Agriculture, CSR and Sustainability, Smallholders, Supply Chain

The security of your supply from smallholder farmers cannot be achieved through good corporate responsibility alone

A guest post by Jim Kirke

Progressive companies’ concerns about security of supply are driving much greater focus on their supply chains involving the smallholder farmers they depend on.

This often leads to a realisation of the need for closer relationships with those farmers, such as direct contracting, support and assistance on the ground and inclusion into certification and/or continuous improvement programmes.

But these closer relationships and most sustainability programmes are typically insufficiently resourced or integrated to address the fundamental risks that undermine the security of supply from the farmer.

Security of supply can only be achieved where farmers:Markets-are-critical-to-the-success-of-smallholder-farmers-credit-Busani-Bafana-IPS

• Have a viable business that allows them to mitigate potentially disastrous risks.
• Are able to manage their operations in a sustainable way to meet consumer and corporate demands and achieve the farm’s own long term viability.
• Are recognised as the core focal point and are empowered to negotiate.
The livelihood of smallholder farmers is highly vulnerable due to the degree of exposure to both environmental risks and social risks, these include risks derived from the impact of:
• Long or short term adverse climate e.g. drought, storm, hail, flood and frost.
• Plant and animal pests and diseases e.g. attack by moulds, insect and virus.
• Loss of a family member through ill health or death.
• Lack of access to education and essential business skills of planning and costing.
• Poor infrastructure e.g. water, power, sewage drains, roads and waste disposal.

Their exposure to these risks is fundamentally due to an inability to mitigate risks with investments or through access to short term cash. This situation is often exacerbated by ambiguous or lack of land tenure rights.

When it comes to establishing the sustainable management by small holders of their farms, even the enlightened progressive organisations that buy the farm produce tend to focus on the delivery of their own corporate sustainability agenda, rather than focusing on the farmer needs.

The weakest point in a supply chain sourcing from small farmers is the potential loss of production and lack of supply from the farm.

Farmers often experience a company’s sustainability expectations as a set of impositions divorced from their needs to create a resilient farming business that can cope with risks and be viable for the next generation.

There are wide ranging expectations of the smallholder farmer to achieve sustainable ways of working.

Consumers have a perception of what sustainability means crafted by brand managers to help them shape consumer purchasing decisions.

Corporations have demands around labour rights, environmental protection (including water stewardship), crop or animal husbandry systems that deliver the product they want and the supply of data they need to monitor and communicate to their stake holders.

While the farmer’s own needs are to mitigate risk and maintain/improve conditions on the farm through a portfolio of farming activities spreading labour and demands on resources, all the while building the farm’s resilience to be able to support the next generation; this of course if land tenure is secured.

A key enabling factor in establishing a viable smallholder farm business is the infrastructure accessible to the smallholder including appropriate roads, communications and health services to support marketing of produce, access to quality inputs and information and health support for workers and family.

So how should you secure your supply chain with smallholder farmers?

blog_potato_farmers

The farmer must be established as the core focal point of efforts to establish a secure supply chain.

However the imbalance in power between the smallholder farmer making cropping decisions and the corporation either directly or more commonly through a middle man or supplier ultimately buying the famers’ produce is massive.

This leads to imposition of priorities and requirements that do little to help secure the supply chain.

To date, very few organisations have successfully integrated their supply chains with smallholder farmers through direct partnerships or through agents and suppliers.

This is a highly resource dependent approach requiring high levels of commitment and therefore expense.

A route that many have used is certification, and undoubtedly this has achieved much, both in terms of consumer engagement as well as material change in the supply chain.

However the multiplicity of certificate providers, their lack of regulation, the differing standards and in many instances duplicate but conflicting demands on smallholder farmers is counterproductive to the farmer implementing viable sustainable ways of working, undermines trust and is not an effective mitigation against social or environmental risk.

Continuous improvement programmes are seen by many as a more realistic and constructive approach, but these also require a high investment.

The sweet spot of a truly secure supply chain can be achieved when:

All parties involved, including the small holders, local Government/Regulators and the procuring partner are able to dialogue with mutual respect.
This may require arbitration by the local civil society or international agencies and is more than likely to require some form of community or co-operative representation by the smallholder farmers.

Sustainable ways of working are achieved to deliver sustainable agriculture.
In nearly all cases, a holistic approach is required that takes into account the location, environment and community of the smallholder and the ecosystems he/she impacts and relies on.

At the same time a comprehensive understanding is required of the differing requirements of different customers of the smallholder and how all these demands can be addressed through complimentary sustainable practices.

The challenge is to identify the right management approach and transfer that knowledge to the farmers within the location.

Consistency of message is key and collaboration between the community, local Government and different customers of a landscape is required.

• Finally the smallholder business needs to be viable. Some form of shared responsibility, whether that is through formal co-operatives or community based initiatives will help mitigate risks more easily.

Fundamental to improved livelihoods are transparent pricing and demand information for different crops prior to committing to grow them to allow the farmers to make informed decisions about what they plant.

Similarly, access to sufficient capital (financial or shared equipment) to deliver plans and further mitigate risks. The economics of viable farmer livelihoods is complex, but essential to understand.

This is a daunting scene to present to a one to many procurement model in terms of financial commitment and risk.

Equally daunting is a many to many collaboration model full of pre-competitive co-operation and ‘matrix’ management, difficult enough to make work in the confines of a business unit, let alone a location many hours and time zones away.

But security of supply will continue to worsen and the risks increase and corrective action will only get more and more costly if the fundamentals are not addressed.

Jim Kirke is director at Sustainable Agricultural Supply Chains Ltd. jim.kirke@sustainable-ag-sc.com. He recently attended Innovation Forum’s “How Business can Engage Smallholder Farmers” Forum in London on March 22-23.

These issues above will be debated at forthcoming Innovation Forum events in Washington, D.C., Jakarta and later in the year, in London. See below and for information on the June forum in Jakarta on smallholders please contact: Boris.Petrovic@innovation-forum.co.uk

Supply Chain Risk & Innovation (SCRI) is the subscription publication from Innovation Forum. Packed with concise, practical insight into global supply chains, with all the essential information pulled together for your convenience.

Published 10 times per year, SCRI is required reading for senior management, buyers and sustainability professionals.

For more information or to get in touch contact Eilidh Morrison on Eilidh.morrison@innovation-forum.co.uk.

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