Agriculture, Circular Economy, CSR and Sustainability, Deforestation, Smallholders, Stakeholders, Strategy, Supply Chain

Smallholder supply chains: how to make sustainability sustainable

Innovation Forum recently published ground-breaking research exploring what is really needed to build genuinely sustainable smallholder supply chains.

This identified a clear set of issues which need to be addressed, not just within farming communities, but also along the entire supply chain. However, the research also showed that as things stand at the moment, sustainability is not sustainable. A fundamental shift in approach is needed: Dr Peter Stanbury explains what this might look like.

For the past eight months, Innovation Forum has been conducting an action research project to break down the siloes between those working to improve the environmental and social performance of a range of smallholder agricultural supply chains, with the aim of defining exactly what needs to happen if those supply chains are to become genuinely sustainable.

Unlike most other studies, our research also looked beyond farming communities themselves at the wider, systemic issues impacting on these supply chains.  To do this, we conducted nearly 80 interviews covering a wide range of supply chains including cotton, fruit and vegetables, dairy, coffee, soya, palm and maize.

(This work would not have been possible without the financial and people support of the following key partners: Nestle, CottonConnect, COLEACP, Clinton Development Initiative, Golden Agri-Resources, and GiZ, the German development agency)

What makes sustainable smallholder supply chains?

Our research has discovered that, despite the differences between supply chains, the key issues which need to be addressed if they are to be genuinely sustainable are very similar. We identified six areas which need to be tackled.

The first issue relates to smallholder farms themselves, and as a result of the considerable work that has been done at this level, we have a very clear picture about what needs to be done. Smallholder farmers are often trapped in a cycle of poverty and so very cautious about changing how they farm.

As a result, there is a need to work with them over time to support them in improving their agronomic practices. Farmers also need support in accessing they need better access to market to maximise their prices; they need to diversify their production; and they need better support from financial institutions.

Secondly, it is clear that a key tool in addressing these challenges is to bring farmers together to collaborate in cooperatives or other collective associations. These vehicles provide a basis for farmer field schools to improve farming practices. They also allow farmers to aggregate their production in order to access larger markets and get better pricing, and provide the basis for better access to finance.

However, our research identified a key challenge relating to cooperatives, which are sometimes presented as being a magic bullet. Unless farmer groups have robust processes of governance, they can be part of the problem rather than part of the solution.  These groups are not necessarily inclusive, and can reflect existing divisions in the local society. They are also open to the challenge of elite capture, and the very poor, and women are often under-represented in leadership positions.

Ensuring good governance of cooperatives is therefore critical in ensuring that they will genuinely deliver benefits to smallholder farmers.

However – and this is the third issue needing attention – whilst we know quite a lot about what needs to change within farming communities, we know much less about what happens between when goods leave the farm, to when they arrive at a port. We lack insights into the environmental impacts of this part of the supply chain, and about the income levels and working conditions of those working as traders, in the transporting of goods, or those employed, for example in horticultural pack houses. If we’re worried about the incomes of farming families, why not about those working in other parts of the supply chain?

The fourth area to be addressed, and at present inadequately done so, is the need to engage better with governments of origin countries.  Many of these countries lack coherent policy on the development of agricultural communities, and often extension services are underfunded. Currently, there is a there is far too little work done to understand why such weaknesses exist, and what might be done to address these. Extension services are particularly important since these structures could be the conduit to reach farmers at scale.

Fifthly, there is also a need to engage better with governments of what we might term ‘destination markets’ such as the UK, USA, and the EU. Most obviously, there is a need to collaborate better with the development agencies of these countries, for whom agriculture is a huge area of focus. However, there are also rather more deep-seated issues to be addressed. The first is to ensure that multilateral efforts to improve sustainability in supply chains are realistic, practical and well-informed.

As they are managed at present, initiatives such as the European Commission’s work on cocoa in West Africa will fail since they fail to look at the in-country detail of what change will be needed to make things change in practice. There is also a need to address the tariff structures which means that most value-addition to agricultural commodities happens in destination countries, not origin ones.

