Building Value From the Base Up

Although the drive for sustainability has lost momentum in recent years, companies in most industries remain committed to developing sustainable supply chains. Increasingly recognised as the “right thing to do”, this approach helps firms meet stricter regulatory demands and can even lower costs.    But beyond operational benefits, strong ethical and sustainability credentials can add financial value by increasing consumers’ willingness to pay for products. From working on case studies on Sri Lankan tea producer English Tea Shop Organic (ETS), Ecuadorian chocolate maker Original Postacari-chocolate-building-a-brand-brings-joy-tree-bar?src=s_page" shape="rect">Paccari (formerly known as Pacari) and Swedish plant‑based oils and fats company AAK, I found that transparent and sustainable supply chains can help firms build a competitive product – and achieve subsequent financial gains.    Premium chocolate brand Paccari’s reputation for quality, commitment to ethical standards and holistic community engagement – epitomised by its “tree‑to‑bar” model – means it now commands close to triple the average local price for its 50g tablets. ETS’s strong commitment to sustainability, verified by its high B-Corp score (an independent certification based on rigorous sustainability standards) and “farm-to-cup” transparency efforts, enabled the firm to achieve significant growth, reaching revenues of over US$19 million by 2022. Meanwhile, AAK’s Kolo Nafaso Programme to develop a more sustainable supply chain won long-term contracts and attracted investment from the company’s leading customers.   Identifying the challenges Developing sustainable supply chains is challenging, especially when suppliers are at the bottom of the economic pyramid. Too often, they are asked to comply with sustainability standards, certifications and practices, which are designed for large, well‑resourced producers and overlook the realities on the ground.    A more effective approach is to understand the challenges these suppliers face. When ETS decided to go 100% organic in 2012, one of the issues it faced was low productivity among potential suppliers. A 2018 analysis with Australian NGO Market Development Facility revealed three main causes: post‑harvest losses, limited knowledge of organic farming and low use of inputs, machinery and tools. Paccari’s founders also chose to actively engage with their potential suppliers. Co-founder Santiago Peralta travelled throughout Ecuador to better appreciate the realities facing smallholder cocoa producers. Like the Sri Lankan tea farmers, Peralta found they were struggling with low productivity due to inadequate equipment and lack of access to the necessary facilities for the post-harvest process. Farmers’ reliance on annual payments for their crops also trapped them in a cycle of poverty and left them mistrustful of large buyer organisations. Financial pressures around payment cycles, the role of middlemen and market inefficiencies also impacted the roughly four million women involved in traditional shea harvesting in West Africa. As a dominant player in the shea market since the 1950s, AAK realised that these issues needed to be addressed first if it wanted to create a secure and ethical shea supply chain. Meeting suppliers’ needs Understanding these pain points is just the start. The next step is to treat suppliers like customers: Design solutions for their specific needs and ensure those solutions have a broad, long-term impact. ETS responded to the results of its 2018 analysis by developing a sustainable farming model that blended traditional and modern practices. This included launching a “Training of Trainers” programme in 2020 covering organic audit preparation, pest and disease management, and improved crop handling to reduce post‑harvest losses. The company backed this up with an investment programme to help farmers convert to organic farming and gain Fairtrade certification, and by distributing equipment for irrigation, planting and crop protection. ETS also moved away from the transactional and impersonal procurement process of the traditional auction system, offering long‑term contracts at premium farm‑gate prices – for example, guaranteeing at least 25% more for organic black tea than conventional alternatives. These steps aimed to foster deep, long-term relationships with producers, while allowing ETS to increase quality and productivity levels. Paccari took a similar approach, collaborating with farmers to improve productivity. It introduced biodynamic farming and grafting techniques that helped rejuvenate old cacao trees and designed better equipment for fermenting and drying the cocoa beans. Paccari also addressed smallholders’ financial struggles by paying 100% upfront for their harvests. By paying almost triple the going rate once farmers were certified organic, they provided an incentive for quality control and loyalty. In West Africa, AAK created the Kolo Nafaso Programme in 2009 to work directly with women shea collectors in Burkina Faso and later in Ghana. The initiative, which bypassed traditional middlemen, offered the women pre-financing and fairer prices for their harvests. The company also trained them on a new method of steaming the harvested nuts which used less water and fuel, took less effort and was safer. AAK also trained the women to use readily available materials like earth, cow dung and straw to make stoves that were 35–65 percent more efficient and safer than traditional stoves.  

Understanding your customer  These programmes, though costly and complex to implement, enabled the companies to build secure, transparent supply chains based on mutual trust with suppliers. The companies could then shift their focus downstream to manufacturers, distributors and consumers, and how best to meet their market’s specific needs.   Looking to differentiate themselves in the crowded premium tea market, ETS decided to target the “mindful consumer”: younger, college‑educated buyers seeking genuinely ethical, healthy and speciality products. Recognising the growing popularity of herbal and fruit teas in Europe, it created a range of diversified blends, each with its own unique flavour profile and specific health benefits. Its broad developmental approach to their supply chain meant it already had access to organic farmers producing the ingredients needed to diversify easily and relatively inexpensively. As such, ETS could deliver the benefits sought by their target consumers without having to start a new CSR programme to meet those needs. Committed to paying a premium to suppliers, ETS understood they had to find market segments that would find their products worth paying for. As well as appealing to mindful consumers through their “Wellness-Focused” and “Everyday Collections”, they also targeted the gifting segment. Observing that many consumers who do not typically buy organic products will routinely purchase such “affordable premium” products for special occasions or as gifts, ETS developed a broad portfolio of gift sets for different occasions. By 2022, its gifts range were sold in department stores’ speciality and gourmet sections and accounted for 70% of its overall business. AAK recognised they needed to target the companies using their product, not the end consumer who might struggle to connect shea nuts with the chocolate bars they were used in. This led AAK to align its work with the CSR priorities of manufacturers using their raw product, positioning the Kolo Nafaso Programme as a direct contributor to their social and environmental goals. For instance, AAK identified that the CSR ambitions of US multinational MARS focused on women’s empowerment and tackling deforestation. This led them to co-invest in tree planting and training initiatives that included financial literacy education for women. Another customer, Burt’s Bees, who also targeted women’s empowerment, worked with AAK to introduce beekeeping training to the women, improving farm productivity and creating new income streams through honey and beeswax sales. In each case, AAK’s on-the-ground expertise enabled their customers to advance their CSR objectives effectively, while channelling their resources into sustainable, community-driven impact. These initiatives helped reinforce the customer firms’ credentials with their stakeholders, while ensuring the continuation of the programmes and the partnerships. Meanwhile, Paccari managed to reach a discerning audience of end consumers willing to pay for their premium products via restaurants and retailers that the company connected with at peer-to-peer network events. It also bagged high-profile endorsements for their cacao nibs from famous Michelin-starred chefs. While the chefs appreciated the brand’s backstory, they were ultimately won over by the high-quality chocolate focused on unique, single-origin Ecuadorian flavours.

Building from the base A bottom‑up approach to creating transparent, ethical and sustainable supply chains can deliver three powerful benefits. First, it creates genuine, scalable social impact for bottom‑of‑the‑pyramid stakeholders, as seen among female shea collectors in West Africa and tea pickers in Sri Lanka. Second, long‑term collaboration, financing and training build resilient, transparent supply chains that can stand up to accusations of greenwashing. The initiatives by AAK, ETS and Paccari are clearly not quick-fix, short term impact projects, simply designed to look good in press releases. Finally, and arguably most importantly, these investments translate into clear competitive advantages and increased efficiencies that offer tangible financial benefits and align meaningful change for suppliers with clear business value.