Smallholder inclusion in high value-adding supply chain by Food & Agribusiness Enterprises : A case study on black soybean in Java

World agriculture faces increasing resource scarcity (land, water and phosphate) and growing environmental challenges (climate change effects, declining biodiversity, land degradation) and significant post-harvest food losses. As a consequence of a tighter and more volatile future food supply, global food insecurity will raise and conventional sourcing strategies of food and agribusiness enterprises will be affected. A growing number of private and public stakeholders are considering the crucial elements of an approach that meets the challenges of global food security and ecological responsible management of resources within a framework of inclusive business models. It is increasingly recognized that to guarantee global food supply, smallholder agriculture in developing and emerging economies needs to be integrated into high value adding local-, regional- but also international food supply chains. However, the inclusion of smallholders in high value supply chain, in particular in Asia and Africa, is highly complex. Small-scale farmers face major disadvantages in accessing high value supply chains. These include low volumes of produce to sell, variable quality, high transaction costs, poor functioning producer organizations and rural financial systems, and a limited ability to meet the high credence requirements of many high value outlets. They typically face a tilted playing field in terms of access to land, input, credit, technology and markets. The aspiration of food and agribusiness multinational enterprises (F&A MNEs) is to increase agricultural production by 20% while decreasing greenhouse gas emissions by 20% and reducing the prevalence of rural poverty by 20% each decade (WEF 2011). The WEF (2013, p. 4) reported that the initiatives taken by the public and private sector since the launching of ‘The New Vision of Agriculture’, will directly impact 12 million smallholder farmers in the next three to five years. The research question therefore arises: How can F&A MNEs be able to realise the so called 20/20/20 goals from a business perspective and therefore, how can they integrate smallholder supply in their core supply chains? Until now it is unclear how MNEs can realize smallholder inclusion in a manner that is both profitable and sustainable. Most pilot projects are supported and subsidized by governments, development agencies, NGOs or charitable organizations (i.e. Biénabe et al.,eds., 2011; Reardon et al.,2009). Smallholder inclusion pilot projects in which companies are involved, are often primarily CSR-driven. While this is how new experiences often begin prior to reaching mainstream corporate businesses and markets, the business perspective of investments in smallholders as supply source is still underrepresented in current research. In the present paper, we provide arguments for smallholder inclusion into high value supply chains from a business perspective. Based on an literature review, we identify potential keys to unlock smallholder agricultural production potential and elaborate on the challenges of smallholder inclusion in high value supply chains. A framework for an inclusive food strategy and an agenda for future research will be provided in the paper. This framework can help stakeholders along the food supply chain with the development of an inclusive food strategy in general, and F&A MNE’s in particular with the development of sustainable sourcing strategies. References Biénabe, E., Berdegué, J., Peppelenbos, L., and Belt, J., eds., 2011. Reconnecting Markets: Innovative Global Practices in connecting small-scale producers with dynamic food markets, Grower Publishing Limited, Farnham. Genier, C., Stamp, M. and Pfitzer, M., 2009. Corporate Social Responsibility for agro-industries development, Agro-industries for development, 223-252, FAO, UNIDO and CAB international, Rome. London, T. and Hart, S. L., eds. (2010). Next generation business strategies for the base of the pyramid. New approaches for building mutual value, Pearson Education, New Jersey. McIntyre, B.D., Herren, R.H., Wakhungu, J. and Watson, R.T., eds., 2009. Agriculture at a crossroad: Global report. IAASTD, Island Press, Washington. World Economic Forum, 2011. Realizing a new vision for agriculture: A road map for stakeholders, Geneva. World Economic Forum, 2013. Achieving the new vision for agriculture: New models for action, Geneva.