Corporate Social Responsability: A competitive challenge for agribusiness

Multinational corporations in the agrifood sector are increasingly including social and environmental aspects as part of their corporate social responsibility (CSR). However, although significant progress has been achieved in favour of farmers, more needs to be done.

Nestlé investments have helped to halve child labour in the company’s supply chains © Nestlé SA

Coined in the 1950s, CSR refers to the integration of social and environmental considerations into a firm’s business operations and has become a global phenomenon over the last two decades. This has forced major agribusiness groups – which initially kept CSR hemmed into their marketing and communications departments – to be more accountable for the impact it has on the societies in which they operate.

Unilever – a world leader in the agrifood sector – claims that sustainable development is now a key component in its business strategy. As is the case for most of its competitors, the thrust of the Unilever Sustainable Living Plan is, “that responsible growth is the only model that will succeed in a world of changing consumer expectations and dynamic market trends.” By 2020, this manufacturing giant is aiming to impact the lives of 5.5 million people by improving the livelihoods of smallholder farmers, improving the incomes of small-scale retailers, and increasing the participation of young entrepreneurs in their value chain. In 2016 alone, the company enabled 650,000 smallholder farmers and 1.5 million small-scale retailers to access initiatives aimed at improving their agricultural practices or income. In Madagascar, a programme to support vanilla growers that was launched in 2013, in partnership with the Symrise company, the German development agency, GIZ, and the NGO Save the Children, is already paying off. Three thousand smallholders have been trained on new farming practices, which has enabled them to boost production as well as food self-sufficiency; 160 young people have received training in finance, literacy and computation; and support has been provided to parents to cover part of their children’s fees in 77 schools.

A game changer

Why would a company like Unilever, with a staff of 169,000, bother to train smallholders in Madagascar? The answer is multifaceted. Companies may invest in CSR (and boast publicly that they are doing so) under the pressure of consumers concerned about produce traceability, to comply with legislation and regulations endorsed by authorities in producing countries, or to obtain certification that provides access to new markets. But the overall aim is still to increase profits.

The Business and Sustainable Development Commission (BSDC), in its 2017 Better Business, Better World report, makes the case for why the 17 UN Sustainable Development Goals (SDGs), “offer the private sector a compelling growth strategy that opens new market value and, at the same time, helps solve significant social and environmental challenges.” This could unlock business opportunities worth up to €9.75 trillion, while creating up to 380 million jobs by 2030.

In practice not all companies invest in CSR. Small companies are just links in the supply chain and thus do not have sufficient clout to influence the entire chain. “Agribusinesses face a range of environmental and social challenges,” says Charles O’Malley, senior partnerships adviser with the UNDP Green Commodities Programme. “If (a company) only acts alone, ultimately it risks undermining the competitiveness of its own business. So a lot of CSR work in large companies these days is focused on how to change the ‘rules of the game’ in the industry as a whole, whether through international standards or through national-level legislation.”

A commercial asset

CSR can be a powerful tool to secure supply chains. A spokesperson at Nestlé – a heavyweight in the food and beverage sector – says that, “By investing in creating long-term value for society we will ensure we develop our business in a sustainable manner.” This is referred to as ‘creating shared value’. Nestlé, like other major actors in the sector, has faced several challenges in the past: many critics call attention to child labour in West African cocoa plantations, while cocoa yields have stagnated as a result of poor and environmentally detrimental cropping practices. In 2009, Nestlé launched its ‘Cocoa Plan’ which aimed to improve the lives of cocoa farmers and the quality of their produce. To tackle child labour, Nestlé set up the Child Labour Monitoring and Remediation System in 2012 and forged a partnership with the non-profit International Cocoa Initiative. In its 2017 report, Tackling Child Labour, Nestlé revealed that child labour had been reduced by half throughout its supply chain. Moreover, 163,407 community members had heightened awareness of child labour issues, while 1,246 people were serving as community liaison officers. In the same year, Nestlé also claimed that it had enabled 431,000 farmers to benefit from capacity building programmes while offering them nearly 160 million high-yielding coffee trees, with the intention of distributing 220 million by 2020.

Under high media exposure, multinational cocoa corporations invest substantially in CSR. UNDP, in partnership with the Ghana Cocoa Board and with financial support from Mondelēz International, set up the Environmental Sustainability and Policy for Cocoa Production project in Ghana, the world’s second largest cocoa producing country, with a €1.4 million budget. In Ghana, where around 800,000 farmers depend on the cocoa sector, 100,000 have adopted new cultivation practices and 780,000 seedlings have been distributed to rehabilitate 8,600 ha of forest.

The motives of companies cannot, however, be simply confined to profit seeking. “There has been a huge increase in corporate awareness and understanding of social and environmental issues in agriculture, covering everything from labour and human rights standards through to ecosystems management,” says O’Malley. “A lot of actions that can be taken connect very well with good agricultural practice, increased yields, better quality and better prices in international markets. For major players, a lot of CSR and sustainability strategy is ultimately about long-term security of supply. So CSR/sustainability is a very strategic issue. However, agriculture is a global market and there are many actors throughout supply chains – from producers, to traders, to manufacturers – who either are not aware of these issues, or who do not care.”

Unexpected stakeholders

Some multinational companies buy nothing from small-scale farmers but they would likely have lots to sell them if they became creditworthy. The Syngenta Foundation for Sustainable Agriculture, which was founded 35 years ago, is committed to help small farmers become more professional growers. “We want to help generate good income for smallholders by helping them enhance their harvests, while giving them access to lucrative markets where they can sell their produce,” says Paul Castle, communications officer at the Foundation. “We are not a ‘second marketing team’ for the company. Many of the problems facing smallholders have nothing to do with the products (from companies like Syngenta AG). They need, for instance, better soil, more efficient water management, agricultural training, new forms of organisation, market links, etc.” In West Africa, for example, the Foundation has been trialling a decision-making mobile app and mechanised service centres to improve the yields and incomes of rice farmers (see Spore article, Rice provides youth with employment opportunities).

