=Paper=
{{Paper
|id=Vol-2030/HAICTA_2017_paper15
|storemode=property
|title=Food Sustainability and Crowd-funding: the Role of Internet
|pdfUrl=https://ceur-ws.org/Vol-2030/HAICTA_2017_paper15.pdf
|volume=Vol-2030
|authors=Rosa Misso,Gian Paolo Cesaretti
|dblpUrl=https://dblp.org/rec/conf/haicta/MissoC17
}}
==Food Sustainability and Crowd-funding: the Role of Internet==
https://ceur-ws.org/Vol-2030/HAICTA_2017_paper15.pdf
Food sustainability and crowd-funding: the role of
Internet
Rosa Misso1, Gian Paolo Cesaretti2
1
Department of Economic and Legal Studies, University of Naples “Parthenope”, Naples,
Italy, e-mail: misso@uniparthenope.it
2
Simone Cesaretti Foundation, Naples, Italy, e-mail: gp.cesaretti@gmail.com
Abstract. Food and sustainability are now an inseparable binomial for the
development of our society, or rather an inevitable strategic priority in the
pursuit of a socio-economic and environmental well-being, both individually
and collectively, to be projected in time and space. In this context, support for
entrepreneurial projects aimed at achieving this goal represents a crucial
leverage not only for the enterprise but for the entire society. In the light of
these considerations, this paper aims to clarify the important role that the
Internet can play through crowd-funding platforms that not only allow the
sustainability-oriented agri-food enterprise to "finance its vocation", but above
all to potentiate in the society the culture of sustainability in the food field.
Keywords: crowdfunding; food sustainability; sustainable finance; financing
instrument; well-being sustainability.
1 Introduction
Starting point of this paper is the recognition of sustainability as an inevitable
perspective for the development of the agri-food system. The development strategies
of this last are in fact correlated to every form and size of sustainability and are
evaluated with respect to the construction and maintenance of well-being in time and
space. This orientation, today a compulsory goal for the food system, is the result of
internal and external variables to the system itself and, at institutional level, it is due
to the indications of Agenda 2030, to the programming guidelines of the European
Union and to the actions of different states aimed at implementing economic, social
and environmental sustainability in each territory. At the sectoral level, instead, it is
due to the propensity of businesses to pursue their mission to meet a need for well-
being in the broadest sense, to an increasingly informed, skilled and aware consumer
of food choices importance.
In this context, agri-food businesses become part of a larger socio-economic and
environmental project that goes beyond the core business of the company itself.
Specifically, they are an active part of this project for well-being sustainability and
use various tools in full respect of this role. In financial terms, in particular, the
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crowdfunding is widely used and it is made possible by platforms on the Internet,
which, on the one hand, allow the company to find an economic response to its
design interest, on the other, they trigger a process Informative directed to the growth
of the culture of sustainability.
Taken in consideration the results of the project funded by the University of Naples
“Parthenope” (Italy) on the theme “Sustainability Practices in Food system and
Financial Instruments” (Scientific Director: Prof. Rosa Misso), this paper provides,
first of all, an overview on the sustainability goals in the food sector and then it
focuses on the role that crowdfunding platforms can play as a multiplicator of the
vocation of the food system to the individual and collective well-being sustainability.
2 Food sustainability
The pursuit of well-being sustainability is now a universal aim, or rather, the goal
towards which all businesses operating in the agri-food sector should aim in order to
give new value to their core business. This theme, more precisely, represents a topic
of great interest for each productive sector as well as for any level of society.
