In "The Agribusiness Going Against the Grain", Andras Ferencz writes about the session delivered by Chris Brown (Olam International) on 13th June 2017.
On the 13th of June, Chris Brown, Vice President of Corporate Responsibility & Sustainability at Olam International, a leading agribusiness that operates in 70 countries across the globe, visited Lancaster University. Chris Brown’s short presentation and the ensuing Question and Answers with attending academics from the Lancaster Environment Centre, LUMS and the Pentland Centre served as the introduction of Olam International, kicking into gear another beneficial collaboration between business and academia.
Chris Brown’s illuminating talk on Olam International revolved around the theme of reconciliation. Namely, the reconciliation of operating an extensive international trade company that tries to do right by all of its stakeholders, while remaining competitive in a price-driven market. Environmentalist and ecologist Paul Hawken aptly describes this carrot-and-stick problem in The Ecology of Commerce. He writes that “The dilemma that confronts business is the contradiction that a commercial system that works well, by its definitions, violates the greater and more profound ethic of biology.” If a business embarks on carving a sustainable path and decides to account for all its environmental and societal costs, it will inevitably raise prices and lose out in the marketplace. Unfortunately, sustainability-driven businesses regularly face this puzzle of having to evaluate costs in a system that is far better equipped to lower prices than anything else. This is, in essence, what Victorian economist William Forster Lloyd dubbed the tragedy of the commons, wherein self-interest spurs individual entities to act contrary to the common interest.
Going against this “tragic” narrative is Olam International. Olam International opened its doors in 1989, trading the single product of cashews from Nigeria to India. Today Olam has over 23,000 customers, markets 47 different products (such as nuts, cocoa, spices, coffee, and cotton), operates in 70 countries, and has 4.3 million farmers in its sweeping supply chain. As Mr Brown relayed to his audience in describing the current breadth of the company, “If you are drinking coffee, chances are it is Olam coffee.” While the humblebrag is certainly warranted, especially given the company’s young age amid the industry’s old guards, it is the progressive and mature philosophy, trickling down from CEO Sunny Verghese, that gives Olam its edge. The philosophy is summed up in their sustainability tagline “responsible growth,” and seems to constitute Olam’s fundamental answer to the cost-price conundrum.
As Mr Brown outlined, the idea of responsible growth is quite straightforward. In the same fashion, as it is far more expensive to hire new employees than to keep and cater to existing ones, it is also significantly costlier to replace sourcing partners within the supply chain than it is to address existing or emerging problems. Relationships should be nurtured, and issues should be sent up- and downstream, including environmental, societal, political and economic issues, said Mr Brown. That is, to drive efficiency and keep prices low, a business needs to get ahead of its costs. To achieve the most economical costs possible, a company needs to engage with all its constituencies, ask itself the hard-hitting questions, and possess a willingness to answer them. As Mr Brown aptly described the stakes in such matters, “If you’re in a failing community, no matter how good a farmer you are, at some point you’ll have to move on as well.”
Building an enduring landscape, and building enduring communities means that a company needs to address matters both internally, as well as bring in outside help when necessary. To offer an example, Olam and Nestlé are the only two agribusiness giants that are currently members of the Fair Labor Association, whose mission is “to promote and protect workers’ rights and to improve working conditions globally through adherence to international standards.” Olam’s voluntary participation attests to the fact that no one is more suited to hold a large business’s feet to the fire than itself.
Olam also boasts a long list of above-board initiatives. Case in point is the Olam Livelihood Charter (OLC), which supports farmers within the business’s extensive network. The OLC webpage states that “Supporting as many farmers as we can is not only the right thing to do but makes business sense: if farmers grow more, at a better quality, we continue to satisfy customer demand for sustainable products.” Eight charter principles serve as a roadmap for all OLC sustainability initiatives. The company states that while adhering to all principles does not make sense in every community, by bringing in other collaborating partners they have been able to launch 44 initiatives in 19 countries, reaching over 300,000 farmers. You can find out more about the OLC initiatives in the company’s 2016 OLC report.
Other Olam efforts, such as the Olam Farmer Information System, are galore, and the company’s dedicated webpage on sustainability-related focus areas shows just how extensive and complicated it is to address all issues impacting costs. When Mr Brown reflected on Olam’s 2011 initiative that was aimed at producing the world’s first climate-friendly cocoa, he acknowledged that “Not one customer wanted to pay a dollar more.” Later, when probed by a member of the audience about where Olam factors in the cost of all their engagements, Mr Brown returned to the climate-smart cocoa case and conceded that it is still tough to convince investors and buyers that paying the sustainability surcharge is a savvy market decision. Although he admitted, that their improved ability to quantify the financial benefits of sustainability with such aids as the impact valuation tool has certainly helped investors come around.
Ray Anderson in Mid-Course Correction wrote that for 90% of the time during the first man-on-the-moon expedition, the Apollo XI spacecraft travelled off course. He writes that the “critically important mid-course corrections made it possible to reach the moon.” When translated to the world of commerce, we may think of businesses that are determined to make the appropriate corrections along their way to sustainability. Olam is certainly doing that, and it seems that through its myriad initiatives Olam is taking a brave stance against Paul Hawken’s scathing indictment, which says that “The single greatest flaw of modern accounting is that the cost and losses of destroying the earth are absent from the prices in the marketplace.” In other words, it is the determination to set prices right, and not just low, that separates the wheat from the chaff.