The Business Case for Sustainability – 5 Lessons

by Ann Armbrecht, SHI Director

As a student of herbal medicine, I had no idea that there was even a category called botanical ingredient suppliers. Nor did I understand the key role they play in the complex web of sourcing botanicals from around the world.

In fact, ingredient suppliers are often the key link between product brands and growers and wild collectors around the world. Though invisible to consumers of botanical products, the quality of this work: the attention to the quality of the raw material and to the relationships with producers in large part determines the authenticity of the claims a brand makes about the quality and sustainability of their products. And so, as part of the SHI Sustainable & Regenerative Practices Toolkit webinar series, I spoke with Brian Zapp, Creative Director at Applied Food Sciences, and Andrea Zangara, Director of Marketing & Scientific communication at Euromed about how they balance quality, sustainability and pricing in sourcing ingredients from around the world.

Sustainability Defined

Brian began by saying that for AFS sustainability focused on three key areas:

1. Environmental Leadership. Taking care of the plants and ecosystems around their ingredients. He said they call it progressive agriculture rather than regenerative agriculture, because the more they learn, the more they need to change their systems about how to best care for the planet.
2. Social Responsibility. It is also really important to not lose sight of the people that are involved in growing, harvesting and processing herbs. How to do that as responsibly and ethically as possible?
3. Traceability/Accountability: None of the first really matter unless it’s all transparent, at least to the best of our abilities. And that’s including economic accountability.

Euromed was created by the German pharmaceutical company, Madhaus, to establish a vertically integrated supply network for the botanical raw materials used in the company’s pharmaceutical products. And so that vertical integration, Andrea explained, is key to ensuring a sustainable and traceable supply of botanicals. They establish their own plantations to reduce the collection of wild plants whenever possible. When they do source wild harvested plants, they source from long term partners. Their purchasing manager visits yearly not only to be sure that collectors comply with protocols, good agricultural collection practices, etc. but also to make sure safety measures are in place, there are no children working and that the collectors are compensated fairly.

This works takes resources. Euromed and AFS make these investments because they recognize that the health of their company depends on the quality of their products now and in the long run. And this quality depends on these investments.

5 Key Investments

1. Investing in Long Term Commitments

Knowing and investing in your supply network is essential to ensuring a long term supply of raw materials that meet quality standards. Those investments take time and resources. But those investments are core business, not an add on.

“The question of sustainability is an inherent piece if we want to set ourselves up for long term success,” Brian said. “If we’re thinking in terms of short term, people and businesses tend to just consume, consume, consume and over capitalize. To make a successful product, ingredient, and relationship for everybody, we need to start our thinking at a timeline of the next 5-10 years.”

Euromed invests in agronomic research and establishing farming and harvesting programs to develop protocols to not to damage a particular species. They then train the collectors on the protocols. They also have many examples where they have invested a considerable amount of resources to improve all sustainability and transparency processes of particular species, including Saw palmetto and Milk thistle extracts.

For the Saw palmetto, a wild plant only growing in Florida, Euromed established a warehouse near lake Okeechobee in the Everglades to reduce intermediaries and better control the process. Waste from Saw palmetto extraction is then upcycled for the textile industry. They have established plantations to self-pollinate milk thistle, limiting over harvesting and improving the quality.

2. Investing in Relationships

As everyone who cares about responsible sourcing says, relationships are key. Andrea added, “I think this is even more evident now than before. With COVID and increased demand, established relationship are paying back.”

Developing and maintaining relationships in ways that work for all parties takes work. Brian elaborated.

“When we started our coffee practices implementation, it was a rough road. We were asking growers and producers a lot of really challenging questions. It was received fairly well, but it was based on a promise of [financial] commitment… We’re asking them to reveal a lot of information to us [about economic accountability, ecological pest control, safe work environments, and fair wages], and so we better put our money where our mouth is and make sure it’s financially incentivizing for them.

When we started, it was tough because the demand wasn’t fully there for what we were asking. So we kind of had to be comfortable living in a place where we’re paying more for higher quality material that we didn’t necessarily have a market for. That takes a lot of risk. It’s not an easy thing for a company to be asked to do. But then again, this isn’t an easy step for the farmers who are trying to partner with us. So we had to continue to find the right customer base as well. Those who are in alignment with us and also value this quality of sourcing.

