Sustainable Agribusiness in Africa - International Finance Corporation

Sustainable Agribusiness in Africa: a getting started guide

MAY 2013

Cover image: World Bank/Stephan Bachenheimer

Disclaimer IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help countries achieve sustainable growth by financing investment, providing advisory services to businesses and governments, and mobilizing capital in the international financial markets. This guide was commissioned by the Sustainable Business Advisory Unit of the IFC to promote the sharing of information and practices and is distributed with the understanding that neither the authors, nor the organizations, countries they represent, nor the publisher are engaged in rendering legal or financial advice. The material in this publication is set out in good faith for general guidance, and no liability can be accepted for any possible loss or expense incurred as a result of relying on the information contained herein. This publication is not intended to be exhaustive. The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the views of the IFC. IFC does not guarantee the accuracy of the data in this publication and accept no responsibility for any consequences of their use. This publication is distributed subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out, or otherwise circulated on a commercial basis without IFC’s prior consent.

Business Briefing: Sustainable Agribusiness in Africa

CONTENTS Introduction........................................................................................................................ 4 Sustainable Agribusiness: what are we talking about?...................................................... 6 Key Sustainability Issues..................................................................................................... 8 Economic........................................................................................................................ 8 Productivity, Capacity and Purchasing Practices........................................................ 8 Good Governance, Corruption and Transparency...................................................... 9 Social............................................................................................................................ 10 Food Security............................................................................................................ 10 Food Safety............................................................................................................... 10 Labour and Working Conditions............................................................................... 11 Poverty, Health and Education................................................................................. 12 Land Access.............................................................................................................. 12 Environment................................................................................................................. 13 Climate Change........................................................................................................ 13 Water........................................................................................................................ 13 Biodiversity............................................................................................................... 14 Managing these issues for More Sustainable Business.................................................... 15 Standards.................................................................................................................. 15 Resource Efficiency................................................................................................... 17 Supply Chain and Community Investment: Engaging Smallholders........................ 21 Measuring the Impact...................................................................................................... 24 Conclusion........................................................................................................................ 26 Appendix 1: A Company Self-Assessment Tool................................................................ 28 Appendix 2: Standards and Multi-Stakeholder Initiatives Relevant for the Industry....... 32 Appendix 3: Commodity Snapshots................................................................................ 33 Appendix 4: Country Snapshots...................................................................................... 40 End Notes. ............................................................................................................ 57


Introduction Africa is now the world’s fastest-growing continent1. On a regional level, economic growth in Africa has raised its GDP to a level similar to that of to Brazil or Russia. The World Bank estimates that by 2025, most African countries will have reached ‘middle income’ status2. While there are differences within and amongst countries in the region, social development indicators have improved, poverty has reduced, governance has improved and generally there is more stability. The rising prices of agricultural commodities have helped to fuel this. Agriculture is critical for both economic growth and poverty alleviation. Within the agriculture industry agribusiness refers to the “business activities that are performed from farm to fork” covering “inputs, the production and transformation of agricultural products and their distribution to final consumers”3. Across the continent, agriculture and agribusiness account for nearly half of GDP4, 15 per cent of exports and employs roughly 60 per cent of the labour force5. While rural to urban migration is increasing, 70 per cent of the population still lives in the country side and depends on agriculture for their livelihoods6. Women make up most of the agricultural labour force. Growth in the sector will be a key driver of long-term sustainable development as well as meeting global food demand. The World Bank estimates that by 2030 agriculture and agribusiness together could develop into a US$ 1 trillion industry in Sub-Saharan Africa7. Global pressures on agriculture will continue to increase with demand for food expected to double by 20508. In the next 25 years, in order to meet global caloric demand it is estimated that the world will need to produce two to three times as many agricultural products on the same amount of cultivated land9. Africa is well positioned to help meet this demand with more than half of the world’s agriculturally suitable yet unused land and abundant water resources. However, despite positive prospects, there are challenges to overcome. Sub-Saharan Africa is one of the most vulnerable regions in the world to climate change. Competition for energy, water and land use will continue to increase, putting pressure on producers to grow more with fewer resources. Poverty and food insecurity remain as challenges and roughly one out of every five people in Africa lives in hunger. While water resources may be abundant, these are not evenly distributed. An estimated one in three people endures water scarcity which will be exacerbated by climate change. Most of the food production (80 per cent) in sub-Saharan Africa is by smallholder farms – feeding “themselves, their communities and the world”10. With the exception of cocoa and coffee, most other commodities produced by

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smallholders are not integrated into international supply chains11. Smallholders are often faced with an absence of farmers’ groupings and business units, lack of extension services, inadequate market information, lack of basic infrastructure and high operating costs. There are limited incentives for the young people of today to pursue farming as a livelihood choice and rural to urban migration is on the increase. Rural areas have highly constrained agroprocessing activity and capacity and there is limited value added to farm production in the region. Agribusiness in Africa is on the rise with more and more interest from international companies and investors. Businesses in the region are faced with a multitude of different pressures and are increasingly recognising that long-term success will mean addressing and engaging on issues such as poverty, climate change, and food security. Companies that can do business in a way that provides opportunities for smallholders, generates decent work and jobs, respects human rights and protects the environment can better manage risks and seize opportunities. They can also help to build more resilient communities and create and foster sustainable livelihoods. The International Finance Corporation (IFC) is the private sector arm of the World Bank and is the largest global development institution focused exclusively on the private sector in developing countries. The Sustainable Business Advisory (SBA) unit of the IFC works with companies to adopt environmental, social, and governance practices and technologies that create a competitive edge, which can help to transform markets and improve people’s lives. The SBA team in Africa is working with businesses and their stakeholders to create long term value for companies, communities and the environment. It is engaging with companies across industry sectors and helping to share and disseminate good practices for more sustainable business.

PURPOSE OF THIS BRIEFING This guide has been prepared to assist agribusinesses operating in and sourcing from Africa to understand some of the important issues and to share examples of good practice of how these issues are being managed. This guide has been prepared based on a review of literature and a scan of practices both by country and by key commodity. This was supplemented with interviews with companies, IFC staff, non-governmental organisations and consultants in the industry. A roundtable event was hosted by the IFC in London in March 2013 to engage a group of UK retailers and other stakeholders. The sections that follow outline sustainability in the context of agribusiness along with key risk areas for business. It should be noted that any viewpoints expressed in the text are those of the consultant tasked with preparing this and may not necessarily reflect those of IFC. The guide is not exhaustive but is intended to be introductory and will be more relevant to managers who are new to working in sustainability and need a basic understanding of the issues in a Sub-Saharan African context. It includes SBA’s framework for working with business and examples of practices which address sustainability standards, resource efficiency and engaging smallholders. Appendix 1 provides a basic tool that companies can use to get started on building systems to manage key issues. Appendix 2 briefly summarises some of the important sustainability standards and multi-stakeholder initiatives. Appendix 3 provides an overview of key issues and multi-stakeholder initiatives and standards by commodity including: cocoa; palm; cashews; coffee; tea; horticulture; and cotton.

World Bank/Arne Hoel

Appendix 4 is a brief summary of country contexts for Burkina Faso, Ghana, Kenya, Mozambique, Nigeria, Senegal, Tanzania and Zambia which were the countries prioritised for the research.


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Sustainable Agribusiness: what are we talking about? Sustainable development is about “meeting the needs of the present without compromising the ability of future generations to meet their own needs”12. Sustainable agribusiness is about balancing financial, social and environmental issues, to ensure stable supply chains, the long-term success of the company and the sustainable livelihoods of the communities they source from and sell to. It involves community engagement, respecting human rights, protecting the environment, being transparent, and acting with integrity. Different stakeholders will have different perspectives on what sustainability means in the context of agribusiness. The companies we interviewed for this report talked about maintaining and managing the business in a way which ensures a return now and in the future. Many companies highlight their approach to being a socially responsible business and respecting and protecting the environment, whilst operating with ethics and integrity. While recognising the benefits that business can bring to local communities, some NGOs point to the fact that what companies express in terms of sustainability commitments does not always translate into benefits for communities. They also emphasise, that there are expectations from businesses even when there is not always an immediate business case13. Africa is one of the most vulnerable regions in the world to climate change. Climate change can affect the types of seeds that will flourish and that are being used, growing seasons, water availability, and the frequency of storms and droughts. Businesses are concerned about the long-term viability of farming as a choice of livelihood, and recognise they need to understand the working conditions in their supply chains, and ensure that their business operations as well as ways of doing business enable employees to have fair wages and decent and safe working conditions. For any company working within this sector, land use and acquisition is a critical issue. Sustainable business practices can help:

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Secure supply chains

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Build reputation

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Strengthen client and customer relationships

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Support employee recruitment and retention

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Build relationships with investors and the financial community

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Build relationships with government and the local community


“Everything we make and sell starts on the farm. Sustainable agribusiness for us is about long term secure supply chains.” (Quote from company interview)

“Ultimately it is about enlightened self-interest and not something separate from the core business model.” (Quote from company interview)

What is a Value Chain? Whereas supply chains refer only to backward linkages (i.e. with producers), value chains refer to both backward and forward linkages (i.e. with producers through to consumers). Value chain is a widely cited concept to describe the “full range of activities which are required to bring a product or service from conception, through the intermediary of production, delivery to consumers, and disposal after use” (Kaplinsky 2000). Value should be added at each step along the chain from the farmer who grows the product, to the layers where any processing or packaging take place to distribution to the final basket it sits in where the consumer purchases it.

Creating Shared Value Companies cannot succeed in communities that do not. Shared value is about ensuring business success while also ensuring that communities prosper as well. Creating Shared Value (CSV) is a term which is attributed to an article by Michael E Porter in the Harvard Business Review.

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gribusinesses have the potential to help improve people’s lives and give them opportunities to escape poverty. There are also opportunities for companies to develop business models, which protect the environment and natural resources to ensure production for the present and for future generations, while ensuring benefits for farmers and their communities. Agricultural value chains are complex and involve growers, input providers, government agencies, processors, packagers, and various agents who need to work together. Sustainable business models need to take an integrated approach. Integrating the management of environmental, social and governance related issues are important for managing these complex risks and opportunities. The IFC Performance Standardsi can help companies to manage these issues. Companies can also look to guiding standards such as the ISO 26000 Guidelines for Social Responsibility, and numerous other standards to help them identify the steps that they can take (see Appendix 2). For companies getting started on a journey to a more sustainable business, there are some key steps that can be taken to support continuous improvement. •

Understand the material issues: Companies needs to understand the important (i.e. material) issues, which can impact their business. While there will be crossover within industry and between sectors, not all issues have the same relevance for every business. Briefings such as this one can provide business with a first step and general overview.

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Engage with stakeholders: To understand their material issues, companies need to engage with their stakeholders. There are various tools and resources to support companies to do this. The IFC’s ‘Stakeholder Engagement: A Good Practice Handbookii is a useful business tool.

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Demonstrate leadership and accountability: Managing complex social and environmental issues starts from the top. Businesses can review how sustainability is reflected in their company values and principles and how they demonstrate leadership. For example, is there a Board Member appointed to oversee responsible business practices?

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Define policies, standards and objectives: Businesses need to ensure they have policies and codes of conduct, which define their company’s commitments and strategies. Based on these, objectives and targets can be established.

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Ensure resources and capacity in place: It is important to ensure that sustainability related initiatives are properly resourced and that there is appropriate capacity as to fulfil commitments.

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Measure, monitor, review and evaluate: Recognising the old paradigm that you cannot manage what you cannot measure, businesses can ensure that systems are in place to measure and monitor impacts and outcomes and integrate findings for continuous improvement.

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Communicate and report: Being transparent about the business and its social and environmental impacts and ensuring strategies to address these are part of being a responsible company. By understanding the concerns and expectations of stakeholders, businesses can ensure that appropriate communication channels are in place. Numerous tools and guidelines exist for sustainability reporting at a company level.

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Context is critical: Effectively managing and implementing sustainable business strategies requires that these fit within the local context and are appropriate to the size and scale of the business. Appendix 4 provides a brief overview of some of the issues and challenges in different country contexts in the region.

