{"id":24271,"date":"2017-11-15T17:05:29","date_gmt":"2017-11-15T22:05:29","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/navigating-new-storms-how-the-body-shop-is-building-a-resilient-supply-chain\/"},"modified":"2017-11-15T17:11:29","modified_gmt":"2017-11-15T22:11:29","slug":"navigating-new-storms-how-the-body-shop-is-building-a-resilient-supply-chain","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/navigating-new-storms-how-the-body-shop-is-building-a-resilient-supply-chain\/","title":{"rendered":"Navigating New Storms: How The Body Shop is Building a Resilient Supply Chain"},"content":{"rendered":"

In 2011, heavy rains cut off Achuapa from surrounding communities for nearly two weeks. The northern Nicaraguan municipality is home to the Juan Francisco Paz Silva (JFPS) Cooperative, a collection of smallholder farmers.[1]<\/a> As an Oxfam report detailed, \u201ccrops have been weakened and left vulnerable to disease and pests, and roads have been washed away.\u201d Some families were forced to migrate.[2]<\/a><\/p>\n

JFPS is the sole supplier to The Body Shop, a global cosmetics company, of sesame oil. The Body Shop\u2019s supply chain \u2013 which sources ingredients from 25 smallholder cooperatives across 21 countries[3]<\/a> \u2013 illustrates its unique \u2018win-win\u2019 value proposition: to deliver products with high-quality ingredients while driving social impact, such as benefiting vulnerable populations.<\/p>\n

And yet it also exemplifies the acute risks posed by climate change. As adverse weather destabilizes small-scale agriculture, supply reliability is imperiled. Strategies to improve local resiliency, however, may yet transform these risks into a competitive advantage.<\/p>\n

—<\/p>\n

As developing countries increasingly open agricultural markets to foreign direct investment, multinationals are incorporating smallholder farmers into supply chains.[4]<\/a> With lower comparative labor costs, these 525 million farmers have become attractive opportunities for the sourcing of labor-intensive commodities.[5]<\/a> Yet a changing climate that disproportionately affects poor countries[6]<\/a> presents heightened risks to supply chains where smallholder farmers constitute critical links.<\/p>\n

The Global Climate Risk Index recently ranked Nicaragua the fourth most affected country by weather-related losses.[7]<\/a> Among Nicaragua\u2019s most at-risk sectors is smallholder agriculture where \u201cprolonged droughts followed by flash flooding in recent years have wreaked havoc,\u201d according to USAID.[8]<\/a> Less predictable planting and harvesting cycles now characterize the sector\u2019s increasingly precarious situation.<\/p>\n

This poses a unique threat to The Body Shop, which sources 15 percent of all ingredients from smallholder farmers. Whereas The Body Shop has traditionally relied upon a regularity of low-cost, high-quality supply from its cooperatives, adverse events \u2013 as illustrated by Achuapa \u2013 now impugn this promise.[9]<\/a> In light of these emerging uncertainties, how can the company reliably source key ingredients?<\/p>\n

—<\/p>\n

Two current approaches suggest a viable strategy.<\/p>\n

First, partnerships with cooperatives diversify risks across multiple farms. However, as adverse weather increasingly affects all<\/em> farms in a given region, the company is now expanding its cooperative relationships so that when a \u201ccommunity faces crop losses, they\u2026 [can] source seeds for the oil from other cooperatives.\u201d[10]<\/a> Expanding partnerships in the near-term dampens supply variability.<\/p>\n

Second, the company is scaling efforts to aid farmers\u2019 own resiliency over the coming decade. When household income is dependent upon a small farm, a single adverse event can spell disaster. To decrease this dependency, the company is funding a credit and savings scheme through JFPS for women to start small businesses, diversifying household income and providing farming families with a safety net in the face of adverse events.[11]<\/a> After an event, families are better equipped to re-invest in the farm \u2013 ensuring a less volatile supply base for the company.<\/p>\n

The Body Shop has also recently piloted a crop insurance scheme. After large climate-related losses, farmers \u201creceive vouchers for farm inputs, providing resources for production to recover in the next season.\u201d[12]<\/a> Successful micro-insurance initiatives elsewhere, from India[13]<\/a> to Kenya[14]<\/a> [15]<\/a>, are providing an evidence base to expand such programs. Both income diversification and micro-insurance build resiliency by ensuring adverse events are not devastating to local production.<\/p>\n

Whereas competitors may shy away from smallholder farmers in light of emergent risks, risk diversification and building local resiliency are keeping high-quality ingredients flowing through the company\u2019s supply chain.<\/p>\n

—<\/p>\n

What more can be done?<\/p>\n

Beyond its current efforts, The Body Shop should encourage producers to diversify their own<\/em> supply base. Rather than simply diversify the company\u2019s supply base through more cooperatives, this suggests building sector-wide resiliency by diversifying smallholder production. For example, whereas droughts may devastate sesame plants, maize proves more tolerant to dry weather.[16]<\/a> Crop diversity can ensure the sustained existence of the cooperatives themselves.<\/p>\n

