Global agricultural processor takes a holistic approach to enhancing supply-chain integrity

If a large global corporation learns that a supplier has engaged in unfair, unethical or inappropriate business practices, the corporation can often wield its purchasing power as both a carrot and a stick to compel the supplier to change its ways.

But what happens when the corporation’s supplier base consists not of companies, but of thousands of farmers around the globe, including some who tend relatively small plots of land and sell their crops through cooperatives or complex, informal private trading operations in remote areas of Africa and South America?

In these regions and others, agronomic practices, working conditions and definitions of environmental stewardship vary dramatically. Any single company attempting to impose a uniform standard on this diverse and dispersed supplier base would almost certainly fail.

This is the situation facing Archer Daniels Midland Company, a leading agricultural processor with operations in 60 countries and 230 processing plants around the world. ADM sources crops grown by farmers around the world, then either sells them or processes them into hundreds of food and feed ingredients, as well as renewable fuels and industrial chemicals.

In 2008, after working with experts from Business for Social Responsibility to complete a comprehensive materiality assessment of the various social and environmental issues that touch our business, we decided to make the integrity of our supply chain a principal focus of our overall sustainability platform.

But given the nature of our supplier base, we knew that progress could only come from a collaborative approach: targeting specific geographic regions vital to our crop-sourcing operations, then joining forces with local growers, cooperatives and communities to address both proper farming techniques and social issues that can hinder development in a broader sense. Such issues include hunger and malnutrition, chronic disease, inadequate public education systems and unfair working conditions.

The progress we’ve made since adopting this model suggests that the “holistic” approach is working, and making a meaningful difference in the lives of growers and their communities. We believe it may hold promise for other large, global organizations with diverse supply chains as well.

Toward a better life for cocoa farmers and their communities

In addition to processing millions of metric tons of corn, oilseeds and wheat each year, ADM also grinds approximately 15 percent of the global cocoa crop, from which we produce dozens of different cocoa powders, as well as cocoa butter, cocoa liquor and chocolate products.

These activities connect us to cocoa growers and cooperatives in West Africa, where farmers face a wide range of challenges. Because many of these growers lack access to fertilizers and chemicals, diseases and pests can take a substantial toll on crop yields. Modern farming equipment is rare, which makes work on cocoa plantations more physically demanding than it needs to be. Poor access to market information and a lack of basic business training, meanwhile, hamper farmers’ ability to command top price for their crops. What’s more, many cocoa farming communities wrestle with HIV/AIDS, poverty, poor school attendance and many other issues that impede progress and cause widespread human suffering.

On my many trips to Côte d’Ivoire and Ghana, I’ve seen first-hand just how hard it can be for people to make a living in a place where resources are scarce and infrastructure is often lacking. A 2006 report from Côte d’Ivoire’s national statistics institute noted that just under half of the country’s 20 million people lived below the poverty threshold, subsisting on less than about US$1.25 per day. The picture in Ghana — where the national incidence of poverty fell from 39.5 percent in 1999 to 28.5 percent in 2006 — is considerably brighter, but a good standard of living still eludes far too many of the country’s people.

In this part of the world, cocoa is an indispensable engine of economic growth, and one of the region’s brightest hopes for a better future. So to help maximize the crop’s value to growers, farm workers and local communities, ADM has developed and implemented a series of programs that are enabling area cocoa farmers to improve their yields, the quality of their beans and, in turn, their incomes, by adopting farming techniques that are more productive, socially responsible and environmentally sound.

Our Socially and Environmentally Responsible Agricultural Practices program, or SERAP, for example, has provided more than US$3 million in premiums — as well as generous pre-financing and revolving credit — to cooperatives and individual farmers that meet specific criteria for financial transparency, product quality, safe farming, responsible labor management and forest protection.

Within four years of SERAP’s implementation in 2005, participation in the program had increased from 6,000 to 12,000 farmers, who together delivered more than 10,500 metric tons of cocoa in the 2008-2009 growing year.  What’s more, our monitoring of several cocoa bean quality criteria between 2005-06 and 2008-09 showed that SERAP participants were regularly achieving strong results in virtually every category, including moisture and free fatty acid content. SERAP, then, is also working for ADM customers, who benefit from our ability to source higher-quality beans that are responsibly cultivated and handled.

