Asian workers at coconut workshop to process coconut in Ben Tre, Viet Nam.
Asian workers at coconut workshop to process coconut in Ben Tre, Viet Nam. | Credit: istock / Xuan Huong Ho

Industry-Level Market Reform in Southeast Asia

Spurring Pre-Competitive Collaboration to Green the Coconut Supply Chain
By Angela Hogg

Competitors-turned-collaborators. After more than three years supporting Southeast Asian agribusiness, forestry and other land use companies to lower their greenhouse gas emissions, USAID Green Invest Asia found this sector often lacks trust to jointly address climate risks – and opportunities – even when they share suppliers. The global demand for coconuts and derivatives has risen by over 500 per cent in the last five years, resulting in a renewed interest reviving the coconut industry and its role in climate smart agriculture. To break down the silos that prevent joint climate action, USAID partnered with a global corporate, Barry Callebaut, to convene key buyers – peers – in the coconut industry. The result was the industry’s first global Sustainable Coconut Charter, which aims to improve farmer livelihoods, lessen the carbon footprint of coconuts and boost supply to meet rising global demand. Below is a summary of how we facilitated a “pre-competitive” process, which offers a glimpse into one method of influencing an entire industry’s approach to land use and greenhouse gas emissions.

Coconut stockout?

A handful of corporate buyers that dominate the $40 billion annual coconut market face similar sourcing challenges:  low yields from retiring  farmers, senile trees, and complex supply chains that make it hard to trace coconuts’ journeys. Meanwhile, wide use of coconuts in the cosmetic, food and beverage, and pharmaceutical industries has driven year-on-year rising sales. In terms of revenue, North America held the largest coconut products market share of near 28.0 percent in 2018. The United States is a major importer of coconut oil.  

But despite record global demand for coconuts, producers – almost all in Southeast Asia – are offered only pennies per coconut, which can take more than a decade to harvest. This leaves them extra vulnerable to price and weather shocks. The coconut industry faces inevitable supply chain disruption and increased environmental degradation without immediate change.  (Read more at MongabaySustainableFoodTrustThe GuardianUSAID). “USAID is partnering with companies to deliver large scale market-oriented solutions to some of the greatest environmental challenges in this region: deforestation, food insecurity, natural resource exploitation, natural disasters, and climate change,” said Steven G. Olive, Mission Director of USAID’s Regional Development Mission for Asia.

The puzzle is how to sate global demand by increasing coconut yield — without increasing deforestation“This is a challenge that must be tackled together to be successful,” said Massimo Selmo, Global Head of Sourcing for Barry Callebaut. A USAID-funded study found coconut was the top identifiable commodity that drove deforestation in the Philippines – a top coconut producer country – between 2000 and 2015 (occupying some 24,000 hectares of former forest land in the Philippines. (That’s the equivalent size of 24,000 football fields.)

Acting on consumer demands and new trade regulations, some of the coconut industry’s largest buyers by trade volume have sought ways to boost sustainable coconut production to improve producers’ livelihoods, company profits, and coconut supply.

Pre-competitive collaboration

Barry Callebaut, a leading manufacturer of quality chocolate and cocoa products who also sources coconut oil, approached USAID Green Invest Asia in late 2018– seeing us as a neutral, trusted broker – to support industry collaboration through what is known as pre-competitive collaboration. This process allows business competitors to jointly address common challenges (like environmental and social risks) without compromising any one company’s competitive edge.

USAID Green Invest Asia helped convene an inaugural roundtable in March 2019 in Malaysia followed by meetings over the next 20 months with key coconut traders, producers, and stakeholders in Southeast Asia to agree on common sustainability aims and indicators in what would become the industry’s first sustainability charter. USAID coordinated leadership commitments from industry partners, convened gatherings, moderated and mediated the process, as well as advised on the charter’s content.

Consultations resulted in the Sustainable Coconut Charter, launched in November 2020, that outlines sustainability principles, indicators and a reporting framework. Founding signatories included AAKBarry CallebautFrieslandCampina, the U.S.-headquartered organic coconut water company Harmless Harvest ThailandNestlé, and Unilever, which, together, account for at least 40 percent of global coconut trade volume of a multi-billion dollar industry. The international ice cream company, Froneri, became the latest signatory.

The charter is already informing signatories’ global sustainability strategies, regional operations, and increased investments to green their supply chains. But the thing about sustainability is… it has to be sustainable. For this reason, USAID works through industry players to reduce and reverse environmental degradation in agriculture supply chains; commercial agriculture is responsible for at least 40 percent of deforestation in Southeast Asia. Partnering with and supporting industry leadership to own their sustainability commitments helps ensure implementation long after the ink dries from commitment signings.

The charter’s implementation recognizes the milestones of coconut corporates in achieving sustainable production and is well aligned with U.S. priorities in Agriculture Innovation Mission for Climate (AIM for Climate). USAID is committed to partnering with governments and private sector partners that lead to profitable, low-carbon production across greater agricultural supply chains, more commodities, and at larger scales. 


USAID Green Invest Asia is a six-year program founded by USAID in late 2017 to provide business advisory and capital matchmaking to scalable agribusiness, forestry and other land use companies deploying innovative, climate-smart operations in  Southeast Asia. The aims are to facilitate at least $400 million investment in and by such companies, to help reduce greenhouse gas emissions by 25 million metric tons of CO2 equivalent.

This blog was originally published on the Marketlinks site.

Sectors
Climate, Agriculture
Topics
Carbon, Carbon Markets, Low Emission Development, Climate Change, Climate Finance, Food Security and Agriculture, Climate-Smart Agriculture, Green Infrastructure, Land Use, Private Sector Engagement
Region
Asia
Angela Hogg Headshot

Angela Hogg

Angela Hogg serves as the Regional Environment Office Director for USAID/RDMA.

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