Smallholders play an important role in soft commodity supply chains. Sourcing from smallholders can present challenges when it comes to ensuring compliance with overall company commitments to sustainable commodity production. Smallholders can have challenges ensuring sustainability because of lack of access to finance, markets, secure land tenure, training, and information. These challenges sometimes result in companies choosing to exclude smallholders from their supply chains due to the potential higher costs of ensuring compliance with sustainability commitments or higher risk of non-compliance. To support rural communities’ livelihoods, companies need to encourage smallholder participation and provide the support needed to help smallholders adhere to their sustainability commitments. Excluding smallholders could also carry the risk of shifting negative social and environmental impacts to areas outside company control, as well as having potential reputational risks for the company.
Companies can support smallholders by increasing investments, or increasing capacity in improving the yields and livelihoods of small-scale farmers in their sourcing regions. Specific examples include increased sourcing from small-scale farmers, providing training, financial support or technical support to increase the productivity and quality of small-scale farmer commodity production, encouraging product diversification, and facilitating greater market access for their small-scale-farmer suppliers. Companies can also develop long-term stable business partnerships with small-scale farmers, and develop fair and transparent contracts which do not exploit small-scale farmers. Financial institutions can help by asking companies to include the participation of small-scale farmers in their supply chains.
- The Accountability Framework – Draft Operational Guidance on Smallholder Inclusion in Ethical Supply Chains (2018)