Good Finance Feeds Good Business
Do you have an independent wholefood shop where you live? If not, it is likely that you soon will. From zero waste shop Clear to Sea in Bury St Edmunds, Daily Bread Cooperative (amongst many) in Cambridge, to Rainbow Foods in Norwich, An Ethical Life in Colchester and Grape Tree in Bedford, supply is stepping up to meet demand.
But where do these ethical businesses source stock that meets their values and those of the growing tribe of ethical consumers they serve?
One place is Cambridge headquartered Storimarket, the world’s first farm-to-fork trade platform connecting ethical and sustainable smallholder farmers and producers in Africa to UK retailers whose customers care about the sustainability story behind the food they sell.
However, without a loan to enable it to provide proof of concept, Storimarket may never have been more than a good idea. As a social enterprise committed to meeting many of the United Nation Sustainable Development Goals (SDGs), among other established ethical frameworks, though, it was important that any financial help its founder accepted aligned to his business’s values.
He chose Foundation East. Here’s his story …
In the UK and Europe, two thirds of consumers want to know more about where their food comes from and the majority of millennials want to make more socially responsible food choices. As such there is a growing demand for socially responsible, environmentally sustainable food and information on where that food has come from.
At the same time, there is a growing need for increased food production to meet global food demands, and a requirement that this production be undertaken in a sustainable way. There is huge untapped potential in the African smallholder agriculture sector to meet this demand, however a major challenge that these farmers face is access to markets.
Tom Ellum created social enterprise Storimarket to help solve this conundrum. He first came up with the idea in 2015, when he returned to the UK after ten years living and working in Africa, latterly as a director for the not-for-profit, Marie Stopes International.
“During my time in Africa I became increasingly passionate about finding a way to stop the continent’s millions of smallholder farmers from being locked out of the global food supply chain. When I returned to UK in 2015, the change in consumer behaviour was palpable. People were beginning to question the ethics behind large corporations in the global food chain (take the Nestle’ palm oil situation). Local farmers markets were popping up everywhere.
“I sensed the time was right for an ethical approach that was capable of disrupting the global food supply chain. It was clear that there was a glaring social business opportunity around agriculture in Africa, where 75 percent of the workforce is involved in smallholder farming. Enabling these to trade globally would contribute towards the continent meeting some SDGs,” Tom advises.
So, whilst studying for my executive MBA at Cambridge Judge Business School, I began developing a business plan to address this. With support from Allia Serious Impact, we soon got the business to the point where we needed to provide proof of concept before beginning a funding round. However, we needed some working capital to get us to this stage. Thankfully, Allia introduced us to Foundation East.
Aligning business goals, managing risk
“I liked the fact that Foundation East was a not-for-profit community finance company and that the interest clients pay on loans gets reinvested back into the local community. We, like many of the independent retailers we now serve, are aware that local communities are taking a battering. Foundation East exists to do something positive about this. Its business model aligns well with ours,” Tom advises.
“The fact that Foundation East did not require us to secure the loan with personal assets was also attractive. Our leadership team were all taking a risk already by working full time on the enterprise without any expectation of income for the foreseeable future. Further risk-taking was untenable.”
From Foundation East’s perspective, it was clear that Tom’s business plan was viable and aligned with the goals of the Responsible Finance sector. He also had the right mindset, skills and team in place to deliver it, as business loans manager, Bob Shimmon describes:
“Tom needed funds to purchase stock for an initial trading quarter before starting a funding round. The business plan provided excellent market analysis. He was an impressive individual with a strong, diverse advisory team and ongoing expert support from Allia. His plan was also clearly aligned to many of the UN’ SDGs. As a Responsible Finance member, Foundation East is committed to contributing, both directly and indirectly, to these goals. We are unique in the financial services sector for this commitment and we are always interested in supporting businesses who share our commitment.
“We, of course, agreed to provide him with the required finance.”
Encouraging best practice
As well as its focus on community benefit and supporting the UN’ SDGs, for Tom, there are many things about the way Foundation East operates that serve his social enterprise well.
“The process from application to release of funds was rapid and the communication sensitive at all stages. Foundation East asked rigorous questions throughout to ensure we had thought through our plan, including supporting us in working out what to do if the seed funding did not go to plan. Their reporting processes, including monthly cashflow and quarterly profit and loss accounts, are really focussing. They’ve helped us to ritualise good habits that will serve us well in the long-run,” Tom advises.
As a social enterprise, Storimarket has a strong code of conduct. This code of conduct is informed by established principles, such as the UN SDGs (see below), Fairtrade Foundation and the Ethical Trading Initiative, as well as professional standards, such as the International Workshop Agreement on standards relating to a Professional Farmer Organisation.
United Nations Sustainable Development Goals Storimarket aims to contribute to:
SDG 1: End poverty in all its forms everywhere.
SDG 2: End poverty, achieve food security and improved nutrition and promote sustainable agriculture.
SDG 4: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.
SDG 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.
SDG 12: Ensure sustainable consumption and production patterns.
SDG15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.
SDG 17: Strengthen the means of implementation and revitalize the global partnership.
Guided by this code, within six months of taking the loan, Storimarket has:
- Recruited five suppliers, all small producers in Africa committed to working with smallholder farmers using natural farming methods
- Built a network of 30 + retailers in Cambridge, London, Bristol and Bath
- Created two part-time roles (whilst sustaining three directors volunteering full-time)
- Established a monthly revenue of £2,000 +
- Begun serious discussions with a potential investor.
In terms of social impact, Storimarket is clear on its objectives and, even though it has not yet been trading long enough to have collected much data, there is already substantial evidence of the good it is creating, as Tom explains:
“There are two sides to our social impact story, the positive difference we make to farmers and communities in Africa, and the positive difference we make to consumers and communities in the UK.
“In the case of African smallholder communities, we are making social and environmental impacts. Firstly, we are improving farmers’ incomes and making sure they are engaged in a long-term fair relationship. This gives them reliability in incomes, which is really important if SDGs 1, 8, 9, 12 and 17 are to be achieved.
“This impact ripples through to the environment. Because our farmers now have reliability of income and trust that our model is sustainable, they are willing to commit to our terms in relation to following natural farming methods. We do not insist on farmers being organically certified, as that’s quite a high bar for a smallholder in Africa. We are though insisting on mixed agriculture, minimising use of chemicals, using water responsibly and other positive environmental practices, thereby contributing towards SDG 15.
“In the case of UK consumers, alongside ethically sourced, packaged, distributed and funded healthy food, we are providing the story of how this food made it from farm-to-fork and how, on its way, it positively changed the lives of those who grew it.
“As well as supplying established and emerging wholefood and zero waste shops, we run educational events communicating, for example, how a pineapple grows or where a macadamia nut comes from, thereby contributing towards SDG 4.
“That’s impact. When we all understand where our food comes from and how it got here, we will all be better informed and better able to live healthier lives. And by ensuring we live our own values at every touchpoint, by, for example, accepting finance from an organisation that exists to strengthen the community, we are building the type of authentic social enterprise with which this emerging tribe of ethical consumers will want to engage.”