Category Archives: Supply Chains

Cooperative Africa

In January Social Business Network’s director Nick Hoskyns traveled to Uganda and Rwanda with the Thanksgiving Coffee Company to visit several coffee cooperatives.

Nick brought his expertise in cooperative development to help deepen the relationships between the coffee growers, cooperatives, and buyers and resolve some transparency issues. He reflects afterward on the relevancy of his years of experience in Latin America in other continent, showing the universalism of cooperative business model.  “Uganda and Rwanda are beautiful and fascinating in their own ways with a lot of potential and really wonderful people.”

You can read more extensively about the trip on Thanksgiving Coffee’s blog.

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Moving Upstream: Why Farmers Need to Gain Control over their Inputs

This post is adapted from the blog of Social Business Network’s Communication and Sustainability Director, Rachel Lindsay.  The original post can be seen at Sustainable Farming in Nicaragua.

The ground is fertile for new sustainable agricultural markets, pun intended.  Not only is there  growing consumer awareness and expanding markets for organic and sustainably grown products, but a recent estimate places a $4.5 billion value on the “green agricultural technologies” market over the next decade, including improvements in available biopesticides and organic non-petroleum based fertilizers.  Which is great, except that with harsher climate extremes and increasing intensity of pests and diseases, it is unclear whether this investment will result in increased production yields or simply be necessary to maintain the current level of production.  And of course, this doesn’t mean $4.5 billion for farmers – unless farmers come together to invest in the development and creation of their own amendments.  The infrastructure within the agricultural cooperative movement should give farmer cooperatives an advantage in centrally producing economical and ecological inputs for their member farmers, retaining some of the value of this growing industry in the hands of small farmers.   Since it is in the best interest of farmers to have ownership over the quality and source of available amendments, supply chains should come together to create policy and promote business models that give farmers a stake in the upstream agricultural supply markets.

UNCTADThe recent United Nations Conference on Trade and Development (UNCTAD) Trade and Environment Review 2013 is entitled “Wake Up Before It Is Too Late” and stresses the need for transformations in our food systems that strengthen farmers’ ability to employ ecological practices that increase the stability and health of agriculture and the environment.  The report, compiled by over 60 experts in the field, lists as one of its key points the need to recognize farmers as more than just producers.  Farmers are managers of agro-ecosystems that impact public goods and services including water, soil, land use, energy, biodiversity and recreation.  When we recognize them as managers with influence in several areas of long-term impact, the resources that we make available to them and the role they play in trade relationships and business takes on greater importance.  In one section entitled “Democratizing the Role of Agriculture to Meet the Needs of the 21st Century,” the report outlines the effects of the consolidation of corporate interests in agriculture – from monopolization of upstream markets including seeds, pesticides and fertilizers, to lobbying and influencing trade and farm policies that protect corporate interests and rights over the rights of farmers.  Although as stewards of the land farmers have the potential to greatly impact carbon sequestration, erosion, local food systems and energy production, the consolidation of corporate interests effectively prioritize profit margins on fertilizers, seeds, and retail over supporting good farm management and profitability.  As the graph below from the Canadian Department of Agriculture shows, the price of fertilizers is directly linked to the rising cost of fuel, diminishing profit margins for farmers.

From 1999 the gap between the cost of fuel and cost of crops on the market has widened at an increasing rate, reducing profitability margins for farmers.

From 1999 the gap between the cost of fuel and cost of crops on the market has widened at an increasing rate, reducing profitability margins for farmers.

The UNCTAD report suggests a variety of concrete actions that should be relevant especially within fair trade and alternative supply chains.  There are examples of farmer groups who have made investments in the production of fertilizers and seeds.  I have previously written about SOPPEXCCA’s fertilizer plant as a model coffee cooperative’s initiative to take into their own hands the lack of effective organic certified fertilizers on the market.  Because the farmers themselves have a stake in the fertilizer production, the quality of the finished product, and the profitability of the coffee production, the investment includes annual tests and improvements in the composition of the fertilizer they make, effectively lowering the cost of the fertilizer for farmers rather than raising it.  The Juan Francisco Paz Silva  (JFPS) cooperative produces bio-fertilizers inoculated with mycorrhiza and beneficial micro-organisms for their member farmers and maintains a demonstration plot to continually test and experiment with improved formulas.

