Supply Chain
Ejido Verde:
Protecting a Supply Chain While Empowering Indigenous Communities

Big news from Mexico – a groundbreaking regenerative economy project has just become official. The Patamban indigenous community, part of the Purepecha nation in the state of Michoacán, will be the chief beneficiaries of what will be a 12,000-hectare plantation producing a valuable commodity: pine resin.

One of the goals of this initiative is to increase the supply of pine resin. While it is a product few have heard much about, pine resin is, in fact, found in many different kinds of products, including in something you probably used today.

“Companies in 125 industries use pine resin. It’s in cosmetics, it’s a great emulsifier in making soft drinks, linking the flavor oil and water,” said Kevin Doyle Jones, co-founder of Neighborhood Economics and a supporter of Ejido Verde. “It’s also used in many adhesives; it makes ballpoint pen ink stick to paper, it holds the mix of fluids in a Fanta or Gatorade together, it connects the leather of your shoes with your soles.”

With so many uses, it is no surprise that pine resin is no niche market, either – at $4.6 billion, it is the same size as the global cacao industry. And it is facing real pressures from environmental stress – land use changes mean there are less mature pine trees across the world, creating supply issues that are impacting the industry in Mexico, the fifth-largest producer of pine resin.

"The supply of pine resin [has] declined by 60 percent over the last 40 years, due to deforestation,” Jones said. This is what led to Fredo Arias-King, a Michoacán businessman in the pine resin refining business, to look into investing in indigenous communities as a way to maintain production, back in 2009.

This initial idea slowly turned into something far bigger. With the help of Shaun Paul — founder of EcoLogic Development Fund and Root Capital, and now interim CEO of Ejido Verde — what started as just buying pine resin from indigenous peoples turned into a new model for how to do business. The final agreement is not just going to ensure a more reliable supply of pine resin, but it might lead to a wholesale thinking about how equity is distributed along a supply chain.

The project is notable for how much of the total revenue goes to indigenous communities. In a normal supply chain, source producers can sometimes get just pennies on every dollar for which the commodity. Even fair trade only increases this to, on average, 15 percent — meaningful, but oftentimes not enough.

Ejido Verde is a dramatically different model that ensures most of the value goes to the community producing it.

“The communities [will receive] 95 percent of the revenue from selling its resin,” Jones said. “Ejido Verde gets its loans paid back with the five percent of the resin the communities will give them when the trees start producing in 10 years.”

It gets even better. “After 20 years, when the zero-interest loans for increasing production are paid off ... the communities get 100 percent of the revenue from the trees they grow on their land.” Ejido Verde will still receive a cut from pine resin processing to maintain its own sustainability over what is planned as a 30-year project that, if all goes to plan, would produce $1 billion in total for the Patamban people.

Ejido Verde is a win-win-win proposition. For resin refineries, it creates a sustainable source of raw materials. For the Patamban community, it will create 12,000 jobs that pay up to 5x more than existing opportunities. And for the environment, 24,000 hectares of reforested, protected land; clean water, and safe habitat for animal and bird species.

What Jones and others involved with Ejido Verde hope is that their model spurs innovations across other commodity supply chains, creating new models for ensuring more reliable supply, better economic opportunities for rural communities and meaningful environmental benefits.

As Jones pointed out: “This model can be replicated anywhere there is degraded but not eroded land, in places where the people earn their living from subsistence farming, and where there is good local community governance.”