In 2018, the Eat Lancet Commission on Food, Planet, and Health brought together 37 world-leading scientists from across the globe to answer this question: Can we feed a future population of 10 billion people a healthy diet within planetary boundaries? The authors are looking to set the first scientific targets for a healthy diet that can be grown within the earth’s available resources, given they are already under so much pressure: “Transformation to healthy diets by 2050 will require substantial dietary shifts. Global consumption of fruits, vegetables, nuts and legumes will have to double.”
In 2020, the UN has announced a Decade of Action—just 10 years until we hit the deadline to achieve the 17 goals of the Sustainable Development Goals. There is a tremendous opportunity for the health and nutrition sector to demonstrate how their products can improve health for consumers, while also alleviating poverty for producers. Embedding this into the company strategy rather than talking about corporate social responsibility as a separate initiative will also help to drive trust and long-term value creation.
Making sustainability visible to consumers
It's important for brands to consider how they demonstrate sustainable action to the consumer purchasing their product through physical retail or ecommerce. In-store, a label can be invaluable when mass awareness is required, as well as a need for third party assurance for major issues like deforestation. Take the RSPO certification label for palm oil as an example. Or the SRP-verified label for rice that has just been launched by the Sustainable Rice Platform. Few consumers are aware that rice is one of the biggest contributors of methane emissions—a greenhouse gas that is far more potent than carbon dioxide. This new label will help consumers recognise that by choosing SRP-verified rice they are helping farmers and planet.
But if the interaction is via social media, then storytelling is critical if it can be backed up by commitments, standards, and policies on the brand’s website. Consumers are looking more and more to brands to uphold their values—and this is where a brand needs a close relationship with its suppliers in order to provide that information and evidence of positive impact.
Getting hold of accurate and timely data that demonstrates real impact on the ground, at the heart of issues, has never been more important to prove impact is being made and to demonstrate transparency.
Rethinking the approach to sustainable supply chain
A significant proportion of the pain points—and therefore opportunities—mainly lie in the first mile. Products for sports nutrition, healthy snacking and functional foods rely on crops such as cashews, sesame, quinoa and chia, and even cocoa for nutritional content, texture, and flavour. Meanwhile one of the biggest supplement trends is for the antioxidant and anti-inflammatory benefits of turmeric. All of these are grown by smallholders in emerging markets.
In the first mile, the farmer base is usually very remote and highly fragmented The farmers have low literacy rates, little or no access to technology, poor infrastructure, and limited financing facilities. The supply chain is complex with multiple intermediaries in play. We estimate that Olam Food Ingredients (cocoa, coffee, nuts, spices and dairy) is sourcing directly and indirectly (via intermediaries) from 3.5 million smallholders. Of these, OFI is providing around 500,000 farmers with sustainability support including training in good agricultural practices, access to inputs like fertiliser, healthcare and education but scaling that is the biggest challenge.
So how do we physically reach more farmers? Fortunately, digital technology is moving forward significantly, and we are increasingly able to transact with farmers we have never been able to reach, as well as provide educational text message outreach with Agri advice, or more recently COVID-19 health advice.
Empowering farmers
The greatest challenge is how to lift millions of farmers out of poverty given world prices don’t achieve a living income. We have seen some policy changes for the better, such as in 2019 which saw the governments of Côte d’Ivoire and Ghana bring in the living income differential supplement of US$400 per tonne of cocoa on top of the market price. Nonetheless, poverty still runs deep—bringing associated risks like child labour as farmers can’t afford to hire workers.
Policy mechanisms must also take markets into account—Côte d’Ivoire brought in a minimum farmer price for raw cashew nuts, but it was higher than the market price. Low market prices have also hit coffee farmers. During 2019, Olam Coffee participated in the IDH Taskforce for Coffee Living Income. The report highlights the need for a wide range of stakeholder and policy intervention: “The living income gap for most small conventional producers in Colombia (0.5-5 ha) who sell [conventional coffee] is too large to be solved with technical assistance and price support from buyers alone. According to available data, a small average conventional producer would need to cultivate 12.4 hectares of coffee to reach a living income.”
