The rural Philippines: hot, wet, lush. Though I wasn’t exactly sure where I would end up after graduating from Santa Clara University and hiking the Pacific Crest Trail for 4.5 months, I’ve come to settle in at Paranas, Samar, my home away from home. Don’t get me wrong, living in the Eastern Visayas has not come without its challenges—never quite “fitting in”, sweating—always, and living to the cacophonous soundtrack of roosters—but behind the curtain of this small provincial town, innovation is brewing in the coconut industry, and I’ve been lucky enough to be a part of it.
For many of us, coconuts have begun to play a larger role in our daily lives over the last 5-10 years. We cook with its oil, munch on its dried meat in our snacks, moisturize our skin, and of course, bake macaroons. Despite its wonders, the journey of a coconut and its farmer remains mystery to most. Prior to beginning my work in the Philippines, most of my coconut related thoughts revolved around devising a strategy to best chisel open the outer shell without injuring myself, this generally required moving from the kitchen to my garage to select more appropriate tools.
For the more than 15 million Filipinos who farm coconuts for a living, the coconut is more than just a guilty pleasure. Throughout its 7,000+ islands, generations of farmers and their communities have harnessed coconuts to build homes, sweeten meals, create art, and generate income. Its many uses and frequent fruit production has led to the coining of its eternal name, “the tree of life”. And with the rise of globalized markets, more people are demanding its coconut products, yet, despite this growth, 9 million of these coconut farmers still live in poverty.
Understanding this discrepancy begins at the farm. In Samar, most farmers lack access to higher-value markets for their coconuts and are thus forced to produce a low-value product called copra. In the Philippines, farmers spend long hours drying coconut meat to make copra. After the moisture content is reduced to the required maximum, farmers sell copra to village-level traders who then send it to regional oil mills for energy intensive processing. This ultimately creates a low-value coconut oil called refined, deodorized, bleached (RBD) oil, used primarily for cooking. Despite the intensity of their efforts, the average farmer in Samar earns around $620 per year from copra production.
Concurrently, producers of high-value virgin coconut oil (VCO) operate large, but costly processing facilities in more industrialized regions of the Philippines (Manila, Cebu, Davao). In these areas, many high volume, multi-million dollar facilities compete for expensive whole coconuts to be shipped from the closest farmers who are able to meet their demand. These heavy whole coconuts are costly to ship and are commonly processed into dried coconut flakes (desiccated coconut) before being expelled into VCO.
It’s at this juncture where you might be thinking: why not produce desiccated coconut in rural areas and employ farmers in the processing? With this model coconut farmers could increase their incomes by forgoing the need to make copra and access employment at a municipal-level processing facility, at the same time, the large, multi-million dollar facilities could access less expensive desiccated coconut (DC), forgoing the need to ship whole coconuts, which are 7x heavier than DC.
This is what we are doing at CocoAsenso.
For the last 2 years our team has been assembling the necessary partners, funding, and equipment to begin creating high-value coconut products in the communities where coconuts are grown. Our next challenge: can we scale this innovation beyond our first facility to make a more equitable and efficient coconut industry in the Philippines? We think so.
After beginning my journey to social enterprise as a Global Social Benefit Fellow in early-2015, consulting Jibu during its early growth stages, and helping launch CocoAsenso since May 2017, I’ve assembled a few reflections to consider for those looking to create scalable ideas in the social enterprise space:
1. Let your community shape your model
The traditional model for starting a business or implementing a new innovation begins with the idea, then finds a financially capable market segment. While this may work for proven businesses that are trying to target established certain groups of people in new areas, new ideas seeking to solve social and environmental challenges in impoverished areas must understand its communities first. Some important questions to ask yourself during the brainstorming process:
How much investment is needed to carry out given solutions? How can I minimize investment while maximizing impact?
Has anyone pursued my idea? If yes, why didn’t it work or why couldn’t it scale? Was it a capital, human, or infrastructure problem? How will you overcome it?
What is the broader context I’m operating in? What resources are available locally, regionally, globally? How will I be disrupting the livelihoods of existing business owners, how vulnerable are these entrepreneurs? How will I give disrupted groups a voice?
What is my role in bringing this idea to fruition? How will I ensure my idea has local ownership and management?
