Background

Challenges and best practices

In recent years, the wide usage of coconut in cosmetic, food and beverage, and pharmaceutical industries have driven rapid growth of the global coconut market. Philippines and Indonesia are the world’s largest producers of coconut oil (Goldstein Research, 2017), and production in Asia Pacific is growing at a rate of ~1.3 percent per year (GRO Intelligence, 2016). However, demand is outpacing supply; consumers and buyers both seek sustainably sourced coconut products.

There is tremendous market potential but also significant production challenges for sustainable coconut. Ninety-five percent of global coconut is harvested by smallholders, and 90 percent of global coconut production is in Asia-Pacific (Fair trade, 2015). Production challenges include senile (aging) trees, natural disaster, disaggregated and complex value chain structures, and producers' limited access to market, finance and technical know-how. Combined with falling commodity prices, these factors lead to stagnating yields, low income and low incentive to invest in coconut production, despite growing market demand.

Improving smallholder livelihoods and incomes

Diversify farmer incomes by intercropping with higher-value crops and make full use of nut by products. Mitigate investment risk through strong partnerships with agricultural support providers, processors and buyers.
Implement organic certification schemes in response to market demand to provide opportunities for increased premiums for producers.
Mobilize higher-value coconut products in new markets at scale to maximize the benefit to growers.
Process coconuts at the community level as much as possible to simplify the supply chain and reduce the influence of middlemen.

Replanting trees

Interplant seedlings with existing trees. Use trusted agricultural extension services to get farmer buy-in and provide incentives over the long-term to ensure seedlings reach maturity.
Plant different varieties or dwarf hybrids that bear nuts earlier and with a higher yield.
Increase tree density per hectare.
Establish the best business model (intercropping, replacement or other models) and build coalition of partners, e.g., public-private partnerships with farmer associations, to invest over the long-term (7 to 10 years).
Identify other sources of income at the farm level (e.g., intercropping seedlings with higher-value crops) to ensure return on investment in the short to medium term.

Improving productivity

Farmer training to support good agricultural practices such as fertilizer application and mulching.
More public-private sector partnerships to build capacity, training of trainers, access to seedlings and to secure supply chain.
Provide technical know-how and increase investment in processing equipment such as copra ovens to improve efficacy of copra-drying process, which leads to improved quality and less potential contamination.

Enhancing traceability

Share origin sustainability data and origin’s interest in a pre-competitive way through supply chain mapping.
Identify and facilitate creation of coconut cooperatives.

Increasing access to technology

Need for long-term assistance to increase productivity and income via improved access to technology.
Collaboration among pilot projects to avoid saturation.

Reducing deforestation and encroachment

Assist farmers with good agricultural practices to increase productivity of existing plantations, rather than expand to new forest areas.
Learn from planting procedures developed by the Roundtable on Sustainable Palm Oil. Adopt a jurisdictional approach and establish community-based monitoring systems and standards/ criteria linked to traceability.
Public-sector engagement to raise awareness of sustainable coconut oil.

The Roundtable

To address production challenges that coconut buyers, processors and suppliers commonly share, in March 2019 USAID Green Invest Asia and Barry Callebaut co-organized in Kuala Lumpur an inaugural Sustainable Coconut and Coconut Oil Roundtable, where industry leaders agreed on broad areas of improvement for the coconut industry: farmers’ livelihoods and income; supply of productive coconut trees; farmers’ productivity; traceability; deforestation prevention, and; farmers’ access to technology.

The inaugural Sustainable Coconut and Coconut Oil Roundtable, co-organized by Barry Callebaut and the U.S. Agency for International Development (USAID), Green Invest Asia, brought together over 80 buyers, processors and other actors actively involved in coconut supply chains to collaboratively find solutions and share investment approaches in establishing cost-effective sustainable coconut and coconut oil value chains.

The event was attended by 49 companies representing over 40% of global coconut oil volumes and included some of the largest coconut product buyers. A panel of private sector partners and sustainability experts showcased five successful pre-competitive initiatives and pilot projects working to address sustainable sourcing, transparency and investment challenges in the Philippines and Indonesia.

Barry Callebaut presented a proposed pilot approach and a roadmap to achieve 100 percent sustainable coconut sourcing by 2025.

Participants identified priority challenges for pre-competitive collaboration by voting on the preliminary list created based on pre-roundtable conversations with participants, and results were provided on the same day.

Drawing on the panel’s key messages and investment models, participants outlined action points for a roadmap.

Way forward

The forum agreed to meet annually and form a task force to consider the following actions:

Craft concept of a jointly-funded supply chain mapping task force to identify overlap and potential for industry collaboration and efficiencies
Identify partner(s) to organize continuous dialogues and facilitate coordination among industry players and stakeholders to create synergies at different levels, scale-up and share best practices.