Private sector consultation: Investment in sustainable supply chains and ecosystem services
Incentives directed to the right actors at the right time, are essential to promote sustainable supply chains, beneficial ecosystem services and responsible land-management practices. Comprehensive and complimentary incentives, from different sources and actors, are required to address the scale of incentives needed to promote sustainable supply chains and landscapes. The private sector (PS) plays a fundamental and complex role in providing these incentives, but is not always brought in as an active partner soon enough (too frequently only viewed as a buyer/commercial actor). The PS can and does, however, perform a much more complex and critical role in developing and delivering incentives. The drivers and motivations the PS themselves have to invest in incentives are also not always understood nor sufficiently addressed when developing an incentives program.
Objectives
The Incentives for Ecosystem Services (IES) project conducted a consultancy in 2016-2017 to better understand motivations and drivers of the PS for investing in, and partnering with other actors and institutions on incentive programmes. This consultancy was designed to develop recommendations for integrating the PS perspective into packages of incentives.
A web survey was sent to key PS actors connected to the Sustainable Commodities Assistance Network (SCAN) – A global network of 18 leading international organizations collaborating on the provision of needs-based technical assistance on sustainable production and business management --. Response rates were low, so while it cannot claim to be representative of the PS on a broad level, it does provide an insight into the use of incentives by the PS and recommendations for the way forward.
Results
Four main messages emerged from the survey on the motivation, drivers and role of PS in providing (and receiving) incentives to support supply chains and ecosystem services provision.
1. Supply/risk management
1. Supply/risk management
Why PS would invest:
- A fundamental driver to secure a supply of consistent quantity and quality and to manage risks
- Secondary drivers include: improving/ protecting image, pre-empting criticism and complying with regulations
PS concerns/ needs
- Support for the consistent quality and quantity of desired products
- Mitigation for environment/ climate change risks
- Stable political/ policy actions
- Help avoid reputational risks and create an enabling environment
- Business case needed
How does the IES approach address this:
- Building collaborative efforts (Public-Private-Partnerships (PPPs))
2. Return of investment
2. Return of investment
PS concerns/ needs
- Return of investment not compensated for:
- Lost by side-selling to a "free-rider" or
- Investment is not recognized by the producer or the end buyer (importer or consumer) as a benefit provided by the PS, and therefore does not build supplier or buyer loyalty
How does the IES approach address this:
- Integrated packages of measures can provide long-term stable and mutually beneficial commercial relationships
3. Collaboration with other investors
3. Collaboration with other investors
Why PS would invest:
- PS sees value in collaborating with the public sector, in particular on joint funding ventures and to align policy initiatives
PS concerns/ needs
- Poorly enforced or insufficient enabling policy (especially a lack of stable land rights/ tenure policy)
- Rapidly changing political decision-makers
- Counter productive (<perverse>) incentives
- Slow and complex bureaucratic processes
How does the IES approach address this:
- Collaboration through an IES approach would support the establishment of mechanisms to create and demonstrate a more stable enabling policy
4. Better targeting of incentives
4. Better targeting of incentives
PS concerns/ needs
- That their investments, in particular when delivered through collaboration, may not reach the desired target and therefore not justify the investment
How does the IES approach address this:
- IES packages enable a clear and direct mechanism for producers/ traders/ exporters and other actors along the supply chain to receive benefits directly
More
When seeking private sector investment in IES, the sector should not be viewed as a homogenous unit. Companies vary dramatically. Even within a company, different department and different positions along a value chain can have different views on the use of incentives and engagement with different actors.
The IES approach can, however, support change through the value chain by enabling different private sector actors – farmers, cooperatives, agri-business, buyers, food companies, retailers and consumers – to use different incentives at different stages of the commodity value chain to enable the transition to sustainable practices.
Some examples are finance to support farmer compliance to certification standards for sustainable production, training to improve processing practices and the business capacity of farmer cooperatives, retailers prioritising sourcing of sustainably produced products to create market drivers, and consumers paying a premium for sustainable production practices.IES packages must emphasize flexibility in the enabling environment and the provision of incentives to respond to the differing needs of all involved, as well as changes in the needs of the stakeholders, markets and landscape according to geography and time frame.
Given the scale of the investment needed to provide such a comprehensive and customized incentive package, each actor’s role must be properly identified and their investment maximized.
Recommendations and next steps
PS respondents indicated that they were actively involved and interested in providing incentives to support commodity value chains and ecosystem services.
Key concerns for their investment commitments were predominately related to unclear returns of investments. Integration of the PS perspective and combining packages of investments from private and public sectors through IES was recognised as an approach to address the PS interests and concerns, and motivate collaboration.
It was also recommended to:
- Hold face-to-face interactions with key (respected) PS actors through interactive workshops to further understand the PS perspective, build trust and interest in the IES approach
- Develop practical tools to guide project managers and trainers to identify
- Potential incentives
- Which actors to invest/deliver incentives
- Mechanisms/ structures to integrate incentive packages
- Provide case studies for reference