Reducing Risk: Landscape Approaches to Sustainable Sourcing - at the IFC, June 10, 2013

Reducing Risk: Landscape Approaches to Sustainable Sourcing

Lee Gross -- EcoAgriculture PartnersMike Godfrey -- Rainforest AllianceBambi Semroc -- Conservation International

A presentation to the International Finance Corporation June 10, 2013

www.ecoagriculture.org or www.landscapes.ecoagriculture.org

+ Collaborators: Int’l Advisory Committee, 22 landscape networks & initiatives

Strategic Advisory Committee: World Business Council for Sustainable Development, IFC, Rio Tinto, Unilever, Nestlé and Mars Inc.

Working Group: Conservation International, Rainforest Alliance, Solidaridad, African Wildlife Foundation, World Resources Institute, Fauna and Flora International, Root Capital, University of Greenwich, and EcoAgriculture Partners.

Business Working Group

The Terminology and Practice of Ecoagriculture

"The landscape approach has been championed by organizations active in the development and conservation sectors for many years, though the concept has been slow to migrate into mainstream corporate thinking. Now this report from the Landscape for People, Food and Nature Initiative, sets out a case for companies to think about their business in landscape terms."

- José Lopez, Executive Vice President, Operations, Nestlé S.A.

Why do businesses pursue a landscape approach?

Drivers: Is it as a consequence or identified as a goal at the outset?

Rationale: Why is the business motivated to pursue this?

Modes: What methods or tools do businesses apply to put these rationales into practice?

Businesses are increasingly at risk of “sustainability megaforces”

KPMG, 2012. Expect the Unexpected: Building business value in a changing world.

Climate Change

Poverty and Food Security

Competition for resources

Increasing demand

Scoping Analysis: Modes and Rationales

100+ initiatives reviewed

27 selected by criteria

3 in-depth case studies

Address risks at scales

Requires more than “sum of the parts” thinking

Reducing risk through landscape approaches

Source: Kissinger, G., A. Brasser, and L. Gross, 2013. Reducing Risk: Landscape Approaches to Sustainable Sourcing. Washington, DC. EcoAgriculture Partners, on behalf of the Landscapes for People, Food and Nature Initiative.

Case studies

●SABMiller: reducing water risks in Bogotá, Colombia and George, South Africa with WWF and GIZ

●Olam: cocoa and forest initiative in Western Ghana with Rainforest Alliance

●Starbucks: coffee in Mexico, Indonesia and Brazil with Conservation International

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Landscapes for People Food and Nature Initiative –

The Starbucks Case Study

Bambi Semroc

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1. The Landscape Approach within the Starbucks context

2. Rationale for Engaging at Landscape Level

3. Modes of Engagement- Supply Chain Interventions- Regional Producer Support- Payments for Ecosystem Services

4. Value of Landscape Approach

5. Challenges of Landscape Approach

Outline

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Landscapes within the Starbucks and CI contexts

Starbucks Language

• Coffee communities

• Coffee supply chains

Conservation International Language

• Coffee landscapes

• Coffee communities

• Conservation corridors

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Rationale

Operational Risks

• Price volatility due to market dynamics.

• Declining production and yields due to climate change and aging farmer demographic

Reputational Risks

• Environmental risks related to deforestation, greenhouse gas emissions, water use and quality

• Community risks associated with farmer income and livelihoods, including food security

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Supply Chain Interventions

Regional Producer Support Interventions

Payments for Ecosystem Services

Modes

ModesSupply Chain Interventions

C.A.F.E. Practices

• Promote and verify adoption of best practices within the supply chain.

• Provide assurance to Starbucks on social and environmental performance of its supply chain.

Regional Producer Support

Conservation Coffee

Suitability Analysis of Coffee Production

Regional Producer SupportClimate and Coffee in Chiapas

Regional Producer SupportFarmer Loans in Chiapas

• Verde Ventures has lent USD 1.5M to 6 Small and Medium-Sized Enterprises in Chiapas

El Triunfo

Volcan Tacana

Payments for Ecosystem ServicesClimate and Coffee in Chiapas

Carbon Markets and Policy Engagement

Regional Producer SupportClimate and Coffee in Northern SumatraMap 1 – Northern Sumatra

Aceh Tengah District

Dairi District

Bener Meriah District

North Sumatra Province

Aceh Province

Payments for Ecosystem ServicesClimate and Coffee in Northern Sumatra

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• Increased understanding of critical issues facing coffee supply currently and in the future.

