By Laura Canevari
Small businesses operating in the Caribbean are faced with constant challenges.
First, the challenges when operating from an island: you are in a remote and isolated location with limited natural resources; costs of production are high; transport costs are high; there are no economies of scale; and your domestic markets are quite small.
Second, trading policies are unfavorable to local producers. There is a high level of dependence on imported inputs (including fuel); a lack of diversity in the goods exported and in trading partners; and a rapid depreciation rate of some Caribbean currencies (such as the Jamaican dollar), which increases operational costs and reduces business competitiveness, both locally and internationally.
Third, access to finance – including finance for innovation and for relief – is very challenging. High interest rates, lack of collateral, and the burden of government (in terms of tax rates and bureaucratic inefficiency) are highly problematic.
Agriculture in the Caribbean has also been fundamentally shaped by the colonial legacy of plantation economies. There is a tendency in favor of export-oriented production, and the best arable lands have – and continue to be- allocated to major export crops such as sugar cane and bananas in large scale operations. This leaves only marginal – and hilly – areas for small-scale domestic production. These areas are generally under-utilized, many times due to farmers lacking the investment capital to clear and develop more land at their disposal, or to update their equipment and practices to increase land use efficiency.
And this is just the top of the iceberg.
Climate change, a threat multiplier
Add to this reality climate change: A threat multiplier capable of generating new and amplified perils to a group of actors that are already in relentless struggle for survival. Analysis of observed meteorological records show a warming and drying trend across the entire region as well as an increase in tropical storms (especially for hurricanes category 4 and 5). In the future, the Caribbean region is expected to experience further erratic rainfall, higher temperatures, stronger droughts and greater climate variability.
Multiple effects on agricultural systems emerge from these changing conditions. In particular, changes in temperature and in rainfall patterns and diversion from favorable agro-climatic conditions can hinder farming productivity, lowering yields and the quality of the produce. Increase intensity of hurricanes and tropical storms can increase the incidence of coastal and riverine flooding and expose assets to high wind speeds. These hazards can generate damages to infrastructure and equipment, making it difficult to undertake farm operations and reach markets; and it can also impact on communities and labour force.
But it is not just farmers that are exposed to the challenges generated by these changing conditions. When we take a whole value chain approach, we can see that climate change generates differentiated risks along all tiers of a value chain, depending on the resources and activities needed to carry value chain operations. To illustrate this point, Figure 1 below shows the different actors, resources and activities along the cassava value chain in Jamaica and some of the key associated climate hazards that each tier is exposed to.
Strategically relate to better adapt
New forms of innovation aligned with the socio-economic and climate realities of the Caribbean are therefore needed. It is herein that a relational approach to climate adaptation can be most beneficial.
As a form of soft innovation, relationship building and strengthening can help actors in agri-business reach critical resources – such as finance and information – helping to increase their adaptive capacity. My research also finds that business relations affect actors’ ability to share or transfer climate risks, making businesses more or less susceptible to adaptation actions taken by others and granting businesses greater or lower flexibility when responding to climate hazards. These dynamics can alter businesses’ perceptions and attitudes towards climate risks and their adaptive responses. In addition, effective relationship management can increase value chain flexibility, visibility and agility, strengthening the overall resilience of agricultural value chains and their capacity to withstand and respond to external shocks, including climate hazards.
When thinking about barriers to climate adaptation, a key challenge that SMEs face is their ability to engage in and benefit from open innovation processes. Due to their size and financial capabilities -which restrict resource allocation for in-house R&D- SMEs are more reliant on open innovation processes than larger firms, and also perform it more intensively. However, SMEs ability to engage in open innovation processes is not only reliant on SMEs internal organisational learning capabilities: It also depends on their capacity to build collaborative relationships with counterparts in order to unlock access to new inflows of knowledge, and on the overall levels of inter-organizational knowledge and innovation openness of the broader business network.
What is the role of government in promoting relational adaptation?
Governments can formulate adaptation strategies focused on stimulating and incentivizing relational innovation, i.e. innovation that occurs through the establishment of new relationships or the re-structuring of existing ones. They can promote the development of cooperatives, business associations and industry clusters, as these networks facilitate information flows between agribusiness and support the dissemination of adaptation best practices. In order to help reduce the current R&D investment gap, strategies can also promote the development of linkages between universities and value chain actors. If done effectively, these network developments can help to reduce the burden on government extension services, as actors can then access information and training through others.
Moreover, business networks improve collaboration, information sharing and joint problem solving. They also help developing shared values and beliefs among businesses, and promote the creation of a shared risk management culture, which are thought to increase value chain climate resilience. There is therefore scope for governments to provide support and allocate resources to the formation, expansion and maintenance of business associations and industry clusters, as they can directly enhance the capacities of businesses to respond to climate risks.
Government and development agencies lacking the resources to promote harder (i.e. more technologically driven) forms of adaptation, may see the promotion of relational innovation as an interesting avenue to promote adaptation. As a form of soft adaptation, supporting relationship building could complement existing adaptation strategies in agriculture whilst easing the burden of government activities.
An enabling environment that promotes adaptation through relational innovations grants greater agency and responsibility to value chain actors. In other words, governments can help framing the conditions for the development of a network structure that facilitates exchange and interaction, but that relies on actor’s abilities to develop and manage relationships effectively. Thus, whilst businesses can directly seek to increase their adaptive capacity by building strategic relationships, governments and development agencies can also play a role in facilitating the development of an enabling environment for relationship building.
This article is based on the research studies carried by Laura Canevari at King’s College London. Free access to peer reviewed publications available below.
- Canevari-Luzardo, L. (2019). Climate change adaptation in the private sector: application of a relational view of the firm. Climate and Development. doi:10.1080/17565529.2019.1613214[
- Canevari-Luzardo, L., Berkhout, F., & Pelling, M. (2019). A relational view of climate adaptation in the private sector: How do value chain interactions shape business perceptions of climate risk and adaptive behaviour? Business Strategy and the Environment. doi: https://doi.org/10.1002/bse.2375
- Canevari-Luzardo, L. M. (2019). Value chain climate resilience and adaptive capacity in micro, small and medium agribusiness in Jamaica: a network approach. Regional Environmental Change. doi:10.1007/s10113-019-01561-0