On the other hand, if the finished buyers are pinching every chance they get to get more certifications and better quality for a lower price, then it continues to push the pressure downward. By the time we see the ramifications of that and see the quality suffer, it’s already too late. A lot of what is needed to maintain that quality has already fallen apart, maintaining equipment, paying employees fairly, taking care of health and safety, suddenly using banned pest control, because they refuse to invest in a long term solution for responsible pest management.”

Preventing that from happening requires being willing to pay more than the cheapest price.

3. Alignment of Values

Focus on like-minded companies where values are in alignment.

I asked Andrea and Brian what they needed from their customers in order to continue to invest in these initiatives. Andrea said that most of their customers have been their customers for many, many years and they work on long term contracts. Brian agreed, adding that the first step was being able to provide quality ingredients that met their customer’s specifications. The barrier for entry is quality documents, validation against adulteration, every quality supplier should have that. Then the next question they hope to hear is about sustainability. What works best is to work with customers whose values align with their own.

Brian said, “Sustainability is a less sexy marketing piece of the puzzle, right? Nobody’s searching necessarily for this, at least right off the bat. It’s like a ‘nice to have.’ And so hats off to the kinds of companies that are supporting initiatives like the Sustainable Herbs Program. Supporting sustainability is something that should be celebrated more than it is.”

4. Investing in Certifications

Certifications are valuable in providing an independent verification on claims companies make. But they will never be the end all, Brian explained, because many of the challenges of poverty and environmental degradation are beyond the power of any particular company. These are systemic issues that need to be addressed in systemic ways. And so certifications are a first step, but they aren’t the final step. Nor are they a replacement for traveling to the site and meeting the farmers growing the botanicals and learning directly from them the challenges they face. “A certification can’t replace the authenticity of that relationship,” Brian said.

Brian’s comments elaborated on these points and so I share them in full:

“When you go there it becomes apparent that there’s so much more to the conversation than just saying, ‘Hey, here’s our criteria, are you guys going to follow through on our checklist of what we need? If not, we won’t work with you.”

When we approach it this way, we have to ask are we really supporting these communities or not?”

He elaborated on this tension in the example of working with coffee growers:

“Some of the farmers we work with are in their ninth generation and the workers are fourth, fifth generation and sometimes longer at times. So there’s an economic incentive for them to keep going, right? And suddenly if we come in and start putting demands of blanket criteria on them, saying, ‘Hey, this is our one size fits all audit and you’re either following these rules, or you’re not,’ it just shows that you can be equally unfair as a supplier by just putting our demands on these communities. And again, then what if we suddenly have a fourth, fifth generation family, saying that it is too much for them to meet these standards and keep going? Now you lose that experience. How do you measure that detriment in quality?”

Euromed also has a number of certifications and regulatory bodies or external parties continuously audit their facilities. They also invite their customers to visit their plantations in order to see firsthand the collection and drying process, how they care about workers, etc. “Those are things that are above and beyond certifications, but certifications are indeed important as part of an overall movement towards transparency.”

Euromed is developing new products with locally sourced botanicals to better control the process, to improve the local economy, and reduce Euromed’s carbon footprint. They have invested in developing technology to extract botanicals with water only, which, though a big investment, ensures no potentially contaminant chemical residues are released in the environment and improves the safety of the extract. They also recently launched a line of organic and bio extracts.

5. Investing in Collaboration.

Companies in the botanical industry tend to focus on differences and to differentiate themselves from potential competitors. This can make it hard to work collaboratively to address the common problems the entire industry faces. They each emphasized the importance of collaboration and gave examples, Brian of working with another company to develop and expand markets for cascara as a way to support coffee growers. Andrea mentioned Euromed’s collaboration with ABC to host events to advance the fight on adulteration.

Stay Informed!

The next in the SHI Toolkit Webinar Series is a conversation with Tal Johnson, CEO of Herb Pharm and Sebastian Pole, Co-Founder of Pukka Herbs about the role of leadership in mission-driven companies. Following that, we will be speaking with Bethany Davis, MegaFood, Matt Dybala, HerbPharm, and Tommy Leonard, Gaia Herbs, about the different paths their companies are taking to support regenerative practices.