Advanced Management Control and Sustainable Development Food Value Chain: FAO-Developing Sustainable Food Value Chains: guiding principles Lecture 6: The Sustainable Food Value Chain development paradigm Prof. Angelo Riccaboni University of Siena Department of Business and Law angelo.riccaboni@unisi.it

Agenda The sustainable food value chain development paradigm Sustainable Food Value Chain Growth Loops Food Chain Fallacies Small is beautiful; urbanization is a problem; smallholder farming should be preserved The development of FVCs can help only a small minority of farmers The problem of food insecurity can be solved within the food system

The sustainable food value chain development paradigm

Sustainable Food Value Chain Growth Loops Investment Loop Regards the Investment and working capital, which derives form retained profits, from lending by a growing financial sector driven by accrual of domestic wealth. Multiplier Loop Small farmers close activities and prefer searching work outside the farm sector, in rural or urban areas. The VCs entrepreneurs and their workers, previously small farmers, spend their increased income in products and services offered by self-employed, previously also small farmers. Progress Loop Progress involves growth of the company, increase in income. As income increases, the social and environmental impacts of the food systems become more important to consumers and to governments, and they are incorporated into the BM and food production costs.

Food Chain Fallacies The Sustainable Food Value Chain development paradigm exposes a number of fallacies relating to food VC. Small is beautiful; urbanization is a problem; smallholder farming should be preserved The development of FVCs can help only a small minority of farmers The problem of food insecurity can be solved within the food system

1. Small is beautiful; urbanization is a problem; smallholder farming should be preserved Almost 90% of food is produced by smallholder farmers Smallholders use land for multiple purposes simultaneously, for multiple crops and for small livestock This provide double advantages: Increases and diversifies the benefits per unit of land Simultaneously reduce the pressure on natural resources relatively to mono- cropping systems Smallholders use less chemicals, more natural farm inputs, more labour and this provide a less impact on ecological footprint Smallholder farmers are among the poorest and improving their actions and activities could contribute to reduce poverty

1. Small is beautiful; urbanization is a problem; smallholder farming should be preserved Development and social objectives: Smallholders consume a large portion of food they produce, thus reflect economic circumstances and not economic opportunity Neither small nor large farms are always commercially better option. The size of the farm often depends on: the nature of the crop, the natural environment and the structure of the agrifood system.

Development and social objectives: 1. Small is beautiful; urbanization is a problem; smallholder farming should be preserved Development and social objectives: The informality of most smallholders makes the enforcement of environmental standards near impossible, thus undermining the perceived greener image of small-scale farming Urban areas can offer more job and greater efficiencies in the provision of public services than rural areas. Agro-businesses should be developed in rural areas or near new and existing urban centres, because this stimulates job creation and increases the demand for agricultural raw materials Traditional smallholder farming will not be able to achieve high levels of labour productivity, being characterized by undercapitalization and derives its competitiveness from low-cost family labour

2. The development of FVCs can help only a small minority of farmers Two Mis-conceptions on the nature of VC development: The FVC concept does not apply only to high-value agrifood products for export markets or supermarkets, but also it is applied to any agrifood product and any market The crated added value in FVCs does not accrue to current smallholder farmers only as farmers, but as downstream entrepreneurs, job seekers, consumers and beneficiaries of tax support programmes

3. The problem of food insecurity can be solved within the food system Hunger- is an important economic problem. Solution – increase in net income. But it is impossible to achieve through farming and food processing. Exceptions: products ready for exportation; products for which new and rapidly growing markets exist Development of specific VC must go simultaneously with development of other VC that provide clear market-growth opportunities Important consideration: necessity to develop post-harvest service, that can in the initial stage have the broadest impact but has a direct impact on demand for raw materials and number of households involved

The SFVCD Paradigm Key challenges: The need to understand the root problems, key leverage points and approaches that will have the greatest impact on the VC in a specific country How to combine the capabilities of the public sector, the private sector and civil society into an effective partnership