Analyzed no longer exclusively in its environmental dimension, sustainability is
increasingly understood as an extension in the future, or as a strengthening, of the
economic, social and cultural (in addition to environmental) patrimony currently held
by an individual, community or territory (Misso et al. 2013). After all the action plan
signed in September 2015 by the Governments of the 193 UN member countries,
“Agenda 2030 for Sustainable Development”, is a clear signal that no one is
excluded, nor should it be left behind on the road to bring the world on a sustainable
path. The signatory countries have pledged to achieve by 2030 the Development
Goals (which act on the results of the Millennium Development Goals that preceded
them) representing common goals on a set of important issues for development: the
fight against poverty, the elimination of hunger and fighting climate change, to name
just a few. In agriculture, of course, the goal of greater environmental sustainability
led to the definition of the concept of integrated control of harmful organisms in the
principles of integrated production, the concepts and practices of which were the
subject of general and specific documents for individual crops. On this basis,
numerous private and public guidelines have been proposed on the integrated
production in order to meet the growing demand for healthy products by producers
and consumers, products that require processing processes with minimal
environmental impact.
While at an international level, Agenda 2030 is marking the transition to a new
sustainable society, at European level, undoubtedly, the principles of sustainable
development are an integral part of the Common Agricultural Policy (CAP). From
the Treaty of Rome to date, this policy has evolved in line with the needs that
emerged on the european horizon from time to time in order to be always current and
meeting the expectations of its members' agriculture. Today, the CAP, in more
apparent way than in the past, has to overcome the existing conflicts between the
market, society and the environment and to synthesise in its action the needs arising
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from these three spheres in order to ensure the sustainability of its agriculture, both at
global than at European level (Table n. 1).
Table 1. The CAP between Market, Society and Environment (Misso, 2010).
Market Society Environment
Internal 1. Simplify access to 1. Increase 1. Management of
dimension credit and favor a farmers' landscaping and
widespread income natural resources
diffusion 2. Fight the (biodiversity)
2. Growth of the aging of the 2. Attenuating
sector rural vulnerability to
3. Increase the population climate change
contractual power 3. Repopulate and greenhouse
of farmers the gas emissions
4. Quality standards countrysides
4. Occupation
5. Investments in
human capital
International 1. Sustainable 1. Attract young 1. Preserving the
dimension competitiveness people identities of
on markets towards rural European
2. Volatility of areas and territories
prices activities 2. Promote eco-
3. Quick action 2. Support the friendly practices
tools for any role of farmers and green energy
crisis as providers of production
4. Food security of public goods 3. Environmental
emerging 3. Guaranteeing Standards
countries Healthy 4. Adapt the CAP to
5. Food Standards Products the global fight
against climate
change
So, if at institutional level, international and European programming has outlined
new pathways for sustainable development, at the sectoral level, an increasingly
informed consumer stimulates businesses to pursue their mission to meet a need for
well-being in the broadest sense.
Consumers are, in fact, increasingly sensitive to issues related to the improvement
of information on agri-food products, but also to the production processes used. New
consumer trends are heavily influenced by changes in social work organization and
demographic changes (marco-economic variables). Such dynamics of consumption
greatly affect the behavior of the operators and the economic system and, on the
other hand, this then affects the consumption of food, in a logic of circular evolution
of the phenomenon.
In this context, the ability of food system to develop over the long term depends
on the ability to set strategies that ensure the sustainability of production factors. The
presence of an intact environment, social capital and more generally, the existence of
all those factors that guarantee economic, social, environmental, territorial and
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generational sustainability, are, in fact, necessary elements for the survival of the
sector. Therefore, an enterprise strategy oriented to ensure the sustainability of
factors and production processes focuses on a responsible and equitable management
of the workforce, the preservation and enhancement of environment and the
introduction of sustainable innovations capable of balancing sustainability and
competitiveness goals.
3 Crowdfunding
Financial support for companies that pursue ethically and responsibly goals that
we could call "off-market" is very important for the company's sustainability. A
bottom-up microfinance practice that mobilizes people and resources to support
sustainability-oriented businesses is crowdfunding. It is a relatively new and evolving
method of using the Internet to raise capital to support a wide range of ideas and
ventures. An enterprise raising funds through crowdfunding typically seeks small
individual contributions from a large number of people. Individuals interested in the
crowdfunding campaign – members of the “crowd” – may share information about
the project, cause, idea or business with each other and use the information to decide
whether to fund the campaign based on the collective “wisdom of the crowd”.
