Things we learned this year: 10 years back and 10 years forward - hopes and fears for agri-supply chains
“If you ask me about the state of our world today, I have mixed emotions”, muses Sunny Verghese, Co-founder & Group CEO of Olam, an agri-business that supplies many household brands with crops and ingredients like cocoa, coffee, cashew, almonds, dairy and spices.
“On the one hand, our collective awareness of social and environmental issues has significantly improved, but on the other, we have made little progress on addressing these major challenges. This dramatically enhances the risks of disruptive, even cataclysmic, climate change impacts. No longer are we talking about our children and grandchildren seeing the impacts of climate change. It’s happening in our lifetime, right now.”
“No longer are we talking about our children and grandchildren seeing the impacts of climate change. It’s happening in our lifetime, right now.”
Sunny is in conversation with Joost Oorthuizen, CEO of IDH – the Sustainable Trade Initiative – which is celebrating ten years of catalyzing coalitions of companies, NGOs and other agencies to tackle issues in agricultural supply chains, such as farmer poverty, working conditions and deforestation. It’s an occasion to reflect on the last ten years as well as to look forward to 2029: the eve of the delivery date for the UN Sustainable Development Goals (SDGs).
The reality of climate change
Sunny continues: “In 2015, we had the Paris Agreement and the world was full of hope that we might just be able to hold back or reverse climate change. Two years later, we have breached four of the nine planetary limits. 2018 yet again brought us a series of extreme and unusual weather events including summer temperatures in Europe reaching 42oC with fires across Europe. In Greece, as many as 100 people died in the blaze.
“2018 also saw the release of three significant research reports that really shook me up. The first was an article that appeared in Nature Geoscience in July this year; the second was a study released in the Proceedings of the National Academy of Sciences, co-authored by 16 Earth System scientists from across the globe; and lastly, in October the IPCC Report came out. These all provide compelling evidence that there is a big difference between 1.5 and 2oC global warming on climate impact. Once a certain threshold is crossed, feedback loops could push the planet’s climate towards a ‘Hothouse Earth’ scenario with global temperatures potentially rising between 4 and 5oC.”
“But if nothing else, perhaps coming to the brink is finally forcing an understanding of the linkages between climate change, extreme weather, political unrest and migration,” says Joost. “In March, the World Bank warned that ‘around 143 million people would turn into climate migrants to escape crop failure, water scarcity, and sea-level rise’. Many are likely to be smallholders. No farmer, indeed not even Olam with its technical expertise and resources, can put up a force-field or umbrella to protect them. We now have the narrowest of windows to redress the situation. And we need the Olams of the world to step up and continue to beat the path for others to follow. Agriculture is the main driver of deforestation; and to address an issue of this scale, Olam will have to sit at the table with its biggest competitors.”
“Agriculture is the main driver of deforestation; and to address an issue of this scale, Olam will have to sit at the table with its biggest competitors.”
Sunny concurs: “If it wasn’t for organizations like IDH providing a neutral convening ground and fostering unusual collaborations – where the mistrust between corporates, competitors and civil society can be set aside in pursuit of a common and larger goal – we would for sure have made less progress.”
“IDH works with focused drive to find market-based solutions that benefit both the public and private sectors. They have catalyzed many unconventional partnerships for those wanting to work with each other without knowing quite how. IDH played a catalytic role via the Cocoa and Forests Initiative, facilitating the industry and cocoa-producing countries to find common approaches to eliminate deforestation from the cocoa supply chain. They have also helped to change the perception that corporates are always the bad actors, and instead show that the private sector needs to be an integral part of the solution.”
“Even if you think that companies are part of the problem, you should work with them.”
“Even if you think that companies are part of the problem, you should work with them,” Joost underlines. “When IDH was conceived in 2008 by the Dutch government, it was a first attempt at bringing the Trade and Aid agendas together, a first attempt to leverage the interests of the private sector. One of our guiding principles has always been to invest only if the private sector is willing to pay at least half the bill.”
“At first, we didn’t know if it was going to work, but it has kept us sharp and focused on solutions the market is willing to pay for. Our beginnings also coincided with a time when the private sector was looking for partners, because they realized they needed to go on this journey but didn’t know where to begin. The commodity crisis of 2009 left many companies worried about the security of their supply, and they started to realize that sustainability and sustainable procurement are related. And, above all, the private sector was seeking credibility – they were willing to embark on this journey if it meant they received the blessing of the public sector. And IDH was able to bring that, through the backing of the Dutch, Danish and Swiss governments, as well as the support of many NGOs.”
Growing business while supporting farmers
Sunny considers the journey that Olam has travelled: transitioning from an asset-light supply chain trader to a more asset intense and integrated agricultural and food ingredients business with its own farms, plantations, and major processing facilities, while still buying from an extended network of around 4.7 million farmers – the vast majority being smallholders.
