Signatures of Asia: creating a win-win model through a joint venture in the organic palm sugar industry
Signatures of Asia (SoA) was founded in 2007 and is today not only one of the top ten organic rice and sugar exporters in Cambodia, but also the first company in the country to implement an inclusive business that encourage farmers and buyers to form part of a joint venture in the organic palm sugar industry. It was the will to innovate their business model that led them to apply for Innovation Against Poverty (IAP) Challenge Fund.
“Building a sustainable inclusive supply chain is about building partnerships with producers and buyers and work together in a win-win model”, says Huy Kosal, Business Manager at SoA.
In order to export palm sugar, SoA needs to comply with international quality standards. As such, Kosal and his colleagues collaborates with the supply side by working in partnership with agricultural cooperatives in two provinces in Cambodia. By investing in a supply processing facility and capacity building in quality standards, women inclusion and environmental sustainability for cooperatives, they ensure that the organic palm sugar produced is of high quality and ready for export markets. Besides the capacity building, SoA also provides support on finance via revolving fund to ensure that AC has enough materials and budgets to advance to its members.
With this business model, SoA has successfully managed to create benefits for all value chain stakeholders; from smallholder farmers on the ground to big international buyers in Europe. By involving buyers and farmers as shareholders in the business, it will secure supply power, improve the local economies, and contribute to increased trust among value chain actors, while also providing much-needed input and human capital for the new venture. By sustaining the business, the ambition is to increase social, economic and environmental impact for all.
“Farmers are trained in palm sugar producing skills for exporting markets – this gives them access to a whole new market and the opportunity to increase their incomes. It also ensures that we can supply palm sugar to our buyers. Win-Win!”, says Kosal.
Compared to other crops managed by SoA, the impact of income from palm sugar production is higher, as it generates an additional income of USD 2,000-3,000 per season (20 trees) compared USD 600-1,200 per season for rice production, and USD 1,000-2000 for cashew nut per hectare. Furthermore, the capital investment for palm sugar is smaller since less input is required. Given that the season for palm sugar is different than rice, the production and selling of palm sugar would not compete with the dominant rice industry, but instead serve as an additional source of income for the farmers.
To encourage the production of palm sugar and promote environmental sustainability, SoA introduced an eco-friendly cook stove that requires less wood, saving up to 60% energy. This significantly reduces the CO2 emissions, saving 2.4 ton per ton palm sugar produced. For the farmers, it means a larger profit as less wood has to be used in production. In Cambodia, the palm tree is regarded as a national identity but due to low profits, farmers are often driven into cutting down their palm trees in return for quick cash. However, by making the palm tree into a long-term productive resource, SoA contributes to the preservation of Cambodia’s palm trees and thus the environment.
Beside the quality of social and environmental impacts, palm sugar is among the best sweeteners providing positive health impact to consumers as it has low Glycemic Index (GI=35) and other mineral useful for health compared to conventional sugar has the GI of 60.
A clear goal of the inclusiveness of the new business model has been to invest in women, youth and the environment. 50% of the palm sugar suppliers in the cooperatives are women. While women have been encouraged not only to take part of the family business but to lead and to make decisions regarding the farm, youth are encouraged to join the family business and to learn about farming. According to Kosal, being part of the IAP project has been catalyzing in terms of achieving social impact results.
“We are great business people but we didn’t necessarily know the best way to create social impacts. For example, we never had the right tools and skills to integrate gender inclusion in business or the supply chain before, but now we start to understand and implement, with the technical support from the IAP team”.
With project management support offered from IAP, SoA could innovate their business to a sustainable inclusive business model that supports the farmers directly, while expanding their supply chain. Today, their sugar supply chain has scaled into two new provinces.
“When we were working alone, we didn’t feel like we were going in the right direction in terms of social impact but now we know we are”, says Kosal.
SoA are achieving results faster than they ever thought possible and they are now expanding their inclusive business model to other sectors and regions where they work. By proving that the model works for organic palm sugar, they feel confident to apply it to other agricultural value chains such as cashew nuts and organic rice in other Cambodian provinces – ultimately providing opportunities for more smallholder farmers!