IFAD Greenin Value Chains Presentation

© Bios Partners 2008

Greening Value ChainsAre value chains an entry point for managing natural assets ?

Steve Homer


10 second biography ...

• 25 years in international agriculture and horticulture

• Flamingo Holdings CSR manager - €300M supply to EU supermarkets

• Ethical Trading Initiative Board Member

• Former GlobalGap Board of Directors

• CMI Agri-Certification Governing Board

• Public and private standards and development consultancy

DFID/Chatham House Procurement Forum

IIED/NRI Trends in private Agri-food standards

B&M Gates Foundation New Business Models

Unilever standards benchmarking consultancy

UNIDO – Trade standards compliance reporting

World Bank – Standards consultancy

GFSI – Standards benchmarking consultancy

WTO STDF – Private standards briefing

Meatco Namibia – EU supermarket entry requirements


Content ...


Good Agricultural

Practice

Globalgap

Good Manufacturing

Practice

BRC

IntegritySocial & Ethical

ETI

SA 8000

Environmental

ISO 14001

Rainforest Alliance

CARBON !

Business Equity

Fair Trade

Provenance

Integrity to provenance ...

5 years


Drivers - Campaigns & media…

• “To you it is a bag of salad, dropped into the supermarket trolley with the weekly groceries”

• “The world is running out of water and British supermarket shoppers are contributing to global drought”

• The Independent May 2006

http://www.independent.co.uk/


Why Now ?

• Sceptical consumers• World food shortages• Climate change• Buy local• Credit crunch• Oil prices

• Mature supply chains reverting to survival mode and more ‘risk averse’


Pesticide residues in food, worker health and safety

Packhouse labour conditions, excess corporate profit

Climate Change Debate

The lens - A ten year UK retail cycle


Public response to carbon ...

• PAS 2050:2008 - Specification for the assessment of the life cycle greenhouse gas emissions of goods and services

• Sponsored by Defra and the Carbon Trust

• PAS 2050 builds on existing methods established through BS EN ISO 14040 and BS EN ISO 14044 by specifying requirements for the assessment of the life cycle GHG emissions of products.

• Similar initiatives in many countries – The public / private institution approach.

http://www.bsigroup.com/en/Shop/Publication-Detail/?pid=000000000030154435

http://www.bsigroup.com/en/Shop/Publication-Detail/?pid=000000000030154427


EQUALITY & RIGHTS

ISO 22000

ISO 9000

ISO 14000

Testing Services

Private Standards Framework

Private GAP

Private GMP ENVIROMENTAL

Business to Business

SOCIAL & LABOUR

Business to Consumer Business to Society

1990 20102000


A private response - BENTONVILLE, Ark., July 16, 2009

• Walmart will provide each of its 100,000 global suppliers with a survey of 15 questions to evaluate their own company’s sustainability. The questions are divided into four areas:

– Energy and Climate

– Natural resources

– Material efficiency

– People and Community

• Walmart is helping create a consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products – from raw materials to disposal.

• Walmart will provide the initial funding for the consortium, but it is not our intention to create or own this index.


• Environmental and Pesticides

– Our unique approach with 'Nurture' offers us the fantastic opportunity to pioneer standards around the use of pesticides, reducing energy usage and allows us to break new ground improving and enhancing the local environment.

• Social and Ethical

– Working in partnership with the ETI we ensure our suppliers are annually risk assessed on ethical standards and worker welfare to ensure that all standards are achieved. Our dedicated technical team also visit suppliers to ensure continuous conformance. This is evaluated and monitored using SEDEX, the Supplier Ethical Data Exchange.

How does Nurture work?Each grower is audited on an annual basis to ensure they meet the required high standard Tesco has set. No matter where in the world we source our fruit and vegetables from and who we work in partnership with we use one standard this is Nurture.

Business to Business Business to Consumer Business to Society

1990 20102000

The combination standard B2B becomes B2C


Carrefour

• Quality

• Food Safety

• Code of Conduct/Supplier Charter

• Global Compact

• 20% energy consumption pledge

• GSCP – Social and labour rights

• Parenthood Charter

Business to Business Business to Consumer Business to Society

1990 20102000


Content ...


