5.1 Choosing your Sourcing Model

Can you get the sustainably sourced raw material through your existing supply network or do you have to develop new sources of supply? Is there a need to redesign existing supply chains?

In Chapter 2, we explained how to map the existing sourcing situation. At the end of that exercise, needs for changes in the current sourcing model must be identified. For example: What visibility do I have of my supply chain? Where am I ‘blind’? What do I need to do to gain visibility?

Integrating Sustainable Sourcing Requirements into the Existing Sourcing Model

You may wish to try and implement sustainability requirements (as identified in Chapter 3) within your company’s already existing sourcing model(s):

1. In the case of direct sourcing, there is already a strong relationship between your company and farmers. External standards and certification systems may not be needed. Your company – or a third party acting on its behalf – may directly support farmers towards the adoption of new practices that conform to the standard.

2. If your firm is sourcing from suppliers such as processors and traders, it may not have built up close relationships with farmers. You may only be able to promote sustainable agriculture indirectly – through adding sustainable agriculture requirements to supplier contracts, for instance. These suppliers will be expected to transfer these requirements up the supply chain eventually to the farmers. In that case you may or may not decide to rely on third parties for securing compliance of farmers with the sustainability requirements.

3. Sourcing from anonymous commodity markets does not provide your company with realistic possibilities to impact the farmers’ practices, owing to the lack of traceability/transparency. A practical solution here may be to require compliance with an externally defined and independently certified sector sustainability standard.

Adapting the Sourcing Model to Make Sustainable Sourcing Possible

It may not always be possible to effectively implement the sustainability standard(s) chosen without changing your company’s sourcing model. For instance, this may be the case with commodities for which there are no widely accepted sustainability criteria available yet, and which require a more direct company involvement than is the case today. This may be a reason for changing the sourcing model to focus on more direct sourcing – see the LINK methodology in example 13[1].

[1] See also: Don Seville, Abbi Buxton, Bill Vorley, Under What Conditions are Value Chains Effective Tools for Pro-Poor Development?, IIED, 2001. http://pubs.iied.org/16029IIED.html

Example 13. Linking Worlds: Building Sustainable Supply from Small Scale Producers

Tremendous opportunity exists to increase the sustainability and stability of supply from small-scale producers. Coupling sustainable sourcing with increased market access and development impact can meet increased volume needs as well as bolster brand image in emerging markets. The Linking Worlds website, hosted by the Sustainable Food Lab, is the result of a partnership between Oxfam, CRS, IIED, Unilever, Rainforest Alliance and CIAT. It contains online resources on the LINK methodology: Business Models that Link Smallholders to Markets.

The Issue: Think Big – Go Small

From the LINK website: “Well-managed, inclusive businesses have the potential to create a win-win situation: farmers gain access to markets, knowledge, and technology and increase their income and resilience. While buyers – beyond considerations of CSR and the creation of “ethical products” –are better able to source key raw materials to their specifications at a competitive cost. The authors of this guide maintain that inclusive business practices in an era of tightening global supplies and natural resource limitations is simply good business.”

The Process

The LINK website suggests different ways to structure the process for sourcing from smallholders. The LINK process is the most elaborate. It consists of four key tools and two add-on tools:
• Key tool #1: value chain map
• Key tool #2: business model canvas
• Key tool #3: New Business Model Principles
• Key tool #4: Prototype Cycle
• Add-on tool #1:Drivers, trends and key implications
• Add=on tool #2: New Business Model Typologies

Source:  http://sustainablefoodlab.org/images/stories/pdf/

However, sustainability arguments may not be sufficient to change a company’s supply chain. It is therefore highly recommended to look for additional business gains that your company can realise. If, for instance, the change can also solve supply security or quality problems, the business case is much stronger.

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