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IFC Performance Standards accessible online at: http://www1.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/ IFC+Sustainability/Sustainability+Framework/Sustainability+Framework+-+2012/Performance+Standards+and+Guidance+Notes+2012/ ii IFC ‘Stakeholder Engagement: A Good Practice Handbook’ available online at: http://www1.ifc.org/wps/wcm/connect/topics_ext_content/ifc_ external_corporate_site/ifc+sustainability/publications/publications_handbook_stakeholderengagement__wci__1319577185063

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Key Sustainability Issues

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hile the sustainability issues are interconnected, the following section has grouped these issues within the broad headings, which the IFC uses: economic, social and environment.

Through their engagement with stakeholders, agribusinesses can identify and build understanding of the important issues, analyse their potential impact on the company, and prioritise. Figure 1 below shows a materiality matrix of the type that is often used and adapted by business for mapping risks and opportunities. The prioritisation for different agribusiness will depend on their own operations and stakeholder concerns. The accompanying boxes show key issues that were identified through the research and interviews carried out for this briefing. It is by no means exhaustive. The following sections provide a brief overview of some of these key issues.

Increasing concern to stakeholders

Figure 1: Example materiality matrix for prioritising issues

Essential to prioritise Important to prioritise Issues for attention

Economic & Governance • Productivity • Capacity • Purchasing practices • Risk of corruption • Poor governance • Lack of transparency

Issues not considered essential Increasing current or potential impact on company

Source: CDC Toolkit for Fund Managers14

Social • Child labour and forced labour • Farm and factory health and safety • Minimum and fair wages • Lack of contracts • Freedom of association • Migrant workers • Land • Cultural heritage • Indigenous peoples

Environment • Climate change and energy • Biodiversity loss and impacts • Soil erosion and loss of productive capacity; • Water contamination; reductions in local water supply from overuse; • Waste management and hazardous effluents • Impacts of genetically modified crops • Pesticide and herbicide use

ECONOMIC PRODUCTIVITY, CAPACITY AND PURCHASING PRACTICES Improvements in agricultural productivity are needed for growth and development, and to address the global demand for food. It is estimated that for each 10 per cent increase in small-scale agricultural productivity in Sub-Saharan Africa, almost 7 million people are moved above the dollar-a-day poverty line15. While recent years have seen sustained growth in agricultural production in Sub-Saharan Africa, in comparison to other regions, productivity levels in Sub-Saharan Africa for many food products are extremely low16. The root causes of low productivity are multifaceted and include: • weather conditions; • access to knowledge and resources; • access to financing; and • access to markets, technology, infrastructure and agricultural inputs. Throughout the region, agricultural research and development (R&D) investments have stagnated due to political, social, and economic unrest as well as institutional changes (such as mergers, subdivisions, relocation, reshuffling)17. 8


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0 per cent of food grown in Africa is grown by smallholders. For example, in Tanzania, smallholders only cultivate average farm sizes of between 0.9 hectares and 3.0 hectares and cultivation is mostly by hand hoe18. Most smallholder farmers, and particularly poor rural farmers, do not participate in formal value chains and are often limited to producing for informal markets. This is a challenge for businesses looking to engage smallholders and to find ways that add value to farm production and create jobs. Analysts have pointed to the fact that agribusiness in Africa does not add the same value that it does in other regions, which is a missed opportunity. Whereas in high-income countries, agribusiness adds about US$180 of value by processing one tonne of agricultural products, African countries generate only US$4019. While 98 per cent of agricultural production in high-income countries undergoes industrial processing, in African countries less than 30 per cent is processed. Rural areas in African countries have limited agro-processing activity and capacity. As such, SubSaharan Africa countries in particular experience large postharvest losses, especially for perishable commodities such as fruit and vegetables. It is estimated that post-harvest losses average 35-50 per cent of total possible production for fruits and vegetables and 15-25 per cent for grains20. Research on cocoa production in Sub-Saharan Africa found that “in Ghana and Cote d’Ivoire, farmers harvest an average of 300kg-400kg of cocoa beans per hectare per year – up to 50 per cent lower than their potential productivity”. Reasons identified included “outdated farming methods, the lack of access to technology and finance, and lack of incentives to improve depleted soil fertility or replace ageing trees, many of which are more than 25 years old and past their productivity”21. Contributing to building an enabling environment where there are economies of scale can help address some of these challenges. For instance, the Ethiopian Coffee Exchange has been cited as a positive intervention in terms of the role that government can play and has helped to increase incomes for coffee growers there by 60 per cent22. Large consumer goods companies and retailers purchasing from Africa also note that there are key challenges in finding producers who have the capacity to be a part of their supply chain. Organised farmers groups and aggregation can help to support capacity building and productivity increases. However, participation in organised farmer groups ranges from an estimated 30 per cent in Côte d’Ivoire to much lower levels in Nigeria and Ghana23. This can pose a challenge for buyers who do not have organised farmers groups to work with. A lot of the agribusiness value chain is based on shortterm investments. This is a challenge for farmers to be able to get the knowledge and resources needed to take on risk to diversify and produce food both for subsistence needs as well as for the market. In Tanzania, only 3 per cent of agricultural households have access to credit24. Even medium- and large-scale commercial farmers and

agricultural investors face major financing constraints, and therefore refrain from larger-scale investments in the agricultural sector. When companies and other stakeholders were interviewed for this briefing the critical issue that came up time and again was in relation to purchasing practices vs. sustainable development commitments. One agricultural company noted how retailers have a great deal of leverage but that there is a dichotomy between what they say and their buying practices. Furthermore, uncompetitive behaviour by crop buyers especially for key cash crops, can force farmers to sell their produce at low prices, which will lead to continued and chronic rural poverty.

GOOD GOVERNANCE,CORRUPTION AND TRANSPARENCY Doing business in an ethical and transparent way is critical for sustainable business. On Transparency International’s Corruption Perception Index for Sub-Saharan Africa, 90 per cent of the countries scored below 50 (with a score of 100 indicating high level of corruption and 0 being very clean). Botswana was perceived to be the least corrupt and Somalia the most corrupt. The worst perceived region was Eastern Europe and Central Asia25. If corruption involves politicians it can deplete a country’s national wealth, particularly if agricultural projects are granted based on exchange for personal gains. Corruption undermines economic, social, and environmental goals, and keeps people and communities poorer. For agribusiness, corruption can impact the safeguards of standards, whereby those who are entrusted with ensuring workplace or product safety could be paid money to turn a blind eye. Access to land titles may require payments of bribes, putting companies and their employees at risk. Transparency is needed to facilitate land acquisition, valuation and compensation issues. Corruption can undermine trust in institutions, and contribute to a lack of or non-enforcement of environmental laws and regulations, leading to unsustainable exploitation of natural resources. Companies and communities can benefit from ensuring transparency. Growing numbers of companies now want to ensure the traceability of their supply chains to manage the associated business risks. Other stakeholders have increasing expectations that companies sourcing from Africa will disclose information about where their products and raw materials come from.


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SOCIAL FOOD SECURITY Food is a human right and included in the 1948 Universal Declaration of Human Rights. Malnutrition stunts growth and development, affects productivity and helps to sustain poverty. Food security is an important issue for businesses, who have a responsibility to respect human rights, while ensuring the sustainability of their supply chains and whose companies cannot thrive in communities that fail. Although there have been improvements on many socio-economic development indicators, Sub-Saharan Africa has the highest prevalence of hunger in the world26. At the same time, with changing diets, urbanisation, and an increasingly sedentary life for the emerging middle classes, the region is also experiencing an increase in obesity27. Despite the positive economic growth, malnutrition continues to plague communities across the continent. The malnutrition rate for children in Africa under the age of 5 was 41 per cent in 2010, which was only a 2 per cent decrease from 1990 levels. In contrast, Asia went from 48.6 to 27.6 in the same period28. In 2011, a famine in East Africa left more than 2.5 million people reliant on emergency assistance and was estimated to have killed up to 100,000 people. In 2012, West Africa was affected by severe and acute food shortages. In Mozambique, farmers have reported that households routinely experience a ‘hungry season’ where there is not enough food to feed the household and that this is considered a normal part of life”29. Riots have broken out in countries such as Mozambique and Algeria in recent years due to the spike in prices of basic commodities. Although Africa has the means to be self-sufficient, the region is still a net importer of food. It is estimated that 95 per cent of the basic staples in Africa are not regionally produced, but imported30. Agriculture exports are a major source of income for countries and communities in the region, while greater dependence on food imports leads to exposure to price and supply risk31. The food retail sector on the continent has changed over recent years with the rise in supermarkets and a corresponding decline in more traditional shops and markets in some areas. Arguments in favour of Genetically Modified (GM) crops are that they could provide higher yields and help to meet the growing demand for food. However, other advocates and analysts have argued that GM crop developments to date “have largely benefited northern countries and markets, not small scale farmers in the developing world”32. The knock-on effects of GM crops are not yet fully understood both in terms of their human and environmental impacts. While economic growth tends to result in improvements in nutrition this is not always the case. Increases in agricultural output do not always lead to better outcomes in the communities and for local nutrition. For example, in Malawi where “farmers managed to dramatically increase their grain yields, moving the country from a grain importer to exporter”, there was not a corresponding improvement in the nutritional status of many Malawians33.

FOOD SAFETY

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side from the availability and affordability of food, another important issue for agribusiness is food safety. Food poisoning can result in impacts for people ranging from mild discomfort to death. Well publicised outbreaks of microbial and chemical food poisoning cases are on the rise globally and in Africa. • Globally, one of the most high profile cases in recent years was the 2008 milk scandal in China, where six babies died and 300,000 fell ill, when melamine, which is an industrial chemical, got into the milk supply34. • In Nigeria, in 2010, many people in Bekwarra Local Government of Cross River State suffered from food poisoning due to indigestion of beans (made into ‘moi moi’). As a result about 122 people were hospitalised, while deaths of two children were recorded. The ‘moi-moi’ and the beans it was made from were said to have contained a large dose of highly toxic pesticides35.

Agricultural supply chains are complex and have become more so over recent years. Stakeholders interviewed for this briefing emphasised the importance of traceability. Tracing the value chain and knowing where your products come from can help companies ensure that their products are safe and that social and environmental issues are managed well. However, other stakeholders pointed out that companies also need to bear in mind the cost implications of traceability and whether their need and their customers need for traceability could be having an adverse impact on the producers in their supply chains and in particular for small holder farmers.

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LABOUR AND WORKING CONDITIONS

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griculture in Africa employs roughly 60 per cent of the labour force. Companies are faced with managing risks and ensuring that workers’ rights are protected as well as balancing labour shortages.

Agricultural work is the second most dangerous work after mining in terms of fatal accident rates. According to the International Labour Organisation, out of some 335,000 fatal workplace accidents worldwide, about 170,000 occur among agricultural workers. However, the injuries are often under reported36. Working on plantations is labour intensive, and wages along with housing and social conditions may be a problem. There are often issues regarding lack of or poor facilities such as schools, pharmacies, health clinics, etc.37 Labourers often cross borders in search of employment opportunities and reports have noted that in some supply chains there are risks of trafficking and forced labour38.

The International Labour Organisation (ILO) is the international organization responsible for drawing up and overseeing international labour standards. The ILO Declaration on Fundamental Principles and Rights at Work includes eight Conventions in four areas of • • • •

Freedom of Association; Elimination of forced labour; Abolition of child labour; Elimination of discrimination

The ILO Code of practice on safety and health in agriculture contains guidance and tools for agribusiness.

