Transparent supply chains? It pays off!
Published on 28 October 2020
Cocoa farmers in Nicaragua are very satisfied with the final product in their hands:
a chocolate tablet on the shelves at Colruyt.
Rikolto (formerly Vredeseilanden) draws upon lessons from 15 years of working on sustainable, transparent supply chains with Colruyt Group. In the hope that it will inspire other companies and NGOs to take up the challenge as well.
A small farmer in the South doesn't have it easy. Often, they do not have the necessary means to deliver a decent quantity of high-quality products. And even if they do, the farmer must still be able to get their products on the market.
Cooperatives are not enough
On the local markets, they often have to compete with imported products that are usually cheaper and/or of higher quality. And exporting them is when it becomes a real challenge. After all, there are usually strict hygiene and quality requirements, which a small farmer will not meet.
Rikolto didn't know a way around that problem 15 years ago. For years, they had trained farmers and united them in cooperatives because together they were stronger in the market. But that turned out to be no guarantee of success. The markets evolved rapidly and were too demanding.
The Belgian retailer Colruyt Group (Colruyt, Spar, OKay, Bio-Planet, etc.) offered a way out, because they too had a problem. How could they guarantee, for example, that there was no child labour behind the production of toys? The group came to the understanding that this would only succeed if the structural causes were also addressed. In other words, if producers' living conditions improved.
This was why Colruyt Group set up the Collibri Foundation, which was financed from part of the profits from a number of products on Colruyt's shelves. The foundation trained hundreds of young people in the South.
But Colruyt Group wanted to go even further. Was it possible to make the supply chain fully transparent and to work directly with producers, including young people trained thanks to Collibri? Because only that way can you really take away the structural basis of child labour, poverty, deforestation, environmental pollution, migration and so on.
These Nicaraguan young people, who were trained thanks to Collibri,
also find their way into the cocoa chain.
Colruyt Group and Rikolto then joined forces. A perfect match, as it turned out! Rikolto had plenty of experience with farmers' cooperatives, while Colruyt Group was the dream access to assured sales.
In 15 years' time, various supply chains or 'value chains' were tried out: cocoa in Nicaragua, coffee in Eastern Congo, rice in Benin and so on. Today, there are 3 products on Colruyt Group's shelves under one of their own brand names: Graindor and Spar speciality coffee, Boni chocolate and Boni quinoa. Other attempts were ceased, often because the local market had since become a more interesting sales channel, such as for bananas in Senegal.
‘The successes gave us energy and we drew valuable lessons from the failures,’ says Jelle Goossens, Communications Officer at Rikolto. ‘That's why we thought the time was ripe to list the lessons learned in 6 articles. We're doing this very openly and honestly and hope we can inspire other supermarkets, food companies and NGOs this way.’
The tricolore quinoa from Peru was a real success story.
A lot of lessons were learned. We will name a few. It is best to start with an existing, strong farmers' organisation. Starting from ‘zero’ wasn't easy. In Tanzania, for example, Corlruyt Group wanted to buy passion fruit. But the farmers' group still had to be formed. In the end, a number of members did not want to go all the way to meet the standards (pesticide residues, etc.). The exporter Special Fruits and Colruyt Group dropped out at that point.
‘That seems like a lost investment,’ says Goossens. ‘But the person responsible at Special Fruits confirmed to me that, as a company, they gained a lot from it. By slogging away at it for a few years, they now have a lot of knowledge to start up chains elsewhere. The local farmers have also benefited a great deal.’
It is also not easy to work with very poor farmers. They are constantly short of cash and prefer ‘quick money’. That was the case with the bananas in Senegal. Even though the farmers could earn more through the cooperative if they had some patience, some preferred to sell their bananas to a buyer who paid them immediately.
Furthermore, the chain must be as transparent as possible, and honest and open communication is a must. For example, it is best that the farmers not only get a fair price, but also know the price in the shop and understand where the difference comes from. This is how you build trust. For Colruyt Group, it is important that a local partner (NGO, etc.) can check what a good price mechanism is. Producers must be able to participate in decisions.
It is also essential that all parties benefit from it. Producers must receive a sufficiently high price, but a stable price and assured sales offer added value as well. However, an agreed price has the disadvantage that if the price on the market rises temporarily, farmers may be tempted to sell elsewhere. It takes discipline and persuasion from the cooperative to convince its members that a stable, long-term business relationship over several years is actually more advantageous.
The product must also sell well, because this is the only way for the retail company to achieve the anticipated sales. With quinoa from Peru, this worked very well. Colruyt Group started with the three-coloured quinoa, but later decided to buy all the organic quinoa, including the white ones, via that chain.
Employees in eastern Congo load a truck with bags of coffee, a unique quality product.
It also needs to be possible to react to changing market conditions. Political developments can also play a role. For example, the security situation in eastern Congo regularly deteriorates. This can result in containers not being able to leave or being stuck at checkpoints for too long. At such a time, it is crucial that there is a strong partner on the ground who can unblock the issue.
In any case, it is crucial that you build up sufficient trust within the entire chain. As soon as you succeed in that, you must maintain the trust by consulting regularly. Initially, it is best if the organisation with local representation (Rikolto, etc.) takes the reins. But once the chain is running smoothly, it is better for the ‘final buyer’ (Colruyt Group) to be in charge of the contact.
Consultation can take place via e-mail, video calls and WhatsApp, but local visits have the greatest effect, especially at the start. Colruyt Group employees not only visit the cooperatives, they also invite producers to Belgium to get to know their company there.
All the players in the chain must also be supported by a common goal and shared interests. Sometimes it is necessary to provide the farmers with technical assistance first, but they only really get involved when they are investing themselves. This was the case, for example, with the coffee farmers in eastern Congo, who helped pay for the washing stations for the coffee beans. In this way, they felt more like co-owners of the project and were more motivated.
Ceo Jef Colruyt visiting rice growers in Benin.
Local visits are essential to forge strong ties.
In any case, Rikolto and Colruyt Group are highly satisfied with the chain projects. ‘15 years ago it was completely new to be working with companies as an NGO; today, it became routine,’ says Goossens. ‘In all the places around the world where we are active, we are working with supermarkets and food companies to create a sustainable chain. Colruyt also got inspired to develop chains in Belgium too, particularly around potatoes and milk. A special apple variety also came out of it, which can only be bought at Colruyt. That's one competitive advantage of such a value chain: the retailer gets unique products on the shelves that you can't find elsewhere.’
In any case, the success stories show that it can be done. According to Goossens, this contributed to all the Belgian players joining Beyond Chocolate. This government initiative aims to make all Belgian chocolate sustainable by 2025 and give cocoa farmers a living income by 2030. ‘It gave them confidence to do it too – it wasn't a leap in the dark anymore.’
In response to Beyond Chocolate, Rikolto collaborated on Lidl's ‘Way To Go!’ chocolate bars. Lidl Belgium was ultimately able to convince all the Lidl branches in Europe to offer this chocolate as well.
So the idea is clearly spreading already. As transparent, sustainable value chains become commonplace, we have taken an important step towards that better world, expressed by the UN's Sustainable Development Goals.
Rikolto is a partner of the Belgian Development Co-operation.