The Changing Role of Business in Agricultural Development

Opinion Article by Juan Gonzalo Perez* (jperezg@eafit.edu.co)
* International Business Student, Universidad EAFIT, Medellin, Colombia

Times are changing and as the world population grow and global change strikes, communities in rural areas are encountering some serious problems. For instance according to the Climate Change Report 2014 released by the United Nation, in Latin America and in the Caribbean there is a risk of water resources becoming scarce and food production decreasing, aspects that will affect the agricultural development. (IDB, 2013)

On the one hand, in a traditional approach, the responsibility of addressing socio environmental conflicts in rural areas has been yielded to nonprofit organizations and governments, yet it is difficult for them to make changes at a large scale due to the lack of resources, and information. On the other hand, in recent years companies have been viewed as a major cause of environmental, social and economic problems. But, what if the solution to rural development issues was at the core of every agricultural business?

In a 2011 article published by the Harvard Business Review, Professor Michael Porter and Mark Kramer present a new concept that is changing the role of business in development, this concept is known as Creating Shared Value (CSV).

According to Professor Porter, the concept of creating shared value consists of addressing a social issue with a business model, allowing businesses to create social value and economic value simultaneously. This can be done by meeting societal needs through the process of reconceiving products and markets, redefining productivity in the value chain by utilizing resources, suppliers, logistics, and employees more productively, and enabling local cluster development by improving the local business environment (Porter & Kramer, 2011).

To achieve the creation of shared value in agriculture, it is fundamental that companies change how they see themselves and how others see their business. This implies changing the idea of short term growth based on profits and start thinking long term by adapting to the needs of the communities in which they are involved.

To illustrate the differences in approaches let’s take a look at the Fair Trade movement. Fair trade seeks to increase the revenue that goes to poor farmers by paying them higher prices for their crops. The problem with this approach is that is about redistributions instead of increasing the overall amount of value created. With the shared value approach, poor farmers focus on improving growing techniques and strengthening the local cluster of supporting suppliers and institutions so that farmers can increase efficiency, yields, product quality, and sustainability; at the end it will lead to a bigger pie of revenue that benefits farmers and the companies that buy from them. (Porter & Kramer, 2011)

In accordance to a case study presented by the Inter- American Development Bank (IDB), a Chilean Company named Subsole, is applying shared value by focusing in sustainable workforce, which means proving health benefits, education, professional development programs, child care facilities, year- round employment and the right working conditions to the workers in the supply chain that are mostly small, independent farmers. As a result, in recent years the company has grown so rapidly that is now one of the top five fruit exporters in Chile.

In conclusion, creating shared value goes back to a simple idea in which if agricultural communities do well and develop while taking care of the environment, then companies also do well. Creating shared value is different for every company, but it is possible for every company to rethink the way they do business so that social issues can be addressed as part of their core activity, both creating value to the shareholders and society (Porter & Kramer, 2011). Finally, as said in the words of Professor Michael Porter at the 2013 Creating Shared Value Forum held in Colombia, “Businesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face.” 

References

Inter- American Development Bank. (2013). The Fruits of their Labor:A Case Study in Shared Value. Washington, DC: Author

Porter, M., & Kramer, M. (2011). Creating Shared Value. Harvard Business Review, Obtain at http://unm2020.unm.edu/knowledgebase/university- leadership-and-governance/11-porter-creating-shared-value-ss- highlights.pdf

United Nations, Intergovernmental Panel on Global Change. (2014). Climate Change 2014: Impacts, Adaptation, and Vulnerability. Yohohama, Japan.