A range of fertilizers produced by the Juan Francisco Paz Silva Cooperative in Achuapa, Nicaragua

A range of fertilizers produced by the Juan Francisco Paz Silva Cooperative in Achuapa, Nicaragua

Other examples of farmer groups taking a pro-active stance to protect available cost-effective quality inputs for farmers that are not controlled by  are seed savers groups and seed banks.  The difference between farmer-driven and corporate-driven amendments is simple – farmers have a vested interest in the effectiveness and quality of the product, as well as in their affordability and long-term ecological impact.  Corporations only have a vested interest in the first. As the examples of SOPPEXCCA and JFPS show, farmer cooperatives have the infrastructure to produce and monitor amendments.  In both case however, additional support would allow them to scale up their production and explore new formulas to continually improve the quality and availability of these products.  Actors within supply chains should come together to invest in the local development and production of upstream agricultural inputs.  To ensure the sustainable futures of our supply chains, we should heed the advice of UCTAD and support farmer groups in gaining ownership over their sources of inputs like fertilizers, amendments, and seeds.

What other innovative farmer-initiated production models or policies are currently working to shift upstream market control, productivity and profitability into the hands of farmers?

Ético: An Alternative Trading Company

In this guest blog Social Business Network/Ético intern Nora Burkey applies the frameworks outlined in a classic text used in many business and development schools to form an analysis of Ético’s business model: 

In their newly revised book “Reframing Organizations: Artistry, Choice, and Leadership,” Lee Bolman and Terrence Deal maintain that people live their day-to-day lives as parts of many complex organizations, from schools to sports teams, from families to the working world, and more.  Cooperativization in Nicaragua is a very clear example of how people commit to organizations, and likewise Ético: The Ethical Trading Company provides another example of organization in the workplace, as it is a company 100 percent owned by organizations who work together.  As a very innovative company that at its core is promoting a fairer model for international trade, how can Ético show that managing so many organizations and interests is not only possible, it is better?

As the United States has ruled that corporations may be considered people, at least symbolically, perhaps it is not so strange to consider Bolman and Deal’s point that companies or organizations need ethics, or a soul, to survive.  They need a sense of identity.  Bolman and Deal write,

Many would scoff at the notion that organizations can have soul, but there is growing evidence that it is a critical element in long-run success.  A dictionary definition of soul uses terms such as “animating force,” “immaterial essence,” and “spiritual nature.”  For an organization, group, or family, soul can be viewed as a bedrock sense of identity, a deep confidence about who we are, what we care about, and what we deeply believe in….Growing evidence suggests that tapping a deeper level of human energy pays off (p. 396).

Quite possibly it is the very soul of Ético that makes it function so well.  Ethics, and giving voice to more people within an organization is not only moral, it is equally if not more efficient than power concentrated in the hands of one leader or one owner.

In their book, Bolman and Deal present four frames with which to look at and understand organizations.  Their purpose in doing so is to help organizations better manage themselves, as “modern mythology promises organizations will work splendidly if well managed,” (p. 8).  Although, they say, there exists book after book on how best to manage a company or organization, very few people understand the importance of joining solutions together and understanding organizations through many different lenses.  This is critical, as organizations are made up of individuals who all see differently.  Viewing Ético and the cooperatives they work with in light of the four frames outlined by Bolman and Deal gives a better sense of their function, mission, and effectiveness.

The structural frame emphasizes goals and roles for a unified strategy that produces output. The workplace can be viewed as a factory, whereby “the ethical imperative of the factory is excellence: ensuring work is done as well and as efficiently as possible to ensure high-quality output” (p. 400).  There are many examples of high-quality, unique and individual output in the work of the cooperatives and Ético.  The Body Shop (TBS) buys quality sesame oil from one of Ético’s shareholding cooperatives, Juan Francisco Paz Silva (JFPS).  When the price of sesame rose in 2008, The Body Shop and the JFPS Coop renegotiated what the new price was going to mean, and in doing so authored the unique “Recognition of the Unpaid Work of Women.”  As an additional example, cooperative members have created their own unique products, from sesame candy to hibiscus wine, all of it at a level of quality that both The Body Shop and small farming communities can be proud of.