• Fewer surprises to undermine investments in supply chain development and regional producer support.

• Ability to achieve and report on results at a concentrated scale.

Value of the Landscape Approach

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• Different language than that used by companies.

• Lengthy and non-integrated commodity supply chains do not lend themselves to landscape thinking.

• Requires looking at multiple commodities to maximize resiliency of the landscape and communities.

• Difficulty calculating a direct ROI to the company on the investment due to external factors.

• Requires long-term commitment to sourcing area to justify investment.

Challenges of the Landscape Approach

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Acknowledgements

LPFN Initiative - Lee Gross, Gabrielle Kissinger, André Brasser

CI Mexico - Monica Morales, David OlveraCI Indonesia - Terry Hills, Fazrin RahmadaniCI-CELB - Joanne Sonenshine, John BuchananCI-Verde Ventures – Neel Inamdar, Lorena Bustos, Ana LopezGötz Schroth

Starbucks Coffee Company – Kelly Goodejohn

CIATCATIEAmbioEcosurUniversity of North Sumatra

Thank you

Hypothesis: that the resilience of the cocoa production systems increases with increasing forest cover of the surrounding lands and within the cocoa farms themselves

Description: Olam, in partnership with Rainforest Alliance, is piloting a landscape approach to mitigate business risk in their cocoa value chain through a novel program in Ghana emphasizing cocoa agro-forestry production systems, certification and REDD+

Climate Cocoa Partnership for REDD+ Preparation

Timeline: 2011-2013

Partners: Olam International Ltd., Rainforest Alliance, Ghana Forestry Commission,

Goal: to ensure that the climate-friendly farm level practices are escalated and replicated to a landscape and forest management level

Juabeso-Bia Landscape Southwest Ghana (24,000 Ha.)

• Reputation: opportunity to be a first-mover company to bring climate friendly cocoa to the market;

• Community concerns: income opportunities from carbon markets for farmers by increasing carbon stocks;

• Value chain efficiencies:1. option to build resilient supply chains when farmer

communities sensitized and starting to understand the concept of managing a landscape as opposed to managing farms in a sustainable way.

2. opportunity to break the link between cocoa production and deforestation ;

• Reduce operational risks due to climate concerns and resource security;

• A learning exercise to change and improve corporate programs;

Corporate Rationale

• GAP training based on SAN Standards

• Forest and Landscape Governance

• REDD+ activities• Sustainable Forest

Management including Agroforestry Systems

• Small and Medium Scale Forest Enterprise Development

Project Components

• On farm production partly depends on off-farm management; cocoa production area is a mosaic of cocoa farms and forest lands presenting a real opportunity for landscape management

• Carbon financing can be the mechanism to increase the resilience by increased carbon stock through increasing shade, enhancing soil management and introducing better agricultural practices.

Preliminary Findings (1):

Preliminary Findings (2): • Carbon financing requires

collaborating with governments to induce better legislation, to comply with global standards and to secure basic quality of the wider cocoa production landscape.

• Corporate policies can drive change and success – the project builds on Olam’s existing sustainability strategy and Livelihood Charter

• Landscape approach can mitigate multiple risks: climate change, reputational, operational, community concerns and value chain efficiencies.

1. Increased monitoring and evaluation to test the hypothesis against achievements and results of the pilot;

2. Complete the Program Design Document (PDD) for the forestry REDD+ methodology and validate as an acceptable approach;

3. Complete the farmer training and subsequent certification steps as indicated by both the interest and outcomes such that farmers are remunerated for the improved management systems;

4. Communicate more broadly the landscape model that integrates climate-forestry/agro-forestry and certification into a complete package of tools and interventions;

5. Secure second phase funding for to meet the initial business, social and environmental targets set.

Next Steps:

Lessons Learned

Rationale●Landscape

and community health are at the core of business success

●Valuing the risk/cost ratio

●Investing in better decisions

Investment

● Partners with shared interest

●Need for collective action in the sourcing area and sector

●Develop management solutions across the landscape

●A package of solutions provides greater impact than ‘one-off’s’

Value proposition

●Avoided costs—basis of the business case

● Solid risk assessment

●Added value accruing to all partners

● Position the business for long-term

Recommendations based on our review

Assess and manage risks and opportunities at scale

Mitigate landscape risks in partnership Integrate landscape risks and the

investments required to mitigate them into business plans at all levels

Evaluate landscape approaches as an opportunity to increase both the efficiency and effectiveness of sustainable sourcing.

Thank you!www.landscapes.ecoagriculture.org