Sustainable Sector Transformation Model

Addressing sustainability issues in agro commodity sectors is challenging, especially in sectors that are dominated by smallholders. In these sectors, systemic change has proven to be elusive. Current transformation models, whether public or market driven, have only been able to realize systemic change to a limited extent.

Therefore, Aidenvironment, NewForesight and IIED have developed a groundbreaking holistic Sustainable Sector Transformation Model commissioned by the IFC, the Dutch Ministry of Foreign Affairs, SECO and IDH, the sustainable trade initiative.

The Sustainable Sector Transformation Model is used to analyze a particular agricultural value chain by defining the five building blocks needed for the transition towards a sustainable agri-sector. This analysis can lead to a local development agenda which includes all stakeholders, from government, civil society and the private sector.

Altering a system is not something that is done in isolation: sector stakeholders need to work together to change the incentives that drive the sector. The Model’s holistic approach attributes responsibility to those who have the appropriate mandate and are empowered to make those decisions. An essential part of the process is coming to a vision for the sector shared by all relevant stakeholders, and making each actor responsible for the success of a transition towards that shared vision. Stakeholder buy-in, a solid strategy and concrete actions are indispensable factors for success.

The Sustainable Sector Transformation Model

Sustainable transformation model

Figure: Sustainable sector transformation model

The five building blocks, which are also oulined in figure above, are:

I. Sector alignment and accountability
This building block focuses on the development of a vision on farm and sector quality, including the setting of a strategy that reaches that goal. This vision should be shared by all relevant stakeholders, and the strategy includes clear roles and responsibilities for each of them. All are held accountable according to key performance indicators (KPIs). A monitoring and evaluation (M&E) system will provide for the data to measure progress and to revise the approach when new information or best practices are identified.

II. Strengthening of demand
Part of a sustainable sector are procurement practices that are organized in such a way that they reward improvement and exclude worst practices. Buyers should position themselves as preferred buyers and possibly provide additional services, such as capacity building or providing inputs.

III. Public sector governance
The public sector has an important role as regulator and facilitator: they support sector transformation where the market fails or is incapable to act. This includes enforcing social and environmental regulation (e.g. land tenure, labor, conservation), providing investments (e.g. infrastructure, research, input subsidies) and governing the market to ensure effective quality differentiation and price transmissions, reduce price volatility and improve sector organization (e.g. minimum prices, quality regulation, marketing boards).

IV. Organization of the production base
The organization of the production base can enable the market to reward good performance and exclude worst practices. Key for wide-scale promotion of sector quality is to organize producers around service delivery. Organization could be obtained in different ways, for example through service provider networks, outgrower schemes, supply chain networks, and cooperatives of sector-wide organization.

V. Organization of the service sector
Services such as extension, inputs and finance need to be accessible, demand driven, high quality and bundled where possible. In the ideal situation, services are provided by a competitive market of service providers that treat farmers as clients. Farmers are more and more able to pay for the services themselves. Service delivery, in a sustainable sector, rewards good performance and excludes worst practices. When a professional service sector is not available, buyers or the public sector could organize this alongside the complementary – possibly non-competitive – investments to build a professional service sector. Small sector levies and taxes may offer potential for longer-term sector-wide financing of services.

If you would like to know more about the model and its development, as well as examples of its implementation, please visit http://sectortransformation.com/, see our publications on the topic at the bottom of this page, or feel free to contact us.