NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

I recently attended a conference on “Sustainability as a key factor for mitigating risk in agricultural supply chain finances,” co-hosted by the Rainforest Alliance and Citi Foundation. A pretty specific topic, for sure, and you may be asking yourself, “how many people are there trying to figure that out?”

Well, you’d be surprised. There were at least 80 people there, and potentially many more that would have come if they could. Why, you may ask?

A simple answer, really: a lot of the things that people consume come out of the ground – coffee, tea, chocolate, cotton, and almost everything we eat. What many don’t realize is that in the majority of the world, the people who grow the stuff we consume are among the world’s poorest, and the way commodities are produced is having a bigger and bigger impact on the environment. Our global supply chains now matter more than ever.

Most of the world’s poor are small scale farmers. And a major reason they remain poor is because they struggle to get their products to market. Even when they do, because of a multitude of reasons – lack of transportation infrastructure, lack of access to capital, lack of accurate market information – they are often abused by exploitative middle men in the process and fail to capture the true value of what they produce.

At the same time, conventional agricultural practices are creating a perfect storm of environmental challenges: decreasing water tables, loss of arable land, deforestation, loss of habitat, and pollution from pesticides and fertilizers.

People need the stuff that comes out of the ground, but we also need to get it in a way that enables producers to have stable and adequate incomes, and that creates the environment to sustain life in the long-term. Without both conditions, the system cannot be considered sustainable. One of the best ways to achieve both is to develop new supply chains and new business models that fairly compensate farmers and reward sustainable agriculture. At the most basic level, engaging smallholder farmers – farmers with tiny plots of land – in global agricultural supply chains may be one of the most powerful ways to reduce global poverty and ameliorate environmental degradation.

So things like Fair-Trade, organic, and certified sustainable are not just hip new ways to show you care – they are actually the beginning of an effort to transition our agricultural systems into a means to meet customers’ needs, but also to address critical social and environmental issues.

(Pictured left: A Western Seed customer).

What’s exciting is that major brands and retailers— Wal-Mart, Coca-Cola, Pepsi, Starbucks, Unilever –recognize the value of sustainable supply chains (short hand for this effort). But huge challenges stand in the way of improving these practices, especially among the millions of disaggregated smallholder farmers. OK- reality check – it’s anything but simple. Tensie Whelan, who leads the Rainforest Alliance and co-hosted the event, mentions the growing role of companies in her blog on the event:

“Hundreds of companies are working with civil society (and occasionally, governments) to help millions of producers to invest in sustainable practices-helping them to become more viable small businesses and, not incidentally, more stable long-term suppliers.”

A few weeks ago I joined these 80 people from companies, financiers, foundations, non-profits, and academics, because Acumen Fund has developed a portfolio of companiesdedicated to improving farmer productivity, and we’ve begun to find innovative business models that we think will contribute tremendously to the advancement of socially and environmentally sustainable agriculture. Companies like Global Easy Water Products, which distributes low-cost irrigation technology tailored to small-holder farmers in India, andWestern Seed, which sells high-quality hybrid seeds to farmers in Western Kenya who for generations have used farm-saved varieties. Or companies like GADCO, one of Acumen Fund’s newest investments from our new operation in West Africa, which engages smallholder farmers in Ghana in the production of rice for local markets, increasing their productivity through improved inputs and linking them to a higher value market by managing the whole supply chain.

I was there to better understand how we can partner with companies, NGOs, and multilaterals to make sure that these innovations truly achieve scale, both for individual companies in our portfolio, and for the broader network of global supply chains.

My big ‘Aha’ at this conference is that a challenge this complicated takes the networks, expertise, and capital of a whole constellation of actors. Acumen’s niche here is, I believe, in finding and supporting innovation in the sector, and whenever it makes sense, to be a great partner to those organizations who need this challenge addressed in bold, new ways: to corporations who know they must move in the direction of sustainability for a myriad of reasons, and to foundations (such as the Bill & Melinda Gates Foundation, which helped us launch our agriculture portfolio), who have made it their business to tackle the world’s biggest challenges.

Making sustainable supply chains the new norm and not just a niche or fad will require tremendous effort on the part of these diverse actors, and the creation of whole new systems that can support, expand and monitor sustainable practices. In all of this Acumen Fund aims to be a source of innovation through the business models we invest in. And always, we strive to be a champion for entrepreneurial solutions and for the entrepreneurs themselves, recognizing that transforming markets and raising standards can just as easily create new barriers for farmers and entrepreneurs that are already struggling.

At this event, I was humbled by the complexity of the issue and impressed by the commitment and expertise of all those gathered. I left convinced that Acumen Fund and our agriculture portfolio has a unique role to play through our continued investments in enterprises that unleash new ideas for a system that must evolve – for producers, for the planet, and for all those who consume and know they must do so in ways that are sustainable. That is, for you and me.