Exposure to agrichemicals is a risk for agricultural workers. Chemicals (fertilizers and pesticides) have had negative effects on human health and on the environment39. Chemicals are also often misused for the quick and artificial ripening of fruits and vegetables, which has can have negative impacts on the health of people. Additionally, agricultural workers are exposed to dusts and other biological elements which can be harmful to their health. Most agriculture is carried out by smallholdings. This can mean that home and work are interconnected and there is a reliance on family members and informal labour relations. Children are usually depended upon to help with the land. This can bring risks to companies in terms of having young workers in their supply chains. Child labour is a real risk and a particularly important issue given the hazardous work involved. Roughly 30 percent of children between the ages of 10 and 14 are employed in agricultural work in Africa and the majority are unpaid family workers40. However, throughout the world agribusiness often consists of small businesses and family businesses. This can present a tricky issue for companies given that pulling children out of the supply chain or refusing to work with family businesses could potentially be detrimental to those children. Gender inequalities are an important sustainability issue for business. Women grow 80 per cent of staple foods in SubSaharan Africa41, yet are usually in the lower paid jobs in the supply chains. In commodities like cocoa, tea, and coffee, women are often producers while men sell the crops to traders and control decisions and the money. Boys are still the recipients of most educational opportunities42. Women workers earn less and often face barriers to credit and markets. Companies will often look to source from established producer groups, yet women are typically underrepresented in both membership and governance of these groups. Companies have recognised that they need to have policies and codes of conduct in place, which meet both national laws and international standards and include topics such as fair employment practices; health and safety; prohibition of forced and child labour; non-discrimination on the basis of race, gender, sexuality, national origin, or religious beliefs; and prohibition of harassment and abuseiii. In addition, workplace-specific risks and hazards need to be identified and action plans put in place to eliminate these. Ensuring workers have a voice and communication channel with management (trade unions or other forms of representation) is crucial, as is a grievance mechanism. If companies are dealing with any form of child labour, they should ensure that decisions are taken with the best interest of the child in mind. Furthermore, research has found that many international food companies could improve crop productivity and quality, grow the smallholder supply base and improve access to high value markets when they increase women’s participation43.

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See IFC Performance Standard 2: Labour and Working Conditions


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POVERTY, HEALTH AND EDUCATION Growth in the agricultural sector has been the key factor in reducing rural poverty providing jobs and income. While poverty, health and education indicators across the region have increased, challenges still remain. As noted in the preceding section, a large proportion of children between the ages of 10 and 14 are agricultural workers. This is driven by poverty and also impacts and is impacted by educational opportunities available for children and young people. The ILO has estimated that in Kenya, during the peak coffee picking season, up to 30 percent of the pickers are under the age of 1544. High levels of illiteracy still exist across much of the region, particularly in rural areas and studies have found correlations between literacy and improvement in farm productivity. In addition, limited ability to access market information means that farmers may not have a clear idea of fair prices for products and cash flow challenges mean that many may need to sell their yields quickly and for lower than fair prices45. Similarly rural poverty has been exacerbated by low investments in health and education. HIV/ AIDS and malaria have taken huge tolls on the potential workforce and combined with rural to urban migration, there are growing labour shortages for many farms. Poverty disproportionately affects girls and women. Girls are more likely to be impacted by any increases in infant mortality and face inequalities in their opportunities for schooling. Women are more likely than men to be doing unpaid work as family labourers or in the informal sector and overall have unequal access to economic opportunities. While women make up to half of the agricultural labour force in Sub-Saharan Africa, they have lower access to inputs such as extension services and fertilizer which can impact on yields46. Through their core business models and additional community investments, companies can work to build shared value, so that the business benefits and communities thrive. Companies can work to put in place conditions, which enable longer term relationships with smallholders, providing a decent and fair income, and support investments, such as, agricultural services, credit and inputs. Interventions need to factor in gender considerations. With better prices, farmers can get out of extreme poverty, local industries can be promoted, unemployment can be reduced and gradually the country’s standard of living can be raised.

LAND ACCESS

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ince the global food price increases in 2008, there has been a growing demand for land for agricultural use and a growing increase in land acquisitions – particularly in developing countries47 and particularly in Africa. NGO campaigns have pointed to the challenges for local communities whose rights are often infringed through the land acquisitions48. For smallholders in Africa land is often passed from generation to generation with ill-defined tenure rights, which can leave farmers – and in particular women - at risk. Issues around land use and access to land vary between countries depending on the policy environment. However, for agribusiness, land acquisition and, land use can be significant risks depending on how it is managediv. Companies around the world have found themselves faced with community protests and global campaigns if they have not ensured that they are respecting existing land rights. Many companies and other stakeholders such as governments, financers and communities recognise that obtaining ‘Free Prior and Informed Consent’ (FPIC) can be an essential tool in managing community relations and protecting local people’s rights. FPIC refers to informed, non-coercive negotiations between companies and local communities– prior to development of business activities. It recognizes indigenous peoples’ inherent and prior rights to their lands and resources. It involves ensuring information about and consultation on any proposed initiative and its likely impacts are detailed in a way which communities will understand. It also involves meaningful participation of indigenous peoples and representative institutions. iv

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See IFC Performance Standard 5: Land Acquisition and Involuntary Resettlement


Companies have found FPIC particularly useful where customary and indigenous rights are not fully reflected in national legal frameworks. Some standards such as the Roundtable on Sustainable Palm Oil (RSPO) have also included the FPIC topic in its framework. Although the FPIC framework should ideally be used to prevent conflicts through prior consent, experience shows that the framework can also be helpful in resolving existing conflicts and enhancing community trust49.

between 4.5% (conservative estimates) and 9.8% (worst-case scenario)51. Agribusiness needs to consider its operations in a resource constrained world, how it manages its own greenhouse gas emissions throughout the value chain and including land use change and how it is adapting to the risks caused by climate change.

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ENVIRONMENT CLIMATE CHANGE

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ub-Saharan Africa is one of the most vulnerable regions in the world to climate change. While many countries are already prone to frequent droughts and/or floods and these events are cyclical, their increasing frequency and intensity are thought to be linked to climate change. The impact of these shocks on already vulnerable populations is often severe, affecting both short-term food securities as crops fail or are destroyed, and long-term food security as households lose or are forced to draw down on their few assets. The World Bank’s 2012 Report ‘Turn Down the Heat’ warned that temperatures could rise by more than 3 degrees above pre-industrial climate this century without further commitments and action, and that the most alarming impact may be on food production, with Africa being particularly affected50.

Climate change is a critical business issue. Agriculture itself can significantly impact climate change through land use change and cutting down forests or removing peat-lands which help to absorb carbon. Agribusiness will be impacted by climate change which can impact on the quantity and quality of crops, pasture, forests and livestock. It will bring changes in land, soil and water resources. There will be new and different challenges for weed and pest control. Resulting socio-economic impacts will include changes in yields and production; price fluctuation; increased food insecurity. Examples of climate impacts include: • Research into maize has found that climate change affects the crop production and results in lower yields and harvests. • For Kenyan tea farmers, changing weather patterns have stressed tea crops and hampered productivity which has depressed income and delayed cultivation of important staple crops. • Crops such as Arabica coffee grown from limited genetic stock may lack the flexibility to be able to cope with climate change.

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ater is essential for agriculture and for all life on the planet. Globally, the agriculture sector is the largest user of water (more than twice that of all other sectors combined), and the greatest source of water pollution52. It is estimated that agribusiness accounts for 70 per cent of freshwater consumption globally53. Access to water is recognized as a human right. It is forecasted globally that there will be a 40 per cent gap between water demand and supply by 2030 under ‘business as usual’ conditions. While Africa is endowed with an abundance of fresh water supplies, it is estimated that one in three people endure water scarcity and climate change will make things worse54.

The use of chemicals also has an adverse effects on the environment resulting in the pollution of surface and ground waters55. Although most farmers cannot afford to use chemical pesticides, those who use them may apply incorrect doses and use improper procedures56. While integrated pest management techniques can provide more sustainable options, pesticides continue to be attractive to most farmers and governments because they are simple to use. Stress on water sources are compounded by low levels of irrigation in the region. Only 4 per cent of arable land in the Sub-Saharan Africa region is irrigated compared to 35 per cent in Asia and 15 per cent in Latin America. For some agribusiness, poor water storage and harvesting is a key risk. Processing of agricultural commodities, which is not properly managed can wreak havoc on local water supplies and contaminate drinking water. Given the stress on water resources and growing global scarcity, successful agribusinesses in the future will need to ensure they have a water resources management system in place with procedures to conserve, measure and manage their water use, and manage the risks that water shortage can pose to their supply chainvi. Many companies are starting to develop such systems. Companies can help to make a positive contribution to sustainable development by recognizing that water is a human right and respecting this right as well, as by carefully managing their water footprint / use of water and helping to protect local watersheds.

• In Mozambique, it is estimated that climate change, combined with the effects of more frequent flooding on rural roads, could result in agricultural GDP losses v

See IFC Performance Standard 3: Resource Efficiency and Pollution Prevention See IFC Performance Standard 3: Resource Efficiency and Pollution Prevention

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BIODIVERSITY AND ECOSYSTEM SERVICES

B

iodiversity is the variety of life in our world or in a particular habitat or community. Ecosystem services are the benefits that people, including businesses derive from the ecosystems. Agriculture impacts and depends on biodiversity and the ecosystems it supports.

As land is converted for agricultural purposes, it can reduce biodiversity. For example, palm and tea plantations can destroy biodiversity as a result of forest degradation and fragmentation from conversion to monoculture57. Tea must be planted in steep, remote areas on terrain that often hosts high concentrations of vulnerable animals and plants. Converting such landscapes for tea production endangers species and, due to the slope of the land, can cause soil erosion. Forests and woodlands face pressures from a growing human population including encroachment and conversion for agricultural expansion, illegal logging and poaching of wild animals, overgrazing leading to loss of woody vegetation, and the impacts of conflicts58. Only about 6 per cent of sub-Saharan Africa, or 142 million ha, falls under protected areas59. Agricultural production in sub-Saharan African ecosystems is greatly affected by pests such as insects, nematodes, fungi, rodents, birds, weeds, viruses and bacteria60. For smallholders, lack of access to fertilizer can be a key contributor to low yields and simple agricultural practices and correct application of fertiliser can significantly increase yields. However, incorrect use of fertiliser and chemicals can also create impacts on the environment and human health61. Chemical use can not only impact drinking water, but can also affect soil quality and kill species. There are arguments both for and against the expansion of GM crops. Modifications of crops could enable their survival in unfavourable conditions and increase their ability to withstand climate change. However, critics are also concerned about an increased dependency on the companies who control and supply the seeds and the knock on impacts on biodiversity. Biodiversity loss is a significant risk for business and a critical sustainable development issue. For agricultural crops and innovation in seed production, biodiversity is fundamental. Some companies are increasingly recognising the importance of protecting biodiversity and the corresponding ecosystem services. Negative impacts should first be avoid but if avoidance is not possible then companies can work to ensure impacts are minimised as well as restoring impacted areas after usage. Some companies have biodiversity offset strategies to compensate for impacts that cannot be avoided, working to achieve no net loss of biodiversity or, alternatively a net gainvii. vii

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See IFC Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources

Managing these issues for more sustainable business

T

here are different ways of characterising and categorising the approaches that companies take to manage these complex issues. For IFC, interventions cut across 3 areas: standards; resource efficiency and supply chain / community investment. Table 1 maps activities and strategies in relation to these focus areas and the sections below provide further details and information. The examples that were chosen were those which were highlighted and elevated through the research and are based on publicly available information and do not necessarily imply any partnerships with IFC. IFC Sustainable Business Advisory Focus Area:

STANDARDS

Standards and certifications can help companies put management systems in place and to demonstrate to others how they are managing social, environmental and governance issues in their business. This in turn can build investor and consumer confidence, and increase access to markets. For agribusiness exporting to the European Union (and other markets), traceability of products with appropriate packaging and labelling are essential. IFC Performance Standards are viewed by banks and businesses alike as the ‘gold standard’ for managing sustainability risks in their operations. They are directed towards clients, providing guidance on how to identify risks and impacts, and are designed to help avoid, mitigate, and manage risks and impacts as a way of doing business in a sustainable way. They include guidance on stakeholder engagement and the disclosure obligations of the client in relation to project-level activities. Together, the eight Performance Standards establish standards that the client is to meet throughout the life of an investment by IFC. The IFC also produces industry guidelines for the Environment, Health and Safety. Many businesses including retailers, processors and traders have made commitments to the environment and to the working conditions and human rights of workers in their value chains. This will often be expressed through their policies, principles and codes of conduct. Businesses use standards and codes (both internal and third party) to promote responsible practices in their supply chains and support traceability and food safety. Farmers and their associations can implement standards, which open up and increase access to different buyers and markets.

