Through the report, IIED demonstrates how biodiversity loss, climate change, and other environmental threats such as pollution and soil erosion threaten the ‘business as usual’ model prevalent in the industry.
Embracing complexity in supply chain partnerships
A growing number of businesses sourcing their products from forest and farm landscapes are aspiring to be a force for societal good. As of February 2024, there are over 8,000 certified B Corporations worldwide, across 162 industries in 96 countries. These purpose-driven for-profit businesses are implementing innovative ways to manage the complexities in their supply chains, thereby fostering sustainability and equitable growth.
These businesses – and other social enterprises that are not officially B Corp certified – aim to create benefits for all stakeholders, not just shareholders, and are navigating social, environmental, and economic complexities in their supply chains to create positive impacts for local producers and the landscapes they depend on.
Case studies of pioneering companies
The report highlights four companies that exemplify ‘business unusual’ by embedding partnerships with smallholder producers into their core mission. These companies invest heavily in building trust and shared goals with smallholder producers and leverage technology, such as mobile apps, to collect and aggregate necessary data without overburdening the producers.
Aduna
Aduna, based in London, is a social enterprise sourcing grains, powders, superfood teas, and beauty oils from Ghana and Burkina Faso. With an annual revenue of approximately $3 million, Aduna works with over 3,300 women in these countries, supporting 20,000 family members. What makes Aduna’s business model unusual is its deep commitment to social impact and environmental sustainability. The company has planted over 60,000 moringa trees and 15,000 baobab trees, creating a sustainable source of income for local communities while promoting biodiversity.
Mountain Hazelnuts
Mountain Hazelnuts operates in Bhutan, working closely with smallholder farmers to cultivate hazelnuts. The company provides extensive social and technical support to help producers reach their personal and communal aspirations. This includes assisting with agroecological farming techniques, promoting biodiversity, and sustainable land management. Mountain Hazelnuts’ approach goes beyond commercial transactions, building resilient farming communities through holistic support and sustainable practices.
Tony’s Chocolonely
Tony’s Chocolonely, a Dutch chocolate company with a mission to make all chocolate 100% slave-free, has established long-term partnerships with farmers' cooperatives. These partnerships support the cooperatives in developing stronger organisational capacities and diversifying and improving their land and businesses. What sets Tony’s Chocolonely apart is its mission-driven focus on eradicating slavery and exploitation in the cocoa industry, ensuring fair treatment and improved livelihoods for farmers.
Cafédirect
UK-based Cafédirect sources coffee, tea, and cocoa from smallholder farmers in developing countries. The company invests significantly in nurturing partnerships along its supply chains, covering all operational costs for their local partners who provide flexible and direct support to smallholder producers and their cooperatives. Cafédirect’s model is unique due to its deep investment in partnership development, prioritising long-term sustainability and mutual benefit over short-term profits. This approach ensures that producers are integral to the company’s success and benefit directly from it.
Building trust and social capital
These pioneering companies challenge the traditional buyer-seller relationship in agriculture and forestry supply chains. They demonstrate that a partnership model is a viable business model that provides the flexibility and adaptability needed to deliver positive social and environmental impacts despite complex social, economic, and environmental contexts.
The report by IIED makes it clear that successful ‘business unusual’ companies are those that build strong, trust-based relationships with smallholder producers by providing comprehensive – social, technical, and financial – support. This includes training in sustainable practices, access to markets, and investment in local infrastructure.
Climate change threatening ingredient supply chains
The increasing threats posed by climate change and biodiversity loss to global food ingredient supply chains underscore the importance of adopting new business models. Extreme weather events, such as droughts, floods, and heatwaves, are causing significant disruptions in food production and distribution.
For instance, cocoa prices globally hit a record high in February 2024 due to dry weather in West Africa, exacerbated by the El Niño phenomenon. This led to a doubling of cocoa prices since early 2023, significantly impacting chocolate production costs.
Soybean production has also been heavily impacted, particularly in the US and Argentina. The Midwest experienced its worst drought since 2012, leading to a substantial drop in soybean production. Argentina faced similar issues, with drought conditions causing a significant decrease in soybean output, affecting both local and international markets.
Biodiversity loss further compounds these challenges, posing a serious threat to food security. The decline in biodiversity affects pollination, soil health, and the resilience of agricultural systems to pests and diseases. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) has highlighted that around a million species face extinction, which would severely impact agricultural productivity and food security. The loss of biodiversity narrows the gene pool, making crops and livestock more vulnerable to climate change and other environmental stresses.
