Posts Tagged ‘csr’

While not intended to be a two-part article, Earl’s response to the outcry from industry and government in Western Canada provides a perfect moment to reflect upon the most integral piece of implementing supply chain sustainability and CSR initiatives: collaboration.

One should appreciate the wicked problems that a retailer, such as Earl’s, faces when procurement and marketing misalign. Marketing outlined that the clientele of the restaurant have ‘approved’ a preferred product for the menu: verified humane beef. This specification was clearly not on the priority list for long-term strategic procurement much before the announcement, leading to no smooth transition or hybridization of sourcing practices, but a public outcry that was heard across the supply chain. One must only look at successful and unsuccessful implementations of new market demands on a supply chain to understand why this was a problem.

Please put on your investor hat: stakeholders of a company should be thrilled when the business looks outwardly, increasing transparency with customers in order to boost marketing potential, share good news stories, and illustrate where value will be developed through improving practices, operational processes, or strategy. Stakeholders will be less thrilled when that transparency is clearly missing through the supply chain.

There are obvious benefits for undertaking approaches that increase social acceptability and marketing potential of a product. It is easy to get tunnel-vision on these benefits and industry hype, wanting to lead the pack, gain free media attention and early adopter profitability. However, the work behind such announcements is something often overlooked and typically more influential to the long-term strategy of the business: collaboration.

Collaboration has significant influence on the relevance and profitability of end products. The speed of social evaluation of product and requirements for hyper-transparency is continuing to speed up, so too is the required rate of communication and collaboration across the supply chain.

To address this growing need for communication and agility across supply chain partners, the most progressive and forward-operating businesses have adopted some choice mechanisms that allow them to act as a conduit to tether consumer demands to members across the supply chain. This is a new concept. In the past, these partners have never had to know what consumer demands were, as they were “just the suppliers.” Now, however, the nature and speed of business has progressed to the point where there is an increased need for agility and flexibility across the entire supply network. This is a result of the growing nature and speed of transparency requirements for all aspects of the supply chain by consumers, leading to partners or suppliers turning into collaborators.

While this may seem as semantic, the difference between partner and collaborating is important. It is linked to the type of communication and the increase in mutual benefit associated with collaborations. David Murphy speaks to three key partnering principles: equity, because it leads to respect; transparency, because it leads to trust; and mutual benefit, because it leads to sustainability.

Mechanisms, like roundtables, have growing acceptance across various industries and sectors. These roundtables tend to have producers, processors, non-governmental bodies (i.e. activists), academics, and retailers, each providing equal voice and input to the decisions made. A word of caution: roundtables are only and example of a mechanism. Some Google research will find you many others. These mechanisms will provide strong, socially responsible outcomes, but will slow the process significantly, as consensus is usually required.

An example situation of how a roundtable may work: Retailer A brings a customer demand and to the roundtable. This constitutes an opportunity for the group. As we can observve from examples like Fair Trade coffee or Humane Certified beef, there are preferred markets and, occasionally, price markups associated with such opportunities. The group, as a roundtable, can then work collaboratively to voice concerns and challenges to meeting such demand. As a group, collaboratively, these issues are heard and solutions can be developed in a manner that is respectful of supply chain strategy and transparent to all involved. Such communication can significantly aid the long-term sustainability of businesses across the supply chain, both in terms of agility, but also market relevance and access. This communication mechanism can also aid the supply chain in times of crisis or risk management, as mitigation can be sought to reduce risk environmental, social, or economic tensions and risks, leading to greater stability and profitability long-term for all organizations. Collaboration.

Roundtables are just one example of a mechanism of collaboration. More company-specific examples are used successfully every day, particularly in the agriculture and food world. One such example is Kellogg’s work with rice farmers in Spain. Kellogg’s works directly with farmers in Spain to improve their growing practices and profitability. While Kellogg’s only sources a portion of their Rice Krispies rice from these farmers, by assisting them in decreasing their impact on the environment and improving financial profitability through developing a local cooperative and improving productivity on-farm, there are significant benefits to the cereal-maker. Kellogg’s now has contributed to a local economy, sourcing from one cooperative of farmers instead of numerous individual producers, decreasing administrative burden. The rice harvested and purchased is also of higher standard with fewer impurities and greater consistency, increasing the efficiency of the manufacturing process. These are the benefits the procurement officers are going to realize. As for the marketers, they get to put a local farmer’s face in the advertisements of the Rice Krispies coming from these Spanish farms, increasing local loyalty and branding awareness. As a result of all this, the farmer is also benefiting from increased yields, increased profitability, greater end-market acceptance and stability in their buyer. Collaboration.

Wayne Visser describes sustainability as a “values-laden umbrella, in which environment and society is managed to ensure that human needs are met without destroying the life supporting ecosystems on which we depend.

If values are understood and built throughout a supply chain, how much easier would it be to understand market opportunities, maximize productivity and continue to meet the growing, mutual needs of farmers, restaurants, and society’s demands?

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Defining Sustainability

Sustainability is a holistic, long-term approach to business.  It maximizes the economic and environmental stability, equity, and health of the farm, business, and family.

A sustainable approach to farming is more than talking about environmental actions or maximizing profits.

