the Amazon region and the inexistence of a regular market for products such as murumuru,
andiroba, cupuaçu, cacao and acai, among other biodiversity inputs, made the purchase and
sale of these products difficult. In the words of José Renato Cagnon, manager of the
Benevides Industrial Unit:
“I challenge you to go to the Amazon with five million in your pocket and try to buy
something. You’ll see that you won’t be able to buy anything.”
To help in the sourcing of these essential inputs for the Ekos line, the UIB and Natura
developed a methodology of dialogue and relationship with the supplier communities in the
Amazon Region.
Local partnerships
One of the earliest problems faced by the Natura UIB was: how to find potential suppliers
in a region with a lack of logistics, information and communication facilities. And how to
retain the suppliers that it managed to acquire.
To be able to implement this business model, UIB needed the assistance of local partners
that knew the region very well, already had contacts with the associations and, above all,
enjoyed legitimacy in their relationships with these communities. One of these partners was
the Federation of Organizations for Social and Educational Assistance (Fase). Created in
1961, Fase was an NGO based in Rio de Janeiro with a Marxist-leftist ideology. Its mission
was “To contribute to building a democratic society through a sustainable development
alternative.”15 Its policy had always been, according to its leaders, to combat “neoliberal
policies”16. The NGO had a history linked to rural and riverside communities and, since the
1970s, had been involved with the rural worker movements in Brazil’s North. It had a
regional office in Belém (Para) to manage its operations in the Amazon region.
Contact between Natura and Fase started in 2000 but was not fully satisfactory to warrant
a partnership. However, with the passage of time, the dialogue with Natura evolved such
that, in 2007, Fase noticed that both institutions shared the same objectives regarding
development, autonomy and sustainability. According to a director at Fase, the difference of
a partnership with Natura:
“[lies in] the development viewpoint, which means he [the farmer] remains in the
cooperative, remains in the association […]. Our viewpoint matches that of Natura by
maintaining the viewpoint of collective work, so the cooperatives become stronger, which is
something that sets the relationship apart in the region.”
15 Fase website, available at:<http://www.fase.org.br/v2/> Visited on: Sep 09th, 2012 16 Idem.
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This partnership with Fase gave the Natura UIB an opening for initiating dialogue with
Amazonian communities. The joint development of relationships and the transfer of
information among these communities, Fase and Natura brought benefits for all three
parties. The communities were strengthened with the income generated from the sale of
biodiversity inputs. The work of Fase was strengthened with the offering of courses and
leadership training in the communities. And the company could source inputs from the
Amazon’s biodiversity for use in its products. Natura also hired former Fase employees to
work on its team.
Partnerships like the one between Natura and Fase enabled the company to penetrate a
region where, at times, even the government did not have access. However, the viability of
the business depended not just on the company’s initial penetration, but also on maintaining
its relations with partners and supplier communities.
Non-exclusivity and purchase guarantees
Fase was highly concerned with the emancipation, autonomy and development of the
communities in accordance with democratic and sustainability principles. According to the
NGO’s directors, this emancipation occurred via a unique source of income and by avoiding
individualized relationships between farmers and large producer companies, as is the case in
the production of palm oil (dendê), which is a commodity with a more developed market.
Fase also believed that pursuing diversification in production and consequently in income
sources was fundamental to the independence of the members of the community. According
to a Fase director at the Belém office:
“Diversifying production gives you various prospects, rather than just a single prospect,
like in the case of palm oil.”
Aligned with these precepts, one of the key measures taken by Natura was to ensure the
security of the communities in the purchase of biodiversity inputs while at the same time
avoiding their dependence on a single producer or company. In this regard, in accordance
with Fase’s orientation, Natura sought to sign contracts with “purchase guarantees” that
estimated at least three years of supply and guaranteed the prepayment of receivables to the
communities. However, to preserve the independence of producers, these contracts did not
require suppliers to work exclusively with Natura.
The lack of barriers on sales to other agents was a potentially attractive factor for Natura’s
competitors wishing to develop new products using biodiversity inputs. Consequently, this
could generate a potential risk for the company, whose investment could be taken advantage
of by its competitors. For example, according to reports from Fase management:
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“We just now received a contract from the people of Cametá [a city in the state of Pará]
with an Italian company for the purchase of inajá [a native palm tree in the region of Pará] […],
but the contract was completely irregular.”
A similar view voiced by the Natura UIB team:
“There are companies such as Beraca [a Brazilian company with seven units in Brazil and
one in France] that sold to L’Oréal, L’Occitane and other large cosmetics manufacturers
around the world. But it’s known that these companies do not go directly to the Amazon to
buy inputs, but rather prefer to deal with local intermediaries for supplies.”
But, according to Mauro Costa:
“Trust in relationships is based on maintaining close relationships with the communities,
monitoring supply together with them and checking for any potential barriers that could
emerge during supply.”
