How can NGOs work effectively

with companies?

6 November 2014

Lessons from Oxfam-Unilever Project Sunrise on inclusive

business models with smallholder farmers

Page 2

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

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Intro: Joint Oxfam-Unilever project “Sunrise”

Objective: To learn how to do business with smallholders in

a way that improves their livelihoods and that can inform

Unilever’s business model and Oxfam’s development model

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What are the key messages from

Project Sunrise lessons?

1. “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

2. “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

3. “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

4. “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

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What have we learnt from

Project Sunrise about

inclusive business?

Page 6

Summary of events in Sunrise

Phase I:

Phase II:

2013

Project shifts focus away

from Azerbaijan and setting

up “greenfield” new supply

chains. However, the

farmers in Azerbaijan are

supported with Good

Agricultural Practices

guidelines, and Oxfam in

Azerbaijan continues work

on vegetable value chains.

2013-2014

Research into 3 Unilever value

chains with smallholders (India-

tomatoes, Kenya-tea,

Indonesia-soybean) and

research into other companies’

work with smallholders.

Guidance is produced for

Unilever’s procurement staff on

sourcing from smallholders.

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2010-11

Oxfam & Unilever

conduct feasibility

studies for

smallholder supply

chains across

several countries in

Latin America,

Africa and Asia

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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.

Key lessons from Sunrise phase I

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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.

Key lessons from Sunrise phase I (cont.)

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Phase II: Looking at existing supply

chains, what is the role of the lead firm in

smallholder inclusion?

Lead firms are rarely in a direct trading relationship with

smallholders

•So how can lead firms support suppliers to trade with

smallholders?

•How can lead firms reconcile inclusion of smallholders with

commercial drivers?

Farming households

FarmersAggregator

/ TraderProcessor Lead firm

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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.

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What are the implications of these

success factors for NGOs? (1)

A clear business

strategy for

inclusive procurement

Understand clearly the business drivers for inclusion.

These business drivers will sustain the inclusive

business model for longer than purely philanthropic

objectives.

When recommending more or better inclusion, link the

recommendations to business strategy as far as

possible.

e.g

.

e.g. Indonesia – black

soybean. Securing supply of

the product was an important

business driver. Sourcing

from local smallholders also

added brand value.

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What are the implications of these

success factors for NGOs? (2)

Alignment of the

lead firm

procurement

practice with strategy

Recognise that the internal incentives at lead firms and

suppliers may conflict with the goals for inclusion.

Pinpoint these internal incentives, and negotiate for

greater flexibility as far as possible.

NGOs can be ‘honest brokers’, understanding the

incentives both at the lead firm and at the farmer level.

This can help make inclusive value chain connections.

In this process, it’s also important to train farmers to

improve their skills for trade and negotiation.

e.g

.

e.g. India – tomatoes. The

contract with farmers allows

them to sell upto 25% of

produce to other buyers. This

flexibility helps reduce tension

around “side-selling”.

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What are the implications of these

success factors for NGOs? (3)

A relationship-

based

procurement model

Encourage relationships that share risk along the

supply chain. Smallholders are the actors least able to

absorb risk, but they often bear the greatest burden.

Build the capacity of producer organizations to be able

to engage effectively with buyers.

e.g

.

e.g. Kenya – tea. Farmer Field

Schools trained smallholders in

managing environmental risks,

as well as increasing yields and

profitability. Farmers are well-

organised through the KTDA.

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What are the implications of these

success factors for NGOs? (4)

Tailoring the

approach to the

product and

supply chain structure

Help with “poverty footprint” analysis for particular

supply chains. This is where NGOs’ field experience

can be essential in understanding what type of inclusion

is needed for a particular crop in a particular area.

Accept that, for some crops and some areas, there may

be no business interest in inclusion.

e.g

.

e.g. Azerbaijan – onions. As a

widely available crop, it was

difficult to compete in the

global market. There was

also little added brand value

in this case.

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What are the implications of these

success factors for NGOs? (5)

Pilots that are

implemented with

a view to scale

and mainstream business

Have a clear exit strategy for NGO and donor support.

Manage expectations on the time it takes to build a

viable inclusive business model.

e.g

.

e.g. Practically all case

studies show that it takes

several years to get a supply

chain from conception to pilot

and then to full

implementation.

Page 16

How does Oxfam assess

whether to work in partnership

with a company like Unilever?