In the human resources frame, the organization can be viewed as a family.  Bolman and Deal write,

Caring—one person’s compassion and concern for another—is both the purpose and the ethical glue that holds a family together….A caring family or community requires servant leaders who serve the best interests of its members and stakeholders.  This implies a profound and challenging responsibility for leaders to understand the needs and concerns of community members so as to serve the best interests of individuals and the community as a whole.  The gift of the servant leader is love” (p. 402).

Both authors acknowledge that it seems strange to talk about love in terms of organizations, but maintain that a successful leader of an organization is truly a servant, and serves out of self-less love for the family or organization.  The very structure of Ético relies on servant leadership.  Historically, The Body Shop had been buying from the JFPS Cooperative before Ético existed.  In fact, Ético was born when L’oreal bought The Body Shop to preserve the direct relationship between the JFPS Cooperative and the renowned cosmetics line.  What this demonstrates is that Ético was born out of service to the cooperative when the farmers needed a new type of leadership to be able to continue working with a large multinational company.

In the political frame, the workplace can be seen as a jungle where there is a constant battle and the routine seeking-out of self-interested gains.  “In a world of competing interests and scarce resources, we are continually compelled to make trade-offs.  We cannot give everyone everything they want, but we can honor a value of fairness in making decisions about who gets what” (p. 403).  Bolman and Deal maintain that leaders can ensure this type of justice in the workplace by putting power in the hands of employees.  “People with a voice in key decisions are far more likely to feel a sense of justice than those with no seat at the table” (p. 403).  In the cooperative model, members gets one vote no matter how much land or money they have, and no matter how much they supply to the cooperative.  By working with cooperatives, Ético ensures that it works with the most marginalized groups, the smallest of farmers, giving them as much as say as those better off, creating a sense of justice in being a cooperative member.

Finally, in the symbolic frame , “An organization, like a temple, can be seen as a sacred place, an expression of human aspirations, and monument to faith in human possibility.  A temple is gathering place for a community of people with shared traditions, values, and beliefs” (p. 405).  Above all, workers must feel that the organization is doing something worth doing, that there is some significance to their work.  As the founder of Ético has been with the cooperatives from the beginning, instrumental in their creation, Ético is an outgrowth of the existing family.  Together, that family has many traditions.  For example, each year the cooperatives and Ético share traditions, such as putting on an annual music festival, and so far these traditions have not been broken.  There is a very real sense of community, and based on conversations with cooperative members, there is the belief that the cooperatives, as well as Ético, are there to help.  The cooperatives believe in what they do and therefore members believe in them too.

Source: Bolman, L. G. & Deal, T. E. (2003).  Reframing Organizations: Artistry, Choice, and Leadership.  San Francisco, CA: Jossey-Bass.

Nora Burkey is currently a candidate at SIT Graduate Institute for a Master’s in Sustainable Development.  She became involved with Social Business Network in August 2013 after connecting with Dean’s Beans Organic Coffee Company, a trading partner of ÉTICO.  She currently lives in León, Nicaragua, and plans to continue working with Dean’s Beans and Social Business Network on development projects into 2014.

When failures matter more

This year Nicaragua hosted the 2013 Human Development and Capability Association’s annual conference.  The three day event was held in the University of Central America and the participants represented a diversity of organizations and universities from 44 different countries.  The final speaker of the conference was Joshua Cohen, an American philosopher and professor at Stamford University.  His talk focussed on his experiences bringing together students from CA and Nairobi to design mobile technology innovations that address health and human development.  His examples included several pilots that failed – point being, it’s important to fail and learn from your failures so you can apply that to your next pilot.  As long as your keep trying, you will have success.  

In the Q&A, Social Business Network’s representative at the conference asked Cohen why it is acceptable for individual startups or pilots to repeatedly fail, while other models of business development such as cooperatives are written off when they fail.  While unfortunately Cohen agreed but couldn’t offer any further insight, it is worth considering when analyzing supply chains.  Many critics of Fair Trade, for example, will cite a failed cooperative business as proof that the model doesn’t work.  But how often do you read that private corporations are an inadequate model for development because one goes bankrupt?  We are quick to forgive or blame individuals for embezzlement, tax evasion, or bad management, but when the same problems occur within a cooperative or social business setting the structure is often scrutinized rather than the individual.  

