SUNRISEBRINGING TOGETHER SUSTAINABLE SOURCING AND DEVELOPMENT

SUNRISE

Goal

• The goal of Sunrise is to learn how to do business with smallholders in a way that it improves their livelihoods

Objectives

• To understand the roles, functions and power dynamics in supply chains currently sourcing from smallholders

• To use the outputs from this to deliver tools and guidance applicable to Unilever procurement, other similar companies and their suppliers that can improve smallholder livelihoods

• A joint programme between Unilever and Oxfam bringing together the development aims of Oxfam with the sustainable sourcing efforts of Unilever

• Research and thinking on what a lead firm can do to achieve better livelihoods for smallholder farmers

• Outputs used to inform Unilever’s business model and Oxfam’s development model

• Began in July 2010 and ended in January 2015

TIMELINE

2010-12

2010 - MoUsigned for a

five-year work programme

Practical learning

based pilot projects

Strategic review end of 2012

Shift of focus to learning from existing supply chains within and outside Unilever

Roll out of Enhancing the livelihoods of smallholder

farmers: Guide for Procurement and

Engaging the private sector:

guide for NGOs.

Phase one

Phase two

2012-14

STRATEGIC FIT

Oxfam’s aim for encouraging private sector investment insmallholder agriculture is to reduce poverty, reduce smallholderrisks; develop viable sustainable livelihoods; promote women'sempowerment and so strengthen the role of smallholders’ in thefuture of agricultural development.

Unilever is committed to sustainable sourcing, improving thelivelihoods of smallholder farmers, especially women and tocontributing to food security. The Unilever Sustainable Living Planset a goal to show evidence of improvement of the livelihoods of atleast 500,000 smallholder farmers in the supply network byhelping them improve their agricultural practices and thus enablethem to become more competitive.

MOTIVATIONS

PHASE 1

2010 TO END 2012

PRACTICAL PILOT PROJECTS

• Based on vegetables for dehydration for use in Knorr products. Feasibility took us to Tanzania and Azerbaijan

• Insight: Greenfield new developments with local partners are not a resource effective scalable model for future value chain development given ambitions for Sunrise

Commercial issuesSide selling can be a key issue if alternative markets exist for raw material

Processing to international standards is limited outside developed countries

Need for constant supplies requires a mix of large and small scale suppliers

Industrial scale plant investment not viable solely based on Unilever volumes

Development issuesProcessed markets represent a lower value, commoditised offer relative to fresh markets, for smallholders, unless graded prices or seasonal average price exists

Commercial ‘drivers’ are gender blind, resulting in unequal opportunities for women unless adapted

Creating income gains with acceptable risks for smallholders requires a mix of accessible markets

To reach marginalised producers requires household and market system investment

KEY LESSONS FROM SUNRISE PHASE I

• Avoid optimism bias at the research stage• Starting a new smallholder supply chain with a combination of

commercial and social-impact objectives is complex. • Participants need to carefully consider a wide range of issues and

consider both positive and negative factors likely to impact on the supply chain proposed.

• Assess the impact of the proposed buying model• The buying model has an enormous domino-like effect on the

dynamics of the supply chain. • For example, a surplus-buying model can be established more

quickly than a contract-buying model, can develop a broader market and can increase the number of farmers involved in the long term.

• On the other hand, a contract-buying model offers more scope for specific produce requirements to be met, and can also provide a framework for all parties to justify upfront investments.

• Invest strategically in greenfield sites• Greenfield projects afford a great degree of freedom to design a

supply chain “from scratch.”• Project leaders must strike a strategic balance between factors

such as direct control and innovation on the one hand, and outsourcing and efficiency on the other hand

• Leave room for trial and error• In supply chains where new approaches are being introduced and

where innovation and learning are critical, there must be room for trial and error.

• Experimentation enables current understanding to be challenged and improved.

• Agree on how systemic the approach will be• Systemic approaches seek to address problems by dealing with

their root causes rather than just addressing symptoms. • Project teams taking this approach must make this choice clear

upfront, and get all partners’ agreement on it.

• Make objectives crystal-clear• When two organisations are highly motivated to collaborate, there

is a danger of avoiding the difficult and sensitive conversations needed to identify differences in objectives, drivers, priorities and agendas.

• Define “success” carefully• In a project that entails collaboration between a business and a

development organisation, establishing success criteria becomes exceedingly complex.

• It is important to ensure that the outcome measurements selected match the objectives of the project.

• Agree on an exit strategy for all parties• In the event that the project needs to be disbanded, all parties

need an exit strategy. • Formulation of such a strategy is best done at the start of the

project, rather than when the first cracks appear. • That way, each partner organisation understands from the outset

what pathways are open to them as the project evolves.