‘Our business is changing’

CSR in agriculture may also sometimes be applied by companies that are seemingly far removed from the sector. For example, the French telecommunications operator Orange supported Abdou Maman Kané, a Nigerien computer specialist, to develop his start-up company. Télé-irrigation enables farmers to start a water pump, simply by calling a phone number. Field irrigation can therefore be done remotely on demand, thus avoiding the need to carry heavy jerry cans for long distances in rural areas where water is scarce. “Our business is changing, value is being developed via new uses and services,” says Bruno Mettling, CEO of Orange Middle East and Africa. “Orange’s strategic challenge is to be a major partner in the digital transformation process under way in Africa and the Middle East, which involves mobile money, energy, education, health, and of course agriculture.”

The operator has already developed a range mobile agricultural services. “CSR is increasingly becoming part of our business,” Mettling explains. “It is gradually being assimilated in all activities and trades, even though there is still progress to be made.” Orange has a strong foothold in Africa and Mettling has not lost sight of the fact that, “The population of this great continent will more than double by 2050, while that of Europe will continue to decline. With this demographic equation, Africa has a major stake in the future of humankind and it faces a daunting challenge in terms of growth, infrastructure and social inclusion.”

With a similar approach, the French bank BNP-Paribas has developed a set of “rules for the management of products and financial services” that are geared towards, “addressing the main environmental, social and agricultural sector governance issues, while outlining recommendations for responsible business management.” Compliance with social and environmental norms, the use of authorised agrochemicals, while respecting of animal welfare concerns, are factors taken into account in the provision of credit or other financial services.

Significant yet insufficient progress

In 2013, the British NGO Oxfam launched its ‘Behind the Brands’ campaign, which involved scoring the performance of the 10 largest food and beverage firms on seven issues: transparency, women, workers, smallholder farmers, land, water and climate change. Three years later, Oxfam pointed out that, “the ‘Big 10’ food and beverage companies have made significant new commitments over the past three years to improve social and environmental standards in their vast supply chains.” Unilever, Nestlé and Coca-Cola are currently ranked at the top of the list, but the NGO stresses, “To accelerate the transformation towards a more sustainable food system, the companies must go much further and fundamentally re-write the business models in their supply chains to ensure that much more power and much more of the value their products generate reaches the farmers and workers who produce their ingredients.”

Much of the difficulty lies in the fact that, “Even very large companies can have limited impact on a supply chain”, says O’Malley. “So McDonalds, for example, has made strong commitments to sourcing beef from ranches that are not contributing to deforestation. While McDonalds are clearly a huge buyer of beef, they are still only a small percentage of the global beef market. They can easily be supplied by farms that are on land that was deforested many years ago. Farms where deforestation happened more recently can easily find other buyers for their beef, since 95% of buyers are not asking about deforestation-free beef. So deforestation continues.” This is also a problem in other agrifood sectors, hence the need for national and international action within entire industrial sectors.

While large firms may only have a limited impact on a supply chain, they nevertheless have an important role to play. “Direct investment in communities […] enables companies to reconcile their supply chain priorities with community development and environmental gains,” notes a joint FAO-UNIDO report, Agro-industries for Development, which presents various case studies. “These examples are compelling, but alone will not add up to the development of competitive and sustainable national agrifood sectors: projects typically reach select communities for specific objectives of interest to sponsoring companies. What is left are ingredients for scale-up.” FAO and UNIDO claim that the public sector and civil society have a responsibility to create a suitable legislative and economic framework to propagate these successes at the national level.

Vincent Defait

 

Sandals Resorts strengthen tourism-agriculture linkages

In the Caribbean, conglomerates like Sandals Resorts, a Jamaican operator of all-inclusive resorts with 19 hotels across six Caribbean islands, are leading CSR efforts. Jamaica – where the company has 14 properties and more than 70 restaurants – has an annual food import gap of approximately €1 billion in the tourism sector. Jamaica’s 2015 Tourism Demand Study also revealed that 820,000 kg of potatoes are consumed annually by the sector. Recognising that there was a need to re-define its hotels’ culinary operations, Sandals launched a pilot project in March 2018 to provide up-front purchase of Irish potato seeds, valued at €22,350, to five farmers. This contribution equates to 1,300 bags, capable of planting up to 20.5 ha with an expected yield of up to 341,000 kg of potatoes (approximately 40% of current demand).

As well as providing farmers with access to a guaranteed market, the interest-free payback of the initial sum is not due to Sandals until after the first harvest. Sandals anticipates that, in time, this partnership will allow them to become exclusively supplied with Jamaican-grown Irish potatoes, which will also help to reduce Sandals’ import bill, and improve the quality and sustainability of its potato supply. The company also hopes that the programme will eventually evolve to include more farmers and that farmers will, within 3 years, be growing at least 15 crops and selling to others in the tourism industry.

Jordan Samuda, group purchasing director for Sandals Resorts International states, “The Sandals Group feels strongly that, whilst providing the farming sector with a market for their produce is critical, greater private sector assistance is needed to aid sustainable growth of the local farming community.” Deputy chairman for Sandals Resorts International, Adam Stewart, tasked his supply chain team to create a long-term strategy that provides the farming assistance required. This initiative is only the beginning as the Sandals Group has committed in 2018 to investing over €160,000 annually in farming assistance through various initiatives in Jamaica. “The long-term goal is to boost the local farming sector sufficiently so that the Sandals Group and wider hotel sector will significantly reduce and erase the need for imported produce,” states Samuda.

Natalie Dookie

The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.