The recent rise in crowdfunding activity is due to different reasons: firstly,
matching funders with creators is now more efficient and effective due to lower
search costs online. Second, risk exposure is reduced because funding in small
increments is economically feasible online. Finally, low communication costs
facilitate better information gathering and progress monitoring for distant funders
and also better enable funders to participate in the development of the idea.
Indeed, there are several crowdfunding models that differ for the reward that is
recognized in favour of the supporters. A type of crowdfunding is based on donation,
so, it does not offer any reward to its funders. But there are also crowdfunding
scheme that could recognize economic rewards to the funders or various other kinds
of not economic reward as participation to the results of the project or simply
symbolic acknowledgements (Stemler, Abbey, 2013; Giudici et al. 2017; OECD,
2015).
More in particular, Agrawal A. et al., (2014) make a difference between equity
and non-equity crowdfunding. The most critical differences between equity and non
equity crowdfunding will arise due to the amplification of information asymmetries.
Whereas the asymmetry problem currently concerns the feasibility of the creator’s
ability to deliver the product, in the equity setting the asymmetry problem includes
the above as well as the creator’s ability to generate equity value by building a
company rather than just delivering a product (Agrawal A. et al., 2014).
Hemer (2011) identifies five types of crowdfunding according to the type of
reward offered: crowd donations, crowd sponsoring, crowd pre-selling, crowd
lending, crowd equity and ranked by process complexity:
Crowd donations: Although a donation is – in essence – an altruistic act without any
obligation for the recipient to give the donor anything in return, one feature of
crowdfunding is for donors to be given some "reward" for their support.
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Crowd sponsoring: In the case of sponsoring, the project initiator and the sponsor
agree on a defined reward which the initiator is obligated to give. Often these
rewards take the form of services like PR or marketing for the sponsor.
Crowd pre-selling: Very often the donation takes the form of pre-selling or pre-
ordering: The donation is meant to help produce something (a book, a film, a music
album, a theatre performance, software, some new technical product, an agricultural
product, a service concept etc.) and the promised return is the delivery of an early
version of the product or service. In such a case, crowdfunding is basically an
advance order of a product and represents a purchasing act which is subject to
turnover tax.
Crowd lending: Here the rewards are normally the interest and the payback after the
lending period. One alternative to this is long-term lending based on the revenue
sharing principle. Here, the creditor gives a risk-bearing loan. He does not get
interest but receives, at the defined end of the lending period, an amount including an
agreed share of the earnings of the venture, which could be a multiple of the original
loan but could – in the case of bad performance – also be nothing.
Crowd equity: This variant of micro-investments is – in administrative terms – the
most complicated alternative in the spectrum of crowdfunding instruments.
Crowdfunders invest equity; the rewards are either shares of the venture, dividends
and/or voting rights.
The different forms of crowdfunding referred to above show differences in user
groups, risks, complexity and purpose, which warrant a distinction among these
various forms, and, importantly, a distinction between financial and non-financial
return models. Crowdfunding with financial returns is slightly less well-known and is
considered to carry higher risks for contributors who take the position of investors.
The main issues EU legislation addresses with regards to all types of crowdfunding
include anti-money laundering, advertising, consumer protection and – where
relevant – intellectual property protection. Financial returns campaigns and platforms
may be subject to further rules at both EU and national level, again depending on the
specific business model used (European Commission 2014).
3.1 Crowdfunding and food sustainability
Most crowdfunding platforms allow you to invest in projects related to different
sectors: art, comics, crafts, dance, design, fashion, film & video, music, food, etc.
This is the case of the most renowned international platforms, Kickstarter and
Indiegogo, which include a generic Food category. Many other platforms do not
distinguish projects by sector, but they include food projects with big platforms as
Angel List, Crunch Base or CrowdCube.
Surely, crowdfunding can be a good tool to connect the producers and consumers
of food. But above all it can promote the achievement of the company's sustainability
goals through the launch of projects geared towards this.