“Supporting farmers to grow more, with less resource intensity, at a better quality, and therefore helping them earn more, particularly in difficult emerging markets, quickly made business sense to us in terms of security of crop supply” he says. “And it was 10 years ago that we formalized this approach under the Olam Livelihood Charter.”
“IDH has worked on many of those programs with us, including cashew in Cote d’Ivoire, coffee in Vietnam and Cameroon, and cocoa in Ghana, Côte d’Ivoire and Indonesia, bringing their expertise on how to maximize the relationships we have with smallholder farmers, in a way that benefits us both, and how to more effectively work in coalitions with other stakeholders to achieve longer lasting change. And while stewardship of the environment was always there, I think it’s fair to say it has gained far more importance over the years as we have learned to really value the natural capital around us.”
“While stewardship of the environment was always there, I think it’s fair to say it has gained far more importance over the years as we have learned to really value the natural capital around us.”
“But I also think IDH has learned a lot along the way,” says Joost. “Partnership development is not easy – there’s a skill to it. Change management needs to be better taught in business school. In fact, we have just finalized a book on it, based on our ten years of clumsy solutions: how we’ve learned to orchestrate public private-collaboration. It’s called The Art of Collaboration.”
“A few of the key lessons are, first, that you need a committed coalition, a group of frontrunners from strong organizations that are willing to lead. Second, framing is key: it’s crucial to speak to everyone’s needs in order to get buy-in. This can be incredibly challenging in international partnerships, where interests are fragmented and diverse. And a third lesson is the importance of rules and procedures – all that stuff I’m not so good at, but I’ve learned the hard way. A motivated coalition needs to have rules of the game set at the start. If you don’t, you lose players. Business is all about risk, and to mitigate it you need to create transparency and rules of the game.”
Looking ahead ten years, how do both CEOs see the world, and what keeps them awake at night?
“I’m optimistic about some of the targets we’ve set for ourselves,” Joost explains. “The SDGs have given us a good agenda, and it’s clear that if we want to reach the Paris Agreement targets, the SDGs will help us a lot. However, one of the things that keeps me up at night is that I feel we are underestimating the carbon footprint of our food. If I look at the carbon footprint of my grandmother’s food verses my daughter’s, my daughter goes to the shop and buys something that could be flown in from Ghana in the morning. The carbon footprint has probably gone up 100 times and there will soon be 9 billion people starting to behave like this.”
“I am not without hope”, says Sunny. “As Chair of the World Business Council for Sustainable Development, I only had to look round the room at our Annual Council Meeting in Singapore in October to see the determination to collaborate on solving these major developmental challenges. And this was further underlined at the IDH 10th anniversary conference. Perhaps now that climate change has become tangible, people are galvanized. Certainly, at Olam our new corporate purpose – to “Re-imagine Global Agriculture”, to help produce more food, feed and fiber with fewer resources such that it is better for farmers, communities and our planet – probably has far more resonance with all our employees, not just those in the sustainability teams, than ten years ago.”
And if both CEOs were to ask something of each other?
“I said it before, but partnerships are not easy,” says Joost. We need companies like Olam to keep leading, and challenging the rest to step up. We also need to get the Asian markets on board: we can’t truly make an impact without China and India making big changes. Olam speaks the language of these emerging markets and can continue to help channel investments into the regions that need it most.”
“Olam speaks the language of these emerging markets and can continue to help channel investments into the regions that need it most.”
“We need to co-design and co-create partnerships and approaches to help all farmers become more resilient,” Sunny concludes. Each landscape and supply chain is different and needs a bespoke approach underpinned by our mutually agreed environmental and social aspirations, alongside an understanding of the needs of the farmers. We also need organizations like IDH to help galvanize change to occur effectively at individual level, company level, sector level, society level and finally government level.
- We need to change at the individual level and be the change we want to see in others in terms of our individual carbon, water and waste footprint.
- Then we need companies to change and continuously improve to produce more with less resource intensity.
- The sector, in which each of our organizations plays a part, needs to change by building coalitions such that each participant in either the food and agri-sector, or the energy sector, or the automobile sector etc. can develop sectoral roadmaps to reduce our environmental footprints.
- Then civil societies, NGOs and the private sector also have to form unusual collaborations to work together to enhance impact.
- We also need scientists and researchers to innovate solutions which are practical and solutions based, that can solve for these intractable problems.
- Finally, government and policymakers have to create an enabling environment that will change the behavior of corporates and individuals through policy interventions including mandatory foot printing disclosure, carbon pricing etc.
This may all seem very daunting but it’s what’s needed if we want to change the world.”