Value Chains & Inclusive Business

Chris ClaesBIO workshop on investing in sustainable agriculture10/07/2014 – BBL2MEET, Tweekerkenstraat 47, 1000

Brussels

Terminology01

table of contents

The Impact We Pursue, Systems and Complexity0

2 Investing in Collective Farmer Enterprises0

3

Investing in Relationships Between Collective Farmer Enterprises and Buyers

04 Practice of

Vredeseilanden/VECO Working Towards Inclusive Supply Chains

05

1. Terminology

What we talk about when we talk about market chains

farmer co-operative

trader processor retailer

Value added at each level

cocoa fermented cocoa chocolate paste pralines café experience

https://www.youtube.com/watch?v=mu9TWlcjNKk

The movement of materials 

sugar sugar ice cream supermarket

08/07/2014

Our value chain

| 708/07/2014

upstream downstreamOwn operations

Ben Davies, Delhaize, powerpoint presentation, Vredeseilanden General Council, October 2012

Pro-Poor Value Chains (VC4D)

• Value chains that have a positive impact on the livelihood of poor people through: Creating good rural jobs (often the most poor are laborers) Supporting small scale enterprises Investment in communities / taxes payed to governments etc. Buying from smallholders

Inclusive Supply Chains• Supply chains that include smallholder farmers (and their

organisations) as suppliers of agricultural products

Why focus on smallholders?

• Agriculture has great potential to help with rural poverty• Most of the world’s food insecure live in rural communities• Agriculture is proven path out of poverty• Smallholders produce between 50 to 70 % of the world’s food, we will

be 9 billion by 2050, 70 % will live in cities• Links to markets are a critical part of creating agricultural

opportunities

Value chains, services and enabling environment

Chain Wide Learning Guide IIED/CDI Wageningen http://pubs.iied.org/16502IIED.html

David Bright, Oxfam UK, powerpoint presentation, General Council Vredeseilanden, October 2012

2. The Impact We Pursue, Systems and Complexity

The impact we pursue

http://www.fastinternational.org/files/FAST%20SIAMT%201.0%20Full%20Report%20_0.pdf

Systems Thinking: Actions have to take into account the whole system Poverty reduction only posible when global sustainability addressed:

economic, social, environmental (long term) Multi-actor engagement, differing perspectives Added complexity prototyping, short feedback loops

http://policy-practice.oxfam.org.uk/publications/making-markets-empower-the-poor-programme-perspectives-on-using-markets-to-empo-188950

Livelihood strategy

upgrading strategy

Trading relationships

Product value proposition

• Interventions in a particular system affect the whole system

• It’s not about adding up scores, one critical factor undermines sustainability

http://www.apsa.am/images/RISEIndicatorsE_RDN1_2009.pdf

http://en.wikipedia.org/wiki/Cynefin

Intervention areas for upgrading ordeveloping market chains

• Investing in smallholder farmers (capacity, farm infrastructure, materials,…)

• Investing in collective farmer enterprises (cooperatives etc.)

• Investing in service provision• Investing in SME’s buying from smallholders• Investing in relationships between buyers – collective

farmer enterprises• Investing in enabling environment (legislation,

government incentives..)• …

3. Investing in Collective Farmer Enterprises

chain co-owner

chain partner

chain activity integrator

chain segment

Farmer Organizations Development Paths

Investing in cooperatives /collective enterprises

• Being a trustworthy business partner for other chain actors and for own members Comply with demand (quality, food safety, good agricultural

practices, sustainability, label requirements, continuous supply, scale…)

Services to members, internal control systems to guarantee compliance with demand,

Run the business professionally (management) Perform to be an added value for the smallholder members

(negotiation capacities, power, but also economic efficiency)

Collective Selling

Processing • Add value

4. Investing in Relationships Between Collective Farmer Enterprises and

Buyers

Business Models that engage smallholder farmers

• Centralized model: a company provides support to smallholder production, purchases the crop, and then processes it, closely controlling its quality (cotton, sugar cane, tea, banana, palmheart…).

• Nucleus estate model: the company also manages a plantation in order to supplement smallholder production and provide minimum throughput for the processing plant (oil palm, rubber, mango, …).

• Multipartite model: involves a partnership between private companies and farmers ( and often government bodies).

• Intermediary model: subcontracting by companies to intermediaries who have their own (informal) arrangements with farmers (groundnuts…).

• Informal model: SMEs who make simple contracts with farmers on a seasonal basis, often repeated annually.

http://www.fao.org/docrep/014/y0937e/y0937e00.pdf

Possible investment alternatives to landgrabbing

Principles Inclusive Business Models• Chain-wide collaboration with shared goals

Alignment of goals/vision, regular information flow processes, identified champions in lead firms

• New market linkagesAbility to aggregate and reach high value markets, steady and durable market,

complementary markets for seconds and other products, ability to function without subsidy

• Equitable and transparent chain governancetransparancy (price structure, grades, standards, incentives), traceability to farm level,

risk sharing, governance mechanisms, shared equity, contracts• Equitable access to services

Input supplier models, high-quality planting materials, technical support, provision of credit

• Inclusive innovation (vertical co-innovation, process and product)Mechanisms for getting farmer input, continuous renewal of product, diversification

• Measurement of outcomesFeedback mechanisms along the chain, regular assessment process, decisions based on

assessment, assess environmental results

http://www.veco-ngo.org/blog/canned-asparagus-peru-finds-its-way-belgian-supermarket-chain-colruyt

5. Practice of Vredeseilanden/VECO Working Towards Inclusive Supply

Chains

Cases on www.veco-ngo.org

• Cocoa: Armajaro/Mars Indonesia

• Fresh Vegetables: Walmart Nicaragua, Honduras

• Tea: Unilever & local SME, Vietnam

• Dessert banana: Colruyt, Agrofair, Senegal

• Organic rice: Indonesia, Biofresh

• Passion fruit & avocado: Tanzania, Special Fruit nv.

• Organic plantain chips: Ecuador, Ethiquable.

http://dapa.ciat.cgiar.org/wp-content/uploads/big-files/2012/LINK_Methodology.pdf

CANNED ASPARAGUS

SUPERMARKETIMPORTERAGRO INDUSTRY

Farmer Organization

PRINCIPLE OF INCLUSIVENESS

• Common goals of collaboration.

• Identification of leaders.

• Interdependence between actors.

• Stable market

• Expansion of market

• Diversification of market

• Quality standards.

• Volumes,.

• Prices

• Risk Management

• Risk sharing

Coordination or provision of financial and non-financial services, technology, certification, etc.

Innovation in product or service that generated actors according to farmers needs

Evaluation of the business relationship and inclusiveness (indicators)

Making sense of complex realities

Using Sensemaker® to measure, learn and communicate about smallholder farmer inclusion

http://www.veco-ngo.org/blog/using-sensemaker-measure-learn-and-communicate-about-smallholder-farmer-inclusion

http://www.sensemaker-suite.com/smsite/index.gsp

Thank You

Chris Claeschris.claes@vredeseilanden.be

www.veco-ngo.orgwww.vredeseilanden.be

Blijde Inkomststraat 503000 LeuvenBelgium