Steering Non-Hierarchical Business Networks towards Sustainable Value Chains: the Case of Responsible Soy

Systems thinking is a versatile tool for the analysis and design of businesses operating in environments where the outcomes of actions and the results of strategic choice are highly unpredictable. This article shows how system thinking as a tool was used to address a practical question: “What do we have to do, with our stakeholders or all together, to achieve 100% responsible soy products for food, feed and other applications into and inside Europe by 2020?”. This was the leading question of a 4-day expert event realised in 2016, which convened over 30 experts from business, the public sector and civil society to find answers to the leading question.

Soy supply chains are the perfect example of non-hierarchical business networks. The supply chain of soy beans consists of many different classes of actors, geographically dispersed, each with its own interests. For example, soy bean growers in Brazil, Argentina or Paraguay are interested in producing the protein-rich grain at a good – i.e. as high as possible – price while meeting the specifications of the end-buyer. The latter class of actors, mainly companies who produce, trade and market food products or animal feed are also interested in buying at a good – I.e. as low as possible – price while requiring the guarantee that the product was produced in a responsible or sustainable way. Commodity traders play a role in connecting producers and buyers, and are interested in making a margin on their trades, needing to deliver produce that meets the specifications of the buyers. Stakeholders of this value chain may be employees that need a fair wage, local communities that need employment, consumers that may be interested in either the cheapest possible meat, milk, eggs and other soy-fed animal protein products or are interested in being products the external social and environmental impacts of which were not put on society. Investors may be interested in channeling capital to businesses in the value chain if they get a sufficient return on investment. And civil society may be interested in feeding the growing world population while conserving forests, ecosystems, and biodiversity. Not an easy task to reconcile this preferences and different positions into a joint agenda toward more sustainable and economically viable soy value chains.

In all of the classes of actors, there are concerns for responsible and sustainable production methods, that respect human rights, offer fair wages and working circumstances, deal with environmental impacts responsibly while still operating with a viable business model. There are commonalities in the mindset of almost all to do the right thing. However, to make production and trade more sustainable is a huge challenge.

While many of the participants in the value chains make progress, within their operations or in smaller networks with their suppliers and buyers, progress is slow: about 1% of global soy bean production is certified by the voluntary sustainability standard of the Round Table for Responsible Soy (RTRS). The criteria of the standard itself are hardly challenged, especially since RTRS has created the first comprehensive deforestation-free soy bean certification in the world. It has been endorsed by international industry organisations such as the European Feed Manufacturers’ Federation (FEFAC), by the Banking Environment Initiative and the Consumer Goods Forum – the association of food brands and consumer products – in its joint Soft Commodity Compact, and by international NGOs such as The Nature Conservancy (TNC) and the World Wildlife Fund (WWF). The RTRS standard is also aligned with the policy objectives of seven European governments and enshrined in the Amsterdam Declaration “Towards Elimination Deforestation from Agricultural Commodity Chains with European Countries”.

There are many reasons given for why this figure is not yet higher than that. Some have to do with the short history of the standard, others have to do with arguments and decisions of businesses to adopt or not to adopt sustainable practices. And some point to the alleged idealistic nature of the RTRS standard and the economics of its certification system. (Note: the latter of which have not been matched to date to a same or better degree of verification, credibility or transparency by other standards).

Since there is broad support from international business and organisations on the content on the RTRS standard, the only aspect on which these organisations may position themselves differently is the speed and point in time by which they could be fully reached and implemented. And of course, there may be differences in political will to adopt the standards or equivalent standards or to create the policy environment to make adoption feasible. We will not address the category of nay sayers here and instead focus on those who have committed to adopt and implement sustainable practices and standards.

In view of the practical and motivational challenges in moving toward full sustainable value chains, part of the challenge is how to approach things differently and find answers to the above-mentioned leading question. Quite a few businesses, civil society organisations, standard organisations like RTRS, banks who finance supply chain players, government agencies etc have committed to the idea of creating sustainable value chains, but progress is slow. In view of climate change challenges and corresponding pledges of a wide array of businesses, governments and civil society to eradicate deforestation from supply chains, such progress is necessary.

So why does it not happen faster? First, soy value chains are integrated only to a limited extent. They are not fully owned or controlled by a relatively small group of businesses that can impose directions to move towards. Neither do food and feed manufacturers own or control their value chains up to the producers of soy beans. And soy bean producers have a relatively wide choice or parties to sell their soy beans to. In other words, the value chains of soy beans – especially in South America – are not run by parties who have the power to command and move the systems toward a higher degree of sustainable business practices. All such efforts have to occur through an open market where price-based decisions are made under high economic competition. In systems terms: the soy value chains are non-hierarchical networks of business relationships, where the actors in each relationship decide what service is required and delivered. There is hardly any coordination stimulating joint or similar progress across all chains. Just think of a group of merchant ships sailing through international waterways: they may move in the same direction, each carrying the goods it found a customer for, but each has its own owner, captain, crew and client. It is just not a fleet acting in a concerted way. The ships do not engage in a collective effort that could yield higher efficiency or productivity, nor do the ships necessarily display similar sustainability standards and practices. Soy value chains are very similar in this sense: their actors and participants move, but not all at the same speed or in the same direction observing similar quality levels. There is no single clearly delineated system for which there could be identified a joint steering mechanism. However, taking a wider perspective on what ‘the system’ is, namely a network of non-hierarchical business relationships could show new opportunities, as we will show below.

