Impact Investments Along a Regional Value Chain

As an illustrative example of a regional value chain effort, the below infographic provides insights from the Thread Fund’s experience regarding how donors—through grantmaking and investments—can help support the creation and viability of regional value chains.

Operating in Eastern Washington, U.S., this value chain was supported by a combination of grants, investments, and contracts that connected local cattle ranchers seeking regional markets with efforts for school kids to consume healthier, local food. The left side of the chain shows two investment positions that connected ranchers with processing facilities operating at a regional level and who could meet the scale of demand from school districts. The right side of the chain shows a grant to help equip school cafeterias to use fresh rather than frozen or highly processed foods. A performance-based contract for advising value chain positions connected the two efforts.

Value chains are made up of independent enterprises that should eventually operate without ongoing grant funds. This requires that each enterprise operates as a well-functioning business that utilizes proper management, sales, and accounting practices. Management of any value chain enterprise should include individuals with experience producing that particular product or service. For example, a cooperative meatprocessing facility, owned by the cattle ranchers themselves, should be managed by people with experience processing and selling meat.

Traditional supply chains differ from regional value chains in that the latter have solid relationships between the interdependent businesses and other interested parties, such as foundations. It is through these relationships that opportunities for mutual success can emerge.

The value chain work highlighted above was not planned. The Thread Fund had an interest in developing regional-scale meat processing, while another funder was focused on improving children’s health through renovating school food preparation. The linkages became apparent only as each effort gained momentum and work expanded to the next link in the chain, with the investors ultimately joining efforts through a performance-based contract. This value chain has now generated a model that is being revised for a next round of strategic value chain engagement and investment.