Application of crowdfunding in agrifood sector can provide a huge help in
foundation of small businesses and stabilizing cash-flow of small farmers. Because it
reduces pressure on financing and sales, the producer can make their products in the
way he want without anxiety. Also, unlike other agrifood transaction, relationship
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between producers and consumers grow up during the funding process. This leads to
interest and active participation of consumer which can result additional purchases
and popularity. Through the proceeding of crowdfunding, project creator can get not
only funds but also various helpful effects for the success of the project. The project
creator can check point for improvement through this. Also, participants sometimes
form a supporting community and play a role as a co-producer. In case of pre-sale
type of crowdfunding, it can help the pricing of products or services. For the success
of crowdfunding, active participation of friends and fans in early funding, promotion
through social media, and communication effort of a creator such as information
provision are important.
Crowdfunding in agrifood field appears in many different shapes. There are many
different cases of projects such as funding for making a community farm, foundation
of small business, pre-sale for something (cooking equipment, farm products,
processed farm products, garden equipment and so on), farm operation cost, facility
cost, farming education management cost, suppoting events(market, party), and
publishing a cookbook. We can classified crowdfunding projects on agrifood into 3
types, presale, event, and funds for operation cost. Presale type is funding projects
before the production stage of food. Event type is a funding for the events related to
agrifood, such as opening a market, launching a festival or making educational event.
Two cases succeeded in funding by providing enjoyable opportunities which people
can’t normally experience. Funds for operation cost are supporting essential
operation expenses such as cost for setting up company, equipment, research and
development. Mainly these projects have social benefit, or can help to produce
healthy food. All of them reached the funding goal by emphasizing the sincerity and
expected effect (Yoo Y. et al, 2014).
In some ways, crowdfunding almost always benefits the public, and in this case, it
is constructed rollover bars provided to poverty-stricken farmers through the local
agricultural education program. The public is able to view campaigns and donate a
small amount of money to be used toward the project.
Oftentimes, projects with clear goals, specific needs, and a defined end date are
more successful at raising money than projects without clear objectives. Most often,
family members and friends of project creators who are involved in the project are
the most likely to donate. Crowdfunding is less about raising large amounts of money
from a few investors, and rather, more about raising small donations from a large
group of people, “the crowd”. One reason crowdfunding is so successful is due to the
“feel good” or philanthropy attached to donating (Morgan L. et al., 2016; Servato et
al., 2013). Belleflamme et al. (2013) states that crowdfunding produces the same
amount of funds as if you were to seek funds from a bank, but what compels the
public to donate to a crowdfunded project is the perceived benefit to what is being
created.
4 The role of Internet
The financial support for entrepreneurial projects aimed to achieving the
sustainability goal represents a crucial leverage not only for the enterprise but for the
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entire society. In this context, Internet can play an important role through crowd-
funding web-based platforms that not only allow the sustainability-oriented agri-food
enterprise to "finance its vocation", but above all to potentiate in the society the
culture of sustainability in the food field.
From the point of view of its concrete application, crowdfunding transcends
simple financial support to business projects trough credit and is a powerful business
accelerator capable of enhancing sustainable projects by halting the weaker ones.
This is because crowdfunding platforms - from the past - use a new paradigm to
select the worthy financing projects, which consists of an estimate "market test" that
can provide valuable indications and projections of business success. Crowdfunding
platforms initially show the idea-project and its goal to reach: afterwards, they give
users the ability to decide whether and how to finance the projects, and also identify
the economic commitment they intend to sign up. Projects that reach the finish line
will be realized and lenders will get the agreed interest. Projects that otherwise will
not reach the minimum amount of funding will not be realized, and the sums
eventually paid will be fully refunded to the lender, without any loss. This process
allows an extremely effective selection of "profitable" projects, starting with the
design phase of the business, thanks to the impact that the project produces on
consumer-investors (Servato F. et al, 2013).
Crowdfunding platforms also have an incentive to attract projects that can
generate a disproportionate share of media attention because they both expand the
existing community of funders (further increasing network effects) and allow the
platform to expand into new categories (Agrawal A. et al, 2014).