Founding director of Social Business Network, Nick Hoskyns, talks about the importance for there to be a reason for a cooperative.  Because of the inherent egalitarian structure, cooperatives are often seen as an appealing method for social development.  But problems occur when the formation of the cooperative is seen as the end rather than the means to the end – with the goal being creating a successful business.  Cooperatives that are formed for the sole reason of bringing people together to raise themselves up out of poverty rarely succeed. Cooperatives are successful for the same reasons that private businesses are – they produce a quality product for a growing market.  And they fail for the same reasons that private companies fail – market shifts that make the same product cheaper from another source, bad management, or poor leadership.  successful cooperatively owned brands such as Ocean Spray, Cabot Creamery, and the Co-operative in England are not exceptions to a rule, they are examples of good business ethics and skills applied to a model that builds leadership and democracy, and encourages equal wealth distribution.

 

A Smorgasbord of Hoopla

certified-stampWhether you are a farmer, manufacturer, exporter, retailer or consumer you have undoubtedly been faced at some point with a decision regarding the many different ethical or environmental certifications.  The growth of certification has followed the growth in centralized distribution and global trade of products.  As the sheer number and variety of products available to consumer multiply, companies and consumer advocacy groups are using an ever increasing number of certifications – and their requisite symbols – as tools to differentiate products on the shelf and, through their intended implementation, affect positive changes in the lives and environments of the producers.

Historically certifications have been driven by consumer groups searching for a product that meets certain standards of production.  Supply follows demand – so once there is a demand created, producers need to be found who will opt to comply with the standards, either for ethical or economic reasons.

Individual certifications exist within a global socio-economic context that is rapidly changing.  Movements that begin with a specific cause and have grown rapidly find it increasingly difficult – or costly – to maintain their initial standards.  As an intermediary between links in a potentially lengthy supply chain, certifications need to maintain minutely detailed rules and records.  Even defining what you wish to enforce or promote may take years!  As any ecologist will tell you, rapid growth is unstable, and as certain certifications gain popularity (and profitability) standards are adjusted, fees are hiked, and consequently new certifications arise as central groups of consumer or producer advocates fraction in their attempt to maintain their original values in a new socio-economic context.

supermarket-aisle-grocery-store-shopping-cart-Favim.com-475341Many of the current debates around certifications focus on the labels of finished products, and the dilemma of the well-intended shopper faced with a befuddling array of different symbols at the grocery store.  How can they know which product has the best impact on the world? But the increased number of certifications presents producers with even more difficult decisions – often costly and risky.  The cost – both in time and money – for different certifications needs to be weighed by each producer against the potential market.  Sometimes this means a double risk – first if you are certified whether you will make the associated costs back through the difference in sales, and once you have promised a certificated product to a client, whether your production will meet the certification rigors.  Depending on whether your market is international, national, or direct to your consumer your choices for certification vary.  Not certifying at all is sometimes the best economic option – which is why a rise or fall in certifications doesn’t accurately represent an actual rise or fall in certain farming or trading practices.

In response to changing standards in widely recognized certifications such as organic and fair trade, peer-based alternatives and producer driven initiatives such as the Certified Naturally Grown and the new Simbolo de los Pequeños Productores are arising. In a market historically driven by consumer advocates rather than producers themselves, these certifications may be conduits for  empowering change. However, the growing list of certifications that producers are faced with begs the question, are certifications still the best means for enacting social, environmental and economic change through trade?

Coffee Rust and Industry Responsibility

It remains to be seen exactly what the impact that the coffee rust fungus will have on the Latin American coffee industry for the 2012-2013 harvest, but estimations have been made of damages up to 40% and millions of US dollars in losses.  Coffee rust is the fungus Hemileia vastatrix that infects the leaves of coffee plants, creating yellow spots on the surface of the leaves with rust-colored spores on the bottom.  The fungus causes leaves to drop prematurely, leaving bare branches.  Spores spread through water contact, infecting new leaves through splashing rain or dew dripping down the leaves and wind that carries the spores from one plantation to another.  Reproduction is accelerated by high temperatures, with the life-cycle of the fungus ranging from 10 to 30 days.