(This section includes Oxfam’s generic internal

guidance on working with companies, and is not

a specific learning from Sunrise/Unilever)

Page 17

Oxfam’s multi-faceted approach to

the private sector

How do we achieve the change we

want to see?

Influencing governmental

regulation

Campaigns & advocacy

Private sector partnerships

Doing business (goods & services)

Fundraising

Page 18

SIX STEPS

1.• Identify your objectives and carry out a power analysis

2.• Identify your private sector approaches

3.

• Assess and manage your risks and carry out an ethical screening

4.• Communicate, consult and get sign off

5.

• Articulate your Theory of Change and incorporate Monitoring, Evaluation and Learning from the start

6.• Get planning and resources right

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Ethical screening + Strategic fit

Two particularly important considerations when considering

a partnership

Ethical screening

If there are risks of working with a company,

we could rule out partnership

Strategic fit

If there is alignment of objectives between the

company and Oxfam, we could favour partnership

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Link private sector work to Oxfam’s change goals

• e.g. Sustainable food

• e.g. Fair sharing of natural resources

Focus on priority sectors

• e.g. Food & beverage companies

• e.g. Extractive industries

• e.g. Finance sector

Identify your exact objective

• What problem are you addressing?

• What is Oxfam’s added value?

Map private sector stakeholders

• Who is most important?

• Identify champions/ swingers/ blockers

Assessing strategic fit:

Objectives & Power analysis

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Risks & Ethical screening

Assess your risks

• Risks to brand or identity, e.g. through “green washing”

• Risks of legal action by the company towards Oxfam

• Risks of reprisals to Oxfam’s work, staff and partners

• Risks of inconsistency with other Oxfam work

Manage your risks

• Assess the impact and the likelihood of each risk

• Focus on managing risks that have the highest impact and may cause the biggest losses

Carry out an ethical screen

• A screen provides an input for a risk assessment

• A screen is not green or red itself - the decision about taking on a piece of private sector work balances the risks with the opportunity

Page 22

What have we learnt from

Project Sunrise about

NGO-corporate partnerships?

Page 23

Potential roles of the NGO in

corporate partnerships

Forming producer

groupsCoordinating project

implementation by

various stakeholders

Knowledge-sharing

on particular

area/crop context

Direct technical

support to producers

Multi-stakeholder

initiatives

Brokering

relationships

between

stakeholders

Commenting on

inclusion strategy

Convenor &

agenda-

setter

Service

provider

Strategic

advisor

Broker &

coordinator

Knowledge-sharing

on sector-wide

issues

Development strategy advice

Technical project implementation

Multilateral(NGO works across

many actors)

Bilateral(NGO works across

many actors)

Page 24

Project Sunrise: Evolution in Oxfam’s role

• Phase I

• Broker & Coordinator to connect Unilever with

smallholder farmer groups

• Service Provider to design pilot projects

• Phase II

• Strategic Advisor to research existing supply chains

and produce guidance

• Convenor & Agenda-setter to share guidance with the

sector (wider than Unilever)

Page 25

What are the NGO’s strengths?

Often, an inclusive business model will require input in all four quadrants

However, one NGO usually has strengths only in particular roles

Some Qs to consider for effective engagement:

• What role should the NGO play in supporting companies to adopt more and better inclusive business models?

• Are the producers, the lead firm, the supplier and other actors clear on what to expect from the NGO?

• If the NGO is focusing on particular roles, do roles in the other quadrants need to be filled by other actors?

Page 26

Learning resources from

Project Sunrise

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Learning resources with more details on

the content of this presentation

IIED paper: “Success factors for lead firms to shape inclusive procurement”

http://policy-practice.oxfam.org.uk/publications/success-factors-for-lead-firms-to-shape-inclusive-procurement-332111

IIED-Kent Business School paper: “Measuring fairness in supply chain trading

relationships: A methodology guide”

http://policy-practice.oxfam.org.uk/publications/measuring-fairness-in-supply-chain-trading-relationships-332135

REOS case study: “Sunrise Azerbaijan”

http://policy-practice.oxfam.org.uk/publications/sunrise-azerbaijan-case-study-324753

Unilever guidance for lead firm procurement on smallholder inclusion

Unilever training module on smallholder inclusion

Case studies on Unilever: India-tomatoes, Indonesia-soybean, Kenya-tea