10 YEARS OF SUPPORTING SUSTAINABLE SOURCING

10 YEARS OF SUPPORTING SUSTAINABLE SOURCING

'Most 10 year olds want cake, balloons, and lots of presents. Well, we're partial to a bit of that too, but what we really want is something that is much trickier to wrap up: sustainable livelihoods for smallholder farmers in Latin America. Finding viable solutions for those who grow 70% of the world's food is no easy thing, but we like a challenge. To mark our ten years our staff have been musing on where we’ve come from and where we’re going.

WHERE WE CAME FROM

Ten years ago when CIMS came into being, the plight of smallholder farmers was already acute. Victims to volatile prices and subject to the increasingly powerful interests of buyers and international supply chains, they seemed destined to remain in a vicious cycle of poverty. Ten years later, you could argue that not much has changed. In fact with the ever-growing threat of climate change thrown into the mix, the picture looks even bleaker for farmers: just one more thing over which they have little or no control. And now they have to contend with auditors, agronomists and certifiers trying to make them ‘more sustainable”.

‘When you are out talking to farmers, like the pineapple producer I met last year, you hear how it really is. Their frustrations, their take on what sustainable farming really means to them.‘ says CIMS Executive Director Liza Lort-Phillips. “ Endless audits, paperwork, expense, multiple hormones and chemicals to make the fruit grow faster so it can end up on supermarket shelves on time.. “In other words, we have a hard enough time being economically sustainable, let alone the rest!”

If all this sounds a little grim, let’s just say we believe in telling it as it is. But it’s not all bad news. We do also see some green shoots, and we believe that these shoots are worth nurturing.

Ten years ago we began by providing market information to small producers so that they could connect to outside markets. But we realized that with the power residing at the top of the supply chain, we had to re-think that approach. In order to influence behavior change at the top, we had to adapt to that reality.

“Initially we thought the best way to help farmers to was to help them build relationships with small and medium sized companies”, says Lawrence Pratt, founder of CIMS and professor at INCAE business school, “but we’ve since realized we can have more impact dealing with some of the world’s biggest companies. Right around that time some of the multinationals state talking more openly about farmers and how important they were to their value chains, so we thought, let’s see if these guys are serious.”

WHAT WE’VE LEARNED

One of the first companies CIMS worked with was the global coffee brand Nespresso. Nespresso already knew that its coffee strategy was dependent on sourcing a consistently high quality product from small farmers. The challenge was how to ensure farmers viewed the prospect of growing coffee as a viable long-term option for themselves and their families. CIMS’ research on the economics of coffee farms helped them to understand and prioritize their focus.

“One of the key concepts we try to get across is that price is not income, and that’s hard to understand for many people. Simply paying a price premium doesn’t mean the farmer will be better off, says Research Director Bernard Killian. “There are many other drivers, including productivity, crop and farm management, and investment.”

Nespresso introduced the concept of Real Farmer Income™ after learning from CIMS. The insights that CIMS shared with Nespresso created a substantial paradigm shift in how they viewed their supply chain. They started focusing on the drivers of farmer income, having greater visibility further down the chain beyond the buyers and exporters, addressing causes rather than symptoms.

“CIMS support and insights over the years has helped us immeasurably, to understand what is really happening on our coffee farms”, says Jerome Perez, head of Ecolaboration at Nestle Nespresso. “Their focus on farm economics in particular, which led to the conceptualisation of Nespresso's Real Farmer Income™ (RFI), was groundbreaking, and remains at the heart of what sustainable farming is about.”

But it’s not just all about the big companies. CIMS has also worked closely with NGOs, development banks, certifiers such as Rainforest Alliance, and the public sector to develop and spread the benefit of this learning to other smallholders.

Being based in Costa Rica, one of the most bio-diverse countries on earth and a significant player in several tropical agricultural supply chains, means CIMS is deeply rooted in its surroundings and aware of the realities facing smallholders. It’s this kind of knowledge that we were able to share with Walmart when it acquired a Central American supermarket chain, and since advised it on how to work with small farmers around the world.

