Investing in smallholders and workers is good for business

Across the developing world, food systems and supply chains are changing — exports are rising, particularly in fresh foods, supermarkets are playing an increasingly important role and there is a growing number of standards for safety, ethics and environment.

Article, 21 June 2011

Where does big agribusiness fit in the picture? Some companies are pulling out of production, closing down their estates and plantations to focus on sourcing supplies from the world market. Others are moving into production, setting up big farms in one or more developing countries and hiring local farm labourers to work on them.

A key question for participants at the latest provocation seminar from IIED and Hivos was whether, in the face of these changes, development efforts should focus on smallholders or wage labourers as the fastest route to reducing poverty (see blog post: Fast track out of poverty: farm labour or smallholder?).

But the seminar, which was held in Manchester, also saw an interesting discussion evolve around the extent to which big agribusinesses, and the way they operate in developing countries, benefit or harm local people and environments.

Big bad business

There was no shortage of offers to illustrate how big companies can cause a lot of damage. “I’ve seen [big companies] operate... and if you look at the situation on the farms, it’s like slavery,” said John van Duursen of Hivos.

Sue Longley, from the International Union of Foodworkers, agreed. She talked about the mounting precariousness of wage labour on commercial farms — the increasing reliance on seasonal contracts and migrant workers. She spoke about weak legislation in the agricultural sector — lower standards in health and safety and little support for minimum wages. And she described the extreme vulnerability of women labourers who can find themselves victims of sexual harassment.

Smallholders are often no better off. It is true that many big companies involve smallholders in their supply chains. But this involvement needs to be more than simply procuring to alleviate poverty, argued Sukhpal Singh from the Indian Institute of Management. “[Cocoa farmers] have little market information. They are largely price takers and get the least part of the value in the value chain,” added Peter McAllister of the Ethical Trading Initiative.

Beyond corporate social responsibility

But marrying business with development is possible. Wilfred Kamami, and his agribusiness Wilmar in Kenya, is a living, breathing example. Kamami told the provocation in Manchester about his experience in working with 4,000 smallholders to export flowers to Europe. Kamami’s suppliers are increasing incomes, improving efficiencies, conserving soils and planting trees. It seems like a win-win situation.

The key lies in nurturing the capacities of smallholders. Kamami works hard to support his farmer suppliers — employing field agronomists to help monitor soils and offer on-site advice, investing in new water-conserving technologies and, in some cases, providing funds to start production. Why? The answer is simple: “it is good for business,” said Kamami.

And therein lies the key to encouraging more agribusinesses to follow suit. “In my experience, most big companies don’t set out to do evil things and exploit the planet,” said McAllister. “But,” he added, “they don’t start off their day thinking how can I help the poor work in Kenya, or how can I help the planet?”

“They are driven by market share, return to stakeholders, return per square foot etc... as well as reputation and regulatory environments,” explained McAllister. But he also said that many companies now realise that focusing on these drivers alone is not good for business.

It’s not a case of corporate social responsibility — it’s a question of long-term sustainability. And across the world, businesses are waking up to the fact that it’s in their long-term interest to look after smallholders and wage labour.

Doing that involves more than simply signing a code — it means real engagement. Here is where development agencies can play a role — in helping businesses understand the social impact of their decisions and in making the connections on the ground to support smallholders in practice. “Getting development professionals and business people together to see how the knowledge of both can be used to help both is really important,” said Mike Bird of Women in Informal Employment: Globalizing and Organizing.

According to McAllister, many of the bigger companies are asking the right questions: “How do I understand the impact on social conditions and environment in a country that is a long way away? Who can I turn to for useful advice? Who do I work with to affect local government policy and help workers be part of the solution?” Those of us who work in the development community must be ready to help them find the answers.

The discussion is particularly timely because inclusive business is the focus of the next provocation, ‘Pro-poor business, development and smallholder empowerment’. The seminar, to be held in Brussels on 22 June, will bring together policymakers, academics and practitioners to debate the achievements, limitations and dilemmas inherent in inclusive business models and ask to what extent approaches that claim to marry business with development are delivering on their promises.