Category: Opinion

An insiders look into the most recent IISLA forum – Beyond Logistics: Optimising Food Distribution

At the beginning of September, the IISLA team invited a group of industry professionals to come together and discuss the food distribution system in the Philippines. Hosted by Mel Yan, our panellists were: IISLA’s Founder and CEO, Jennifer Viloria; Sonia Lazo (Intas Destinations); Reuben Pangan (Air21 Global); Prince Ang (SACHI Group) and Tamara Mekler (Fortuna Cools). 

In a continuation of our food system analysis, the September forum examined how we can better deliver food from farm to market, to ensure fair and stable income for producers whilst maintaining fair and affordable prices for consumers. We also wanted to find ways of optimising the capacity of MSMEs in providing affordable transportation, packaging and storage services for a more efficient food distribution system. 

To give you a glimpse into the conversation, here’s a roundup of what was said:

Kicking off the discussion was IISLA’s Head of Research, Jayces Garello, who began to talk us through her team’s recent findings. She highlighted the ways in which food travels in a globalised system, informing us that the globalised flow of food has allowed multinational companies to dominate the global south. Developing countries, like the Philippines, have become increasingly export-orientated, which has increased their dependence on imported and/or processed foods. So much so that in 2019, the Philippines exported $5.2 billion worth of agricultural products, whilst importing double this amount at $10.6 billion – posing the question, why are we not consuming what we are producing? 

The presentation then took us through the regional transport routes in the Philippines, noting that 30% of total costs over sales went to logistics, proving that more must be done to support farmers and MSMEs in finding more efficient and suitable transport. Presenting IISLA’s findings, Jayces highlighted the issues throughout the distribution system. One being the lack of infrastructure to support farmers in the first mile of distribution, as they are not supported in their journey from farm to market. She illustrated that the sheer lack of suitable packaging and cold storage units, which increases the risk of spoilage, plays a role in the fragility of the chain.

To follow, our Community Development Manager, Imelda Canuel, gave a presentation on the highlights of our UN Food System Summit Dialogue, in which we came to understand the issues throughout the food system from those experiencing it first hand. In this focus group discussion, MSMEs and farmers revealed to us the challenges they face when finding sustainable and affordable transport. (To read more about our work in the UN Food System Summit, click here.)

The panellist discussion began with a presentation from Reuben Pangan of Air21. Agreeing with our research, Reuben declared that the problems lie within the complex structure of the supply chain, in which farmers have no choice but to sell to the middlemen. He informed us that vital infrastructure such as roads are still not capable of supporting a sustainable journey from farm to market. Reuben took us through the work of Air21, who are working towards a more equitable and fair supply chain for farmers.

Our next panelist, Sonia Lazo, then highlighted the lack of vehicles to support the transport of fresh fruits and vegetables across the Philippines. Telling us about her company, Intas Destinations, Sonia started to integrate the distribution of food into the tourism sector during the COVID-19 crisis last year. Intas Destination saw an opportunity to use the vehicles that were once only used to transport tourists to be also used for the delivery of food. This helped to increase the number of transportation links, whilst connecting tourists with the food system.

Prince Ang of the SACHI Group, perceives the issues presented as needing to be systematically addressed. He explained to us that there is a real lack of plastic alternatives, meaning that when consumers do come in contact with biodegradable packaging, they are unsure as to how to compost it. In an effort to change this, his company has partnered with communities, to teach people how to compost. In turn, he sells the compost to farmers, who can use it to grow their crops organically. By seeing issues through a holistic lens, Princes’ initiative has been able to solve multiple problems that run throughout the food value chain. 

Tamara Mekler’s company, Fortuna Cools, is working hard to create a more sustainable food distribution system. She told us about her company, Fortuna Cools, an initiative that turns agricultural waste into food insulation. In a drive to steer away from brittle, styrofoam packaging, their research found that coconut husks could be used as a replacement material. With tons of it wasted on farms, Fortuna Cools buys these raw coconut husks from farmers and transforms them into packaging coolers that are long-lasting and equally better for the environment. 

IISLAs CEO, Jennifer Viloria, closed with an answer to the question: How do we fund sustainable and efficient methods of food distribution? Her answer: putting impact before profitable returns. At our core, we see systemic investment as fundamental for progress. We know that the capital is out there, but we must ensure that farmers and MSMEs are able to access and absorb it. To quote Jennifer: “we cannot work in silos, we must all work together”.

Thank you again to those that joined us, it was an incredibly thought-provoking discussion and we were very pleased with the participation of both our panelists and guests. The session has helped to further our own understanding of the food distribution system in the Philippines, and will help us to serve out our mission and vision of a more equitable world as we continue to carry out our work.  