PHASE 2

2013-2015

PHASE 2

Looked in depth at three

Unilever supply chains already

sourcing from smallholders,

carried out research on what

others are doing to identify

common success factors

Guidance for lead firm procurement

operations & NGOs

External research

Unilever cases

Practical projects

UNILEVER CASES

Tea in Kenya, tomatoes in India and black soy beans in Indonesia

Critically there has also been a commercial basis for Unilever engagement; a development

opportunity for government and NGO agencies and a market opportunity for suppliers, farmers

and input providers = MUTUAL BENEFIT

Common success factors emerging from the cases :

• Financial arrangements that allow smallholders to participate without having to rely heavilyon credit from external providers, primarily because of quick payment and pre-payment fortheir crops

• Transparent pre-harvest price negotiations and guarantor role of buyer

• Partnership models that provide extension services, training and inputs directly to farmers

• Internal structures within Unilever that see procurement, supplier development andsustainability functions working hand in hand

• Key role for leadership in generating commitment and trust, and bringing together the actorsneeded to succeed with a fragmented supply base

EXTERNAL RESEARCH

What can lead firms do to influence the trading relationship between primary producers

and their direct buyers? and what does it take for such approaches to succeed?

Assumptions:

Lead firms are rarely, if ever, in a direct trading relationship with smallholders; the relationship is

mediated by one or more levels of trader and supplier. It is their actions that will make or break

attempts at inclusive business.

By adapting aspects of procurement, lead firms can support suppliers to trade with smallholders

And in doing so lead firms and suppliers can reconcile inclusion of smallholders with commercial

drivers

INTERCONNECTED SUCCESS FACTORS

1 A clear business strategy for inclusive procurement

2 Alignment of the lead firm’s procurement practice with strategy

3 A relationship-based procurement model

4 Tailoring the approach to product and supply chain structure

5 Pilots that are implemented with a view to scale and mainstream business

PHASE II: SUCCESS FACTORS FOR LEAD FIRMS TO SHAPE INCLUSIVE PROCUREMENT

A clear business strategy for inclusive

procurement

A clearly defined business case makes

the difference between inclusion of smallholders via ad

hoc projects, and inclusion through the

commercial operations of the

company.

A clear business case exists when value is

generated for the lead firm, supplier and

smallholder.

For the lead firm, the value proposition may be security of supply,

or brand & reputational value.

Alignment of the lead firm procurement

practice with strategy

Embedding the ‘inclusive

procurement’ strategy into the core

procurement function, and aligning

policies with this strategy, to ensure

consistency of messages to

suppliers.

A relationship-based procurement model

Full supply chain visibility for lead

company buyers right through to primary

production, to understand the

consequences of buying decisions.

Collaboration and co-investment with

suppliers, supported with buyer education and incentives, even when dealing with

preferred suppliers.

Transparency and risk sharing all along the chain, including

producer organisations

Tailoring the approach to the product and

supply chain structure

Companies and their suppliers need to adjust and tailor

their strategy based on specific factors

related to the product and supply

chain.

There may be greater business

rationale for niche high-value products

than for commodities.

Pilots that are implemented with a

view to scale and mainstream business

Giving pilot interventions time to be successful,

with patience, persistence, access

to know-how, learning and adaptation.

Even with enablers in place, getting

from pilot to commercialisation

can be hugely challenging, and failure is under-

reported.

TRANSLATING LEARNING TO PRACTICE

GUIDE FOR PROCUREMENT & GUIDE FOR NGOS

GUIDE FOR PROCUREMENT: PURPOSE

Support buyers and suppliers on how to improve their impact on the livelihoods of smallholder farmers by:

• Creating a common language • Orienting companies to the basic risks, strategic

options, and common success factors

Which should help buyers and suppliers explore opportunities to:

• Reach more smallholders by expanding or developing new sourcing arrangements

• Improve outcomes in existing sourcing arrangements by developing programmes that increase benefits and impact and improve commercial performance

And ultimately to make sensible decisions about if

and when investing in smallholder sourcing is a

good choice for the specific context being looked at

How can NGOs work effectively

with companies?

6 November 2014

Lessons from Oxfam-Unilever Project Sunrise on inclusive

business models with smallholder farmers

Page 21

About this presentation

Objectives

• Share lessons from Project Sunrise on inclusive

business models

• Offer guidance on strategic considerations in NGO-

corporate partnerships

For whom?

• NGO practitioners in private sector partnerships

• Governments and donors that support PPPs and NGO-

corporate partnerships

WHAT HAVE WE LEARNT

FROM PROJECT SUNRISE

ABOUT

NGO-CORPORATE

PARTNERSHIPS?

KEY MESSAGES

• Clarify mutual expectations in the corporate-NGO partnership

• Is it an implementation partnership or a learning partnership? Be clear on each partner’s skills & capabilities

• Partners should manage mutual expectations and continually clarify roles

• Go beyond the buy

• Lead firms can drive best practice in buying, and also in investing in smallholder capacity

• Sharing the benefits, costs, and risks, e.g. Farmer field schools, pre-harvest payment, cost-plus pricing

• Look for the women

• Lead firms can identify the women hidden in the supply chain, and target interventions directly to them. E.g. Separate remuneration for women’s activities, organising women’s groups

• Think twice before going greenfield

• Building new supply chains with smallholders requires rigorous analysis & risk management/sharing

• Deepening social impact in existing supply chains with smallholders may work better