As subscribers of the Living Income Community of Practice (LICOP) know only too well, smallholder producers are at the sharp end of global supply chains, and can face significant challenges in achieving and maintaining a decent standard of living.
Trading terms are an important driver of a farmer's ability to improve their income. Buyers can adopt responsible purchasing practices which enable producers to build resilience. Doing so can have important upsides for buyers, from more stable business relationships to reputational benefits in consumer markets.
In fact, it’s a concept that’s beginning to emerge in the evolving regulatory landscape too – reflected, for example, in the recently introduced European Corporate Sustainability Due Diligence Directive (CSDDD).
LICOP ran a webinar to put the spotlight on responsible purchasing practices, exploring strategies that bring meaningful change, and how they can be integrated into strategies to close the income gap in producer communities.
Solutions on the ground
Alphonse Amani, Rikolto’s cocoa programme coordinator for Ivory Coast, explained the difficulties faced by growers, providing a vivid illustration of the reality of life on the ground for smallholder producers.
He explained how smallholder producers face various challenges, such as high production costs, illiteracy, lack of labour, to name a few. But one of their biggest barriers to a living income arises due to low pricing.
In the Ivory Coast, the government, which regulates the cocoa market, sets the official farmgate price that goes to the farmers – and often that price is simply too low to close the income gap and improve farmer livelihoods.
Rikolto, along with other civil society actors, are advocating to change the structure of the market to increase the farmgate price, which would make a direct and immediate difference to the farmers themselves (note that the West African government regulators in both Ivory Coast and Ghana have recently raised minimum farm gate prices. Reuters, Sep 2024).
Cooperatives are in the frame too. Amani spoke of the need to invest in their governance and business management capacities to make them more professional and profitable for the sake of their members. But they need reliable finance to do this, which in turn depends on them having strong, stable partnerships with buyers who are willing to pay a price premium to meet operating expenses, the cost of compliance, and guarantee long-term business relationships and funding.
Melissa Karadan, purchasing programme lead at the Ethical Trading Initiative, touched on some of these themes as she spoke about ETI’s Common Framework for Responsible Purchasing Practices (CFRPP).
This broad reference document has been developed to help companies integrate human rights due diligence into their commercial practices to benefit the farmers at the other end of supply chains.
Although different countries and commodities face different risks, and while there are certainly no one-size-fits-all solutions in the CFRPP, it is nevertheless applicable across most sectors – provided there’s real commitment from the buyers involved.
IDH has been a pioneer in sustainable procurement, and programme director Mark Birch told the workshop how the company has been putting together a toolkit and library of best practices to help businesses and farmers.
IDH identify three vital pillars for sustainable procurement: better supply chain management, improved rewards and value distribution and an equitable and safe approach to reducing risk and volatility for farmers. Birch emphasised that the way in which these are applied will depend on the sector, the type of organisation, its place in the chain, its size, and so on.
The same ideas underpin good purchasing practices guidance recently released by the VOICE Network that was also shared at the workshop. The document is focused on three over-riding principles that cocoa sector buyers should adopt – pay a fair price based on accurate living income benchmarks, share the risk through long-term contracts that enable future planning, and be accountable with regular reporting.
It’s also vital to focus on sustainability: closing the living income gap is a good start, but finding ways to keep it closed in the long term is what really matters.
Nina Kuppetz of GIZ described her experience working with the German Retailers Working Group to implement a living income project in the Latin American banana sector, based on ETI’s CFRPP.
The project’s core strategic objective is to explore how best to embed responsible purchasing practices in an improved procurement framework, which supports human rights due diligence obligations – fair trading dynamics, transparency, and stable long-term relationships are all key to success.
The aim is to go beyond mere compliance to create meaningful and lasting change that benefits producers, buyers, and the wider global economy too. The initiative is now expanding its work from bananas to the way retailers purchase their coffee.
Procurement has transformed over the last 20 years, and – as sustainability and human rights due diligence become ever more important – it can be a powerful catalyst for change.
Momentum in support of responsible purchasing practices is consistently building, but how do we turn that momentum into meaningful action? We’ll be continuing the conversation through the LICOP and at future events – including at our Latin American workshop in November, where sustainable procurement will be a key topic of discussion. You can find out more about that here.
