Market Conditions and Information

Our findings revealed that market conditions in Kenya affected the adoption of circular economy practices mainly in a negative way. This was primarily related to access to and lack of market as well as limited market information. In relation hereto, Kurgat et al. (2018) argued that market integration was a major factor that influenced the adoption of most SIPs. If the farmers have inadequate access or connections to the markets, this can lead to difficulties in getting their produce to the market, which ultimately may lead to large food losses.

Furthermore, if the farmers do not have secured access, this immensely decreases the incentives to produce higher quality products as they run the risk of not being able to get them to the markets. A way some of the smallholders manage to address the issues of market access is through contracts with export companies. We found that four of the interviewed farmers were a part of a cooperative engaged in export in addition to their operation on the domestic market. They explained that they had been able to access new stable markets through their collaboration with the export companies. Banson et al. (2014) argued that a contract with an export company entails certain standards and requirements the farmers need to live up to in order to get access to the export market. Therefore, it is arguable that access to export markets act as a driver for implementing higher standards and more control

with external inputs, which are fundamental steps towards a circular economy. This is in accordance with our findings. Furthermore, it can also lead to positive spill-overs for the domestic production.

We found lack of market and consumer demand for sustainable products to be a barrier to adopting more circular practices. Specifically, the organic farmer explained that he sometimes experienced a gap in the market in terms of interest in and willingness to pay premium for organic products (Appendix 6). Similarly, Wheeler (2008) emphasised that market issues, such as lack of price premiums and small market size, are the primary barriers to the adoption of organic farming. Furthermore, McCarthy & Schurmann (2014) argued that there is a limit to the price consumers are willing to pay for organic produce and that the lack of premium prices restrict entry of more farmers to the sector. The organic farmer experienced uncertainty and a lack of market as he from time to time would have surplus of organic produce that he would have to sell at conventional markets instead (Appendix 6). Hence, he ended up being a price taker with lack of power in the supply chain, as suggested by literature, since he was willing to lower his price to the minimum rather than throwing it away (McCarthy & Schurmann, 2014). These findings suggest that the market in various ways might hinder the adoption of more circular practices. If the farmers are experiencing uncertainty and lack of market, this will diminish or completely eliminate the incentives to produce more organic or circular as Njenga also argued (Appendix 8). Further, as the production is far more labour-intensive and you risk not being able to get the premium price for your products, this undoubtedly discourage a change of practices unless they, like the organic farmer we interviewed, generally are passionate about food security and overall well-being of people and the planet. However, even he mentioned that the discouragement of the market sometimes had made him question whether it was really worth it (Appendix 6). Thus, the uncertainty and lack of market can act as barriers for circular the smallholders.

Opposed to the experience of the organic farmer, the ProGrOV project (2017) found that the consumption of organic products was increasing in Kenya and that the demand for organic products had outstripped the supply. They further found that farmers producing organic vegetables in Nairobi achieved a higher gross profit margin attributed to the conversion to organic production. The problem is, however, that many farmers are not aware of this

development. This can be related to the lack of market information as has been highlighted and, further, it emphasises the importance of establishing an effective market information system and infrastructure (EKN, 2017). Thus, if this information was enclosed to the farmers, it would likely work as a driver for them to change practices. If a more effective system was in place, this would diminish the uncertainties surrounding the market and whether a market exists or not as well as where the potential market is. This would extensively increase the incentives of the farmers to change their practices given that they would know with certainty that there would be a market out there ready for them. Concluding, the establishment of an effective market information system is foreseen to work as a driver for the smallholders to adopt more circular practices.

The rigidity of consumer behaviour has proved to be a common barrier to the implementation of more circular practices (De Jesus & Mendonça, 2017). De Jesus & Mendonça (2017) found market drivers to be connected to pressures from demand-side toward circular economy solutions. As the consumers are ultimately the ones to decide how much they are willing to pay and if they are willing to pay extra for higher quality, they play a pivotal role. Rizos et al.

(2015) argued that the lack of suppliers’ and customers’ environmental awareness is a discouraging factor for implementing circular economy practices. Nonetheless, we found a general awareness among the farmers concerning more sustainable agricultural practices.

Moreover, our key informants argued that consumers had become more aware as they had experienced people getting sick from the consumption of certain food. However, even though it is supposedly up to the consumers to demand higher food safety, the majority in Kenya do not have the bargaining power to do so as they cannot afford to buy it. The premium price point, for e.g. organic products, is simply out of reach for the average Kenyan’s disposable income. According to institutional theory, it is argued that external social, political and economic pressures influence firms’ strategies and decision-making as they seek to adopt legitimate practices or legitimise their practices in the view of other stakeholders (Glover et al., 2014). Similarly, it is arguable that the lack of these discourage the farmers to act sustainable. We found that the consumers did not demand sustainable products to a high enough degree to affect the farmers, which further might explain the lack of enforcement by the regulators since they will feel no pressure to allocate resources to this. This is might be a reason why some farmers maintain unsustainable practices since they lack the incentives to

change. Thus, this highlight the importance of consumer behaviour and emphasises it to be an overriding determinant for the smallholders to adopt more circular practices.

The findings of this section emphasise the power of the market as a determinant for circular practices. It was revealed that the impact of the market differs to a great extent depending on the farmer and his production. The farmers producing for the domestic market on one hand face insignificant incentives to change practices due to the lack of enforcement of standards.

The farmers that produce for the export markets are on the other hand encouraged to produce more circularly because of the market’s high requirements and the consequences of not complying because of the increased focus on enforcement. Finally, lack of reliable market information as well as a lack of consumer demand for sustainable products discourage the farmers to change to circular practices.