Adapting business models to incorporate smallholders into supply chains
Food and beverage companies are facing a rapidly changing world. Global demand is rising as the world's population grows. Yet the planet's ability to meet this demand is threatened by factors such as droughts and other expected consequences of climate change, together with land degradation and biofuel production. At the same time consumers everywhere are growing more knowledgeable and concerned about the ethics of where and how their food and drink are produced.
This paper tries to show the advantages – both in productivity and consumer appeal – of domestic and global companies connecting with smallholder suppliers. The Fair Trade movement grew out of the recognition that most large-scale food supply chains were bypassing smallholders.
While many companies are now starting to realize the sourcing potential of smallholder-based supply chains, Oxfam and Sustainable Food Lab (SFL) recognize that these companies also struggle with the challenges of linking diverse smallholders to formal markets. Development agencies and governments are willing to support companies who take up this challenge, because approximately two-thirds of the world's rural households – the majority of whom live in poverty – depend on smallholder agriculture for their food and incomes.
This briefing paper aims to show – incorporating programme experience and case studies – how domestic and global companies in the food and drinks sector can deliver value for their business so that smallholder suppliers gain value too.
Five Principles to underpin sustainable trading relationships that ensure both corporate and smallholder value:
- Chain-wide collaboration and innovation
- Market linkages
- Fair and transparent governance
- Equitable sharing of costs and risks
- Equitable access to services