Federighi, N. 2014. Private sector development: The role of food and agriculture business principles. GREAT Insights, Volume 3, Issue 6. June 2014.
No country can develop without a thriving private sector. Most developing countries have a large share of their GDP in agriculture, feeding the local population and providing important export revenues. So the need for a strong private sector is even greater in agriculture in developing countries.
Even when smallholder farms are the dominant productive units, few are able to thrive unless they organise themselves as agribusinesses. More and more are finding it useful to follow the emerging consensus on voluntary Food and Agriculture Business (FAB) principles, developed by the United Nations Global Compact.
Cultivating healthy value chains
FAB principles originate in the call for responsible businesses to align to the goals of the United Nations, as articulated in the Rio+20 Outcome document The Future We Want(1). They provide important strategic guidance to all business in the value chain—from cultivation to retailing:
Private firms adhering to the principles are providing nutritious food in a sustainable way, helping to meet global needs, with improved resource efficiency and sharing value across the entire value chain from farmers to consumers. This way of doing business should improve the lives and purchasing power of workers and farmers, respect the rights of the people and provide equal opportunities, avoid corruption and respect the law.
Most challenges business faces have to do with systemic failures as corruption. No single company alone can solve it. Platforms such as the UN Global Compact and Companies United can push for it with less risk.
FAB principles help accountability and transparency. Transparency creates the right enabling environment to be competitive and to facilitate partnerships which will realise the sustainable transformation of food and agricultural systems.
Knowledge sharing is key to supporting the three pillars of sustainability, and extension and advisory services are a vital knowledge sharing institution: protecting natural resources, productive processes, marketing and entrepreneurial skills and nutritional needs.
Corporate sustainability has not penetrated the majority of companies operating in markets around the world—the global tipping point has not yet been reached. Advanced performance by leading companies, also leading small and medium enterprises (SMEs), that anchor the principles in their business strategy, and not just isolated good practices, offers crucial inspiration. It is about the way you do business and generate income and not about what you do with the income.
Answering to FAB principles
Being responsible and following FAB principles means planning a business model that allows you to grow, integrating sustainability concerns in your business. Developing things of worth, with high and nutritional value for the people, and communicating it to the society which will benefit the position of your products in respect to competitors.
Stimulating sustainable food production and systems and increasing incomes of smallholder farmers is not philanthropy. It is, rather, being a good corporate citizen who generates jobs and income, creating opportunities for improving the living conditions of the people. Responsibility has to be in the minds of the top managers, in the training and extension work, in the relationship with other companies along the value chain – it is understanding how things should be done and what direction we should take in the longer term.
There is a general and growing private sector interest in adopting goal setting as the UN Global Compact principles. Large companies are helping their own supply chain which consists mainly of SMEs to help them responsibly manage their business. Large companies like Yara can be key to reaching SMEs and promoting the FAB principles with their stakeholders in their value chain. After all, we work in 150 countries and are participating actively in developing and promoting FAB principles, as part of our wider efforts at contributing with the international community in our quest for food and nutritional security.
Some SMEs are doing corporate sustainability but they do not know it and they are not promoting it strategically. The consciousness of the companies of being sustainable and committed can turn them into leaders in their sector and differentiate them from their competitors if they communicate it well. SMEs have the advantage that their size represents an opportunity to integrate sustainable action and a comprehensive model will scale up easily.
Comprehensive food systems
“Smarter governments have to promote and leverage business, and good business performance, especially for SMEs that have less resources”. They can reward and give visibility to those good practices and business models.
Food and Agriculture Business principles means investing in sustainable food systems, in agriculture development models that are comprehensive and can be multiplied, that cover all elements such as access to financing facilities that complement existing commercial and donor funds to help establish new agribusiness investments, investing in market development and supply last mile delivery. A good business model and strategies should maximise the positive impact in society, environment and economy to position the company strategically towards consumers.
These principles, if applied in developing countries, may create an enabling environment for more responsible governance in the private sector, thus strengthening these key actors for development. The time has come for a new culture to take us in a new direction.
Natalia Federighi is Director for Public Affairs & Institutional Relations at Yara International (Norway).