Latin America has been plagued with coffee rust in the past.  The fungus first appeared in Brazil in 1970, and quickly spread through South and Latin America.  Today it is established in nearly every coffee growing region of the world.  Although there is no one factor that the current epidemic in Guatemala, El Salvador, Honduras and Nicaragua can be attributed to, excessive rains and poor cultural management certainly play a role.  The quality of crop management can drastically reduce the impact that coffee rust has on a harvest, through the annual employment of good agricultural practices such as renovation of older plants, pruning, proper shade management, and adequate fertilization.  Many studies – as well as our direct experience – have shown that there is a direct relationship between the social organization of farmers, the quality of technical advice they receive, and their management practices.  In order to support coffee farmers and maintain a healthy and sustainable coffee market in the future, the industry needs to address this epidemic in a holistic way, by recommending technical changes in agricultural practices as well as tailoring business practices to strengthen economic and social relationships within the production chain.

Addressing Climate Change – Epidemics such as this in every agricultural crop are exacerbated by extreme climate conditions, such as excessive rainfall, constant high temperatures, and storms with high velocity winds.  Buyers can support farmers who provide raw agricultural materials by supporting initiatives to reduce the environmental and economic impact of climate change, such as reforestation projects, and regional initiatives to increase biodiversity and food security.

Long Term Contracts – working together with organized producer groups to sign long-term contracts gives farmers the opportunity to look for additional long-term financing locally or internationally that can help them finance crop renovations and implement better management practices, reducing their vulnerability to both epidemics and economic changes over the long-term.  It also creates an incentive for purchasers to support farmers with short-term solutions for issues like the rust epidemic that may vary from year to year.

Play an Active Roll in Creating Feedback Loops – purchasers can play a central role in connecting isolated producer groups and facilitate information exchanges to spread the adoption of innovative responses to diseases and pests.  successful structural innovations such as different financing arrangements or changes in the base organization can also have a direct impact on management practices, and regional or even international exchanges between producer organizations can help younger or faltering organizations evaluate the best possible strategies to address their specific needs.  Facilitating information exchange within producer groups strengthens the industry as whole while offering the most potential benefit to the more isolated and disempowered producer groups.

Maximizing the Positive Impact of Trade

A country visit fulfills many purposes.  More horizontal communication (in many parts of the world access to digital media is limited), the ability to give direct quality feedback, and giving producers a chance to share local food and culture are just a few.

A country visit fulfills many purposes. More horizontal communication (in many parts of the world access to digital media is limited), the ability to give direct quality feedback, and giving producers a chance to share local food and culture are just a few.

Earlier this month, the Social Business Network made a special trip with ETICO and a coffee roaster from the states to visit a small group of coffee growers in El Salvador.  The cooperative that drew us there is called La Concordia, and is made up of only 19 families who cooperatively farm 70 acres of shade grown organic coffee – land that was given to them during the agricultural reformation in the early 1980’s.

The struggles that small groups of organized farmers face are numerous.  Over the years, this particular group has worked with several initiatives to try to export their coffee, but changes in the membership of organizations, the cooperative and export laws of El Salvador, and low yields have come in the way.  The farmers struggle to cover their costs of production and organic certification by selling as much as possible to other cooperatives and growers who export, and the rest on the local market.

Although these challenges may have seemed insurmountable, especially after so many years of false hope and failed attempts, the solution may simply lie in bringing as many links of the chain together, face to face, with a common positive intention.  With some preparation, members of the La Concordia cooperative sat down at a table with a nearby cooperative that processes and exports, an importer, a roaster from the US, and the Social Business Network.  After touring the farm, sharing the histories of our organizations and eating a home cooked meal together, it only took a few hours to piece together a plan where each member of the chain pitches in to make the logistics for export to work – an understanding that may have been impossible to reach over email or from a long distance.

Coffee farmers look for export markets because of market security (ideally forging long-term relationships with individual purchasers), higher prices and substantial sales volumes.  If the cooperative can meet the volume and quality demands of the export market, this may be an opportunity for a company in the US to have a huge impact on the lives of this small group of farmers. For businesses looking to maximize their social and environmental impact through the purchase of raw materials however, working with such small, inexperienced groups have additional costs and risks.  Business mechanisms like stipulating funds for social and environmental projects within the cost of the product can efficiently establish transparency, ensure corporate responsibility and help maximize impact.  But a whole additional level of value in trust and understanding can be reached through a well organized trip to the field with the right players, and finding the right people  on the ground who can facilitate good, culturally appropriate communication.

Read a reflection of the trip by Rachel Lindsay (Social Business Network’s Communications and Sustainability Director) on her blog.