2013-06-14

Co.Exist

Poor Farmers Swap Fair-Trade Premiums For Ownership Of Their Own Global Companies

Fair trade might be good. But owning your own supply chain is even better. For small farmers with a patch of forest, new ventures are growing that give them a stake in international markets and a conservation mission.

For tropical forests, millions of square miles are cleared with trees valued as lumber; biodiversity, carbon storage and social benefits mean little. "It is now widely accepted that one of the main problems, if not the main problem, for attempts at sustainable forest management and conservation is that it is only rarely a viable financial proposition," writes Michael Richards of the Overseas Development Institute in the journal World Development. Cutting down forests, however, "continues to be a highly profitable activity."

Fostering for-profit forest enterprises that keep forests intact, and profitable, was the goal of WWF Switzerland’s Tropical Forest Challenge. The two winners--Panama-based Planting Empowerment, and the tea company Runa (disclosure: I am friends with one of the founders)--point the way toward business models which can leave more money in the hands of poor, marginalized growers, rather than the end of the value chain with processing and retail.

Planting Empowerment (PE) is replanting the degraded Darien rainforest in Panama with timber species such as mahogany, rosewood, Spanish cedar, and teak. While the industrial model simply buys land from poor farmers for monoculture plantations, displacing them into the forest again, PE is establishing long-term leases and financing maintenance of mixed plantations with mostly native species on marginal lands not used for farming or grazing. "Our goal is not to make our partners completely dependent upon our lease payments, but to demonstrate a more sustainable way to profit from their natural resources," writes Andrew Parrucci, director of marketing, by email. The company is still small, counting about 100 investors and 25 hectares under management, but it has boosted farmers income by about 45% and plans to scale to 350 hectares within three years.

Retail products come from the forest as well. Runa has built its own vertically integrated supply chain for a premium tea known as guayusa in Ecuador. Indigenous farmers in the upper Amazonian region of Ecuador, once having little or no market access, now use a fair-trade model to sell premium drinks directly into the United States under the Runa label. Guayusa trees, grown in agroforestry systems under the rainforest canopy, have generated over $100,000 of direct income to over 2,000 farming families.

Although promising, none of these models are get-rich-quick schemes. Planting Empowerment distributes investors returns after 12 to 20 years (mahogany and other species grow slowly) while most returns come in year 25. Similarly, Runa is in a fiercely competitive beverage market that offers growers an important but modest premium to complement farming and subsistence activities. And scale, ultimately, is the crucial ingredient. Enrolling hundreds or even thousands of hectares in profitable conservation schemes is not enough if millions are cleared each year.

Both companies say their models can grow beyond their current size. Perhaps their greatest impact may be in showing others in the forestry sector there is another way.

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