Examples of Standards for Agribusiness Fairtrade aims to improve the lives of farmers in the supply chains and give producers a better (fairer) deal. For a product to display the FAIRTRADE Mark it must meet international Fairtrade standards which are set by the international certification body the Fairtrade Labelling Organisations International (FLO). Rainforest Alliance (RA) Certified seal is awarded to farms that have met the environmental, social and economic standards of the Sustainable Agriculture Network (SAN), a coalition of local conservation organizations that first set the standard for sustainable farming in rainforest areas in the early 1990s. The SAN standards cover ecosystem conservation, worker rights and safety, wildlife protection, water and soil conservation, agrochemical reduction and education for farm children. UTZ CERTIFIED started as a certification standard for mainstream coffee and it is now expanding to other commodities such as cocoa, tea and palm oil. The program gives independent assurance of sustainable production and sourcing and offers online real-time traceability of agricultural products back to their origin. The Roundtable on Sustainable Palm Oil (RSPO) was established in 2004 with the goal of promoting the growth and use of sustainable oil palm products through credible global standards and engagement of stakeholders. RSPO has developed the most credible mainstream standard available for sustainable palm oil production, covering key environmental and social criteria.

There are numerous multi-stakeholder standards, which are important for agribusiness including Fairtrade, UTZ Certified and the Rainforest Alliance; and standards which are specific to commodities such as the RSPO. While timber was not included in the scan or the research for this project, the Forest Stewardship Council should also be emphasised as a key and important standard. Other standards such as ISO 14001 help companies with environmental management systems. Appendix 2 outlines some of the ones relevant for companies in this sector. Companies can invest in initiatives, which help suppliers and communities: • • • •

Identify relevant Environmental, Social and Trade (EST) standards Adopt these standards Identify market opportunities based on the application of these standards Reduce costs of the adoption standards


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W

hile standards can have numerous benefits, companies need to bear in mind that the resources required to meet quality standards (not only traceability requirements) can pose several challenges for small-scale farmers (for example in the duty to keep records). As one stakeholder interviewed noted, “There has been a lot of focus on certification – money from development agencies to support certification without understanding what it means for producers on the ground. A lot of tea companies put in commitments to achieve 100% Rainforest Alliance certification without understanding certification costs to the producers on the ground. When money runs out, the producers will then need to spend the 20k for certification. Certification has been a good starting point but it has not always factored in how and if it is viable to maintain62”. In some markets, new standards required from buyers have resulted in the exclusion of small scale producers, who cannot afford the cost of certificationviii63. Companies interviewed for the research pointed to cocoa and palm as examples where companies have worked together with each other and with other stakeholders to manage complex sustainability issues.

EXAMPLE: COCOA For chocolate manufacturers, ensuring a sustainable supply of cocoa is essential for business. The cocoa trade in Africa is dominated by countries such as Cote d’Ivoire, Ghana, Nigeria and Cameroon and the sector provides livelihoods for millions of people. However, demand for cocoa is rising and companies are worried that supply will not be able to keep pace. The crop is labour intensive and farmers often do not earn a living wage. Long hours, poor wages and lack of health and safety conditions have been documented in the industry. Most farms are small family enterprises of less than 2 hectares and it is often children (sometimes as young as 10) who are harvesting the cocoa. Climate change and environmental degradation are also posing challenges to cocoa farmers and their buyers. Companies see cocoa certification as a way to ensure that minimum standards are met and that there is traceability through the supply chain. • Unilever have started rolling out Rainforest Alliance certification to smallholder cocoa growers in West Africa. Through certification, they are working to cut out the middleman to ensure farmers get a better deal and are also providing training to improve their farming practices. • Mars committed to sourcing 100 per cent of its cocoa from certified sources by 2020. • In 2009, Cadbury’s Dairy Milk became 100 per cent Fairtrade in the UK and Ireland and was the first mass market chocolate bar to gain Fairtrade certification. The company which owns Cadbury’s, Mondolez International has been working with the Rainforest Alliance, GTZ, and USAID, and cocoa trader, Armajaro, to support sustainable cocoa production in the Cote d’Ivoire. This project has enabled six Ivorian cooperatives representing over 2,000 farmers earn the Rainforest Alliance Certified seal. This has resulted in improved yields and made significant productivity gains, in some cases above 50 per cent. The incidence of cocoa ‘black pod’ disease was also reduced by one third and farmer incomes have improved. • Divine Chocolates is a Fairtrade company set up by the Kuapa Kokoo cooperative of farmers in Ghana aiming to get a better deal for their

farmers.

• For Ecom it is estimated that over 50 per cent of all of their purchasing is currently touched by certification (i.e. purchased from certified suppliers). The company states on their website that certification is only the first step on the improvement ladder and serves as a common language to communicate value and values throughout the supply chain.

viii

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A survey of ten exporters by Graffham et al. (2009) as referenced in the recent IIED report, found that after the introduction of compulsory Global Gap certification in Kenya in 2005, these exporters controlled over 50 per cent of the Kenyan export horticulture market. There was a 60 per cent drop in formal participation of small-scale growers in these companies’ supplier networks.

EXAMPLE: PALM OIL Palm oil is a food staple in Africa and is used around the world in food, soaps, detergents, cosmetics, plastics, and as fuel. Producers range from smallholders to large plantations. Palm oil originated in West Africa and although most of the world’s production currently occurs in Malaysia and Indonesia global palm companies are looking towards Africa for new investments. Palm is a labour intensive crop and workers are often faced with poor working conditions and exposure to hazardous chemicals. The environmental impact is well documented as plantations require clearing of forests with land use change contributing to climate change along with methane use associated with the mills. The industry is water intensive and involves wide-spread use of agrochemicals. Land use and acquisition can result in communities being displaced and potential loss of land rights. Companies in the sector have been working together with other stakeholders to address these issues. The Roundtable on Sustainable Palm Oil (RSPO) was established in 2004 with the goal of promoting the growth and use of sustainable oil palm products through credible global standards and stakeholder engagement. • In 2012, Unilever announced that it reached its target of 100 per cent certified sustainable palm oil and is working towards a new target of purchasing all its palm oil from traceable sources by 2020. In Ghana, Unilever has a 40 per cent stake in - the Twifo Oil Palm Plantation (TOPP). TOPP is in the preparatory stage for certification by the RSPO64. • Woolworths, which uses some 600 tons of palm oil each year in its products, has joined the RSPO in order to promote and raise awareness of the need for sustainable palm oil production. This commitment includes purchasing certified sustainable palm oil certificates for the tons of palm oil used in Woolworth’s foods and beauty products. Woolworths has also undertaken to replace palm oil with alternatives where possible and has further committed to using only certified sustainable palm oil by 2015.

The RSPO process also enables potentially affected communities to raise grievances if there are concerns that the requirements of the RSPO certification are not being fulfilled in country.

IFC Sustainable Business Advisory Focus Area:

RESOURCE EFFICIENCY

World Bank/Jonathan Ernst

Agribusinesses faced with issues such as food insecurity, climate change and water shortages must find ways to produce more food with less land, make more efficient use of water, reduce fossil fuel inputs and reduce greenhouse gas emissions. Environmental (and social) management systems can help businesses to manage their risks and impacts. This typically involves ensuring there is a policy in place, identifying impacts, planning and setting targets, implementation, checking and reviewing for continuous improvement. The efficient use of resources is critical for sustainable agribusiness and can reduce costs and increase profitability. Investing in relevant technologies can help reduce waste and greenhouse gas emissions, even as companies’ output levels rise. Initiatives which farms and firms can put in place can help with: • Reducing costs by identifying opportunities to save water, energy, and inputs • Improving water use efficiency along the supply chain by adopting advanced irrigation technologies • Protecting soil and biodiversity


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A

t a farm level, water conservation programmes can help to protect water resources. Water management for crops while conserving the quantity and quality of water resources, should aim to optimize crop yield. The Rainforest Alliance Standard requires that farms make use of the best available technology and resources, consider water re-circulation and reuse, maintain the water network and minimise use. It requires farms to record the annual water volume provided by source and the amount of water consumed by the farm. Ensuring appropriate treatment systems for any wastewater generated and preventing discharges would also be critical. Farms can help to conserve ecosystems through identifying, protecting and restoring natural ecosystems. This can include reforestation of areas within farms that are not suitable for growing crops. Soil erosion prevention and control programmes can help to minimise and reduce erosion while managing pesticides as part of an Integrated Pest Management (IPM) and considering alternatives (crop rotation and use of varieties) are important strategies. Agribusinesses can put in place energy management systems, which would involve understanding their current energy usage, identifying opportunities for improvement, setting targets and measuring progress. Low electricity penetration in Africa causes constraints for both production and consumption. Identifying opportunities for use of renewable sources, such as solar power, can save money and reduce emissions.

EXAMPLES: Karsten Farms is an IFC client since 2006 that grows and packs grapes and other fruits in South Africa. Following an assessment of resource efficiency opportunities, the client received an IFC long-term loan of $1.1 million in local currency to install efficient lighting and refrigeration systems to reduce its operating costs. IFC worked with Karsten to install solar water heaters in approximately 300 farm-worker homes, improving the living standards of its employees. Karsten is expected to save $205,000 annually from energy savings of 1,500 MWh/year while also reducing greenhouse gas emissions by more than 1,500 MT CO2/year65. Kenya Tea Development Agency has worked in partnership with the Rainforest Alliance to strengthen resilience to climate change amongst tea producers. KTDA makes drought-tolerant, high yielding tea varieties available to KTDA smallholders. Seedlings from the KTDA nurseries are distributed to the local community for farmers to plant along boundaries to provide buffers for waterways and forests. These native trees can store carbon and help farmers to adapt by stabilising the micro climate and increasing soil fertility. If trees are planted on steep slopes or degraded lands, it can also reduce the vulnerability to heavy rains and droughts. Significant sources of fuel are needed to power the dryers used in the processing plants and Rainforest Alliance is working with KTDA to share industry best practice to reduce fuel66. Technoserve, in partnership with Mother Parkers Tea & Coffee the Brown Gold brand, is working with wet mill operators along the Kolla River in Ethiopia to implement a low-cost, sustainable approach to water treatment – vetiver grass wetlands. The vetiver grass’s deep roots suck up the water, slowing down flow and infiltration into the soil. The remaining effluent, if any, is stored in a small pond at the bottom of the wetland to evaporate. Technoserve has found that water treatment will not only improve water quality for families who depend on the river but will also promote a more sustainable and competitive coffee industry67.

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Unilever’s Integrated Pest Management (IPM), involves the integrated use of a range of pest (insect, weed or disease) control strategies in a way that not only reduces pest populations to satisfactory levels but also is sustainable and non-polluting68. Unilever’s Sustainable Agribusiness Code has established IPM as a mandatory commitment, which their growers must comply with and have a system in place which: clearly defines responsibilities; establishes processes and criteria for selecting suitable growing areas, fields rotation and varieties; includes cultural control of pests within the agricultural system; and identifies key pests, their life cycle and action thresholds69. The Coca-Cola Company is actively working to maintain a water sustainable business. Their Water Stewardship Strategy focuses on three areas: Reduce the use of Water through specific water Efficiency targets; Recycling Water used in their operations (Wastewater Treatment); and Replenishing Water through Community Water Access and Watershed restoration and protection programmes. Their water sustainability programme also includes conducting a Source Vulnerability Assessment and creating a Source Water Protection Plan for each plant to identify and address local water resource issues and risks. In 2010, Coca-Cola and USAID announced an additional joint investment of $12.7 million in their global partnership, the Water and Development Alliance, focusing on watershed management, water supply and sanitation, hygiene promotion and productive water use. In 2009, The Coca-Cola Africa Foundation announced our Replenish Africa Initiative (RAIN)—a six-year, $30 million commitment to provide access to safe drinking water to communities throughout Africa70. Woolworths, a South African company, has invested in WWF’s water neutrality programme, covering the water used in their direct operations. Through its ‘Farming for the Future’ initiative, the retailer works closely with farmers and suppliers to implement water-conserving methods, including water storage, recycling, and improving water waste management during growing, production and manufacturing. This has resulted in a saving of 720 million cubic metres of water over the past three years71.

Rajkumar Impex, a company of Indian origin, is the world’s number two cashew nut processor. It revealed plans to open its first cashew plant in West Africa in November 2011, which would eventually be powered by a 5MW biomass plant fuelled by waste shells. This would help reduce the emissions when the shells are burned. The oil would then be sold onto chemicals firm Cardolite, which turns it into products such as thinners or non-corrosive coatings for ships72. H&M is the world’s biggest user of certified organic cotton. H&M works with cotton farmers to grow more cotton with less water and fewer chemicals through trainings conducted by Better Cotton Initiative’s partner organisations such as WWF and Solidaridad73.

