Supply Chains in Agriculture: Joint Action of GIZ and the Private Sector

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1 Supply Chains in Agriculture: Joint Action of GIZ and the Private Sector Sophie Grunze GIZ-Division 45 Rural Development and Agriculture Presentation at IAMO Forum, Halle, 20th June Seite 1 1

2 Contents Introducing GIZ GIZ and the Private Sector Global Supply Chains in Agriculture Practical Examples Agriculture in Central Asia Sustainability in the Coffee Sector Conclusions & Lessons Learnt Seite 2 2

3 Introducing GIZ Seite 3 3

4 About giz (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH) Founded on January 1 st, 2011 giz merged: DED Deutscher Entwicklungsdienst GTZ Deutsche Gesellschaft für Technische Zusammenarbeit InWEnt Internationale Weiterbildung und Entwicklung ggmbh Seite 4 4

5 GIZ is a federally owned corporation operating worldwide in the area of international cooperation for sustainable development. works on behalf of the Federal Government as well as other public and private, national and international clients. promotes complex reforms and processes of change in different sectors. works closely with the private sector and promotes synergies between the development and foreign trade sectors. The objective is to sustainably improve the living conditions and prospects for people in developing and transition countries Seite 5 5

6 GIZ worldwide 130 countries 17,000 employees (70% as national personnel) EUR 2 billion business volume (2011) GIZ Head Office, Eschborn, Germany GIZ Berlin, Germany GIZ Bonn, Germany GIZ Brussels, Belgium GIZ offices GIZ offices in German Development Cooperation Houses Seite 6 6

7 GIZ and the Private Sector Seite 7 7

8 Common Goals Private Sector objectives Development Partnerships Development Cooperation objectives Assurance of supply chains, market entry and expansion in developing and emerging countries Marketing of products Finding new customers and ensuring customer loyalty Corporate Social Responsibility (CSR) Improvement of local economic conditions Establishment of sustainable supply chains Mobilization of capital and know-how Involvement of local communities in economic cycles Seite 8 8

9 What are Development Partnerships? Development Partnerships are partnerships between development agencies and the private sector on equal terms. aim to connect business management and development policy. This leads to growth opportunities and benefits for companies, while at the same time contributing to sustainable development. minimize potential risks for both sides. Creation of win-win situations for companies and development cooperation. Common goals can be achieved faster and more sustainable Seite 9 9

10 Areas of Cooperation Development of education and training programmes Demand / labor market oriented training with the involvement of prospective employers Transfer of technology Ensuring the sustainability of technological innovations by the commercial interests of the private partner Optimization of value creation / supply chain Improvements to secure the success of a market-based value chain by integrating the product-specific know-how of the buyer Introduction of guidelines and standards For example, labor standards or environmental standards Introduction of internal improvements For example, through HIV / AIDS workplace programmes Seite 10 10

11 Sustainable Supply Chains in Agriculture Seite 11 11

12 How does a value chain look like? Specific Inputs Production Processing Trade Consumption Seite 12 12

13 Global Trends & Challenges Arable land per capita Source:FAO (2006) Seite 13 13

14 Global Trends & Challenges Diminishing quality & quantity of natural resources Increasing food prices & price volatility Changing consumer demands Changing patterns in agricultural trade Climate change impacts... Sustainability is more & more a competitive factor Competition for access to resources increases Hedges of investments Committments of trade & industry Seite 14 14

15 Sustainable Sourcing - Challenges and Opportunities Profit - increasing Market demands Planet - limited natural resources People - lacking capacity and incentives Capacity enhancement and supplier fidelity through vertical co-operation among actors in the value chain COOPETITION - Cost efficiency, broad impact and synergies through horizontal/sectoral cooperation Reliable & verifiable sources through multistakeholder engagement and voluntary standard systems Reliable sourcing in terms of delivery time, quantity and quality Ensuring long term availability of and access to commodities through sustainable management of natural resources Enhancing sustainable quality and productivity Risk minimization Seite 15 15

16 Sustainability in the Value Chain Social and environmental management Preservation / protection of the ecosystem / natural resources Protection of wildlife Ecological Principals Conservation of water resources Social Principals Fair working conditions Health and safety No serious form of child labor Integrated crop management Economic and & Management Principals Maintenance of soil fertility and management Integrated waste management Seite 16 16

