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Crowdsourcing Capital for Sustainable Supply Chains
October 27, 2011
Everyday the world gets a little more connected. With only a mobile phone and a Twitter account, citizens across the globe are publishing international news and breaking stories in a matter of seconds. Sustainable brands have the opportunity to take advantage of this new level of connectivity with producers and consumers to do what their profit-only competitors cannot: build passionate, engaged customers around real stories of impact.
In 2010, a group of entrepreneurs and leading sustainable brands came together to launch The Hoop Fund. The group’s mission is to connect consumers and producers, crowdfund microloans for ethical producers, and transform sustainable value-chains into powerful platforms for customer engagement and acquisition.
The Hoop gives consumers access to the producers in a brand's supply chain and engage them as mission-aligned lenders. Customers of pioneering brands like Alter Eco, Indigenous Designs and Runa pitch in a few extra bucks to fund cool sustainability and business improvement projects. By supporting the farmers and artisans who make their favorite products, customers literally become invested in a brand's supply chain and become loyal brand champions over the course of the project.
Through the process, ethical producers and brands learn what customers are looking for in both product and practice. Since customers want to see strong sustainability metrics from the people who make their products, these organizations are able to receive direct feedback about what metrics matter and perform at a higher level in the $40 billion dollar ethical products marketplace.
Capital for Ethical Producers
By leveraging customer capital, ethical producers have been able to build their own business capacity, improve and/or diversify their product(s), provide additional training to employees, and launch community development projects.
Past projects have included:
- Vocational school training for Peruvian women weavers
- Organic certification for cotton farmers
- Planting 2,000 trees for Amazonian tea farmers
- Marketing kits for “upcycling” non-recyclable waste
“These "fair" loans give talented and passionate artisans the opportunity to open their door to new levels of business opportunity,” says Matt Reynolds, co-founder of Indigenous Designs, an organic and fair trade apparel company. “By working together through positive finance, we work with artisans in order to elevate their skills to premium status on the world market.”
With this model, customers come together to make small loans of $10-100 to fund a larger microloan of $500-$5,000. Hoop microloans go to small and medium producer enterprises (SMEs) who supply leading U.S. brands with products such as coffee, chocolate, designer apparel, premium crafts, and much more. Hoop loans are 0% interest and current repayment rates are at 100% due to the nature of the engagement. Customers can look forward to loan repayment within 6-18 months in order to buy product, lend to another project, or cash out.
In coordination with US brands, the Hoop has funded 12 projects in producer communities across the globe. With over 600 registered Hoop Funders, the average lender provides $20 in capital.
Meeting Brand Needs
There are certainly many ways to finance producers, but by leveraging the power of the crowd this type of sourcing meets additional brand needs:
- Engage your customers in the supply chain. They will appreciate your efforts and feel like part of the production team.
- Create long-term links between customers, producers, and your brand. Personal investments inspire customers to stick around.
- Attract customers motivated by your company’s mission and impact, something deep discounts will never do.
- Build the capacity of your producers and integrate them into the value chain at a higher level. Producer stories are more engaging if your customers are connected to them.
According to Reynolds, “Retaining customers that come to us through the Hoop is far easier than customers we acquire through other channels, because these individuals understand how our supply chain functions, empowering artisans and using organic and natural fibers.”
"We value the opportunity to help consumers support producers in more innovative ways,” says Tyler Gage, president of Runa tea company. “After our product plus a microloan deal filled and closed on the Hoop, we wanted to open the product deal to all Hoop Funders. This is our target audience.”
But not all brands are created equal. In order to find the best brand partners and maintain our standards in the field, we look at a number of sustainability metrics:
- Organizational leadership (CEO, Board, management) aligned with the sustainability goals of the organization
- Producers are highly engaged in the value-chain and offered growth opportunities
- Brand sustains a high environmental and ethical performance record
- Brand maintains a transparent supply chain with third-party certifiers
In terms of producer standards, our customers are looking for high performance producers that understand the importance of sustainability metrics and are working to improve in many sides of the business, including:
- Fair and living wage for all employees and workers
- Equal opportunities for growth and worker ownership
- Safe and healthy working conditions
- Environmentally sustainable products and practices
Technology connects us to our neighbors, friends, family as well as producers and consumers worldwide. The most innovative brands realize the unique competitive advantage of their sustainable supply chain as others will be left in the dust.