SmallholderGrower

Packer – ProcessorExporter

DistributionAir Freight

UK Break BulkFreight Distribution

UK Packer Importer

SupermarketDistribution Hub

Regional Distribution Centre

Supermarket Retail Store

CustomerConsumer

Freight DistributionCustoms & Health Inspections

UK Packer Importer

UK MarketWholesaler

Retailer / CatererTrader

CooperativeInformal Merchant

Field staff & management

%age of product not suitable for export

Freight charges dependent on availability & exchange rate

Capital investment in buildings & packhouses.

Certification charges & staff costs and wages

Expensive levy charges applied to transport

Chilled distribution so expensive running costs

QC inspections grade out & rejections

Inspections , delays, fees & rejections

Capital, rates, staff and running costs

QC inspections specifications & more potential rejections

If product is not sold then wasted

Product wasted if not sold

Consumer looking for best value for money

Consumer looking for best value for money

Typical Vegetable Supply Chain

• “The trouble with the English is that they spend all of their time cleaning

their neighbours houses”

• Kenyan farmer 2009


Sustainability changes in value chains are chain wide

• “The trouble with the English is that they spend all of their time cleaning their neighbours houses”

• Sustainability demands and concerns from the north are not widely understood by small farmers and are seen as imposing values

• Conservation of natural resources for long term gain is tough to sell to a farmer who has six children to educate today

• There is no mainstream market premium for sustainable products – sustainability premiums must come from more efficient value chains


Misconceptions ... And opportunities

• Select ‘positive’ intermediaries

• Make the chain more transparent

• Invest in the intermediary services

• Encourage co investment between farmers and intermediaries

Producer Intermediary Intermediary 2 Wholesaler RetailerProducer Intermediary Wholesaler Retailer Retailer$Informal services

•Mobilisation•Consolidation•Finance•Planning•Transport•Risk

http://www.regoverningmarkets.org – Bill Vorley & Felicity Proctor

http://www.regoverningmarkets.org/


Efficient targeted intervention and investment

• 3000 farmers

• 100 farmer groups

• Consolidator exporter

• 10 Retailers

• 60 million consumers


Market inclusion new model

Organized and Empowered farmers


Content ...


Flowers grown by rural smallholders

• 3000 smallholders

• Growing local vegetables

• Not “certified”

• Flowers are upgrade products

• Current supply to the Dutch auction as a commodity via the intermediary


Wilmar Naturegrown

• Naturegrown provides (with USAID)

– Shade nets for crops– Seedlings for Delphinium, Strelitzia,

Agapanthus– Building grading sheds– Supplying appropriate chemicals and

fertilizers on crop payback terms

• Training currently includes (Africa Now)

– GAP and Agronomy– On farm record keeping– Forming and registering legal

associations (SHGs)– Farm committees and policy meetings


Wilmar Flowers

• A ‘trader’ providing

– Group planning

– Raw material

– Start up funding

– Weekly group aggregation of auction prices

– Working with NGOs like USAID and Africa Now

• NEW BUSINESS MODELS – BMGF/IIED intervention started 2009


New Farmer Groups

Farmer Groups

USAID/FINTRACAgricultural practice and awareness

training

Africa NowOrganising self

help groups and micro finance introductions

Wilmar flowers

Auction 2

Auction 1

Auction 3

Sales Aggregation

Crop Planning

Agronomy & Materials Support

Miami Freight Agent

Wilmar flowers

New Flower Varieties &

Inputs

EU based flower packer

Wilmar flowers

New Flower Varieties &

Inputs

Upgraded Farmers

Rainforest Alliance

Certification

Upgraded Farmers

Upgraded Farmers


Greening the value chain

• $5000 for training and certification of farmers

• $3000 for purchase of protective clothing !

• 15 weeks of trade with ASDA at a steady market price (not premium) returned $6000 extra revenue to farmers

• Premium was derived from new market access, cost of certification covered in 15 weeks

• Capturing rural best practice and applying that to capture market access. Small farmer flower growing protocol.

• Investing in the intermediary – RA certified farmers are differentiated from his competition.


Wilmar flowers

Upgraded Farmers

Farmer Groups

UK based Freight Agent

Miami Freight Agent

EU based Freight Agent

Northern and Central Kenya

Potentialother

regionalgroups

Farmer Groups

Upgraded Farmers

Southern and Western Kenya

Phase two – Entrepreneurial funding

Rainforest Alliance certified + Local farmer protocol

Investment here greens the local value chain – but does not address upstream?