Redefining Philanthropy in an Enterprising Ecosystem

by Mel R. Yan – COO, IISLA Ventures

Our concept of philanthropy may be wrong. The value-driven nature of philanthropic organisations like NGOs1 distinguishes them from the profit orientation of private businesses.  This suggests that NGOs are not supposed to ‘make money’, and that philanthropic funding must be used, as much as possible, entirely for community projects. Regulatory bodies like the Philippine Council for NGO Certification (PCNC) peg the standard for administrative (overhead) expense in the non-profit sector at 20% maximum of the total organisational operating cost.2 Many NGOs are forced to comply with this restriction, given that the legitimising effect of a PCNC accreditation can significantly aid in getting donations. Fundraiser Dan Pallotta3 argues, however, that fund usage restrictions may be counterproductive as they prevent philanthropic organisations from engaging in relevant ‘non-project’ undertakings like resource mobilisation and human resource development. Fundraising can aid in expanding beneficiary reach whilst sending staff to trainings can improve the quality of project delivery. Despite the obvious benefits, these activities are often dismissed as “making money out of donations” or “using donations for personal gain”.

The stigma surrounding the use of philanthropic funding is driven by the social construct that creates a stringent distinction between development work and business (profit-making). This distinction also informs how philanthropic funding is acquired, eventually leading to grant or donor dependency in some NGOs. This dependency and its attached fund utilisation restrictions, however, may not necessarily pose serious problems when donors are abundant. In the past, funding for NGOs in developing countries became a crucial component of international aid.  This reached its peak in the 1980s when the international community adopted a ‘sustainable development’ agenda4 that promoted a tripartite cooperation among government, business, and the civil society where NGOs became the institutional ‘face’.   Support for NGOs was also evident at the national level, with countries like the Philippines recognising the sector’s role in nation-building as enshrined in its constitution.5

Unfortunately, what appeared to be the ‘golden era’ for philanthropic organisations has been threatened because of corruption issues.  The ‘pork barrel scam’ in the Philippines in 2013, for example, has tainted the image of NGOs due to accusations of public funds being channeled to bogus organisations and fake community projects.6 My personal interactions with impact investors reflect this concern.  Some of them used to be philanthropists who have become more concerned with how their money will be spent, noting historical philanthropic fund mismanagement.  Hence, many have opted for their money to be treated as loans or equity investments rather than donations to retain control.  This means that such funding cannot be readily accessed anymore by philanthropic organisations, who are legally established as non-stock and non-profit.  The apparent ‘shift’ in development finance has also provided an opportunity for social enterprises which, as for-profit entities, are designed to accept, earn from, and potentially return impact investment.

Does this mean then that philanthropy is obsolete in the present social enterprise ‘regime’? I have been engaged in discussions with former colleagues in the NGO community on how they can diversify revenue sources.  The obvious option is to venture into social entrepreneurship.  But the more I explore such possibility, the more I realise that we may be forcing NGOs to become something that they are not.  Aside from the fact that they have not been trained on how to run a business, thinking about profitability may also be too much to ask from community organisers faced with the big challenge of changing people’s mindsets and behaviors. The failure of several NGO-initiated livelihood programs due to poor and/or lack of business and revenue modelling illustrates this point.

On the other end, many social entrepreneurs struggle with community organising. I have observed that most incubation and accelerator programs, whilst teaching relevant business management strategies, substantially lack input on community development.  I have also met social enterprises on the brink of bankruptcy because they cannot sustain the enthusiasm of their community suppliers-cum-beneficiaries or cannot play along local political dynamics.  Effective community organising cannot be readily learned through a module but requires the years of experience that NGOs have. Moreover, the time and resources needed to do development work may be too much to bear by start-up capital or pre-growth revenue. This is where philanthropy, which measures ‘profit’ under social and/or environmental rather than economic terms, becomes a more appropriate funding source.

Our concept of philanthropy must go beyond fund utilisation.  Attention should be given, instead, to the increasing difficulty of accessing philanthropic funding, which threatens the very survival of NGOs.  Philanthropic organisations must continue to exist in an enterprising ecosystem because social entrepreneurs would need to partner with them if we are to achieve the Sustainable Development Goals (SDGs). This collaboration will entail social entrepreneurs to focus on building profitable yet inclusive business models whilst development workers anchor the capacity building of beneficiaries-cum-business partners so they can effectively engage in the value chain.  Private funding for development, therefore, should still allocate a fair share to philanthropy.  NGOs must also do their part though, particularly in ensuring that community projects are properly implemented under a sound financial management system to maintain credibility with donors.

End notes

1NGO in this article refers to non-stock, non-profit, non-government, and development-oriented organisation.
 
2See: https://www.academia.edu/10082914/PCNC_Guidebook_on_the_Basics_of_NGO_Governance
 
3See:https://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong?language=en#t-6421
 
4See: Cabo, W. 1997. Theory and Practice of Public Administration. Quezon City: UP Open University
 
5See: Article II, Section 23: https://www.officialgazette.gov.ph/constitutions/1987-constitution/
 
6See: https://newsinfo.inquirer.net/1016890/what-went-before-napoles-and-the-pork-barrel-scam