The SIFCA Group is one of West Africa’s largest agribusiness and their brand Sania has a large refinery in the Cote D’Ivoire. The company has undertaken several efforts to recycle most of its waste. For instance, they spread the husks of the palm nuts around the nursery to prevent soil erosion and this also provides the seedlings with the nutrients they need. The palm oil refinery, which relies largely on fossil fuels, is switching to burning the shells of palm kernels. Through this switch, they expect to curb their yearly greenhouse gas emissions by just over 45,000 tons (roughly the equivalent of taking about 8,200 cars off the road for a year). According to the company “switching to greener energy enables the company to cut their production costs and become more competitive in the market place”75.

World Bank/Arne Hoel

Water Efficient Maize for Africa (WEMA) WEMA is a public/private partnership, initiated in 2008. Its stated aim is to help smallholder farmers mitigate drought risk and manage insect pressure. Led by the Kenyan-based African Agricultural Technology Foundation and funded by the Bill and Melinda Gates and Howard G. Buffett foundations, WEMA key partners include the National Agricultural Research Institutes in Kenya, Mozambique, South Africa, Tanzania and Uganda, the International Maize and Wheat Improvement Centre (CIMMYT ) and Monsanto. The WEMA partnership has developed new drought-tolerant hybrids that will be available to local seed companies royalty-free over the next five to six years and the first WEMA products are expected to be available to farmers in early 2014. Monsanto estimates this effort could result in new white corn hybrids that may provide 20 to 35 per cent more yield during moderate drought. WEMA has faced criticism from NGOs due to issues related specifically to Monsanto and genetically modified crops74.


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IFC Sustainable Business Advisory Focus Area:

SUPPLY CHAIN AND COMMUNITY INVESTMENT: ENGAGING SMALLHOLDERS

F

or agribusiness in general, secure and sustainable supply chains are critical, and buyers and retailers are looking for appropriate ways to engage smallholders in sustainable agribusiness as part of their supply chain and community investment strategies. Smallholder engagement strategies have helped companies to minimise production costs, stimulate local demand and grow products suited to local markets. More direct control over crop production can also reduce commodity price fluctuation risk. The way in which agribusinesses carry out their business will have the biggest impact on local communities. Given the numbers of households that rely on agriculture for their livelihood, responsible sourcing strategies have the potential to have a positive impact on communities. Approaches that help farmers to boost productivity, diversify their production (to reduce reliance on a single product and therefore manage risk), and to adopt techniques which are ecologically sustainable, promoting things like soil management, can all help build sustainable supply chains. Providing training to farmers on simple, low-input techniques to help build sustainability of small-scale farming can also bring notable benefits to both the farmers and the companies, along with effective farmers’ organisations can significantly support the capacity building of smallholders and the access to appropriate resources. In developing such strategies, businesses should consider partnerships with other parties, particularly local organisations who may have relevant skills and trusted relationships with smallholders that companies do not. Some of the good practices which companies can undertake include: • Building capacity and creation of farmers’ organisations, supporting out-grower schemes and contract farming, which have longer term agreements and facilitation of access to inputs (bank loans, seed and advisory services). • Helping to ensure financial services are in place for growers and others in their value chains. • Investing in the much needed technical assistance in production and postharvesting techniques and operations, and training and capacity development to enhance farmers’ management, negotiating and bargaining skills. • Ensuring transparency in dealings with small holder farmers. • Paying a price to producers that at least covers the costs of sustainable production. • Paying a ‘Fair-trade Premium’ so that producers can invest in development. • Partially paying in advance, when producers ask for it. • Signing contracts that allow for long-term planning and sustainable production practices. • Supporting and ensuring traceability and record keeping systems. • Enabling long term contracts through supply chains. • Enabling access to market information, taking care that if you deal with ‘middle men’ the benefits are not lost for small holders.


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EXAMPLES: Waitrose: Recognising the need to invest in their value

chains, the Waitrose Foundation was established in 2005 to help improve the lives of the farm workers and smallholders who grow the company’s produce in South Africa, Kenya and Ghana. Instead of funding through a price premium, Waitrose - in conjunction with growers, importers and exporters - passes a percentage of profits into a trust to pay for projects. These include educational, social and healthcare projects, and are chosen by farm workers and smallholder committees. Money raised by the sale of Waitrose Foundation produce is therefore spent on projects that are chosen by and directly benefit the farm workers and smallholders76.

Cargill is investing $US 1.35 million in a three-year partnership with the Aga Khan Foundation (AKF) to provide support for the Bilibiza Agriculture Institute (IABil) in order to enhance and expand educational possibilities for farmers in northern Mozambique. The partnership, which has been supported by Cargill’s businesses in Switzerland and Africa, will enable IABil, the only full secondary vocational school for agriculture in Cabo Delgado Province of Mozambique, to improve its teaching capabilities and to reach more student farmers in the northern region77. SAB Miller started contract farming in Africa when yields were low and injected their management skills and technologies to boost standards. In Zambia and Uganda the company engaged smallholder production in order to minimise production costs, stimulate local demand and grow products suited to local markets. The other advantage is that direct control over crop production reduces commodity price fluctuation risk. Given the strict standards, not all smallholders can get on board. The company has put over 10,000 of their subsistence farmers into job-creation schemes. SABMiller’s economic footprint in South Africa shows that beyond its 9,000 direct permanent employees, the company has created an additional 378,000 jobs through its operations along the supply chain78. TechnoServe is helping nearly 2,000 smallholder tea farmers to turn their main cash crop into a business, tripling their productivity and improving the quality of tea being produced. Farmers are organized into business groups so they can benefit from economies of scale when selling their products and buying supplies. The program is also helping farmers to acquire business financing and to register with Fairtrade, which offers price premiums to support community investment. The key supporters are the West Foundation and the U.S. Agency for International Development79. Nestle has launched ‘The Nestle Cocoa Plan’, which is a range of initiatives to improve farm profitability, cocoa quality and traceability in the cocoa supply chain. Nestle is the first cocoa purchaser to set up such a system of monitoring though community liaisons, who will raise community awareness and report on the conditions of farmers and their children at each stage of the supply 22


chain. This is a direct move to eliminate child labour from Nestle’s supply chains, promoting and facilitating school attendance. Nestle is working with its certification partners to incorporate this process into certification itself80. M&S was the first major UK retailer to switch all its tea and coffee to Fairtrade back in 2006 and has continued to strengthen relationships with suppliers across the world. M&S is also the first retailer in the world to launch a Kenyan tea that’s packed by the smallholders who grow it. M&S has helped the Kenyan farmers acquire the skills and technical knowledge to not only grow, but also package their tea. The aim is to enable the farmers to become self-sufficient and build their future business81. The Grow Africa platform is an example of how large private sector players are working in partnership with national governments to accelerate investments and initiate transformative change in African agriculture. This work is linked to The New Vision for Agriculture82, a global initiative led by the consumer industries community of the World Economic Forum, which recognises agriculture’s potential as a driver of food security, environmental sustainability and economic opportunity83. Southern Agricultural Growth Corridor of Tanzania was launched at WEF Africa in 2010 as a public-private partnership that aims to boost agricultural productivity in Tanzania and the wider region, and thereby achieve the country’s agricultural strategy. SAGCOT will promote “clusters” of profitable agricultural farming and services businesses, with major benefits for smallholder farmers and local communities. By catalysing large volumes of responsible private investment, the initiative aims to deliver rapid and sustainable agricultural growth and thereby tackle food security, poverty reduction and reduced vulnerability to climate change84. Unilever has set a target of improving the livelihoods of at least 500,000 smallholder farmers and to provide the evidence that their intervention has had a positive effect. The company recognises that this is a ‘win–win’ relationship in which the company benefits from increased yields, sustainably produced crops and security of supply, and farmers enjoy training, support and security of livelihood85.

Table 1: Models of Engagement: Standards, Resource Efficiency and Supply Chain / Community Investment Strategies and initiatives which agribusiness are undertaking at different levels of the value chain mapped in relation to IFC Sustainable Business Advisory Focus Areas

Standards

Farmers and Farmer Associations

Traders

Processors

Retailers

Implementing standards which open up and increase access to different buyers

Implementing an effective traceability system that allows better knowledge of suppliers and the opportunity to develop the right interventions.

Having environmental and social management systems – to manage risks and reduce impacts.

Implementing standards which manage risk and show traceability in the value chain.

Sustainability training/ Certification

Supply chain management system (ESMS)

Supply chain management system (ESMS) Food safety standards

Food safety standards

Traceability systems

Traceability systems

Sourcing & contractor system

Sourcing & contractor systems

Transparency and good governance

Transparency and good governance

Resource Efficiency

Partnerships for shared value. Transparency and good governance Supply chain management system (ESMS) Food safety standards Traceability systems Sourcing & contractor systems

Viable irrigation solutions and water (and watershed) management

Energy management

Energy management

Investing in initiatives and technology to cut carbon emissions and reduce water usage in their operations and through the value chain.

Water efficiency

Water efficiency

Waste management

Water management

Water management

Pesticide and fertilizer use

Waste management

Waste management

Fair purchasing practices

Fair purchasing practices

Investment in new crops and hybrids which benefit producers

Investing in research to identify key nutrient-dense staple crops, which can be used in locally produced nutritious foods and snacks

Extension services

Extension services

Smallholder and community engagement

Smallholder and community engagement

Product responsibility which benefits local communities

Contract arrangements – longer term and advance payments

Commercially viable aggregation models

Energy use Climate smart agriculture practices Access to information on price & weather Access to finance to purchase low cost efficient irrigation equipment

Supply Chain / Community Investment: Engaging Smallholders

Access to inputs, credits and on a long run, better planting material availability of service / support businesses Investment in new crops and hybrids, educational, social and healthcare projects chosen by farm workers and smallholder committees Infrastructure Expanding capacity of communities to cope with climate change

Commercially viable aggregation models Partnerships to grow farmer outreach

Partnerships to grow farmer outreach Supply chain mapping

Extension services Smallholder Engagement

Commercially viable aggregation models Finance Partnerships to grow farmer outreach Supply chain mapping

Supply chain mapping


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Measuring the impact Measuring the impact of sustainable business strategies – for businesses and for those affected through the value chains - is often stated as ‘the holy grail’ in that it is an important pursuit but not an easy one. • For agribusiness the impact can be in more sustainable supply chains, improved yields, improved market access, an enhanced reputation, and better relationships with stakeholders including governments, financers and consumers. • For communities the impact can be in areas such as improved access to markets, improved financial outcomes or greater sustainability and improved nutrition and standards of living, as a result of changes in farming operations and improved relationships with others in the value chain. Companies are starting to see the benefits of ensuring that they understand their community impacts and transition from measuring their inputs and activities (what they provide and what they do), to really understanding the differences that their sustainability strategies can make. There is emerging evidence of the impact of standards, resource efficiency and supply chain / community investment both in terms of business benefits as well as for affected communities and a few examples have been included below. Standards: Implementation of standards helps business to manage risks and address issues such as traceability in their supply chain. There is clear evidence that standards have had demonstrated impacts in improving specific issues such as health and safety but there has been less evidence of improvements in other more context specific issues, such as freedom of association86. In relation to the impacts of standards, commentators note that so far there are very few independent evaluations available on the costs and benefits for producers and workers of participation in certification schemes87. However, in 2012 WWF undertook research to understand the benefits of RSPO certification. The conclusion was that benefits outweigh the costs and in many cases this was significant for community relations, for improvements to yields, for reduced turnover and occupational health and safety as well as for revenues and market access88. Resource Efficiency: The efficient use of resources is critical for sustainable agribusiness and can reduce costs and increase profitability. Investing in relevant technologies can help reduce waste and greenhouse gas emissions, even as companies’ output levels rise. Understanding the benefits of resource efficiency is usually more straightforward as it often results in both cost savings as well as resource savings. The example cited earlier of Karsten farms noted that they expected to save $205,000 annually from energy savings of 1,500 MWh/year while also reducing greenhouse gas emissions by more than 1,500 MT CO2/year. Supply Chain / Community Investment: Smallholder engagement strategies have helped companies to minimise production costs, stimulate local demand and grow products suited to local markets. This can help with increased yields, sustainably produced crops and security of supply, while farmers can benefit from training, support and security of livelihood. A partnership between The Coca-Cola Company, Technoserve and the Bill & Melinda Gates Foundation called ‘Project Nurture’ was set up to bring more than 50,000 smallholder fruit farmers in Kenya and Uganda into the fruit value chain by 2014. Results in 2012 were that for more than 42,000 farmers recruited to the programme, and incomes from fruit more than doubled due to increased productivity and better sales outlets89. 24


