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Image credit: Agroforestry in Ghana. Courtesy of Rainforest Alliance.

Reducing Risk: Landscape Approaches to Sustainable Sourcing – Olam International and Rainforest Alliance Case Study

Editors

  • Lee Gross

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Date

April 24, 2013

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Short Summary

Olam is a global integrated supply chain manager that sources 6 million dollars worth of cocoa from the western Bia/Juabeso region of Ghana each year. When the company recognized that its regular producer support program was unable to mitigate climate change and other resource risks, Olam partnered with the rainforest Alliance to start the Climate Cocoa Partnership for REDD+ Preparation.

Summary

Partnership for climate friendly cocoa

“Olam’s Governing Objective is to maximise long-term intrinsic value for its continuing shareholders. We can only achieve this by building a sustainable business in the fullest sense.” – Sunny Verghese, CEO, Olam Partnerships for sustainable supply chains

 

In 2011, Olam partnered with the Rainforest Alliance to start the “Climate Cocoa Partnership for REDD+ Preparation” project in the Western Ghanaian region of Bia/Juabeso. The project aims to allow Olam to be the first company to bring climate friendly cocoa to market, diversify opportunities and increase income for farmers, build efficient value chains, and serve as a learning model for future expansion of the project. The partnership has worked with stakeholders at the landscape level to accomplish these goals. With farmers, the partnership has been instrumental in training them to be certified under the Sustainable Agriculture Network (SAN) standard including the additional climate module thus ensuring that both sustainable and climate smart methods of agriculture are followed.

 

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Rationale, modes and value proposition for Olam’s landscape approach. From p. 11.

 

Working at a landscape scale

Such certification allows for farmers to increase their incomes by both being paid for higher quality cocoa in addition to promoting the usage of supplementary income generation through intercropping, beekeeping, and maintaining carbon stocks for future payment under REDD. The partnership has been working closely with the Forestry Commission, traditional authorities and private concession holders on partially or wholly devolving land rights to local communities who can then develop these resources into REDD projects.

Yielding early results

At the end of 2012, there were 833 and 1,259 certified farmers and farms, respectively, which contributed to an estimated yield of 1,295 metric tons of certified beans that sold for $2.4 million USD. Though the expected sourcing of 3000 tons of cocoa a year in the first two years of the project make up only 4% of the total amount being sourced by Olam in Ghana, this number will rise over time. While this project represents almost double the cost of a normal business venture of this scale for Olam, the company intends to reduce costs as they learn from mistakes and the project matures. If a success, Olam looks to eventually apply these methods to other cocoa farms in other locations as well to other tree crops such as coffee.

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