17 Important Topics in VC Development Micro level: Farming as a Business Trainings Business skills in service delivery Meso level: Organisational Development of groups and associations Marketing and market information Macro level: Certification and standards Regulatory framework and policy matters Seite 17 17

18 Practical Example I: Increasing the Productivity on Farms in Central Asia Seite 18 18

19 Kazakhstan Kyrgyzstan Uzbekistan Turkmenistan Increasing the productivity on farms in Central Asia Partner: Claas, Lemken, BASF, KWS 12/ /2014 Volume: 3,2 million Public: 1,5 million Challenge Lack of basic management skills and knowledge of modern sustainable and efficient farming techniques No effective system of repairing service stations Many farmers find it difficult to cover their operating costs since the yields and performance of agricultural holdings have decreased Objective Farms in the selected countries have improved access to business management and production engineering consulting Centers of agricultural technical services are in place Building a network of relevant institutions in the agricultural sector for fostering public dialogues on agricultural topics Seite 19 19

20 Approach Identifying the needs for extension services based on analyses of typical farm types for the region Establishing farm-based testing and demonstration centres Setting-up repair and service centres for farm machinery Trainings, seminars and technical assistance for local farmers Involvement of relevant institutions of the agricultural sector Seite 20 20

21 Impacts through joint Action with GIZ Despite complex political circumstances in the region and an ongoing transformation from a centrally planned economy to a competitive social market economy Rising incomes for farmers through increased yields in crops, reduced harvesting costs and more marketing possibilities Establishment of local production plants for agricultural machinery through Joint Ventures Set up of service stations with local trainers leads to increased usage of farm machines and guarantees faster repairs Sustainable knowledge transfer through trainings of agricultural professionals and organization of study courses at universities Seite 21 21

22 Practical Example II: Sustainabilty in the Coffee Sector Seite 22 22

23 Coffee- Basic Facts The world's most important traded commodity after oil Production in DCs, mainly consumption in OECD countries > 100 million people live from coffee worldwide ~80% smallholder farmers 11% market share of sustainable coffee (certified) Seite 23 23

24 Challenges & Market Requirements Challenges (supply): Low income Price volatility Low productivity and quality Deforestation Unacceptable working conditions, child labor Lack of know-how Climate Change Market requirements (demand): Reliability Quality Quantity Traceability Sustainability in coffee production is important! Permanent improvement of the local living conditions Protection of natural resources and Meet the global demand for coffee Seite 24 24

25 Sustainability in the Value Chain Voluntary Sustainability Standards as one possible instrument: Good agricultural practices (GAP) environmental protection Social protection Business knowledge, internal management Systems, traceability, auditing Seite 25 25

26 Worldwide Common Code for the Coffee Community (4C) Challenge 2000: Structural overproduction of coffee extreme price crisis Threat to the livelihood of more than 100 million people Measures Development of a Code of Conduct sets basic standards for the coffee industry German Coffee Association Building and strengthening smallholder organizational structures Multi-stakeholder cooperation and plattform Impacts 3.5% of the world's coffee supply are produced according to the criteria of the Code 54% of global coffee production are represented in the 4C Association worldwide Seite 26 26

27 Ecological Standards Social Standards Organic Shade grown Bird friendly Solidarity Fair Trade Worst ecological Practice Common Code Worst social Practice Unacceptable Practices Seite

28 Towards Sustainable Coffee Production Sector-wide approaches: 4C Seite 28 28

29 Conclusions & Outlook Sustainability in Agricultural Supply Chains: Global value chains pose challenges & opportunities likewise Certified sustainability: From niche to mass market Beyond certification: Education, mandatory sustainability reporting etc. Expansion of sustainable products from developed countries to emerging markets Seite 29 29

30 Conclusions & Lessons Learnt Public-Private Cooperation: Private sector investment is key driver of agricultural growth Need for innovative public-private partnerships Beyond CSR: project attached to core business of the company Requires donors to allow private sector to play a leading role & for private sector to be willing to take on that role Capacity development at local level is key to achieve sustainable impacts By and large: highly successful instrument despite some challenges Seite 30 30

31 Thank you! Any questions?! Contact Sophie Grunze GIZ Seite 31 31

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