“The chain that Walmart bought here in Costa Rica was famous for its care for workers and suppliers. It had been involved in direct farm sourcing for fifteen years because it was the only way it could operate,” says Lawrence Pratt. CIMS already had a relationship with the former retail company and was able to help Walmart understand and codify its direct farm program in this region. “We went out with Walmart’s produce buyers and talked in detail to farmers growing coriander, celery, papayas, onions and other produce”, says Lloyd Rivera CIMS’ research manager, “By the end we were able to work out how the supply chain really worked in practice. That sourcing model has provided a framework for Walmart in countries as far away as India and China”.

FARMER FOCUSED, BUSINESS LED

Our mission to support small farmers by working with global corporations has some inherent contradictions. Here at CIMS we deal with those by acknowledging them and keeping our focus on value that can be shared more equitably throughout the supply chain.

“We believe that if you want to influence branded food companies, this is the way to do it”, says Lawrence. “If a company the size of Walmart decides to do something it then becomes standard practice, and the scale that can be achieved and the difference that you could make is remarkable.”

‘Nonetheless if we think a company is not taking this message seriously, and our values are compromised, we reserve the right to discontinue the relationship.’ says Liza.

We don’t think it’s a coincidence that most of the team comes from a farming family. Emilie Dardaine, our Chief Operations Manager is a farmer’s daughter. Bernard Kilian, our research director, goes back to Germany every summer to help with the harvest. He says it’s the perfect antidote to supply chain economics. CIMS Executive Director LIza Lort- Philips also grew up on a farm.

“I have spent 10 years working with global companies in their boardrooms advising on sustainability issues, but up there in the corporate hothouse it’s impossible to know what’s really going on where it matters – down on the farm.“ she says. “Coming from a farm yourself makes you understand just how hard it can be to make a living. These guys are feeding half the world, and yet many of them live below the poverty line. So here at CIMS we need to speak two languages - that of the farmers and that of business.”

Emilie Dardaine joined CIMS this year having worked with co operatives and in fair trade certification. For her, the combination of farming knowledge, scientific research, academic rigor and business know-how is what makes CIMS stand out.

“We do things seriously here. A lot of NGO work is anecdotal and qualitative, but we are evidence based and our research is supervised by high-level professors. We don’t believe anything until we have the evidence and I think that’s why our work and the solutions that are based on it has a lot of credibility.”

THE TEENAGE YEARS AHEAD

As we blow out the birthday candles on our first ten years, we get to make a wish. Llza makes hers:

  • That by the time we hit 20, we no longer have to be dependent on companies’ voluntary efforts and public claims about how sustainable they are, because they will be legally required – in the same way as they are required to report their profits - to back such claims with independent evidence on their impacts. Adds Bernard..‘We need a more honest debate, and a greater willingness to admit when things aren’t working. Because if you really want to source sustainably, you have to be willing to change your supply chain.”
  • That resource-poor farmers in commodity-rich countries have a greater share of the value chain and a greater control over their destiny. Currently, the average coffee farmer receives about 2% of the final retail value of his product. Examples such as Thrive Farmers, a farmer-invested coffee business in Central America, are now getting farmers up to 50%. These new breakthrough models give us hope. Thrive Farmers do what they say on the tin: Thrive. Cutting out the middle man, and with a vertically integrated supply chain of their own, these farmers are making up to four times more than a farmer producing Fair Trade coffee and have direct contact with their end consumers.

We’re looking forward to our teenage years. We plan to continue, like all good growing teenagers, to be awkward (sometimes) and ask difficult questions. But we also plan on bringing fresh energy and new ideas to this ever critical corner of the sustainability agenda.

*Watch this space for upcoming published papers on coffee economics and carbon footprint...