Finally, there is the issue of agricultural markets per se. International spot and futures commodity exchanges operate on the basis that they are trading largely-undifferentiated commodities: they do not accord greater value to goods which are associated with reductions in environmental degradation, better incomes and so on. Over time this will need to change. So too will the way in which sustainability integrates – or more to the point, at the moment does not integrate – into core business functions of businesses, in particular procurement.

Sustainability is (currently) unsustainable

The unavoidable conclusion of our research to date is that the current model used to achieve smallholder farmer sustainability is itself unsustainable. There are a number of reasons for this, which need to be addressed if we are to move towards ‘smallholder sustainability 2.0’.

Firstly, it is clear that there are large parts of what needs to be done to make sustainability work which have had little or no attention. Virtually all the work to-date on smallholder supply chains has focussed on the needs of farming communities themselves.

Yet almost nothing has been done to understand environmental and social challenges further downstream in supply chains – the part from farmgate to port. Nor is there much in the way of informed, focussed dialogue with governments, be that of host governments of those of ‘destination’ countries. Supply chains will not be genuinely sustainable unless every link in the chain is sustainable.

Secondly, current efforts are based primarily on a project-based approach. Those projects may be run by companies, NGOs, government agencies, or coalitions of all three, but they are projects, not a joined-up approach aimed at driving systemic change. As a result, there remains too little engagement with the issues where fundamental change may be necessary. For example, as is clear not only from our study, but others such as work done by Wageningen University, a central question is whether smallholder farms can be sustainable in the long run. Until the debate engages with issues like this, sustainability will remain elusive.

Thirdly, the myriad projects operating in any given location are not joined up. In many places, multiple projects exist, but no coordination or collaboration exists between them. There is no shared understanding of the challenges that need to be addressed, nor joined-up approach to dealing with these. Quite apart from the fact that this absence of collective action means the opportunity for larger-scale change is missed, it also means that resource is wasted. For example, our research threw up examples of farmers which had been involved in two or three sets of training, each provided by a different project. Such a situation is not sustainable in the longer run.

Fourth, existing initiatives are inefficient because they are not properly joined-up, even within individual organisations. One example was given of a company’s coffee project support to farmers encouraging them to intercrop with peppers. Yet no mechanism existed to alert those in the same company who were looking to source sustainably produced pepper that this supply existed. There is no mechanism to match sustainably-produced supply with sustainability-seeking demand. Again, this approach means that considerable resources are being wasted, a situation which cannot be sustained within a commercial environment.

Fifth, current approaches remain largely separate from mainstream business functions. Though sustainability departments have increasingly more Influence, until issues of social and environmental harm are properly integrated across whole organisations, they will remain important but tangential. In particular, sustainability issues remain insufficiently integrated into the heart of procurement strategy of most large companies.

Finally, smallholder sustainability projects are pushing into the headwind of ‘business as usual’. The prevailing paradigm of commodity trade does not, in general, accord value to products which have no, or lower, adverse social and environmental impacts. This means that those who do perceive this value will tend to be at a market disadvantage. Global, diversified supply chains make complete sense from the perspective of reducing supply risk, but are at odds with the need, from a sustainability perspective, to have closer and longer-term relationships with suppliers.

How to make sustainability sustainable

In previous articles, we have advocated an approach we think those working in smallholder supply chains need to adopt if they are to address issues like income levels, human rights and environmental degradation. Too often, solutions are proposed to challenges which are imperfectly understood, and little or no collaboration occurs which would allow actions by different actors to come together as a comprehensive approach to making change happen.

To address this, we have advocated the use of research tools such as political economy analysis as a way of properly understanding the realities in a given location, and what we have termed ‘collaborative development governance’ as a means to create joined-up holistic solutions to these.

The findings of our new research report mean that we can now be more specific in defining how these to-date broadly defined tools can and should be applied to making real, systemic, and genuinely-sustainable change happen in smallholder supply chains. We are therefore developing four project streams, each of which will address a different part of the agenda identified by our report, and which collectively will produce a coherent, holistic approach to creating sustainable smallholder supply chains. The following projects will be piloted on a small scale over the next few months, with a view to scaling them up over time.

Country issue matrix

It is clear from our research what issues need to be addressed at field level: working with farmers themselves; ensuring good governance of cooperatives; engaging key elements of the host government; and addressing the downstream supply chain between farm and port. We also know that a clear challenge is a lack of collaboration and join-up between different interventions.

