TERMS OF REFERENCE Terms of Reference Assignment: Baseline and Market Scoping study for coffee, black pepper and turmeric value chains in Paderu, Andhra Pradesh Program: Verified Sourcing Area (VSA) IDH the Sustainable Trade Initiative (IDH), is an international not-for-profit organization that convenes companies, Civil Society Organizations (CSOs), governments, and other stakeholders in public-private partnerships to accelerate and upscale sustainable trade of several agricultural commodities. IDH drives the joint design, co-funding, and prototyping of new economically viable approaches to realize green & inclusive growth at scale in agricultural commodity sectors and sourcing areas. Through its partnerships, IDH aims to drive sustainability from niche to norm in mainstream markets, delivering an impact on the Sustainable Development Goals. IDH VERIFIED SOURCING AREA (VSA) PROGRAM Due to the rising global demand for responsibly produced agricultural commodities, businesses, and governments in producing regions as well as in consumer markets are increasingly putting sustainability commitments on their agendas. Yet no efficient and inexpensive option currently exists to guarantee the supply of agricultural commodities that fulfill these commitments at scale. The Verified Sourcing Area (VSA) model is a new responsible sourcing mechanism currently being developed by IDH and its partners. The VSA model brings together the producing region, supply chain actors, and committed end buyers. In the producing region, a sustainability improvement deal (Compact) is made between private and public stakeholders at the jurisdictional level, e.g. a municipality, mandal, district, or state. Rather than verifying sustainability farm by farm, the proposed partnership model takes a regional jurisdictional approach, which reduces costs for sustainable agriculture and allows markets to buy large scale volumes with greater efficiency, transparency, and traceability. Also, this way sustainability targets related to forest protection, labor, land tenure, governance, and transparency can be much more ambitious in scale and impact. The VSA helps companies (domestic and multinational) source large volumes of commodities in line with their sustainability commitments at a competitive price and scale. Through the Compact, public and private stakeholders agree on priority sustainability topics and targets, the strategy to reach these targets incl. project pipeline, and the monitoring and reporting system. It uses an online platform to match global demand for sustainability with local sustainability priorities and achievements. IDH is currently piloting VSAs in Brazil, Vietnam, Indonesia, and India. The VSA program in India is under the Sustainable Sourcing at Scale in India partnership (link) that aims to brings together businesses, governments, farmers, communities, and civil society to build sustainable jurisdictional governance models. Ths VSA approach would focus on Agri value chains with high commercial potential in select jurisdiction geographic area of Paderu Mandal the state of Andhra Pradesh. Beyond the work in Andhra Pradesh, the partnership will seek to replicate lessons learned in other states in India, as well as connect to the global scaling up of the Verified Sourcing Areas model including in Indonesia, Vietnam, and Brazil. 1 TERMS OF REFERENCE More details on IDH’s strategic approach to VSA can be found here. SCOPE AND OBJECTIVE OF THIS ASSIGNMENT IDH has selected the Paderu Mandal of Visakhapatnam district, in Andhra Pradesh, India as the potential location for the VSA implementation. IDH will implement the VSA model in select 3-4 farming clusters in the Paderu Mandal wherein a typical farming cluster would consist of around 1000-1500 farm families (3- 4 Gram Panchayats in terms of jurisdiction). The VSA implementation will focus on crops that have high commercial potential as observed in the selected location: Coffee, Black Pepper, and Turmeric. The rationale for the selection of these crop commodities is based on the market potential, value chain improvements, and the ability to get larger and committed buyers on board as potential partners for the VSA project. IDH is looking to conduct a market assessment and scoping study as a part of its VSA implementation work through an external consultancy firm. This study will be a critical part to develop the overall project design, development of compacts, supply chain efficiency, and on-boarding of committed buyers as a part of the VSA implementation work. The market assessment and scoping study will have two critical components as a part of the work: - Market assessment and analysis of the coffee, black pepper, and turmeric value chains as observed in local jurisdiction area of Paderu block and the regional area. Focus has to be given on the market linkages and potential for value addition for these crops post-harvest - Baseline survey and assessment with a select sample of the smallholder farmers in Paderu block who would be covered under the VSA implementation. The minimum sample size for the baseline assessment is expected to be 300 small holder farmers The selected consultancy firm will be expected to utilize a mix of secondary and primary research techniques to conduct this assignment. In the project area of VSA implementation work, the firm will be expected to identify the key stakeholders active in the coffee, black pepper and turmeric value chains and to perform a detailed assessment of the operations, opportunities and challenges envisaged in the VSA implementation work. Specific insights will need to be developed for market linkages across the select value chains in terms of the nature of buyers (local market vs regional, national vs export markets, processed vs raw product buyers, etc) concerning the commodities, aggregation scenario and improvement and opportunities and value chain structure that would help to attract buyers into the VSA location. Based on the information gathered through the analysis of the value chains and insights from the baseline survey, the consultancy firm will recommend market-oriented value chain improvement and critical design components that VSA should consider to attract buyers . The consultancy firm should develop a pipeline of potentially interested buyers such as processors, exporters or FMCG firms: existing buyers of products from the area to support the VSA development; or to attract new buyers who have sustainability commitments on procurement and development of value chains. Some of the key questions that the market scoping study should aim to answer include: • Key opportunities and challenges across the value chains that impact the efficiency of operations and market linkages 2 TERMS OF REFERENCE What are the key challenges in the value chains that inhibit suitable and sustainable market linkages in the jurisdictional area? What are some of the key risks or challenges that are envisaged during the implementation of any value chain improvement activities? What could be the potential mitigation strategy? What would be the desired impact from various stakeholders on any new intervention that is designed and developed in the area? • Baseline assessment What is the desired area of impact for smallholder farmers for any sustainability related intervention in the VSA area (higher or better price of the produce through better market linkages or direct sourcing, reduced cost of production through access to high quality inputs, better diversification of income, rationale use of inputs to enhance farm productivity etc?) • Potential interest in sustainable sourcing from the VSA model and buyer analysis What are the key segments of buyers who will be interested to procure from the VSA area. What is the level of commitment of these buyers (private sector players, individual traders etc) on sustainable sourcing for key Agri commodities covered in the VSA? Who could be the key private sector sourcing partners for the commodities covered under the current VSA implementation? Are there already existing multi-stakeholder partnerships and examples that are relevant to the VSA for learning as well as exploring partnerships? Are the buyers (private sector players, local and regional traders) willing to co-fund sustainability related interventions planned under the VSA project that improve smallholder farmer capacity to undertake different sustainability-related practices for farming? • Sourcing area How relevant or strong are the select value chains for potential VSA implementation? Are there any alternate value chains or segments that should be looked into while implementing the VSA model? The consultancy firm is expected to present a framework for value chain analysis that will be utilized during the course of this project. An indicative framework that could be utilized to analyze the value chains has been presented which should be further enhanced based on the consultancy firm’s experience and knowledge • Production profile and business case to • Relevance of the value chains for VSA invest in the value chain development implementation • Status of government engagement and • the interest of the private sector for focus on value chain operations participation or collaboration across the • Main stakeholders along the value chain value chains and key challenges across the • Assessment of possible sources of transactions (financial, material and funding from the private sector to others) develop the value chain operations • Potential for multi-stakeholder coalition