However, the introduction of new crops carries significant risks of failure; even if science suggests a \u2018good fit\u2019, largely unpredictable variables from local capacity to market demand structure the likelihood of success. Experimenting with new crops risks major losses \u2013 a risk the poor are unable to typically carry. The company could shoulder small-scale financing schemes to aid cooperatives with crop experimentation.<\/p>\n

Looking towards the next decade, even bolder efforts are called for. As countries develop climate change adaptation strategies, how might The Body Shop take a pro-active role to ensure smallholder priorities are incorporated? With $100 billion committed for mitigation and adaptation support from 2020 to 2025 under the recent Paris Agreement[17]<\/a>, what can a private player like The Body Shop do to influence global financing for the benefit of an inclusive supply chain? How might the company leverage expertise and resources far beyond its own capacities?<\/p>\n

How can a cosmetics company give a global voice to thousands of smallholder farmers?<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

(Word Count: 800)<\/p>\n

 <\/p>\n

[1]<\/a> Del Campo, Inc., \u201cCooperative Members Located in Leon,\u201d http:\/\/www.delcampo.net.ni\/coop_le.php, accessed November 2017<\/p>\n

[2]<\/a> Jodie Thorpe & Shelly Fennell, \u201cClimate Change Risks and Supply Chain Responsibility,\u201d Oxfam International, June 2012<\/p>\n

[3]<\/a> L’Or\u00e9al 2016: The Body Shop, 2016 Annual Report (London: The Body Shop, 2017)<\/p>\n

[4]<\/a> Miet Maertens & Johan Swinnen, \u201cAgricultural Trade and Development: A Value Chain Perspective,\u201d World Trade Organization (WTO) Economics & Research Division, April 2015, https:\/\/www.wto.org\/english\/res_e\/reser_e\/ersd201504_e.pdf<\/p>\n

[5]<\/a> International Finance Corporation (IFC), The World Bank Group, \u201cWorking with Smallholders: A Handbook for Firms Building Sustainable Supply Chains,\u201d July 2013, https:\/\/www.ifc.org\/wps\/wcm\/connect\/8dc5628042112fdbba2fff494779b2ad\/Handbook+-+Working+with+Smallholders.pdf?MOD=AJPERES<\/p>\n

[6]<\/a> The World Bank Group, \u201cShock Waves: Managing the Impacts of Climate Change on Poverty,\u201d 2016, https:\/\/openknowledge.worldbank.org\/bitstream\/handle\/10986\/22787\/9781464806735.pdf<\/p>\n

[7]<\/a> S\u00f6nke Kreft, David Eckstein and Inga Melchior, GermanWatch Think Tank & Research Division, \u201cGlobal Climate Risk Index 2017: Who Suffers Most from Extreme Weather Events? Weather-related Loss Events in 2015 and 1996 to 2015,\u201d November 2016, https:\/\/reliefweb.int\/sites\/reliefweb.int\/files\/resources\/16411.pdf<\/p>\n

[8]<\/a> United States Agency for International Development (USAID), \u201cClimate Change Risk Profile: Nicaragua,\u201d January 2017, https:\/\/www.climatelinks.org\/sites\/default\/files\/asset\/document\/2017_USAID_Nicaragua%20Climate%20Change%20Risk%20Profile.pdf<\/p>\n

[9]<\/a> The Body Shop International PLC, 2011 Annual Report (London: The Body Shop, 2012)<\/p>\n

[10]<\/a> Oxfam International, \u201cClimate Change Risks and Supply Chain Responsibility,\u201d June 2012<\/p>\n

[11]<\/a> Felicity Butler, \u201cValuing unpaid labor in community Fair Trade products: A Nicaraguan case study from The Body Shop International,\u201d Gender & Development 22 <\/em>(November 2014): 3<\/p>\n

[12]<\/a> Oxfam International, \u201cClimate Change Risks and Supply Chain Responsibility,\u201d June 2012<\/p>\n

[13]<\/a>Ornsaran Pomme Manuamorn, \u201cScaling Up Micro-insurance: The Case of Weather Insurance for Smallholders in India,\u201d The World Bank Group, Agriculture and Rural Development Discussion Paper: <\/em>36, 2007, http:\/\/siteresources.worldbank.org\/INTARD\/Resources\/ScalingUpMicroinsurance.pdf<\/p>\n

[14]<\/a> \u201cFirst micro-insurance plan uses mobile phones and weather stations to shield Kenya\u2019s farmers,\u201d Science Daily<\/em>, March 4, 2010, https:\/\/www.sciencedaily.com\/releases\/2010\/03\/100304202242.htm, accessed November 2017<\/p>\n

[15]<\/a> \u201cSecurity for shillings: insuring crops with a mobile phone,\u201d The Economist<\/em>, March 11, 2010, http:\/\/www.economist.com\/node\/15663856<\/p>\n

[16]<\/a> Oxfam International, \u201cClimate Change Risks and Supply Chain Responsibility,\u201d June 2012<\/p>\n

[17]<\/a> United Nations: Framework Convention on Climate Change, \u201cClimate Finance,\u201d 2016, http:\/\/unfccc.int\/cooperation_and_support\/financial_mechanism\/items\/2807.php, accessed November 2017<\/p>\n","protected":false},"excerpt":{"rendered":"

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