Business models that drive more equitable outcomes
We all seem to have become accustomed to equating ‘business’ with ‘shareholder owned business’, but different business ownership structures are of course possible. Oxfam had a notion that the structure of businesses, and way that business is done, might be particularly important within the food system, where the share of final value that producers receive has diminished to the point where most farmers or fishers are unable to make a profit without receiving subsidies.
We compiled a series of case studies of different business arrangements (e.g., purchasing contracts, farmers’ participation in pricing committees) and business structures (e.g., (cooperatives, hybrid ownership, cooperatives as shareholders). Using these case studies, we asked the question whether it is possible to share a greater proportion of value with producers, whilst still being profitable.
With the obvious caveats that any businesses can fail, and that business arrangements and structures are only part of what determines the share of value that any actor receives, we found that:
Alternative models do not need to be niche. The food sector includes some large and well-established companies which are owned by producers or by employees (e.g., The John Lewis Partnership, CafeDirect). Cooperatives are the most ubiquitous form: for example, they are responsible for 45% of Kenya’s GDP.
Fair pricing can be good for everyone’s business. One striking feature of several of the case studies is that there can be benefits to all actors in the supply chain by guaranteeing a fairer share of value for producers.
Overcoming gender-specific barriers means women having a say in how businesses are run. Women face gender-specific, in addition to more general, obstacles to benefiting from markets. Collective action, whether as a women-only cooperative or as part of a mixed cooperative, can make a significant difference to women’s income, particularly in sectors that are high-value and allow for flexible work.
Upward vertical integration can help producers capture more value. Some of the most striking examples of producers increasing their share of value have been when they take ownership of downstream processing or manufacturing.
Lead firms, investors and governments can all shape businesses to be structured more equitably. By recognising the potential of equitable businesses to make agriculture more sustainable and fair, companies can try to source more from equitable business structures, and can support suppliers to move to more equitable structures through collaboration and investment. Governments can use the levers of trade policy, industrial policy, corporate governance policy, tax, public procurement and agricultural policy to progress an economic vision of an economy where such business structures are the norm. Meanwhile, investors can play a catalysing role in financing equitable business structures. The time is ripe for driving a transformation of these business structures to ensure that power, value and risk are shared more equitably – and that the ‘hungry farmer’ is a thing of the past.
Business structures that seek to balance the interests of different stakeholder groups offer an alternative to shareholder-based models. These alternative models can significantly improve the livelihoods of the most marginalised women and men in the global food system.