We will work in a range of geographic locations to apply this issue matrix in order to develop a clear understanding of what needs to be done in each location. This work will also allow us to map who is operating there, and what they are doing. This will enable a more joined-up approach.

This will mean that individual programmes will be able to understand in more detail the wider context in which they exist, and collaborate more effectively. This will enable a move from the current project-based approach to something more systematic. From the perspective of procuring companies, consumer brands and others will be able to focus in more detail on the issues which affect their supply chains from different parts of the world. It will help them cut through the noise often surrounding these issues.

A sustainable goods marketplace

Outside certification schemes like Fairtrade, no system exists to match those wanting to sell sustainably-produced goods with those wishing to buy them. Self-evidently, this is highly inefficient.

Even from the relatively small research process we have undertaken so far, it is clear that there are a number of inefficiencies in the production and marketing of sustainably-produced goods. Even within individual companies (albeit very large ones) there seems to be no internal mapping what sustainably-produced commodities are produced, and where. If this is the case even within individual companies, then how much more inefficiencies will exist across the entire smallholder sustainability ‘industry’?

We will develop an effective mechanism to bring sellers of sustainably-produced goods together with buyers of them. As with the risk mapping project, our aim will be to start with a pilot process in a limited number of places, and then expand subsequently.

Engaging the wider business

At present, a key reason why sustainability is not sustainable is that large parts of businesses remain detached from sustainability issues in supply chains. We will develop approaches to address this, building on the following issues.

To begin with, there is a need to understand in more granular detail where the friction points are between ‘business as usual’ in procurement, and how things would need to operate if sustainability factors are to be addressed effectively.  For example, how could one address the apparent conflict between companies’ need to have multiple suppliers to ensure consistent supply, and the need, in sustainability terms, to have longer-term contracts with farmers.

Secondly, some companies have established units which ‘do’ business differently in relation to social and environmental issues in smallholder supply chain, for example, Nestle’s Nespresso business. What lessons can be learned from these specific initiatives which could inform change elsewhere in the business?

Finally, what can be learned from companies in other sectors which have had to learn lessons about building social and environmental considerations into their wider business operations, for example those in the extractive sector.

Engaging the public policy agenda

There is a need to engage the public policy agenda to ensure that it is genuinely supportive of the goal of developing sustainable smallholder supply chains. We will conduct research to ensure that this happens.

Firstly, we will explore what needs to be done to make sure that initiatives like the Sustainable Cocoa Initiative are better informed and more realistic.  How might issues such as governance, transparency and capacity in Cote d’Ivoire and Ghana affect the impact of the initiative, and what might be done to address these things.

Secondly, we will examine how northern’ governments’ strategies for international development, trade and investment can best support the development of sustainable supply chains. Wholesale change in issues like tariff policy are not going to be feasible, but where might small changes in existing regimes be possible which would encourage more processing of raw agricultural products in origin countries, so providing more resources to support smallholders and others in agricultural supply chains.

Be part of the solution

At present, efforts to make smallholder supply chains sustainable are not themselves sustainable. However, what our research has given us is a really clear agenda of what needs to be done to change this. The projects set out above provide practical steps to address different aspects of the challenge, and taken together represent a holistic and comprehensive strategy to create durable agricultural supply chains.

We are putting this programme of work into action during 2021, and we are looking for partners to become involved in what we are doing. As in the first phase of the project, our aim is to deliver both the collective benefit of developing a clearer insight into creating sustainable supply chains, as well as tailored support to each member organisation in delivering their own particular goals. To find out more, please contact either Dr Peter Stanbury or Tobias Webb.

 

Here’s a short podcast summarising the recent research process and paper:

What action is necessary for resilient smallholder supply chains?

Peter Stanbury, senior associate at Innovation Forum, talks with Ian Welsh about new research into how business can help develop really sustainable and robust smallholder farming communities. Stanbury argues that all in commodity value chains need to accept that systemic change is required, and only real cooperation can bring this about.


For more information about Innovation Forum’s Innovation Accelerator initiative, 
click here

 

 

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