In this regard, crowdfunding platforms entirely dedicated to the food industry such
as Crowdfooding, Barnaiser and WoopFood has been surveyed. The first is a
crowdfunding platform dedicated to the world of food and beverage, created by an
Italian entrepreneur. Most startups that responded to Crowdfooding's call are
European, but many entry requests come from India and the United States. The Food
Section is divided into ten categories: Food & Tech, Food & Beverages, Grocery,
Food Delivery, E-marketplace, Specialty Food, Organic Food, Wine & Spirits,
Coffee & Tea, AgTech. Unlike such platform, Barnaiser and Woop Food are
dedicated to sustainable agriculture and are aimed at promoting small, organic,
sustainable farms and projects related to proper and healthy nutrition. In fact, there is
a specific section dedicated to sustainability. In particular, on the Barnaiser platform,
created in the United States in 2014, the categories of projects that are sponsored are
very different from one another, with a single denominator: the one of quality food
production. In "farm", from the urban farming you go to young peasants, from bio
farms to exchange markets; in "community" we find initiatives related to food-related
justice, community gardens, cooperative kitchens and more; Food includes projects
related to accommodation facilities (restaurants, bars and clubs), handicrafts and
distribution; the section "education" deals with workshops and didactic farms; food
media focus on books, TV shows, cellular applications, and creative projects
dedicated to sustainable food.
WoopFood, instead, is the first reward microfinance platform for small businesses
in the Italian agricultural industry. Companies that aim to expand their business or to
new agri-food products can launch a bottom-up funding campaign, collecting sums
of between 5 and 2 thousand euros. The prize varies according to the generosity of
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the donors, according to the scheme already experienced by colossi like Indiegogo
and Kickstarter. The selection filter for the projects is twofold: the eco-sustainable
impact of the activity or a certain rate of innovation, in the form of technologies
applied to the production.
The push from Internet can lead both to supporting small business as well as to
providing a more showcase for niche productions, fixed on zero KM or local
distribution. Like all reward-based crowdfunding systems, the company generates its
revenue with the collected fees at the end of the campaign. The sum is borne by the
project proposer, with a share that may vary depending on the amount reached
(Magnani A., 2016).
An example of crowdfunding web-based platform in Italy (www.woopfood.it).
The benefits of this crowdfunding web-based platform are:
− The creation of a new demand;
− The reduction in investment risk for producers;
− The establishment of direct relations with consumers;
− The sponsorship of a product;
− The valorization and protection of the traditional ecosystem made in Italy;
− The promotion and dissemination of the concept of environmental
sustainability;
− The strengthening of food security and quality assurance.
Very interesting, it is the new project titled "Hemp of Campania Region: the
revolution starts in the fields". The hemp of Campania Region agricultural
cooperative company was founded in 2015 by three young farmers, Valentina
Capone, Simona Falco, Giuseppe Mugione, united by the desire to launch an
initiative to relaunch the territory through the re-introduction of a noble and ancient
plant such as canapa in Campania, a region that until the middle of the last century
contributed to making Italy the second nation in the world for produced hemp and
first for fiber quality. Around 1914, the province of Caserta produced 157,000
quintals of hemp, while in the area of Naples the quintals were 89,000, making
Campania the second Italian region for textile hemp production. The best fiber was
supplied by the "Carmagnola" variety and unit yields per hectare were higher than in
any other country, and the fact that the Italian variety was recognized as the best for
textile fiber quality. Hemp had always been used to dress and produce any type of
cord, cloth, paper (until the beginning of the 20th century, almost all of the paper was
produced with hemp), its seeds gave excellent fuel oil and in the pharmaceutical field
its applications were wide.
In conclusion, in food system, a variety of fairly large-scale ICT-enabled projects
demonstrate economic viability and provide significant social and economic value.
Such projects are directly linked to income-generating activities (for example
providing better selling opportunities for agro-products), making their value easily
visible for end-users (Bargain O. et al, 2016; Carvalho A. et al, 2012). At the same
time these project, collect individuals around a topic that allow them to improve their
knowledge on a product or on an activity in terms of sustainability.
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