Social business with blended values

 Mr L.P. Semwal, SJS, India on social business concepts 

L.P. Semwal'If you're doing business with a social incentive, the social aspect becomes commercial.'
The Indian based organization Shri Jagdamba Samiti focuses on doing business with a social incentive. ‘It works both ways’, according to director Laxmi Prakash Semwal. ‘It’s inspiring because our model works. It’s doing business and helping the community, all at the same time’. In brief our model aims at ‘Doing business with social concern and developing societies with business thinking’.


The Uttarakhand areaCooperation
The organisation Shri Jagdamba Samiti is based in Uttarakhand, in the Himalayas in North India, and was set up in 1991. They launched an ‘Apple project’ for farmers. This project is an initiative of Stichting Het Groene Woudt in the Netherlands and the Dutch company Fresh food Technology (FFT) and Shri Jagdamba Samiti, Semwal explains. ‘We are working with small and marginal farmers on the theme ‘empowerment through ownership and business model development’. 

Semwal knows that small farmers in a market-oriented agribusiness get further marginalised mainly due to the dominance of middlemen. Those chains of well-organised intermediaries control the entire process. That’s why Semwal tried to bring farmers together in a joint venture (together with Fresh food Technology), in order to build a strong cooperation and fight for better prices.


Farmers involved in SJSThe Apple project consists of four decentralised apple collection centres. Farmers are encouraged to join the cooperative, through which they can process and sell their produce jointly at better prices. ‘At first the farmers weren’t convinced that our model would work’, says Semwal. ‘Farmers weren’t that enthusiastic. We were perceived as ‘the enemies’. In 2006 approximately 500 farmers joined us. The programme wasn’t perceived to be realistic, according to the local farmers. But the model proved to be exceptional. And nowadays roughly 2400 farmers are involved.’


ALCS in progressBuilding a bridge
The goal of the Apple project is to facilitate a process of empowerment among small-scale apple farmers in order to promote sustainable socio-economic development. ‘Our model works. Rather than to establish leadership, the farmers are building their own company. This gives them more responsibility. And new trust. It’s like building a bridge.’ 

In April 2009 Semwal implemented the joint Action Learning Case Study with Context. About 30 people joined the workshop. ‘The farmers - after this workshop - really felt that they own the company. Their perception changed. They now have more respect for themselves, because of what they have accomplished. I think that is a big achievement.’ 

This kind of change through participation makes it possible to shift the power centre, says Semwal. ‘This for me was the most exciting thing to experience during and after the Action Learning Case Study.’


Women joining in the ALCSHe explains what happened after the workshop. ‘Immediately after the workshop a group of women raised the question why our programme is only suited for men. They want a programme that focuses on women only.’ 

Semwal was surprised in a positive way by this suggestion. ‘Indeed I am. Though I still question whether in the end their suggestion will come to pass.’ It seems that the centre has an empowering effect on women. It was noted that women were for the first time participating in public meetings, and daring to speak up in public. 

Semwal himself was born on a farm. ‘We had a mixed farm, like so many in India. Paddy, cows, even apples. It was located in a small village called Bhatgoan. About 600 people live in that village.’

Enduring change
Sometimes the question is raised to what extent the Apple project is truly civic-driven. Semwal: ‘The only thing I know for sure is that our model works. If you’re doing business with a social incentive, the social purpose becomes commercial at the same time. I believe that economic empowerment alongside social interventions brings about enduring change.’ 

Still Laxmi needs help. ‘We don’t know how to explain the model to the academic world or researchers. I am hoping that Context can help us explaining our model.’

