage of the opportunities from technology. But access is a major obstacle – without a smart phone and mobile access to the internet , for example, many exciting technological solutions aren’t feasible.
  • Don’t underestimate the importance of soft metrics such as empowerment. Boosting confidence for farmers (and particularly women farmers) can have strong positive benefits for farm performance.
  • Cooperatives can be a very useful mechanism for developing farmer skills, helping them access finance more readily, and for engaging the rest of the value chain more effectively.

    Click here for a podcast with Winnifred Mailu, inclusive markets adviser – Africa, Christian Aid, who outlines why accessing markets is essential for smallholder farmers and how companies can help them to develop the necessary skills. Companies needs smallholder entrepreneurs to ensure supply security, and farming communities are increasingly seeing that there are real incentives to develop sustainably for long-term benefit.

    Click here for a podcast with Olam’s global head, corporate responsibility and sustainability, Dr Christopher Stewart, who discusses the company’s global operations, and particular in Gabon, and the challenges in developing sustainable agriculture plantations in forested areas that allow for local economic development at the least environmental impact. He outlines how the company has responded to activist criticisms, why Olam has agreed to a moratorium on new plantations in Gabon and the need for better boundary conditions around acceptable development. Smallholder farmers are a vitally important part of Olam’s future ability to trade in the commodities it supplies, and Stewart explains what Olam is doing to help smallholders grow their businesses sustainably.Curbing deforestation

  • The traditional concession model historically used to protect forest is coming to an end.
  • New business models have to be built around trust, working in close collaboration with communities and building on the social capital.
  • Private sector travels a journey from production to conservation (typically Sime Darby) whereas development organisations usually do the opposite journey, from conservation to production. There are opportunities to meet mid-way.
  • The key element to reach a balance between agriculture and conservation is to make people pay for conservation. Today, no problem to make people pay for production (even sustainable) but nobody really wants to pay for protection.
  • Certification can be too prescriptive. It’s possible to agree on key indicators or objectives but it’s important that organisations are free to define their own methodology.

    Click here for a podcast (recorded before the conference) with TFT CEO Bastien Sachet, talking about TFT’s latest report – Palm Oil Transformation – and how, despite all the challenges and problems, there has been a transformation and accelerating improvement in palm oil supply chains, and impact on deforestation, since 2010, when Nestlé introduced its responsible sourcing guidelines. He discusses why transparency and trust have been crucial in the moves towards sustainable value chains, and why smallholder farmers need to be a central focus of the evolving solutions.Water and sanitation

  • Companies need to think in terms of what is good for the farmers. A key point is that farms are not going to be productive if the farmers don’t have access to clean water for themselves and their families.
  • In areas of water stress, soil conservation is a major concern. So adapting to better agricultural practices to conserve water will protect soil structures too.
  • There are a number of direct business benefits from working with smallholders to develop sustainable water sources and use, including:

o Securing the commodity supply for your company from that farmer.
o Helping achieve corporate sourcing targets – eg commitments for locally sourced goods for specific products.