Sustainability focusses on business processes and practices, rather than a specific food, fibre, or feed output.  It integrates economic, environmental and societal values to create a Triple Bottom Line (i.e. understanding and accounting for three “bottom lines”: economic, social, and enviornment, instead of simply looking at a cash flow analysis for actions in your operations).  This is very different from a purely profit-driven approach, where businesses benefit economically, but often at the expense of the environment and society.

Agricultural Context

Sustainable Agriculture is…

“the efficient production of safe, high quality agricultural product, in a way that protects and improves the natural environment, the social and economic conditions of the farmers, their employees and local communities, and safeguards the health and welfare of all farmed species.” (Sustainable Agricultural Initiative Platform, 2010)

There is a growing global demand to increase sustainability in agriculture.  What this means on-farm differs depending on where the farm is (the Place), what the farm produces (the Product), and where the product is sold and for what price (the Price). Regardless of what is purchased, grown, or sold, there are broad perspectives that can increase the sustainability of every agri-business by addressing the TBL of economic profitability, environmental stewardship and social responsibility.

Consumers are increasingly concerned with how their food is grown and processed.  The single largest share of impact within the supply chain is the food production itself. Food processors and retailers need long-term and ever-increasing supplies of quality raw materials. Unpredictable weather extremes and global water scarcity make agricultural production and food processing more volatile.  Sustainable practices help ensure businesses along the entire supply chain have reliable sources of product.  At the same time, reliability creates new opportunities for enhanced branding to meet consumer demand.  Sustainable sourcing is a point of differentiation in the marketplace.

While these components are discussed separately below, their goals overlap; impacting and influencing each other.  For example, economic decisions will impact the environmental and social components; the environmental actions taken will impact the economic output and social well-being.

Economic Profitability

To be sustainable, a farm must be economically viable.  While the environmental and social pillars of sustainability may not always translate into immediate economic profit, sustainable practices will have a positive economic impact on the farm.

For example, the diversification of crops can help reduce financial risk.  Over time, diversification of crops can reduce financial risk while improving water quality and increasing other environmental benefits that raise the value of the farm itself.

These factors must be taken into consideration when managing a farm business.

Production and machinery costs are directly affected by sustainable practices.  Fertilizer and pesticide applications can be applied responsibly and, in some cases reduced, based on crop rotation, variety selection or market availability for end-product.  Sometime overall yield may decrease, but differences between production cost and revenue can be improved, leading to increased profitability for the farm.  Likewise, management, marketing skills, and experience of decision-makers will have direct economic effects on the business.

Indicators of your farm’s economic profitability may include:

  • increasing net worth or savings,
  • debt is consistently decreasing, and/or,
  • farm is consistently profitable year after year.

Environmental Stewardship

Stewardship is a familiar concept to farmers.  For many, this is what comes to mind when they think of sustainable agriculture.  Environmental stewardship uses ecologically-sound practices that have a neutral or positive impact on the natural resources and non-renewable resources used on-farm.  It can mean reversing damage that has already occurred, like soil erosion or draining of wetlands.  It can also be enhanced by taking steps to prevent the future degradation of land and water resources through conservation practices, like:

  • naturalizing riparian zones,
  • using smart cattle watering practices,
  • establishing proper cover crops.

These are factors that have direct impacts on your cost of production and economic profitability components of sustainability.

Another key to successful environmental stewardship lies in soil health.  Maintaining adequate soil organic matter, biological activity and nutrient balance are essential to feed crops in the long-term production of the business.

There are many ways to enhance soil fertility and improve soil health, such as including legumes in crop rotation, using manure or compost instead of and /or in complement to synthetic fertilizers, and maintaining a working knowledge of the fertility of the fields so as to properly manage them.

Other stewardship concepts include:

  • protecting water quality,
  • year-round soil cover (residue or cover crop),
  • integrating crop and animal systems to maximize efficiencies, nutrients and energy,
  • controlling invasive plants.

Some traditional practices conflict with sustainable practices, because they severely damage the soil structure and resiliency of a field to adapt to extreme weather events, climate change, and the stresses of intensive crop production.

All practices, new and traditional, must be considered when implementing sustainable farming practices.

Social Responsibility

Social responsibility relates to the quality of life for everyone who interacts with the business: employees, customers, neighbours, local community members, and the farmer.  The most prominent examples of this in rural Ontario are agricultural cooperatives, farmers’ markets, on-farm events and twilight tours.  Other examples occur within the business itself, like fair treatment of workers and good business practices.

Some indicators of social responsibility include:

  • support for other local businesses and families within the community, circulating money within the local as well as the global economy,
  • the rural community population is stable or increasing,
  • post-secondary school graduates return to the community after graduation, to succeed on family farms or with associated businesses.


Sustainable agriculture is defined by three interactive components: economic profitability, environmental stewardship, and social responsibility.  It is important that sustainability is embraced at all levels; farm practices can have compound impacts across the entire supply chain in very complex ways.

Sustainability is a goal. However, a farm should never expect to “achieve sustainability”.  As farm practices become more sustainable, farmers gain a deeper understanding of the natural resources they steward and how this affects their business.

A competent working knowledge of sustainability creates further opportunities for new sustainability practices.  This in turn increases the farmer’s ability to respond to market pressures and environmental conditions, and help develop a robust and resilient business. The profit in sustainable practices is both tangible and intangible. It includes economic gain, environmental stability and social benefit.

Sustainability, like our seasons, is a never-ending journey, which is why it is so important to continue to work towards this goal.

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