Photo: Fairtrade Foundation / Jasper Carlberg
Making international supply chains work for smallholder farmers
In the wake of recent food scandals, the need to increase focus on building more transparent and accountable food supply chains has once again been in the spotlight.
Seeking greater transparency between trading partners, from consumer to retailer to small farmer organisations will also be one of the themes under discussion at a business roundtable event being hosted as part of Fairtrade Fortnight by KPMG and the Fairtrade Foundation on Wed 27 February.
The event is the latest phase of a programme begun by the Foundation in 2011, to explore how to build better approaches to engaging with smallholder organisations as part of international supply chains. With nearly one million small-scale farmers involved with organsations now certified to sell on Fairtrade terms, plus over 450 businesses working with the Fairtrade system in the UK alone, there is a wealth of insight that we believe, through dialogue and collaboration, could lead to building best practice models for the future.
Our initial research (conducted in partnership with TWIN) with a small number of smallholder organisations in Africa highlighted a number of themes, aired on BFP by Aurelie Walker. It included the importance of finance models and timeliness of payments, the power of farmers’ organisational capacity building, and also farmers’ own expectations of transparency from business partners to know where their products end up. Fundamentally, it also pointed to transformational effects when buyers and traders going beyond mere compliance with Fairtrade standards and start to build more direct relationships and explore added value models.
Our new report How businesses are going further to make international supply chains work for smallholder farmers launches on Wednesday 27 February, develops these themes further from a UK business perspective. Interviews conducted by KPMG with 11 businesses working with smallholder supply chains revealed a range of perspectives. For example on the business case for investing in smallholder organisations as social actors, several recognised and supported investment of Fairtrade premiums into social and community facilities as a way to ensure progress in building the kind of communities future generations will wish to live and work in, thereby an intrinsic part of future sustainability of ingredients.
Others were frustrated by farmer organisations prioritising more social concerns over more closely supply related productivity and yield enhancement challenges. Companies and traders working most directly with farmers’ organisations expressed concern that those closer to the consumer end did not always appreciate the cost and timing issues associated with ensuring farmers are able to deliver the harvest, and the upfront investment this required. Increasing traceability and transparency in supply chains was seen as desirable by all, but it is clear that this is only a means to delivering what trading partners are really striving towards, which is mutual accountability.
So what kind of partnerships might deliver better outcomes for business and smallholder organisations alike? A wealth of permutations emerge in our increasing Convergence Economy. Government support, such as DFID’s FRICH programme, are clearly playing a useful role in providing financial incentives to take the risk of building new sourcing partnerships, although in this case has so far been limited to food retailers, rather than a wider selection of businesses, and also to Africa, so a case for complementary or wider scope might be worth exploring. Dedicated Fair Trade Organisations continue to play a catalytic role here too, as can be seen through TWIN’s work with Sainsbury’s Fair Development Fund to develop coffee supply chains from Congo, or international institutions and brands, or Cafedirect’s partnership with IFAD to open up a new source of high quality cocoa sourced from newly established smallholder cooperatives in Sao Tomé, or Tropical Wholefoods’ work to source Fairtrade almonds for Ben & Jerry’s ice-creams, which required a tripling of volumes available.
In the search for best practice in making supply chains work better for smallholder farmers, it is clear that no one model of best practice applies universally. Different commodities, origins, smallholder organisation capacity issues, supply chain structures and retail market dynamics can affect what is actually feasible. However, there are some very clear themes which merit further investigation. We hope by creating a platform for these to be explored more closely by supply chain partners, new insights and models of business practice may emerge. After all, smallholders produce 70% of the world’s food, but also make up half of the world’s hungry people. Ensuring trade works better for them is one of business’ biggest challenges in fighting poverty.