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How can NGOs work effectively with companies?
6 November 2014
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
Page 3
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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Oxfam & Unilever
conduct feasibility
studies for
smallholder supply
chains across
several countries in
Latin America,
Africa and Asia
Page 7
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
Farmers Aggregator
/ Trader Processor Lead firm
Page 10
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.
Page 12
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”.
Page 13
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.
Page 14
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.
Page 15
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
Page 19
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
Page 20
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
Page 21
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
groups Coordinating 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
Page 27
Resources – external publications
Page 28
Products
Page 29
Links
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
[not yet public]
Unilever training module on smallholder inclusion
[not yet public]
Oxfam guidance for NGOs on inclusive business models with smallholders
[not yet public]
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