APPLE PROJECT as cold chain in Uttrakhand

 

The inclusive business model through cold chain of apple is developed by a tripartite partnership of Annamrit farmers as owners’ foundation, farmer trusts and SHGW in Uttrakhand. Farmers collectives organized by local NGO Shri Jagdamba Samiti with the financial assistance of SHGW launched the apple project with the realization that small farmers in a market-oriented agribusiness get further marginalized mainly due to the dominance of well organized strong chain of middlemen who are the part of supplying inputs to arranging transport and negotiating with retail buyers, this chain of well-organized intermediaries control the entire process from credit supply for farm inputs, transportation and marketing of produce. In this business model the farmer organizations become equal business partners with private sector parties and a social investor. This social investor is willing to invest in setting-up of agro-businesses, which can create sufficient value addition to the farmer’s products in order to become healthy, self-sustaining joint companies of participating farmers. The farmer organization themselves become shareholder in this new company, alongside the social investor. The ultimate aim of this approach is that the economic benefits of the company are plough back to the participating farmers, mostly in the form of premiums over their supply (based on quantity and quality), while the investments made by the social investor are fully repaid on commercial terms.  The farmers sell their yield to the collection point against a transparent price, for which a commonly agreed formula has been determined. The apples are bought by the primary producing company (at present six) at collection point where apples are sorted in sizes and pre-cooled in a pre-cooling container. This Joint Venture Company which runs the Collection Centre is engaged in the collection, procurement, sorting, grading, packing, possibly pre-cooling and reselling of the apples. The Farmer Associations work in between the Collection Centers and individual farmers at village and orchard levels. The Farmer Trust functions as the would-be owner of the Joint Venture Company eventually. Now the JV Companies sell their A Grade apples to FFT Himalayan Fresh Produce Private Ltd for long term storage and B & C Grade apples to market and to the Himalayan Juice Factory. After completion of procurement process training session begins for the farmers for different activities of their apple orchards by SJS.

From liability to opportunity:   In traditional supply chain model the individual farmer harvest the apple based on prices in the market which seems very much fluctuating as there are no or very limited control over supply and transport from farm to market. The first level of intermediary called aggregator for transport then pick the apples from 10 to 20 farmers at road heads and it take some time 4 days to 1 week which resulted into wastage of fresh fruits. The same repeated at auction terminals and further each parties involved lead to blames and losses for each other. In this traditional system every one treats the other player of supply chain as liability.  Based on the partnerships model applied farmers collective supply timely and quality produce to the joint companies with expectation of higher returns for themselves and agree on the price build up for selling the full harvest instead gambling on the prices and keeping the fresh fruits longer at farm which cause the quality losses and unpredictable supply in the marketing terminals. The losses saved are around 10 to 15% as compare to traditional sales by pre-cooling and best handling.   The joint venture companies then sort and grade the fruits and sale or store the table top salable apples to market as per demand and process the other 5 to 10% apple for fresh juice which is in traditional case completely considered as wastage by farmers and fruit buyers.   Stored apples supply start during off-season in refrigerated trucks after careful packing and handling where joint companies further saving wastage and moisture losses.     In the whole partnership model there is win-win for farmers, businesses, investors and consumers.

Rationale  Why is this action desirable?    The apple project strives to create a model of business driven, decentralised independent and small scale production with coordinated arrangements for sorting grading, storage and marketing by providing technical, managerial and investment support to enable small and marginal farmers collectively to move up in the value chain. The ‘collective’ feature of the business model promotes saving individual time, distribute risk, maintain price assurance, pursue damage control and save on handling costs such as storage and transportation   The project aims to empower apple growing small farmers in India and to increase their income level substantially, by providing them opportunities of:  - creating formal farmer organizations that will jointly handle, sell and/or process their apples;  - provide these farmer organizations with appropriate financial means and equipment to allow them to collect, sort, pack, pre-cool and handle the apples in a professional manner  - premium apples can be sold to the long term storage, whereas medium grade directly to the market and inferior grades (and other fruits) are used for producing juice;    The profits that are generated through the legally registered companies are in turn used to make premium payments to the supplying farmer groups as well to repay the investment in the companies and gradually transfer the full economic ownership of the companies to the farmers.  The vision behind the project is to set in motion a self-perpetuating model that can be applied throughout India, for the benefit of small scale farmers. Important aspect of this model is that the cost of the technical assistance, the bridging funds and equipment provided under the project is to be recovered from the additional income that farmers’ companies are able to generate, alongside regular Government subsidies for commercial companies.