Mondelez has reported that quadrupling the volume of cocoa sold under Fair-trade terms in Ghana, has helped generate £2.3m in Fair-trade premiums to help improve farming communities’ livelihoods90. Some of the companies we interviewed and other stakeholders stressed the importance of sustainable livelihoods for farmers. Sustainable livelihoods is a concept that has been used by many development agencies recognising the interconnectedness of poverty alleviation with environmental sustainability, capacity of institutions, and social networks and the vulnerability to shocks, seasonality and changesx. A sustainable livelihood framework includes notions of the following types of capitals: • Human Capital: including local community health, education, knowledge and skills • Natural Capital: such as water, land, and other resources • Physical Capital: access to energy, communications, transportation, tools and technology • Social Capital: decision making structures, participation and engagement mechanisms • Financial Capital: such as money, wages, savings, credit and debt Businesses also depend on various forms of capital for their success. This idea is underpinning the International Integrated Reporting Frameworkxi and the current draft framework emphasises the importance of: • Financial Capital: includes availability of funds to use for production of goods and services • Manufactured Capital: includes buildings, equipment and infrastructure available for the business • Intellectual Capital: intellectual property, knowledge, systems and procedures as well as brand value • Human Capital: people’s competencies and capabilities • Social and Relationship Capital: institutional and community relationships • Natural capital: renewable and non-renewable environmental resources and processes Combining these two concepts can provide a framework for agribusiness to consider the long-term impact of its work and its sustainability – both for the business and for the community. Activities undertaken in relation to standards, resource efficiency and smallholder engagement should ultimately be bringing shared benefits. Sustainable Agribusiness for Shared Value and Benefits

COMMUNITY BENEFITS

BUSINESS BENEFITS

(as per a Sustainable Livelihoods Framework*)

(as per the Integrated Reporting Framework*)

• Human Capital: What is the impact on the health of the local community? What are the impacts on the standard of child education in the local community? Is there evidence of development of skills and transfer of knowledge in the local community?

• Financial Capital: Does the strategy help further accesses to financing and funding?

• Financial Capital: Are farmers and workers able to meet basic needs? What income does the business bring to the wider community? What credit facilities are available?

• Intellectual Capital: Is the sustainable business strategy helping to develop and retain intellectual property, and knowledge? Are there improved systems and procedures as well as brand value?

• Natural Capital: What impact does the site have on the local environment?

• Human Capital: Is the strategy supporting recruitment and retention of workers and staff and furthering the development of people’s competencies and capabilities?

• Physical Capital: How has the business helped or hindered local infrastructure? What tools and technology are available? • Social Capital: Are there mechanisms to enable workers and the local community to engage with the business on matters that affect them?

• Manufactured Capital: As a result of the sustainability strategy does the company benefit from better access or improved buildings, equipment and infrastructure?

• Social and Relationship Capital: Are institutional and community relationships being strengthened and helping to achieve and retain a social licence to operate and market access? • Natural capital: Will the strategy help protect renewable and non-renewable environmental resources?

*See www.ifad.org/sla

x

*See www.theiirc.org

For more information on a Sustainable Livelihoods framework see resources from IFAD online at http://www.ifad.org/sla/ For more information on the IIRC see the draft framework for consultation online at http://www.theiirc.org/

xi

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Conclusion With agribusiness in Africa on the rise and with more and more interest from international companies and investors, there is a need to further identify and understand models which can bring shared benefits for both the business and for the communities. As noted in this guide, businesses in the region are faced with a multitude of different pressures and are increasingly recognising that long term success will mean addressing and engaging on issues such as poverty, climate change, and food security. Companies that can do business in a way which provides opportunities for smallholders, generates decent work and jobs, respects human rights and protects the environment can better manage risks, seize opportunities and help build more resilient communities and create and foster sustainable livelihoods. We recognise that the issues covered as well as the examples of good practices in this guide are by no means complete and that different companies, working at different stages in the value chain and in different country contexts will have diverse risks to manage and opportunities to seize. Nonetheless, it is our hope that this guide will further support companies, to better manage the risks and identify those opportunities, which are both good for business and good for communities. The appendices that follow were prepared to provide additional supplemental information for companies who may be just starting out on a journey towards a more sustainable business. Appendix 1: Provides a simple tool / check list for integrating sustainability into your management systems. Users can develop spider graphs to map their strengths and areas for improvement. Appendix 2: Lists some of the standards and multi-stakeholder initiatives relevant for the sector Appendix 3 Provides a brief snapshot of the issues and initiatives for the following commodities: cocoa; palm; cashews; coffee; tea; horticulture; and cotton.

26


World Bank/Samson Mulutega

Appendix 4 Provides summaries of the country contexts for: Burkina Faso; Ghana; Kenya; Mozambique; Nigeria; Senegal; Tanzania; and Zambia

APPENDICES


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APPENDIX 1: A COMPANY SELF-ASSESSMENT TOOL We have included here some key questions, which companies who are starting on their journey for more sustainable business practices can use to think through some of the key elements for their management systems. This has been developed based on research undertaken for the project and adapting an earlier version published by the Global Compact Vietnam Network91. This adapted tool is not specific for the agribusiness sector and could be used by any business. Companies can use the checklists (below) to determine their strengths and areas for improvement. The following diagram shows a mock up for ‘Example Co. Ltd’ whereby each question in the ‘beginners’ category was scored out of 1; each question in the ‘achiever’ category was scored out of 2; and each question in the ‘leader’ category was scored out of 3. The final result was converted to a percentage under each of the categories. This company performs fairly well across all categories but could invest more resources into stakeholder engagement and the identification of risks and opportunities. Important Note: Stakeholder engagement. A company’s journey towards more sustainable business practices requires engaging with various stakeholders. These could be internal stakeholders such as employees or external stakeholders such as government, investors, customers, suppliers and communities surrounding operations. Stakeholders are individuals or groups that are affected, or likely to be affected, by an organisation. Sustainable business practices will look differently in different places and different contexts. Identifying what is most important for your company requires effective stakeholder engagement and identifying issues that concern your stakeholders. How do I know what is important? What’s materiality? Materiality refers to things that are most important to your business and to society. What issues can cause the most risk and harm to your business and what issues have the potential to bring the most benefit? We all know that good business is about managing risks and opportunities. We need to include the social and environmental risks and opportunities as these ultimately affect the financial returns.

EXAMPLE CO. LTD. Leadership & Accountability

Communications/ Reporting

Measuring & Monitoring

Stakeholder Engagement

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100% 80% 60% 40% 20% 0%

Identification of Risks and Opportunities

Policies, Standards and Objectives

Organisation, Resources and Capacity


29

Identification of Risks and Opportunities

Leadership & Accountability

Issue

• We have some general information about the significant impacts of our activities.

• We have begun developing a programme in at least one area of sustainability.

• We are working toward clarifying what compliance means to us in any identified ‘grey’ areas.

• We work to ensure that our relationships and activities fall within the legal framework.

• We recognise that we need a team of people to engage with sustainability issues.

• We are working towards increased commitment from our CEO.

• Our senior management has committed to some aspects of sustainable business which integrate financial, environmental and social aspects. This is primarily focused on avoidance of risk.

Beginner

• We have plans established for managing impacts.

• Assessments have been carried out in a participatory manner which engages stakeholders and, in particular potentially affected communities.

• Assessments are carried out by suitably qualified professionals.

• We have a good understanding of our company’s risks and impacts in relation to: • Health and Safety • Security • Human Rights • Social and community issues • Environment and biodiversity • We have carried out structured impact assessments (EIA/SIA/ HIA) to understand the impacts and determine our management approach.

• We try to avoid being complicit in another organisations activities that fail to meet international norms of behaviour.

• We have begun to integrate policies, programmes and practices into our supply chains.

• We have programmes to ensure we achieve sustainability objectives in a few areas.

• We are examining our corporate visions and mission to incorporate sustainable development.

• We work in partnership, as appropriate, with other organisations to achieve our goals.

• We have a strategy for contributing to community development which is linked directly with our business activities and creates shared value – for the business and for the community.

• Our priorities are closely aligned with the local development challenges and issues identified by the local community.

• We have a strategy for contributing to community development

• We have identified not only the risks and impacts from our operations and activities but opportunities for contributing to community development.

• We engage stakeholders in all these practices and take a lead within the industry.

• We have specific programmes and practices in place.

• We have identified internal leaders or ‘champions’.

• We are a signatory or involved in global sustainability partnerships or other local or regional networks.

• We are working to create business models which create shared value – benefits for the business and for local communities.

• The vision and values of our company reflect our commitment to sustainable development.

• We recognise both the risks and the opportunities sustainability brings. • In addition to national compliance, we strive to respect international norms of behaviour that are embedded in international conventions, treaties and declarations.

• Our company has appointed a Board Director to oversee sustainability.

Leader

• We have a designated person in charge of sustainability

Achiever

SELF ASSESSMENT TOOL – To help companies on their journey towards more sustainable business

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Organisation, Resources and Capacity

Policies, Standards and Objectives

• We have identified specific champions and leaders internally to lead work in terms of labour issues, environmental management, health and safety, or anti-corruption.

• We have identified possible external expertise and consultants that can help us with capacity building.

• We are beginning to identify possible external partners with suitable capacity who we can work with to deliver on our objectives.

• We are carrying out training and capacity building activities internally with our staff.

• Our senior management recognise that the resources allocated to our initiatives are part of an investment in our long terms brand and reputation.

• We have sufficient resources to support a designated manager and programmes.

• We comply with recognised industry standards.

• We have published those aims and objectives and will review than and communicate on progress periodically.

• We have specific aims and objectives covering some aspects of sustainability that are most important/material to business.

• We are putting plans in place to roll out training programme to key personnel within the organisation.

• We have undertaken an internal gap analysis where we need to develop capacity.

• We have identified the resources that we need (time, money, consultancy and technical services) to begin to implement systems and programmes in relation to sustainability topics.

• Our aims and objectives are focused on the issues that are most important/ material to our business.

• We are beginning to develop objectives that go beyond compliance and which can demonstrate our commitment to sustainable development.

• We have a comprehensive risk management system in place and systematically measure our impacts.

• We have started work on developing the systems that will be required to deliver this

• We have made a public commitment to working towards the full integration of sustainability issues within our business

• We recognise the need to internalise these policies through awareness raising, training, capacity building and monitoring.

• We recognise that social and environmental issues bring risks to our business and are working to begin to assess and understand the risks and impacts that are most important / material to our business

• We have specific policies and codes of conduct for managers addressing social, environmental, health safety and governance related issues.

• We have general workplace policies on labour, health and safety, environmental management, human rights and community involvement

• We are working with business partners and other stakeholders to build capacity to meet our own sustainability objectives and develop broader strategies to contribute to the sustainable development.

• Our staff are aware of the importance of social responsibility and receive on-going training to ensure that they are aware of all the issues, our own aims and objectives and the means by which we aims to meet our commitments.

• We have a long term resource commitment from our senior management to ensure that we can continuously improve on our sustainability impacts over time.

• Our aims and objectives are linked to the performance assessment of senior management and those tasked with implementing them.

• We have developed a sustainable development strategy for our organisation that clearly sets out who is responsible for delivering specific aims and objectives.

• We have detailed aims and objectives, revisited periodically, that guide our sustainability programmes and practices.

• We have a system in place to identify and analyse the opportunities for creating long term community benefits in our value chains.

• We are part of a broader industry network to promote sustainable development, more broadly.