Companies sourcing from these farmers therefore need to look at multiple ways in which income can be boosted.
This includes:
- Helping farmers achieve a higher quality of product
- Improving post-harvest storage as so much gets destroyed
- Showing farmers how to intercrop (with other cash or food crops)
- Reducing costs (many farmers waste money by spraying too much pesticide or fertiliser)
- Empowering women (often it is the men of the household who are registered for farming advice but it’s the women who work on the farm and they don’t get the information)
- Identifying other income generating opportunities like bee keeping which provides honey for sale, while boosting pollination.
Connecting roots to consumers
So how do we connect initiatives at the bottom to consumers at the top? We have to look at the problem through a different lens—think about connections instead. How do we better connect with other companies and actors operating in a landscape so that we can pool resources and expertise to achieve greater scale with more impact? How do we better connect the consumer to the farmer so that they feel engaged and motivated to want to pay a slight premium? The coffee sector is looking at initiatives to solve this problem, where consumers can ‘tip the farmer’ directly when making a purchase.
Equally, there’s plenty of evidence of brands who have built their narrative around the positive impact they are creating, so consumers believe their purchase is going to make a difference. If brands take a long-term rather than short-term view, then investment in sustainability is likely to improve rather than dent the bottom line. Especially when you consider motivated employees who see a reason to come to work each day.
Driving action
There's an inevitable cost associated with progress. When budget is limited, brands really need to understand where the highest risks lie in the supply chain and focus the improvement efforts there. To do this, you need to talk with your suppliers and push for information. What’s more, you need to have confidence that they have boots on the ground to monitor the situation and act.
In recent years, one of the biggest improvements has been in technology and monitoring systems. If you have data that is systematically measuring issues such as child labour or farmer yields and incomes, you can make more informed and therefore more resource-efficient decisions about where to act.
Where you have identified a high-risk supply chain and decide to support it with a sustainability improvement project, you can think how it can be addressed holistically to get the best return on investment. If you take a cashew farmer in Côte d’Ivoire where incomes are very low, the obvious route is to focus on farmer training to improve yields and quality so they can sell more at a higher price. But if the farmers aren’t getting a nutritious diet and don’t have access to clean water, how can they work to their full potential even with the training? This is why Olam developed AtSource, our insights platform that provides customers with a single view of their supply chain, with social and environmental footprints and improvement plans.
In these pandemic times, supporting the health of farmers is essential, particularly given the average age of a smallholder farmer is over 50. Your long-term supply depends on their good health. But brands don’t have to provide this support alone. They have convening power to bring other interested parties to help. It might be a technical NGO like TechnoServe or a development agency like GIZ who bring expertise. Equally development finance institutions or UN bodies may be able to bring financial inputs. In this way, with their supplier and other partners, a brand can help the social and environmental regeneration of a whole landscape.
The bigger picture
If you take the food and agriculture sector, it would seem obvious that the crops we grow must depend on the right soils, the right climate, pollinators, water resources and so on. If these are depleted, then there’s going to be an issue in the future. The long-term financial health of our sector is bound up with the long-term health of our planet, and whether people want to be farmers.
This is something we are passionate about across Olam’s operating groups. Last year, Olam Cocoa, part of OFI, piloted the Olam Integrated Impact Statement to financially account for certain natural capital aspects in their supply chain. This includes applying a Societal Cost of Carbon of US$90/tCO2 equivalent to incorporate the full global hidden costs to society of climate change impacts such as drought, rising sea levels, climate migration etc. The statement also looked at the hidden cost of water consumption in processing.
By establishing a numerical link to sustainability using multi capital accounting methodologies, businesses can manage a broader set of drivers and demonstrate how sustainability contributes to long-term value creation.
To read more contributions from industry experts, download the sustainable supply chain report published October 2020 by Vitafoods Insights.
