Food and beverage manufacturers are driving sustainability in the supply chain, says an Oxfam specialist, but they face more risks in catering to demand for ethically-produced products than retailers.
Since the early 2000s Oxfam has been engaging with businesses in a number of industries over their contribution to development. Sustainability has become core business, and companies’ activities can bring large-scale change and help them be competitive.
Dr Lea Borkenhagen, head of Oxfam’s Sustainable Livelihoods Strategy, told FoodNavigator.com that the food and beverage industry is at the forefront of change because of the reliance on agricultural goods at the top of the supply chain.
But she said there is most dynamism and room for innovation in fast-moving consumer goods (FMCG). But FMCG companies also bear the most risks: For instance, they need to be able to source materials consistently, may need to change operations as conditions or supply availability changes, and cover transport costs that go up with fuel prices.
“FMCG is the crunch point in security of supply and consumer demand,” she said.
Retailers, on the other hand, are driving consumer demand but they do not have to change their operations fundamentally to accommodate more sustainable products. They are very powerful in setting terms for their suppliers and can pick and chose which they buy from.
Oxfam has been exhibiting at this week’s FiE trade show in Frankfurt, Germany, for the first time.
“Food ingredients companies can make very specific choices about how they meet demands of companies, such as where to source from and how to source,” said Borkenhagen.
“We think it is possible to source in an ethical way, and from people to whom this would make a big difference.”
Eighty-five per cent of the world’s farmers are smallholders, and when companies buy from them they are investing in the community. This can help build stability in the area in the longer term.
Moreover, it is quite possible for smallholders’ produce to be suitable for the export market. Ingredient companies can pass on knowledge about quality standards, and strategic investment can help them overcome such non-tariff barriers to profitable markets.
If produce is of a high quality, a farmer can sell to more companies and removed the insecurity that goes with having just one customer. This can mean higher revenues – and these, in turn, mean more investment.
Borkenhagen noted the downside to quality standards. When farmers have no extra money to invest, they cannot comply and may be shut out of the most profitable segments of the market. This can be particularly problematic for women farmers who are not in a position to increase their investment.
Changes in EU law can open up new possibilities, however. For instance, this year the European Commission has lifted restrictions on the shape of fruit and vegetables that can be sold in the bloc. This means farmers have new possibilities for selling produce that does not meet the aesthetic ideal.