SERAP has become ADM’s flagship initiative in western Africa, but it represents just one element of our overall cocoa sustainability platform, which also includes:

• The ADM Cocoa Technical Training Program, which works through cooperatives in Côte d’Ivoire to teach cocoa growers about appropriate labor practices, farm safety, HIV/AIDS prevention, operational transparency, bean quality and environmental stewardship. The program also offers financial support in the form of seed money at the beginning of the growing season and revolving credit throughout the year. More than 16,000 growers have attended ADM Technical Training seminars since the year 2000, and it is estimated that the programs have indirectly reached 160,000 members of the region’s farming population.
• A workplace health program for Ghanaian employees, family members and other cocoa-industry workers near our newly opened processing plant in Kumasi. The program, developed in partnership with the sustainable development organization Gesellschaft für Technische Zusammenarbeit (GTZ), aims to meaningfully reduce the incidence of HIV/AIDS, tuberculosis, malaria and other infectious diseases, and to increase access to health and social services offered by the country’s National Health Insurance Scheme.

Beyond our own programs, ADM works with the Sustainable Tree Crops Program’s Farmer Field Schools to educate thousands of cocoa farmers about labor standards, business practices and farming methods. And, we support the United Nations World Food Programme’s Ivorian School Canteen Program to improve nutrition and school attendance. As of March 2008, ADM’s contributions to the program had provided meals for more than 81,000 children.

In addition, last year, ADM joined the World Cocoa Foundation, the Bill & Melinda Gates Foundation and other cocoa and chocolate industry participants to announce a US$40 million program to improve the livelihoods of approximately 200,000 cocoa farming families in the western African nations of Côte d’Ivoire, Ghana, Nigeria, Liberia and Cameroon.

From a personal standpoint, few experiences in my career have been as gratifying as seeing the impact these programs are having on people’s daily lives. When I meet and talk with some of the Ivorian farmers and coop members who have built thriving businesses with our assistance, or learn about classrooms of children who are getting a proper education and good nutrition thanks in part to our commitment, it’s clear to me that global businesses have a unique ability to effect the kinds of societal improvements that might otherwise take decades to unfold.

A collaborative approach to soy sustainability

While we were refining and improving our programs in Africa over the past decade, ADM was also growing its soybean-sourcing operations in Brazil.

In 2008, two years after we had joined a moratorium on the purchase of soy grown in newly deforested regions of the Amazon biome, ADM determined that we might be able to help prevent further expansion into ecologically sensitive areas by providing soybean farmers with the tools and knowledge to increase their yields on existing land. However, we also knew that farmers in states such as Mato Grosso were extremely wary of outsiders dictating how and where they should grow their crops. So to earn their trust, we joined forces with Aliança da Terra, a local NGO founded by farmers, to launch a program known as Doing It Right (in Portuguese, Produzindo Certo).

Doing It Right — funded through ADM Cares, our social-investment arm — offers farmers instruction on how to improve their crop yields in sustainable ways. The effort begins with a comprehensive review of a farmer’s property, environmental practices, operating licenses and labor conditions. Aliança da Terra experts inspect nearby rivers and water resources for evidence of erosion or contamination. They take soil and water samples, scout potential fire hazards and ensure there are appropriate areas for workers to eat and rest.

From this initial assessment comes a detailed action plan containing specific goals and a proposed timetable for improvement. If the farmer agrees to adopt the plan, Aliança da Terra will return one year later to evaluate progress and provide additional counsel and coaching.

Initial results from a 35,000-hectare (86,487-acre) pilot project completed in March 2009 were sufficiently impressive that ADM funded a major expansion of the program, adding an additional 217,000 hectares, or 494,209 acres, to the area under review.

Today, farmers taking part in Doing It Right are realizing the benefits of good land stewardship and proudly displaying their “Produzindo Certo” signs at the entrances to their farms. They have come to appreciate the value of adapting to new trends in international markets that want sustainably sourced soybeans, and they see ADM as a partner helping to make this transformation possible.

Overall, ADM’s work in Africa and South America suggests that taking a holistic, culturally sensitive approach to complex supply chain issues is essential to improving the integrity of a vast, highly decentralized and geographically dispersed supply chain composed largely of individuals and small organizations.

By working collaboratively with growers, cooperatives, NGOs and other key stakeholders to address, economic, agronomic, cultural and environmental challenges, and by aligning growers’ economic interests with broader social and environmental aims, we are helping to drive change in areas where progress had been frustratingly slow or nonexistent. We at ADM believe our suppliers, our customers and our company are richer for the effort.