  • In some respects, companies are finding themselves doing the job of governments in providing fresh clean water for communities. But where developing economy government resources are so stretched, this is inevitable.
  • But the economics stack up – think more commercially in terms of partnership rather than donorship. This can be a tricky mindset change for some NGOs.
  • As for other smallholder famer challenges, finding the right local partners to help deliver water projects is vitally important.Finance – collaboration and innovation
  • Smallholder farmers struggle to provide collateral that standard investment models require.
  • As traditional business finance models don’t work for smallholder farmers – blended finance models, involving some donor finance – can be the solution.
  • SMEs can play a crucial role: in some economies/sectors they can create 75% of jobs, but struggle to gain access to the finance they need as for banks it is risky and expensive to engage with SMEs.
  • Currently donor cash is required in a blended finance deal to be the first loss capital.
  • Corporate ownership structure can influence appetite for some aspects of investment, including the ability to think longer term – ie without shareholders demanding quick returns.
  • Investment partnerships can work, but it essential that the parties involved are aware of each other’s priorities and have a strong sense of mutual trust.
  • Innovative investors are becoming more prepared to think long-term for returns on investment. A problem has been that while there are sources of funding, and willing funders, available, the financing models for them to see returns have not existed.
  • For smallholders that have no credit history, no business plan, creating the necessary enabling environment, that demonstrates that the farms can make profits required to service investment, is the challenge.
  • For the cocoa supply chain, a pressing concern is to rehabilitate farms with ageing trees. Driven by customer need for long-term supply, the industry has recognised that investment is essential. Pre-competitive collaboration where interests in securing farmer viability align, is important here.
  • Focus on full value chains, or taking a landscape approach, can also help develop the new models and thinking required.Digital data – technology needs to be relevant for all
  • Extension services can be used to collect smallholder data – and this is happening now. Software platforms such as Farmforce are used by farm assurers for producer companies doing contract farming – they are Global GAP certified.
  • Technology services are aggregating and analysing data, and can tackle fraud issues in data ie “false farmers”.
  • Digital technology can be used to amplify relationships. Companies can use satellite data to show farmers their land and how it can or has changed.
  • Big data can offer smallholders specific information on bespoke crop platforms.
  • For effective implementation, tracking grower adoption rates is key.
  • Technology has risks in terms of the digital divide – between haves and have nots.
  • Economic interest of the farmer vital for both technology use and effective data collection.
  • Should data be owned by smallholders? Data ownership needs careful consideration.Coffee – the world’s first sustainable commodity?
  • Diversification for coffee farmers (eg mango and avocado) important for both shade (for coffee plants) and financial stability.
  • The challenge of climate change is both as significant as for other commodities and for financial stability, and is being felt now by farmers in Africa.
  • Key challenge, as elsewhere, is keeping young people on farms or bringing them back from the cities, given the average age of coffee farmers.
  • As for other sectors, persuading local and central governments to invest more in extension services is vital for smallholder farmer sustainability.
  • “Quality with a story” is a driving factor for premium coffee buyers to set fixed prices/long term contracts, and help farmers become more sustainable.
  • Coffee farms engaged by some big retailers have seen yield increases of more than 45% in some cases.
  • Can coffee be the world’s first sustainable commodity? A challenge given production needs to triple by 2050, with serious deforestation risks.
  • Can biochar on coffee farms help with sustainability?
  • Out of 10,000 Ugandan (coffee) farmers, 95% of them are earning less than $2 aday. “The elasticity of poverty is infinite”.
  • Simplification and pressure on governments to make life easier for farmers is a major challenge for business. There are 26 different taxes in Tanzania, which apply to smallholder farmers, for example.
  • Partnerships: how do you know when compliance becomes a partnership? What are the appropriate indicators? Is it when the supplier owns the agenda themselves, and what does that look like? But, if the supplier has no choice, is it really a partnership?
  • It can take three years of purchasing to establish a proper, trusted supplier relationship.
  • Pre-competitive collaboration is happening in the coffee sector, for example, amongst premium brands in Latin America.Cocoa – lessons from a sustainability-pioneer commodity

• Strengthening the enabling environment: public-private partnerships can become effective and efficient to help deliver transformation. Challenges:

o Transparency and accountability from governments.
o Work with other sectors on national issues (such as land tenure). o Effective accountability mechanisms.

  • Strong farmer organisations/cooperatives can be the foundation of sustainable cocoa. But there is a need to strengthen the co-op business models.
  • Lessons from the pre-competitive platform CocoaAction:

o Building trust takes time.

o Include all stakeholders (governments, civil society) from start. CocoaAction wanted to move quickly and could have engaged governments earlier for a better result. It has made big steps now and is well placed.

o Move out of theory into practice as soon as possible – don’t let perfect stand in the way of good.

• Could it be that cocoa suffers from being the first commodity-sector to create a non-competitive platforms. Others (coffee, cotton) are following and now seeing better incomes at farm level.

Landscapes – the collaboration challenges

  • Commodity plans around landscapes are taking hold in large companies but it remains early days for responsible production agreements across jurisdictions.
  • Time, money and patience is required to make these early models work.
  • It can take up to six years to build trust between major companies to work together to build a supply chain partnership.
  • Banks are not helping meeting the finance challenge for pre-competitive collaboration, particularly in Africa.
  • The balance between collaboration and negotiation is difficult and complex.
  • Commercial realities have held back progress – we must acknowledge this impact.
  • Companies that can’t walk away easily and are embedded in the industry are much more likely to collaborate.For more insight and debate on smallholder farmers go to www.innovation-forum.co.uk

What’s coming up from Innovation Forum later in 2017: