Pangoa: A business model for reforestation and agroforestry

Pangoa: A business model for reforestation and agroforestry

This news is part of the following focus area:
Natalia Palomino
Natalia Palomino
Comunicación y gestión de fondos | Perú y Ecuador

In 2021 the Peruvian farmer organisation Pangoa is moving towards an ambitious agroforestry development plan that benefits its coffee and cocoa crops in alliance with Cooperative Coffees, one of its most important clients. The U.S. company has been investing $35,000 in this plan based on evidence from previous studies and initiatives of the farmer organisation developed with Rikolto and academia.

Thanks to the 5-year agroforestry plan structured with Rikolto's support, the agroforestry systems will allow Pangoa to generate environmental services and benefits with VCS certification for carbon credits, timber certification (timber sales), used to separate and make better use of waste from the production process and reduce processing costs, all of which interests investors/clients such as Cooperatives Coffees and Deans Beans Organic Coffee.

It also allows the farmer organisation to recover degraded areas through reforestation with clonal gardens and to adapt its coffee and cocoa crops to climate change.

Between 2018 and 2020, the farmer organisation and Rikolto laid the groundwork for these new partnerships with several actions, including a carbon footprint study for organic cocoa for export and the selection of native cocoa trees for the creation of clonal gardens.

The next step is to "repopulate" Pangoa with native cocoa resistant to disease and climate change.

The next step is to "repopulate" Pangoa with native cocoa resistant to disease and climate change.

How can environmental, genetic rescue and agroforestry solutions attract the attention of the private sector and spark new alliances in the chain? We discussed these and other questions, based on the experience of the Pangoa farmer organisation, with our colleagueTeófilo Beingolea, project coordinator in Peru.

What are the benefits of agroforestry for the environment? How does it relate to the farmer organisation's genetic rescue initiative?

Teófilo: Agroforestry offers profitable and ecological alternatives for coffee and cocoa farms, two crops that require shade. It allows us to take advantage of several elements (timber species, orange, cassava or other crops next to cocoa plantations), helps to gradually recover biodiversity and mitigates the negative effects of practices such as logging and burning of trees that produce CO2 in nearby areas.

The Pangoa plan contemplates different models adapted to the needs of coffee and cocoa farms. For example, a "boundary" model that is installed on the contours of the crops, whether cocoa, coffee, pineapple or others that require protection from winds, or simply a delimitation of the cultivated area or the protection of a road or highway.

There is also a "multi-layered" model for cocoa that installs combined species around the contours of the crop and inside the cultivated area as permanent shade.

Also, a "forest massif" model for producers to receive higher profits and value their heritage even more, and other more precise models for coffee, among others.

In the case of Pangoa, its agroforestry plan also contemplates the installation of native species that are more resistant to the high incidence of diseases and pests (a consequence of climate change, but also soil and water pollution). To this end, the farmer organisation's clonal gardens (a genetic rescue initiative) are key.

Does agroforestry contribute both to carbon neutrality and to the mitigation of other climate change effects on the plot?

Teófilo: Yes, the fundamental contribution of an agroforestry design is to improve the efficiency of capturing gases such as carbon dioxide in plots. This raises the overall carbon neutrality of the farm.

It has also been demonstrated that, from the production in Pangoa, the cultivation phase contributes 96% to the final carbon footprint of organic cocoa.

It has also been demonstrated that, from the production in Pangoa, the cultivation phase contributes 96% to the final carbon footprint of organic cocoa.

Agroforestry also brings good agricultural practices and attract pollinators, which benefits several cops of the farm.

The mitigation of the effects of climate change is guaranteed both by the various agroforestry designs and by the initiative of clonal gardens with elite trees from the area that will allow reforestation with grafts resistant to the new climate conditions, among other benefits.

First, it made it possible to measure the environmental impact of the crop to evaluate mitigation solutions and turn into a plan that Pangoa co-finance with their clients. Also, gave clarity for investment, both to producers and to customers/partners. Secondly, it allowed them to create their genetic bank with the best native cocoa trees in the area, to give sustainability to the initiative, since they use their resources (from the area) and lower the costs of reforestation necessary for the agroforestry plan (coffee and cocoa processing).

And there are benefits in the quality of the product itself (native cocoa has excellent organoleptic qualities sought by the international market). Through reforestation (part of the agroforestry plan), future harvests of good quality are guaranteed, as well as the regeneration of the ecosystem (altered by climate change, damaged by logging and burning of trees).

