03rd December 2021, Geneva – The International Institute for Sustainable Development (IISD) and the United Nations Conference on Trade and Development (UNCTAD) launched the report- IISD’s SSI Review: Standards and Poverty Reduction. The report was launched in a joint UNCTAD-IISD webinar, held as a part of IISD Trade + Sustainability Hub, 2021. The report examines the potential of voluntary sustainability standards (VSS) operating in the agriculture sector to reduce poverty, which includes a chapter that UNCTAD and IISD wrote jointly on Understanding Smallholder Farmer Access to VSS-compliant Markets.
It is estimated that 80% of the world’s poor people reside in rural areas and depend majorly on agriculture for their livelihoods. Among these smallholders, the ones that own less than 2 hectares of land are more than often located in developing countries. The report thus comes out at an apt time, emphasizing that poverty reduction interventions should be targeted to benefit smallholder farmers.
“The report highlights key issues and is important as almost 80% of East African farmers are smallholders. In addition to what the report brings forth in the recommendations, there is a need for VSS systems to adopt a more consultative approach with the farmers and understand the conditions on ground while also supporting them to improve in key areas” Mr. Norbert Tuyishime, Program Officer, Eastern Africa Farmers Association (EAFF)
The report defines poverty as the lack of resources, choices, opportunities, power, and voice necessary to achieve a basic level of living standards and to participate in society. Thus, reducing poverty requires progress in three broad, interconnected dimensions: 1) access to resources, 2) opportunities and choice, and 3) power and voice. The report provides relevant and transparent information on the strengths, advantages, and limitations of VSS in reducing poverty and benefiting smallholders.
In collaboration with IISD, UNCTAD provided vital support in the research for the report, in particular for the Chapter- Understanding Smallholder Farmer Access to VSS-Compliant Markets. The Chapter explores this issue and draws results from field study and interviews with stakeholders from developing and least developed countries. The study is based on information from interviews and surveys with the main actors in the six countries’ value chains. This includes producers/producer organizations, government, VSS/certification bodies, non-governmental organizations (NGOs), financial service providers, and buyers. 57 such actors in the following six commodities and value chains in six countries were interviewed to understand the situation of smallholder farmers:
- Rwanda: coffee
- Guinea-Bissau: cashew
- Guatemala: banana
- Colombia: avocado
- Cambodia: rice
- India: cotton
The analysis of interview responses indicates that while market access is important for smallholders to access the benefits of VSS, market access alone is not sufficient for poverty reduction. The findings highlight the trade-offs between benefits from standard compliance and the cost of compliance, particularly given the costs in terms of time and money to implement and maintain standards. The results also brought forth five main factors that enable smallholder farmer access to VSS-compliant markets:
- Supporting actors, information, and training
- Market demand and direct links with buyers
- Producer organization
- Price incentive
- Access to financial resources
The following diagram shows the percentage of respondents in the sample who mentioned each factor.
In addition, the results also highlight six main categories of factors that limit smallholder farmer access to VSS-compliant markets:
- Producer capacity to comply with and maintain requirements: Several factors related to compliance with buyer and VSS requirements limit smallholder farmer access to VSS markets – in particular, lack of time (mentioned by 77% of respondents), low education, skills, and knowledge of producers (mentioned by 68% of respondents), and high upfront financial investment and low returns (mentioned by 60% of respondents). “The requirements imposed by these markets that are becoming increasingly rigorous, mainly in aspects of safety and product quality.” (A Guatemalan government official who was interviewed for the study)
- Access to resources : To access VSS-compliant markets, smallholders need access to financial resources, land, infrastructure, and training that can help them meet buyer and VSS requirements. Almost 79% of the respondents identified limited access to financial services as a key constraint. Limited or no storage facilities (68%), small land size (60%), insufficient productive equipment, inputs, or technologies (54%), and poor water and energy systems (46%) also limit the production capability of smallholder producers and therefore their access to VSS markets. Limited access to extension and training was another major factor identified.
- Environmental constraints: Environmental constraints hinder producer capacity to comply with quality, volume, and VSS requirements. The data show that most respondents perceive insufficient water availability and poor soil quality as major environmental constraints (61% and 60%, respectively), followed by changing weather patterns and natural disasters (mentioned by 58% and 46% of respondents, respectively).
- VSS-specific factors: Smallholders also face several challenges related to VSS and their design that make it difficult for producers to obtain and maintain VSS market access. Respondents across countries perceive the cost of certification & limited support and monitoring as limiting smallholder access to VSS-compliant markets. Compliance with multiple and disconnected standards is another key issue.
- Supply chain structure and power relations: Supply chain structure and asymmetric power relationships stand out as important for limiting smallholders’ access to VSS compliant markets. Three quarters (73%) of study respondents identified producers’ limited access to market information or traders/aggregators as a constraint. 70% of respondents identified too many supply chain intermediaries between farmers and buyers as a major problem. A lack of producer organization and a lack of negotiating capacity and bargaining power and are up against unfair buyer practices is another substantial issue. “When buyers do not pay producers on time, producers may end up selling their rice as conventional rice, not organic, for a price way below the [organic-certified] market price” (A Cambodian financial service provider who was interviewed for the study).
- Competition, market demand and trade policy: Policies are perceived as a significant limiting factor, in particular importing country trade policies (mentioned by 68% of respondents) and monetary policies (mentioned by 67% of respondents). Limited demand for VSS-compliant agricultural product is another significant constraint (mentioned by 60% of survey respondents).
The chapter thus focuses specifically on those conditions under which smallholder farmers can become VSS- compliant. It also highlights how they can access VSS-compliant markets. Both of these conditions are essential precursors to reap the benefits of VSS.
“This is a crucial publication and the research presented in this report is going to ignite the dialogue towards issues that are important especially for the developing countries to foster trade and further their sustainable development goals” Mr. Santiago Fernandez de Cordoba, Senior Economist and UNFSS Coordinator, UNCTAD.
The study, overall, provides recommendations on how standard-setting bodies can strengthen VSS so they have a greater impact on aspects of the three dimensions of poverty. It also provides advice on how VSS, governments, and value chain actors can support smallholder farmer access to VSS- compliant markets, with a view to contributing to broader strategies of poverty reduction.
Download the chapter on Understanding Smallholder Farmer Access to VSS-Compliant Markets here.
Download the full IISD publication here.