Second, the organisations active in the soy supply chains are run as social organised systems: they have boundaries, owners, clients, parent companies or grant givers to fund them. They have to take mployees into account that depend on them for their salaries. The organisations depend on their funders to maintain their continuity, their rationale is to do the thing they have always done and to do this better: produce more soy beans, sell more soy beans, defend the interests of farmers and the food and food industries to keep cost price down, to make regulations or to abstain from making new regulations to get re-elected, etc. They are what Stafford Beer, founder of management cybernetics in his essential work on system change Platform for Change called ‘ esoteric boxes’: they resist change and do everything to maintain their stable state, also known ashomeostasis.

Third, in complex business networks and trade relationships where no one has sufficient control to induce change across the chain, it is unlikely that each actor understands or could essentially even know the combined effects of the actions and strategies of all on future economic, social and ecological conditions. Rational behaviour by one actor from his context may produce unwanted effects to other systems or at other system levels. Farmer A may not invest in better agricultural practices because the returns will not pay his bills, a soy buyer may not commit to sourcing fully RTRS certified soy beans – although there are companies who manage to do – because he expects to be outmanoeuvred on price by this competitors. Even while they all have interest in producing more sustainably, the actions are not taken, and that result does not come about at system level.

In view of the above-mentioned inertia of soy value chain networks to make progress towards higher levels of sustainable operations, what could be done to overcome the hurdles?

As a first step, RTRS and Malik Institute took the initiative to bring together a group of over thirty soy bean value chain experts from business, civil society and public sector to identify opportunities and concrete ideas to make greater progress. The method applied was the Malik Super Syntegration, a large group conferencing method which is fully based on systems thinking solutions, originally created by Stafford Beer in his book Beyond Dispute, published in 1994. The method aims to bring together all knowledge of all experts, cross-validate it, with a focus on actions and solutions, and process-managed in a way that no individual participant or faction is able to dominate or neutralise others. All done in a pressure cooker of 3-4 days of intensive group conferencing.

The report of this Syntegration, probably one of the first ones applied to global agricultural commodities value chains, is publicly accessible here, and provides a transparent account of all topics and priorities the syntegrated group dealt with.

To my personal experience, the Syntegration event was a catalyst moment in creating conditions for making further progress towards sustainable soy value chains: it provided common insights into how strategic options and actions of different, autonomous organisations may reinforce or even neutralise each other; into where the opportunities for synergy are; and into the potential effectiveness of the own organisation’s priorities against the background of priorities and strategies of the other organisations. Also, the power of dialogue came clear to light: intense interaction with experts coming from other backgrounds and having to deal with other strategic priorities conveys more understanding of the manoeuvring space the other has to implement more sustainable practices. Syntegration refines and adapts individual and collective models of knowledge and models of potentially effective ways to further steer a system. Better knowledge informs better strategies, better actions, better impacts and better functioning systems.

Also, some unexpected criticisms were encountered. For example, not all experts invited were willing to participate. Some because the outcomes were not clear or known to them in advance – well, that was the whole point of deploying new methods. Others did not want to participate if certain organisations were to be at the table, which is a censorship attitude blocking dialogue. Finally, some questioned the system-cybernetic approach underlying the Syntegration methodology since the joint insights were not quite compatible with causes and effects as they saw it. Of course, the outcomes of a Syntegration depend completely on the participants, and in this sense the Syntegration is what it is and could have led to different outcomes if other participants had been at the table. However, this is not sufficient argument to dismiss the system-cybernetic approach, for that would be an error of logical typing, in the sense of Gregory Bateson (cf. his seminal work Steps to an Ecology of Mind). Finally, quite a few participants called upon RTRS to develop further ideas and initiatives following up on the outcomes of the Synegration. Which is a reasonable request without a doubt. At the same time, the outcomes of the Syntegration were a joint product of all participants and the Syntegration methodology empowers all participants – by providing them with more elaborate models of how the leading question can be answered and what can and should be done to solve the problem. The results are there for everyone to pick them up in his personal and organisational effort to develop and implement further actions stimulating sustainable soy supply chains.

RTRS has used the outcomes and insights gained through the Syntegration to completely overhaul its annual conference format. In 2016, is annual conference was completely shaped to facilitate dialogue both in plenary and in small group settings. More specific follow-ups are also planned: the executive board of RTRS has already released further plans to create a multi-organisation platform to continue ordination, testing and monitoring of the impacts of responsible and sustainable soy concepts. These will also be founded on Syntegration and system-cybernetic concepts: design, implement and learn from observed impacts (feedback) through dialogue and cooperation.

Non-dialogue – i.e. persisting in the maintenance of taboos – or non-cooperative dialogue in the form of simultaneous monologues may satisfy the goals of individual actors. But they do immunise against refining our knowledge models and in that sense do not contribute to problem solving. Together we can achieve more.

About olafbrugman