• We take a systems based approach to our social responsibility

• We have created a system of economic and non-economic incentives related to performance to social responsibility

• Community involvement and development

• Anti-corruption

• Human rights

• Environmental protection

• Health and safety

• Good labour practices

• We have detailed policies and codes of conduct in place that outline our commitment and strategy for:


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Reporting

Communications /

Measuring and Monitoring

Stakeholder Engagement • We have started interviews and focus groups with key stakeholders relating to the sustainability issues.

• We engage with regulators.

• We have some public information about the significant impacts of our activities and some policies linked to those.

• We recognise the benefits that outside assurance of our CSR can bring us in the future once we have developed meaningful policies, programmes and strategies.

• We are aware of the most significant impacts of our business on society and on the environment and we have in place plans to begin to measure those impacts (positive and negative) in a more systematic way in the future.

• We have a system for measuring the impact of programmes and longer term strategies to understand the value for business and the value for society.

• We seek external assurance for our programmes, initiatives and communications through our stakeholders and the provision of third party opinions.

• We communicate on environmental or social performance.

• We are aware of the need to communicate balanced and timely information about of social responsibility.

• Our measurement strategy is based on key performance indicators in place in relation to our aims and objectives.

• We are starting to measure some aspects of our social and environmental footprint.

• We communicate regularly and appropriately in Vietnam with the aim to raise awareness about our own activities and the importance of sustainable development more broadly.

• We communicate internally and externally about our performance and involve our stakeholders in that process

• We have complete disclosure of our most significant social and environmental impacts and are reporting on this.

• We have developed a communications strategy for our socially responsibility that demonstrates our on-going commitment to sustainable development.

• We have formal third party assurance for our social, governance and environmental performance.

• We have begun systematic (quantitative and qualitative) measurement of our impacts.

• We are part of networks of businesses and other stakeholders prompting sustainability principles and sustainable development, more broadly.

• We have joint partnerships and programmes in place and can demonstrate the impact of these programmes both internally and externally.

• We have grievance mechanisms in place so that stakeholders can raise issues and make complaints.

• We have a systematic approach to stakeholder engagement. We have a stakeholder engagement strategy.

• We have established a two-way communication process with key stakeholder groups. We have on-going two-way communications with our key stakeholders.

• We have identified the most material impacts of our activities through our own assessments and those of our stakeholders.

• We have begun to engage partners in order to involve them in our programmes where they can help us make progress on sustainability related goals and the development of communities around us.

• We understand our stakeholders concerns and the issues that are important to them.

• We are conscious of and respect the interests and needs of our stakeholders.

• We have identified potential partners to work with on CSR issues.

• We have started engaging with our prioritised stakeholders on sustainability issues.

• We have identified our stakeholders. We know who they are.

APPENDIX 2 – STANDARDS AND MULTI-STAKEHOLDER INITIATIVES RELEVANT FOR THE INDUSTRY The following standards and multi-stakeholder initiatives were identified through the research. The list is not exhaustive but provides some of the key ones for the industry. • Rainforest Alliance works to conserve biodiversity and ensure sustainable livelihoods by transforming land-use practices, business practices and consumer behaviour. The Rainforest Alliance’s sustainable agriculture program oversees the certification of farms that produce tropical crops, including coffee, bananas, cocoa, oranges, cut flowers, ferns, and tea. To obtain certification, farms must meet a set of environmental and social standards, including agrochemical reduction, ecosystem conservation, and worker health and safety. The RA Certified seal is awarded to farms that have met the environmental, social and economic standards of the Sustainable Agriculture Network (SAN), a coalition of local conservation organizations that first set the standard for sustainable farming in rainforest areas in the early 1990s. The SAN standards cover ecosystem conservation, worker rights and safety, wildlife protection, water and soil conservation, agrochemical reduction and education for farm children. In this way the Rainforest Alliance strives to foster the values of ‘economy, ecology and ethics’ in its value chain. • Ethical Trading Initiative (ETI) is an alliance of companies, trade unions and voluntary organisations working in partnership to improve the working lives of people across the globe who make or grow consumer goods. The Ethical Trading Initiative Base Code provides minimum standards for companies to adopt founded on the conventions of the International Labour Organisation. • GLOBALGAP is becoming a compulsory standard as most retailers in Europe now require it as evidence of good agricultural/fish farming practices. Producers of crops and farmers raising animals/fish to produce food for human consumption need GLOBALGAP certification. Without it, their products cannot be stocked by those retailers. • UTZ CERTIFIED started as a certification standard for mainstream coffee and it is now expanding to other commodities such as cocoa, tea and palm oil. The program gives independent assurance of sustainable production and sourcing and offers online realtime traceability of agricultural products back to their origin. • Organic: The organic agriculture system is based on the principles of “health, ecology, fairness and care”. It is a holistic system certification system that has been incorporated into law in many countries around the world. The Organic certification is also the only certification that covers all stages of the value chain, which is fundamental to its principle of traceability. In 2007, the East African Organic Products Standard (Kilimo Hai) was developed as a common standard for organic agriculture in Tanzania, Kenya and Uganda. • ISEAL Alliance develops guidance and facilitates coordinated efforts to improve the effectiveness of sustainability standards and scale up their social and environmental impacts. • Fairtrade Certification is a label for products sourced from producers in developing countries. For a product to display the Fairtrade Mark it must meet international Fairtrade standards which are set by the international certification body Fairtrade Labelling Organisations International (FLO). These standards are agreed through a process of research and consultation with key participants in the Fairtrade scheme, including producers themselves, traders, NGOs, academic institutions and labelling organisations such as the Fairtrade Foundation. • Forest Stewardship Council (FSC) is an international not for-profit, multi-stakeholder organisation established in 1993 to promote responsible management of the world’s forests through setting standards, certification and labelling. FSC has 10 Principles and associated Criteria (FSC P&C) that form the basis for all FSC forest management standards and certification. FSC International sets the framework for developing and maintaining international, national and sub-national standards. This is intended to ensure that the process for developing FSC policies and standards is transparent, independent and participatory. • Global Food Safety Initiative (GFSI) is an independent non-profit foundation managed by The Consumer Goods Forum in 2000. It is an industry led initiative that was created following a directive from food business CEOs after several food safety scares led to a loss of consumer confidence. It is a benchmarking organization promoting convergence between food safety standards through a benchmarking process for food safety management schemes. Common acceptance of these by manufacturers and retailers will lead to improved cost efficiency in the food supply value chain. It is also a stakeholder platform that brings together food safety experts to network, exchange knowledge and share information on best food safety practices92. • Sustainable Commodity Initiative is a multi-stakeholder initiative dedicated to lifting the more than 2.5 billion commodity dependent rural poor out of poverty through sustainable production and trade. The SCI’s work revolves around providing key support to the mainstreaming of sustainable commodity production by improving efficiency and impact of existing initiatives. • The Roundtable on Sustainable Palm Oil (RSPO) was established in 2004 with the goal of promoting the growth and use of sustainable oil palm products through credible global standards and engagement of stakeholders. RSPO has developed the most credible mainstream standard available for sustainable palm oil production, covering key environmental and social criteria. Localising the RSPO principles for Africa would mean interpreting the guidelines in each national context. • ISO: Guidelines from the ISO, for environment management systems (ISO 14001), Occupational Health and Safety (OSHAS 18000 / 1) and broadly for Social Responsibility (ISO 26000) can help companies to ensure their business not only manages risks but helps to meet evolving stakeholder expectations.

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APPENDIX 3: COMMODITY SNAP SHOTS While there are common issues across agribusiness, the following sections provide brief summaries of key commodities based on the information gathered. The issues are inter-connected but have been headlined into economic, social and environmental sections. Initiatives, partnerships and company examples have been included for each section.

Cocoa Key economic, social and environmental issues Economic • The cocoa sector provides livelihoods for millions of people in Africa. The world cocoa trade is currently dominated by Cote d’Ivoire, Ghana, Nigeria and Cameroon. • The industry is dominated by a handful of companies. Demand for sustainably produced cocoa is expected to reach 50% of total world demand by 2020 93. • The majority of cocoa farmers are not organised in cooperatives in Africa. Participation in organised farmer groups ranges from an estimated 30% in Côte d’Ivoire to much lower levels in Nigeria and Ghana94. • A high percentage of aging cocoa trees throughout the industry, resulting in lower yields. • Cocoa trees are highly vulnerable to pests, fungal diseases and climate change resulting in major losses for cocoa farmers, affecting their productivity. Social • Poor pay and working conditions: long hours and lack of health and safety conditions has been documented in the industry. • Child labour: Most of the cocoa farms are family run enterprises of less than 2 hectares (5 acres). Historically, it is often the children (sometimes as young as age 10) harvesting the cocoa95. • Migrant workers and risk of trafficking: Ghana and Côte d’Ivoire have relied on migrant labour from Burkina Faso, Mali and Niger. Studies have documented how children from countries such as Burkina Faso, Mali and Togo are also regularly trafficked into Ivory Coast and Ghana, and forced into child labour96. • Risk of forced labour: ‘Tenancy agreements’ can result in a forced labour situation for migrant workers.

Environmental • Climate change: Expected temperature rises caused by climate change will leave many areas in West Africa unable to grow cocoa97. • Water: Cocoa requires access to soil moisture (water) nearly year round and thus benefits from regular watering during dry periods. Drought stress leads to leaf and flower drop and poor fruit production. In West Africa, there is a high reliance on rain fed agriculture, which is a threat to high productivity. • Pollution: Improper use and management of chemicals in the form of fertilizers, insecticides, and fungicides can result in water and soil pollution. • Biodiversity: Removal of original forests. Tradeoffs between shaded cocoa tress (which help retain biodiversity) and un-shaded plantations where cocoa trees will be denser and hence further productivity for farmers. Initiatives / Partnerships / Standards • Africa Cocoa Initiative (ACI) is a public private partnership launched by the World Cocoa Foundation, USAID, and IDH. The aims of ACI are to foster public-private cooperative investments in cocoa and agriculture, improve the genetic quality and productivity of the cocoa varieties under cultivation, expand farmer education and training programs, and improve the agriculture input supply chains that serve the farmers. It is a public-private partnership. Private sector funding for this program comes from WCF companies: ADM Cocoa, Barry Callebaut, Blommer Chocolate Company, Cargill, Continaf BV, Ferrero, Guittard Chocolate Company, The Hershey Company, Kraft Foods, Lindt & Sprüngli, Nestlé, and Olam International Ltd. The four national governments of Côte d’Ivoire, Ghana, Cameroon and Nigeria have each endorsed WCF/ACI and are committing their agencies to participating and investing in its sponsored activities. The success of this initiative will largely depend of the effective ownership of the initiative by local authorities. • Côte d’Ivoire Sustainable Cocoa Initiative (CISCI) is a partnership initiative aimed at contributing to the promotion of sustainable cocoa supply chain system by institutionalizing sustainable production practices; building the institutional capacity to support the systems and tools needed to deliver services to producers and business alike; and supporting policy development and enforcement, and support the national institutions with the mandate for providing long-term assistance to the sector98.


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Palm Key economic, social and environmental issues Economic • Palm oil is a food staple in Africa making up to 65% of edible oil consumption. • Although palm originated in West Africa, most of the world’s palm oil production currently occurs in Malaysia and Indonesia. Around the world it is used in food, soaps, detergents, cosmetics, plastics and as a fuel source. • More and more global agribusiness companies are now looking towards Africa for palm production. • Producers range from small holders (i.e. 80% in Ghana) to larger plantations. Processing and production of palm oil is an important income generator for women in West Africa. • Palm oil is increasingly being recognized as an agro fuel with millions of hectares of land already being earmarked for large scale production. Social • Working Conditions: Palm industry generally considered to be labour intensive. In plantations, workers are often faced with poor working conditions and living conditions including lack of fair wages, discrimination and worker health and safety. Workers on plantations can be exposed to hazardous chemicals. While women manage to do fairly well in the informal sector, there have been some documented cases of sexual harassment in large plantations, which is largely male dominated. Smallholders using families may mean that children are working and exposed to hazards such as chemicals and not able to attend school. • Land use: Increasing conflicts between palm oil companies and local communities, often leading to displacement of people and loss of land rights. Free, prior and informed consent (FPIC) for any land acquisition from the community should be obtained. Environmental • Deforestation, Greenhouse Gas Emissions, and Climate Change: Palm plantations may require clearing of forests for palm oil plantations and drainage for peat lands, which result in increased CO2 Emissions. Methane associated with palm oil mills effluent treatments contribute greatly towards climate change99. • Pollution: Soil erosion, pollution and water contamination are serious environmental challenges associated with Palm Plantations. This can lead to reductions in yield and returns in the future. • Water: Palm plantations can be water intensive, and the use of agrochemicals can polluting local water resources. • Biodiversity: In other parts of the world palm oil growth has meant the removal of original forests which has in turn affected natural species. Companies should make sure that they do not start new plantations on primary forests or high conservation value (HCV) land.