2. Focus, with a broad vision
In the world of coconuts, there are hundreds, if not thousands of ways to extract value from this tree of life. Many are quite niche, and alluring along the long, lonely path to establishing a processing facility in a remote farming community. For CocoAsenso, coconut jerky caught our attention, but, ultimately proved economically infeasible. While exciting in the moment, exploring the feasibility of this products ultimately slowed our progress toward our core model.
- In short: let your competitive advantage drive sustainable revenue, then expand into other areas once you know how to do what you do best.
3. Strategically target financial partners
While the social enterprise ecosystem is still young in the Philippines, impact investing is continuing to gain traction among NGOs and government. More impact-oriented capital is enabling social enterprises to scale with less reliance on traditional financial institutions. CocoAsenso has raised most of its capital through competitions and grants, largely from local and regional partners. We believe these sources will continue to play a substantial role in supporting our early growth stages. A few insights from our experience:
Build resilience in disaster-affected communities: As more NGOs look to fund capacity building, target organizations who may have left over or partitioned funds from disaster response efforts. Of course one should not predate funding which helps the most vulnerable bounce-back from a disaster, but in many cases, 2-3 years after a spike in NGOs have left a disaster affected community, there will be remaining financial support best suited for establishing social enterprise. CocoAsenso has been able to access capacity-building grants by working with farming communities affected by Typhoon Haiyan which damaged much of the Eastern Visayas in 2f014.
Find partners to widen your scope: While much government funding & support remains excluded from for-profit social enterprises, other groups who may share your same vision can work with you to carry out your idea in exchange for ownership or repayment. CocoAsenso was able to establish its first facility by partnering with a local farming association interested in our vision.
Access university resources: As more universities are directing resources and attention toward catalyzing social and environmental change off-campus, utilize their capacity to carry out your shared vision. The Miller Center’s Global Social Benefit Institute is a perfect example of this: a win-win for Santa Clara University and the enterprise. Other Universities, such as the University of San Carlos (USC) in Cebu City (a Miller Center partner), are even going a step further. With the recent announcement of their new Center for Social Enterprise (CSE), undergraduates will soon be required to enroll in social enterprise curriculum. USC’s CSE will also be working to target and launch enterprises in communities throughout greater Cebu.
4. Consider how to prioritize your impact model
Balancing impact and growth can be a difficult trade-off in social enterprise. Founders generally want to be as impactful as possible, but market and political conditions may limit their efforts. At CocoAsenso, we’re beginning to ask difficult questions that will have a significant impact on our model as we scale. While unique to our model and the local coconut market, these questions serve as a framework to think about other challenges:
- How do we best compensate farmers for their coconuts? Do we pay farmers above market rate for their coconuts? Or generate more profit to enable faster scaling? While paying higher prices for locally sourced coconut may have more immediate benefit, this leaves less money for reinvesting, paying farmer employees or funding community development activities.
- How do we protect tenant farmers from being kicked off their land? Many coconut farmers in our community do not own their land. Some operate under an agreement with the landowner and share the revenue from selling copra. With the establishment of our coconut processing facility, landowners have the opportunity to sell whole coconuts, freeing up the needed labor for copra production. Anticipating the potential for tenants (often the most vulnerable farmers) to be kicked off their land, we must establish protective measures that are fair for landowners and tenants.
- Who owns my enterprise? In an ideal world, new social enterprises will always be launched and owned by the most vulnerable and capable. In reality, many are launched by people who are better resourced, may come from another country or community, and have a vision for high level change. As a committed founder, spending time, energy, and passion, you must ask how best to balance fair compensation for your efforts while maximizing benefit to the people you are working to help. It’s here where the core of your company’s “why” lies.
The Road Ahead
While coconuts may not have been on the top of my mind amid my post-graduation job search, CocoAsenso has challenged me to better understand the role of social enterprise in global development. Upon my completion of Miller Center’s Global Social Benefit Fellowship, I’ve thought more and more about starting an enterprise of my own, but for now I’ll be in the Philippines, working with coconut farmers of Paranas, and dreaming about the road ahead.
To learn more about CocoAsenso, and its mission to improve the livelihoods of remote coconut farmers in the Philippines, click here.
To read more of Tom’s reflections and follow his upcoming Pacific Northwest Trail thru-hike, check out his blog: wheres-wheeler.com.