There was an interesting collaboration between Pangoa and Rikolto, as we accompanied the selection of high-yielding and pest-tolerant trees. These serve as "genetic material" that is grown in clonal gardens and grafted onto other plants and improves their resilience to climate change.

What is the challenge in linking these efforts to international markets? Are clients investing in agroforestry solutions?

Teófilo: Anchoring into high-value markets that can pay for these improvements is not easy, and when it is achieved the standard must be maintained. You have to find customers who value this type of product (sustainable, with a high production investment), and the next step is to engage them to invest together in agroforestry solutions that enable the sustainability of supply and raise the value of the product. The needs of the client must be linked with those of the farmer organisation. This was Pangoa's strategy.

You have to find customers who value this type of product (sustainable, with a high production investment), and the next step is to engage them to invest together in agroforestry solutions.

For example, a challenge for the farmer organisation is to improve the use of resources and integrate production systems with shade trees. If I install a hectare of cocoa, I must associate timber plants and others that ensure 30% shade and thus capture more CO2. Thinking of linking with the interests of the client, I make my way to carbon neutrality which is something that is sought after now especially for the coffee market.

There is also the interest of the fair-trade market: in 2020, 26 partners of Pangoa have reforested 13 hectares with 8,000 native timber and high-value cocoa trees, with investment from the fair trade premium.

Agroforestry systems guarantee a high-quality product that can be offered to differentiated markets, which in turn require products with low environmental impact, especially carbon neutral as in the European Union.

But they also allow them to take advantage of other elements of the farm, either by diversifying crops (oranges and cassava, among others) or timber species. Thus, forestry plantations (where cocoa is located) become highly profitable, serve to overcome crises (such as COVID-19) and are perceived as a safe investment by the members of the farmer organisation or association. This has been particularly important since COVID-19 because clients are looking to invest in things that have a positive impact on the farmer's life. Every way you look at it, agroforestry brings business opportunities.

Finally, what challenges does agroforestry bring for the producer? What do producers need to know or do to respond to them?

Teófilo: The main challenge is the investment required to make the farm more sustainable, and that requires specialised labour and technical assistance. Ideally, it should be undertaken under an agroforestry plan, within the framework of a farmer organisation or association.

If I was a producer and I would not want to burn the residues of my crops, I have to invest more on my own than in association with an organisation. Reforestation, in particular, one of the biggest challenges, is not only about the investment for seedlings, but also about access to good quality genetic material. In this case, Pangoa will provide them through its clonal gardens.

Another challenge is to demonstrate to the market that the crop is sustainable and emits low levels of CO2. For this, certifications are important, as well as previous studies that allow us to find solutions.

In the case of Pangoa, they participated along with other cooperatives in a study that we promoted with the Pontificia Universidad Catholica del Perú (PUCP) to measure the carbon footprint of cocoa. The results allow us to refine a work plan that makes certification viable and also, before this, to interest more customers (including coffee growers) as has happened in the case of Pangoa.

They must first be able to organise themselves. Cooperatives and associations are in the best position to access financing. But it is also desirable that they implement their technical assistance services to members, where the farmer organisation has developed capacity. This challenge is often being taken up by young professionals, trained in agroforestry and sustainable cultivation, as well as in taste, on which basis they can advise the producer on how to improve the quality of the product to the client's liking. This is the case of Pangoa, and that gives confidence to the customer.

Plans also help. When a farmer organisation hires professional staff, it presents a plan that demonstrates that it has what and how to invest in. Then to invest in an internal team that can carry out technical assistance and studies to certify low environmental impact is to invest in the future of business relationships.

Finally, be clear about the national landscape and the opportunities arising from it. The low sustainability of cocoa production systems is identified as a priority problem in the National Development Plan for the Cocoa-Chocolate Value Chain 2020-2030.

Strategic actions in cocoa-producing regions like Junín would not be possible without the analysis of climate variability and the calculation of the carbon footprint, mitigation and monitoring of the State, producers and industry. That is why we must focus on synergies, generate evidence, and promote public-private partnerships.

If you want to know more about this project, feel free to contact our colleague Téofilo,

Teófilo Beingolea
Teófilo Beingolea
Coordinador de proyectos | Perú