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Initiatives / Partnerships / Standards • The Roundtable on Sustainable Palm Oil (RSPO) was established in 2004 with the goal of promoting the growth and use of sustainable oil palm products through credible global standards and engagement of stakeholders. RSPO has developed the most credible mainstream standard available for sustainable palm oil production, covering key environmental and social criteria. There are already national interpretations of the RSPO principles in a few African countries. • WWF’s Palm Oil Scorecard 2011, now in its second edition, analyses companies’ commitment to sourcing sustainable palm oil as a key driver to push the market forward. • The Sustainable Palm Oil Investor Working Group (IWG) is a rapidly growing group of investment organizations representing assets under management of over US$1.4 trillion. • IFC’s Biodiversity and Agricultural Commodities Program (BACP) is designed to address the threats posed by expansion in agricultural commodities through market transformation strategies for target commodities, initially palm oil and soybeans”100.

Cashews Key economic, social and environmental issues Economic • 40% of the world’s raw cashew nuts come from Africa. Cashew Trees were introduced to Africa round the 1600s and are now grown through the region. • Historically, Mozambique and Tanzania were the main cashew-producing countries in Africa, with smaller amounts produced in a number of other countries. During the last five to ten years, Nigeria has emerged as a leading producer of cashew nuts in Africa. • Mozambique is one the largest producers of cashew nuts with some being exported for processing and some being processed in the country. Between 750,000 – 1 million smallholders have cashew trees, producing over 80,000 MT of raw cashew nuts (RCN) annually. • Although 40% of world’s raw cashew nuts come from Africa only 10 % of the processing takes place in the region. Where cashew factories are located there is wage labour. Increasing the processing of cashew in Africa will help to ensure more of the value of the supply chain stays in Africa. • The cashew marketing chain is very long, which inevitably leads to high marketing costs. There are issues regarding productivity and quality. • Access to raw cashew markets is variable and the prices are controlled by a few large traders101. • By processing cashew in Africa the ecological footprint of the industry in terms of transportation can be decreased102.

Coffee Social • Poor pay and working conditions: In the cashew factories, wages are low and working conditions are poor103. The industry is also characterized by a high percentage of internal migrant labourers. Trade unions may not exist in the factories or they are weak. • Women are poorly represented in unions and tend to work longer hours than men. Traditionally, women play an important role in cashew production and processing, however in factories, women are discouraged from working on machines and the roles, which traditionally belong to women, are passed on to men. Recognizing women as primary actors in cashew production might contribute effectively to revival of the sector and help in poverty alleviation among cashew growing communities104. • Child labour in cashew plantations is present across plantations and farms in Africa. In Tanzania for example, children as young as age six are reported to be working in commercial farms. • Health: HIV is highly prevalent among migrant cashew workers in Mozambique. In spite of this, many factories do not have any health care resources or HIV education for their workers. • Smallholder Cashew Producers are mainly poor and with little education and often without experience with savings and credit. Environmental • Waste: Export of raw nuts is creating a high ecological footprint as 80% of the shipped volume is waste (husks). • Climate Change will reduce suitability for growing cashews in many regions. Sea level rises resulting and saltwater intrusion could lead to crop failure in many coastal countries in Africa. • Water: Cashew trees do not tolerate arid conditions (i.e. mean annual rainfall A Sustainable Water Solution for Coffee Processing in Ethiopia. 21 March 2013. http://www.technoserve.org/blog/asustainable-water-solution-for-coffee-processing-in-ethiopia 68 Pretty, J. Regenerating Agriculture: Policies and Practice for Sustainability and Self-Reliance. John Henry Press. Washington D.C. Printed in Great Britain. 1995. Pg 97. http://www.books.google.co.uk/ books?isbn=0309052483 69 Unilever. Water – Unilever at a Glance. Unilever & Sustainable Agriculture. 2009. Pg 25. http://www.unilever.com/images/sd_Unilever_ and_Sustainable_Agriculture%20-%20Water_tcm13-179363.pdf 70 The Coca-Cola Company. The Water Stewardship and Replenish Report 2011. Jan 2011. 71 Woolworths. Every Drop of Water Counts with Woolworths. 2013. http:// www.tastemag.co.za/Puttingback-453/Every-drop-of-water-counts-withWoolworths.aspx 72 Shankleman, J. Business Green. Sustainable Thinking. Biomass offers key to cracking cashew nut supply chain challenge. 03 Oct 2011. http:// www.businessgreen.com/bg/news/2113772/biomass-offers-key-crackingcashew-nut-supply-chain-challenge 73 Textile Exchange. TE Featured Member, Dec 2012 “H&M”. http:// textileexchange.org/featured-member/te-featured-member-hmdecember-2012 74 Monsanto. Beyond the Rows. Water Efficient Maize for Africa (WEMA) Update. Originally Published from Monsanto’s 2011 Corporate Social Responsibility and Sustainability Report on 7 August 2012 by Monsanto. http://monsantoblog.com/2012/08/07/water-efficient-maize-for-africawema-update/ 75 Youtube Video. Hr_Ivory_Coast_Palm_Oil_Industry http://www.youtube. com/watch?feature=player_embedded&v=buvS1y1XPsc 75 FAO Forum, The special challenge for sub-Saharan Africa, Rome. October 2009. Pg 3. http://www.fao.org/fileadmin/templates/wsfs/docs/Issues_ papers/HLEF2050_Africa.pdf 76 Waitrose. The Waitrose Foundation. 2013. http://www.waitrose.com/ content/waitrose/en/home/inspiration/about_waitrose/the_waitrose_ way/foundation.html.html 77 The Crop Site. Cargill Invests in Mozambique Farmers. 09 November 2012. http://www.thecropsite.com/news/12382/cargill-invests-inmozambique-farmers 78 OECD. Turning African Agriculture into a Business: A Reader. November 2008. http://www.oecd.org/dev/emea/42987772.pdf 79 Technoserve. Business Solutions to Poverty. Tanzania. http://www. technoserve.org/work-impact/locations/tanzania 80 The Nestle Cocoa Plan. http://www.nestlecocoaplan.com/ 81 M&S. Plan A – Doing the Right Thing. A Big Step For Tea. http://plana. marksandspencer.com/we-are-doing/fair-partner/fairtrade 82 http://www.weforum.org/issues/agriculture-and-food-security 83 Conway, G, and Wilson, L. Tackling the food security nexus: achieving more with less. The Guardian. 22nd January 2013. http://www.guardian. co.uk/sustainable-business/food-security-nexus-global-challenge-onlinedebates 84 Grow Africa. Tanzania and Agricultural Investment. 2012. http:// growafrica.com/initiative/tanzania

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Unilever. Helping Small Holder Farmers. Unilever 2013. http://www. unilever.com/sustainable-living/betterlivelihoods/farmers/ 86 Ethical Trading Initiative. The ETI Code of Labour practice: Do workers really benefit? ETI Impact Assessment, Report Summary. http://www. ethicaltrade.org/sites/default/files/resources/Impact%20assessment%20 summary.pdf 87 Oxfam Grow http://www.oxfam.org/sites/www.oxfam.org/files/bp166behind-the-brands-260213-en.pdf Oxfam Grow http://www.oxfam.org/ sites/www.oxfam.org/files/bp166-behind-the-brands-260213-en.pdf 88 RSPO. WWF Study Confirms Profitability of Sustainable Practices Under RSPO Certification. 19 June 2012. http://www.rspo.org/news_details. php?nid=110 http://www.rspo.org/news_details.php?nid=110 89 Technoserve, The Coca-Cola Company, The Bill and Melinda Gates Foundation (2012). Project Nurture Case Study 90 Mondolez International. Kraft Foods Sustainability Goals & Agriculture Fact Sheet. May 2011. Pg 6. http://www.mondelezinternational.com/ SiteCollectionImages/ImageRepository/news/mmr05112011/2011.05%20 FACT%20Goals%20Ag%20Sustainability%20Release%20FINAL.pdf 91 Global Compact Network Vietnam. Briefing For Business – A guide to the Global Compact Principles in Vietnam with sector supplements from the Extractive, Food Processing, and Construction Industries. http://www. globalcompactvietnam.org/upload/attach/Briefing%20for%20Business.pdf 92 International Trade Centre. Global Food Safety Initiative. December 2011. Pg 1. http://www.standardsmap.org/WorkArea/DownloadAsset. aspx?id=58627 93 Wegner, L. Seas of Change: Cocoa Fact Sheet. http://seasofchange.net/ wp-content/uploads/downloads/2012/04/05.04-SoC-cocoa-fact-sheetfinal_cover1.pdf 94 Wegner, L. Seas of Change: Cocoa Fact Sheet. Pg 10. http://seasofchange. net/wp-content/uploads/downloads/2012/04/05.04-SoC-cocoa-fact-sheetfinal_cover1.pdf 95 Dickerson, K. The place for Children is in Schools. Africa AgriBusiness Magazine. 6 December 2012. http://www.africaag.org/2012/12/06/theplace-for-children-is-in-schools/ 96 Schrage, E. and Ewing, A. The Cocoa Industry and Child Labour. 2005. Pg 100. http://www.logosinstitute.net/PDF/Ewing/The%20Cocoa%20 Industry%20and%20child%20labour.pdf 97 New Agriculturalist. West Africa too hot for Cocoa by 2050. September 2011. http://www.new-ag.info/en/news/newsitem.php?a=2236 98 Halvoy, A; Kebede, T; Adeba, P; Elvis, C; 2012. Towards Cote d’Ivoire Sustainable Cocoa Initiative (CISCI). http://www.nhomatogdrikke.no/getfile. php/Sjokolade/Final%20Baseline%20Report.pdf 99 WWF Report. Palm Oil Investor Review: Investor Guidance on Palm Oil – The role of Investors in supporting the development of a sustainable palm oil industry,2012. Pg 9. http://www. awsassets.panda.org/downloads/ wwf_palmoil_investorreview.pdf‎ 100 WWF Report. Palm Oil Investor Review: Investor Guidance on Palm Oil – The role of Investors in supporting the development of a sustainable palm oil industry.2012. Pg 13-15. http://www. awsassets.panda.org/downloads/ wwf_palmoil_investorreview.pdf‎ 101 Kanji, N; Vijfhuizen, C; Braga, C; and Arthur, L. Cashing in on Cashew Nuts: Women Producers and Factory workers in Mozambique. Pg 94. http://previous.wiego.org/publications/Chains%20of%20Fortune%20 Chapters/Kanji%20Vijfhuizen%20Braga%20Artur%20Cashing%20in%20 on%20Cashew%20Nuts.pdf 102 IDH The Sustainable Trade Initiative. Cashew Sustainability. http://www. idhsustainabletrade.com/cashew-sustainability 103 Kanji, N; et al. Liberalization, Gender, and Livelihoods: The Mozambique Cashew Nut Case. March 2004. Pg 18. http://pubs.iied.org/pdfs/9554IIED. pdf 104 Kanji, N; Vijfhuizen, C; Braga, C; and Arthur, L. Cashing in on Cashew Nuts: Women Producers and Factory workers in Mozambique. Pg 88. http://previous.wiego.org/publications/Chains%20of%20Fortune%20 Chapters/Kanji%20Vijfhuizen%20Braga%20Artur%20Cashing%20in%20 on%20Cashew%20Nuts.pdf 105 Café Africa. Unlocking Africa’s wealth through its coffee. 2013 Café Africa. http://www.cafeafrica.org/ 106 Kucel, P. et al. Status and Current Research Strategies for Management of the Coffee Berry Borer (Hypothenemus hampeiFerr) in Africa. National Agricultural Research Organization (NARO). http://dev.ico.org/event_pdfs/ cbb/presentations/kangire.pdf

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