Content ...


Monday, 1 June 2009 Greenpeace Website

“A three-year, undercover investigation by Greenpeace into Brazil’s booming cattle industry has exposed links between some of Britain’s biggest brands and the destruction of the Amazon rainforest. Cattle ranching in the Amazon region is now the single biggest cause of deforestation in the world, and the expansion of this industry is being driven by the global export market”

Another Issue Looms


The drivers and issues move fast…

• Exclusion from EU market ?

– Phytosanitary

– Public Regulation

– Nation States

– Science based

– Invisible to consumers

– WTO arbitration

• Barrier to return 1 year later ?

– Environmental

– Unregulated

– Private Entities

– Allegation Based

– Visible to consumers

– Arbitration by ??????


Summary – The public debate

• The sustainability debate is now veryB2C with a “viral media” and less B2Bdriven

• The drivers themselves are more subjective and less scientifically drivenand are potentially more damaging to brands who do not react quickly

• The gatekeeper criteria controlling market entry to the global retailer and manufacturer brands are not radically changing in food safety but are expanding quickly into provenance or credence issues.

• Proliferation of feel good labels have become short term “proxy” standards as the scientific debate is still unresolved.


Namibia fact file... 2M Cattle and 2M people

• Second least densely populated country in the world, approx size of Texas

• 50% of the population live below the international poverty line (US$1.25/day)

• 70% at the population are involved in cattle farming and agriculture

• 70% of Meatco cattle are sourced from larger, well organised commercial farmers

• Over the last 10 years Meatco have invested in excess of N$200m in the Northern Communal Farming Areas of Namibia.

• Meatco, through the Meatco Foundation run many outreach and development projects for rural farming communities


Meatco Cattle and Factories

• Meatco cattle are:

• Produced naturally in an open and healthy environment with no hormones or antibiotics allowed

• Fully traceable back to the supplying farm

• From selected, accredited farms

• Processed in Windhoek and Okahandja – both fully accredited and regularly audited to EFSIS and BRC standards

• Expertly chilled following slaughter with full pH testing

• Butchered to specific retail customer specification

Cattle on the Voigtland commercial farm

A Family in the northern community area


Ethical Branding - “ Fair Beef ” Label

• Objective to establish “Good for Development” beef product

• Consult with expert partners such as WWF, Solidaridad & UTZ to gather

best practice advice and stakeholder input

• Develop a wider Southern Africa Farming platform from our small pilot

• “Sustainable Beef Development” Round Table – African voice !

• EU Retailer Support

• Looking for US support

• Prove to OIE that Africa can be aresponsible beef export producer in the future ?


CSR DevelopmentEthical Branding - “ Fair Beef ” Label

• Farmers – Livelihood improvement

• Staff – fair treatment and welfare

• Community – trickle down of export benefits

• Environment – at least a neutral impact of farming

• Not for profit foundation – stakeholder involvement

• Donor development networking – attract partners - aid for trade


CSR & Certification Activities

• Cooperation with stakeholders to manage outreach and development projects – WWF, Solidaridad

• Water borehole projects and bush reclamation and pasture management

• GPS – UK marketing agent for Meatco investing and promoting sustainable beef – Livelihood improvement

• 2 Scandinavian, 1 European retailer now direct supply and talking about African beef


Brand Extension


EU Retailer Development


Phase 2 – Entrepreneurial funding

• The northern communal areas cannot export – VCF and OIE clearance

• The northern communal areas have the largest volume of cattle farmers

• Creation of a holding lot, cooking plant would open access to 200,000 rural farmers excluded from high value markets (c.$50 per animal).

• Matched funding with state meat company $4MUSD required over 2 years

• No funding for export, no funding for meat, Namibia “not poor enough”

• With 200 Million Cattle in Africa and only two countries able to export to the EU the potential to pilot in Namibia is huge.


Greening Value ChainsAre value chains an entry point for managing natural assets ?

Steve Homer

THANK YOU

“Linking Worlds”DON SEVILLESustainable Food Lab

“Re-governing Markets”BILL VORLEYIIED

New Business ModelsBMGF SFL/IIED

IFAD Greenin Value Chains Presentation

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