What does a company like Nestlé fear the most? They fear customers who go to their local grocery to purchase a can of coffee only to find none of their products on the shelf. This fear is not too distant from reality. As Gary Milsted, Head of Procurement, Commodities for Zone EUR at Nestlé explains at the Skoll World Forum, the fact of the matter is that the children of farmers don’t see the value in growing coffee, so they won’t be doing it much longer. Farmers would rather see their children go to school and seek employment that generates more income for hopes of a better life. PepsiCo, Hershey’s, and Kraft Foods – all of these companies share the same fear whether they realize it already or not.
Those who realize it are adopting a concept called Creating Shared Value (CSV). A term first introduced on the Harvard Business Review, CSV is about moving past CSR principles which focus on doing good, as a result of societal pressures, typically for the sake of guarding reputation. Instead, CSV is ensuring that there is value created for everybody through the chain. This includes everyone from shareholders to farmers. The rationale for CSV is a method for companies to continue in the market. This means to make sure that coffee is made available on grocery shelves.
Sustainable cocoa farming is one of the challenges facing chocolate makers today. A vital ingredient in Cadbury’s chocolate products is Ghanaian cocoa. But in 2008, farmers in Ghana were only able to produce 40 percent of the country’s potential yield due to problems with pests, disease, and ageing cocoa trees. Productivity continues to decline and income from cocoa decreases. Consequently, there is no incentive for the next generation of cocoa farmers to enter the industry.
In response, Cadbury launched a Cadbury Cocoa Partnership in 2008 that would seek to build thriving cocoa communities in Africa, Southeast Asia, and the Caribbean. They are committing £45 million ($73 million) over a ten-year period to promote sustainable livelihoods for one million farmers, increase crop yields for farmers in the program by 20 percent by 2012 and 100 percent by 2018, create new sources of income in 100 cocoa-farming communities, and address key issues affecting the cocoa sector such as child labour, health, gender diversity, and environmental sustainability.
From training and technical assistance for producing quality cocoa and higher yields, to expanding access to finance, and ensuring a guaranteed fair price for farmers’ beans, Cadbury estimates the program to bring in as much as $350 million in additional revenues per year. There is value for everyone.
Since launching, the program has grown beyond expectation. Currently, the program is operating in over 200 communities in Ghana and aims to support a target of 500 communities.
Milsted adds that in CSV, we must address down the chain to the farmer. Change doesn’t happen overnight but it has already been past the point where the food industry as a whole needs to ensure viable production in the future. Companies need to work with other organizations – these include donor organizations, trading organizations, and the farmers themselves – to bring best practices together. The issues are different in every country but understanding what drives the people along the value chain will help us figure out how to secure the future.
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