Why now is the time for companies to step up to their commitment to higher farmer incomes.
In this unprecedented time full of uncertainty, two things are clear. First, the Coronavirus pandemic is not only a global health but also an economic crisis. Second, the pandemic disproportionately harms the most vulnerable groups. As a result, up to half a billion people might fall into poverty in the aftermath of the current crisis and almost double the number of people suffering from hunger (up to 250 million). This includes millions of small-scale farmers with little capacity to protect themselves and recover from the impacts of Coronavirus. Food companies – from retailers to manufacturers, processors and traders – have a critical role and responsibility to help safeguard the incomes of these farmers.
Coronavirus is exposing the inequities in food supply chains
The pandemic is turning into an an existential risk for small-scale farmers around the world, many of whom are women, who are already coping with precarious incomes and weak health protections. While the health impacts of Coronavirus are still to manifest, the economic fallout of the crisis has already begun. As roads, ports, factories and retail outlets have shut down in many countries, farmers are losing access to critical output markets.
In Bangladesh, vegetable farmers have taken a significant price hit as marketing opportunities have become limited due to the Coronavirus lockdown. In Kenya, coffee farmers are incurring significant income losses as coffee shops are closing down around the world. In Ghana, the cocoa sector with its 800,000 farmers is expected to experience a shortfall of $1 billion as the pandemic has caused a decline in cocoa price on the world market. In Asia, the closure of processing factories has led to a 50% price drop for the exports of cashew farmers in West Africa. These are just a few of many more examples where small-scale farmers feel the brunt of the economic losses created by Coronavirus.
Companies are responding to health risks, not economic risks
Food companies buying agricultural commodities – like cocoa, coffee, tea or sugar – from around the world are also struggling with the economic collapse of consumer markets around the world. Their response to date has focused on protecting their workforce and supply chains from the Coronavirus. Food companies utilizing their reach to provide important health information and resources to farmers in their supply chains can be valuable contributions by companies in light of weak government capacity to respond to the pandemic.
Yet when it comes to protecting farmer incomes, companies have shown less visible commitments to date. Instead, falling commodity prices have meant that corporate buyers can offset part of their revenue declines with lower sourcing costs. This means that the economic downturn in food supply chains will potentially be shouldered disproportionately by its weakest participants while companies at top of these chains are able to hedge their supply risks while being relieved by economic support packages from their home governments.
We need more determined actions to safeguard farmer incomes
Coronavirus should be a catalyst for more determined actions to protect farmer incomes and more resilient supply chains. More and more food companies have grappled with the income situation of farmers in their supply chains and testing strategies to close existing income gaps. Investors are also recognizing the fundamental risk for food supply chains if farmers are not earning sufficient income to cover basic needs.
Yet, by and large the efforts to date – including company commitments, multi-stakeholder initiatives, research projects and pilot interventions – have not yet managed to translate into a significant improvement in the actual income situation of small-scale farmers. Ironically, Coronavirus is both augmenting the challenge of precarious farmer incomes and risks sidelining the industry’s collective attention to the issue.
So what should companies do?
First, companies should not focus on philanthropic giving alone but ask how their own procurement practices should be modified to enable farmers to weather the current crisis. This could include upholding existing contracts even when demand declines, guaranteeing payments, and revising sourcing timelines to smooth income streams for farmers.
Second, companies should focus their efforts on protecting the incomes of the farmers most at risk in their supply chains. Instead of modeling farmer income efforts on the ability and needs of the best-off farmers in a given supply chain, a company’s efforts to safeguard farmer income (like other human rights issues) should start with impact on the most vulnerable.
And what does that mean in practice for companies?
- Make farmer income a priority area of the Coronavirus response
- Define living income as a human right and as a baseline (not an end goal)
- Conduct assessments to understand how farmers’ income situation in specific supply chains has been affected by Coronavirus
- Take a responsibility-first approach that focuses on how your company will safeguard and help raise farmer incomes during and after the Coronavirus crisis
- Uphold existing contracts and (if possible) extend them to ensure income stability for farmers so they can remain sourcing partners in the future
- Focus your Coronavirus response on the most vulnerable farmers in your supply chain, especially women, and design interventions according to their needs
- Set KPIs that make farmer income stability and growth a key performance indicator of your Coronavirus response
- Measure progress by assessing income changes of farmers, not the number of farmers above a certain income level.
- Be transparent about progress, challenges and lessons learned and create feedback loops with participating farmers that last beyond the response