Realizing a climate neutral and inclusive cacao business in the Philippines

Kennemer is an Asian agribusiness specializing in the sustainable growing and sourcing of cacao beans and is the Philippines' leading supplier to the international market. With its inclusive business model, the company provides end-to-end support to smallholder farmers including inputs, technical assistance, a guaranteed market and long term agri-financing.

Kennemer Foods is described as a “climate neutral sourcing platform.” Can you explain what this means and how you achieved this?

Our farms and farmers produce crops that are net carbon positive: the gains from our improved practices and rehabilitation efforts exceed the carbon losses of our production.

We operate a grower program with smallholder farmers where we help farmers improve the yield and increase sustainability of production, i.e. reduce the carbon footprint of the farm, while also adding elements that have a positive impact on the environment and produce net carbon removals.

Examples of improved farming practices include replacing and/or reducing usage of chemical fertilizers with organic fertilizers, increased adoption of composting, and we have a big push on producing biochar using farm-based organic waste (branches, leaf litter, coconut husks, etc).

Our main method of improving carbon removals is through additional planting of trees. We have an extensive afforestation and reforestation program. Most of our commercial crops need a level of shade, i.e. cacao, abaca, and banana. We assist farmers with the in-filling of shade trees where possible and in addition we plant trees in nearby communal land areas.

Agriculture has led to a high degree of forest loss world-wide. How do you manage the balance between scaling your cacao farming business and preserving forests in the Philippines?

Most of our cacao expansion is happening in lowland coconut areas as an intercrop. Most coconut in the Philippines is planted at low density, around 100 trees per hectare, which leaves room for both cacao and the planting of additional shade trees.

In upland areas, where we work with indigenous communities, new cacao planting is focused on previously deforested areas (deforested more than 10 years prior). We first plant native tree species; cacao trees are planted once the forest trees have grown to provide some level of shade.

Can you tell us about your innovative model to support your inclusive business through partnerships and financing from climate funds? Could you share recommendations for other IBs who are seeking out climate financing?

We believe climate financing can play an important role in supporting smallholder farming systems’ shift to more sustainable and improved crop production.

We have been supporting smallholder farmers with our cacao grower program for the past 10 years. The one thing we have learned is that the provision for training and/or extension support often falls short of what farmers really need. Climate finance provides a long-term funding source which can be used to provide farmers with planting material, financial support for planting activities as well as on-going training and coaching support.

Climate finance can provide a path for financial sustainability for a smallholder crop growing and support system that is no longer dependent on grant funding but can be managed by communities together with their support partners.

For other IBs who are seeking climate funding we can recommend first that they find a partner with some experience accessing climate financing and experience operating in the voluntary carbon space. Secondly, they will need to find a model that involves the planting of significant volumes of (shade) trees as it is difficult to generate sufficient voluntary carbon credits on improved farming practices alone.

What measures are you taking to improve the resilience of cacao farming communities against climate change?

Resilience against climate change means the ability to survive longer periods of excess rains and longer periods of drought.

The most pragmatic measures we are taking address these issues are the creation of increased absorption and water holding capacities of the soil. Besides the planting of shade trees, we have embraced the intensive usage of cover crops. Cover crops help preserve soil humidity, improve soil structure, lessen the need for weed management (especially in the early years when the canopy of cacao trees is not yet sufficient) and help improve nitrogen absorption by the tree crops.

Does your technical support include training related to preserving resources, eco-friendly farming techniques or nature-based solutions? If yes, what kind of training and why do you consider this important?

Yes, our farmer training is based on regenerative farming principles, where as much as possible all materials used in the farm are sourced from within the farm itself.

Most farmers in the Philippines lack the financial resources to practice fertilizer intensive farming. However, they also lack the knowledge on how to maximize their yield using the resources that can be found within their farm. Soils are often acidic and poor in organic matter due to years of non-stop harvesting (of coconut) and neglect. The journey we take them on is for them to realize that the farm and soil need to be rehabilitated and how, moving forward, an ecological balance can be found that allows crops to be harvested while not depleting the soil. Our aim is to train farmer to be self-sufficient. We are not against the usage of chemical or mineral fertilizers, but we believe farmers should only consider using them as complementary inputs. The priority is to rehabilitate the soil and to establish a holistic and sustainable farming system.

What are the main challenges you have identified for inclusive businesses working at the intersection between social impact and climate change impact mitigation, and how has Kennemer Foods overcome them?

There are many challenges. Businesses that operate in our space need to be prepared to come in as ‘problem solvers’, to try and figure out why communities have not developed over time, why poverty still remains. The problems we encounter are often multi-faceted and not easy to solve (otherwise they would have been solved already by someone else).

My advice is to listen, learn and don’t give up. Build coalitions, talk to all stakeholders and be humble. If you stick to it, you will likely succeed. The key is not to give up!