This policy of maintaining open relationships with suppliers was usually accompanied by
constant interaction between the company and these communities. The Natura UIB managed
to maintain a strong presence within supplier groups, while helping the people and
developing agro-extractive associations. This model, which the Natura team referred to as
“engagement”, consisted of the company’s constant presence in the communities, whether in
the form of technical training on the extraction and handling of inputs or raising people’s
environmental and social awareness regarding the importance of forest preservation and
community development. This constant interaction with the community was referred to by
the Natura UIB team as the human “leg” of the relationship (Exhibit 11). This “human”
aspect was perceived by the managers at Natura in the following manner:
“There is no way how we can obtain [exclusivity]. The only way would be to work with
exclusivity contracts or tell them ‘if you sell to competitors, we won’t buy any more from you’
or something like that. But I don’t believe that meshes with the issue of sustainability… So we
have to create an environment in which this loyalty arises naturally. And that’s where this
engagement process comes in, with a very strong human relationship with a high level of
presence (…). When you go out into the field you end up going to these regions where there
are no hotels, no electricity, no toilets and you get involved with the community. It’s an
environment that promotes loyalty building.”
And, according to Mr. Candinho, the leader of the Farmers’ Association of Moju, Pará:
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“Our relationship with Natura is one of friendship. They come here, talk to us, help us
and sleep here. We’re like a family.”
Apart from the human, social and environmental pillars, another factor that was essential
to the feasibility of the Natura UIB’s dealings with the supplier communities was related to
the financial aspect: the pricing of biodiversity inputs.
Joint price setting
Most of the biodiversity inputs sold by Natura were not traded in organized markets.
Therefore, many of them did not have a quoted price or an estimated value for acquiring
them. To ensure the supply of these inputs, Natura developed a mechanism for pricing raw
materials. This pricing mechanism took into consideration the commercial feasibility of
products in the Ekos line so that they remained competitive in the final consumer market for
beauty and personal care products, while also adequately remunerating suppliers.
The Natura UIB sought to hold annual meetings with the community to set the price to be
paid for the extraction and sale of biodiversity inputs. At these meetings, the managers from
the unit presented in a transparent way the costs they would incur in transporting, storing
and processing the inputs and also heard from the community the difficulties and time
needed to gather the inputs. The entire negotiation process was conducted with everyone in
the community or association, with Fase also participating. Even for the three-year contracts,
prices were renegotiated every year to ensure satisfactory compensation for the
communities. The Fase director said:
“It’s a dialogue […]. You go there to talk and discuss the prices instead of arriving with a
set predefined price.”
The price formation model was built in the following way: each year, the Natura UIB
team met with the communities to negotiate the supply of biodiversity inputs and the prices
for the following year. The Natura team first presented the technical coefficients and then,
together with the suppliers, the prices began to be formed. Once the prices were discussed
and set, the Natura UIB team returned to the company to pass on these prices to the
procurement area. According to Mauro Costa:
“Once this price is discussed with them [community], it’s ‘closed’ at the meeting. We
return to the company and convince the procurement and internal adjustment areas. This
team here ends up becoming an advocate for the biodiversity suppliers.”
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Regulatory aspects
Apart from the high input costs, Natura also bore an extra cost arising from
environmental legislation, in particular Executive Order (MP) 2186-16 of August 23, 2001,
which governed access to genetic heritage and traditional knowledge, its protection and the
sharing of benefits. According to Sérgio Talocchi, community relations manager at Natura:
“The law on sharing of internal rights is highly complex and nebulous […]. I don’t think
anybody else follows it, only Natura.”
Much of this complexity arose from that fact that the MP, in Article 24, states:
“Art. 24. The benefits arising from the economic exploration of products or processes
developed from the sample of a component of genetic heritage and the associated traditional
knowledge obtained by a Brazilian institution or an institution headquartered abroad will be
distributed in a fair and equitable manner among the contracting parties, in accordance with
governing law or regulations.”17
However, there were doubts as to what exactly was “fair and equitable” distribution. This
hindered the use of biodiversity inputs by Natura and by other companies and research
entities. Nonetheless, the company paid this benefit sharing to the communities, which
totaled more than R$1.5 million in 201118 alone. This procedure further increased the final
cost of products due to not just the payment of this benefit, but also the legal costs associated
with obtaining the authorizations to use the inputs. According to Mauro Costa, manager of
eco-relations at the Natura UIB, this ended up becoming another competitive advantage for
Natura, despite the costs:
“Today Natura has a legal area that takes care of this. Within the legal area there’s a
biodiversity department. There’s an area called GT-GTBio at Natura that centralizes
everything for these regulatory procedures. […] There’s an innovation funnel that considers: Is
the access already available? Does a protocol exist? […] So all this results in costs and
investments for the company.”
The Genetic Heritage Management Council (CGEN), an agency of the Ministry of the
Environment (MMA), lists the authorizations granted each year to companies, universities
and research entities. To give you an idea, ten authorizations were granted in 2009, of which
five were for Natura (Exhibit 12).
17 BRASIL, MP No. 2186-16 of August 23, 2001. 18 Natura Annual Report 2011, page 58.
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