A commercial-based approach to sustainable livelihoods : Review and syntheses

JOURNAL OF SCIENCE, Hue University, Vol. 70, No 1 (2012) pp. 207-216

A COMMERCIAL-BASED APPROACH TO SUSTAINABLE LIVELIHOODS:
REVIEW AND SYNTHESES
Truong Tan Quan1, Nguyen Van Toan2
1

College of Economics, Hue University
2

Hue University

Abstract. Sustainable livelihood framework has been developed and used by
several authors, organizations and studies. The purpose of the paper is to explore
missing factors in the livelihood sustainable framework in previous studies. The
result of reviewing and synthesis shows that the role of market has unliklely been
exploited in the framework whereas most livelihoods is currently depending on the
market system. Therefore, the market role has been integrated in the framework
when traditional sustainable livelihood framework and supply chains analysis have
been combined.

1. Introduction
A considerable number of studies, projects and papers have applied a sustainable
livelihood framework in their works to investigate the livelihood of people from
households to community levels. However, it is likely that the role of markets is
neglected in these applications, so intervention is not very effective and efficient yet.
The purpose of this paper is to review and synthesize previous studies and then develop
the framework that will be used to investigate household livelihoods in market-based
production. The paper is structured into five sections. Following this introduction is the
second section which discusses the conventional sustainable livelihoods framework and
its relevance to household behavior. The third section discusses the linkage between

livelihoods and markets in a market focused system. A commercial-based sustainable
livelihood framework is then developed by integration of traditional sustainable
livelihoods theory and supply chains analysis. Finally, some conclusions are drawn.
2. Sustainable livelihoods approach
2.1. Main features of conventional sustainable livelihoods
Sustainable livelihood (SL) concepts have been widely used by many
researchers, organizations and agencies after being first introduced at the World
Commission on Environment and Development in 1987. At first, the thinking on
sustainable development was mainly focused on the macro level, and then it developed
to address the wellbeing of individuals and households (Solesbury, 2003). Subsequently,
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many organizations and agencies such as the International Institute for Environment and
Development (IIED), United Nations Development Program (UNDP), Oxfam, Care,
International Institute of Sustainable Development (IISD), Department of International
Development (DFID), Institute of Development Studies (IDS) and some other agencies
have adopted the concepts to meet their goals, foci, and priorities (Carney, 2002;
Solesbury, 2003). Accordingly, the SL approach has become diverse in terms of both
users and uses.
Although the concepts of SL have been adapted considerably by users, there are
common components of the SL framework that are widely recognized and accepted.
These components are described within DFID’s sustainable livelihood framework as
follows (Fig. 1).
Capital assets and capacity to access these resources has a major impact on
sustainable livelihoods. These assets include human, natural, financial, physical and

social capital (Carney, 1998, Soussan et al, 2001; Hussein, 2002; Sida, 2003; Odero,
2003).
According to DFID (2001), these assets can be defined as follows. Human
capital is the skills, knowledge, capacity to work and good health that together enable
people to pursue different livelihood strategies and achieve their livelihood outcomes.
Natural capital is the bio-physical elements such as water, air, soils, sunshine,
woodland, minerals. It reflects the natural resource stock. Financial capital is defined
as the financial resources that people use to achieve their livelihood objectives. Physical
capital is the basic infrastructure and physical goods that support livelihoods. Social
capital is the formal and informal social relationships (or social resources) from which
various opportunities and benefits can be drawn by people in their pursuit of
livelihoods.
The second component of the framework is the transforming structures and
processes. This component includes institutions, organizations, policies, and legislation
that determine capacity to access capital, the terms of exchange between assets, and the
returns on different livelihood strategies (DFID, 2001). Accordingly, insights into
sustainability at different levels (micro, meso and macro), together with the constraints
and restrictions imposed on different livelihood strategies, can be obtained through
understanding these structures and processes. The understanding also clarifies
opportunities to improve livelihoods of people through transforming the structures and
processes.
The third important component of the livelihood framework is the livelihood
outcome. It is defined as the goal or the result of livelihood strategies (DFID, 2001).
The outcome is generally to improve the wellbeing of people but its emphases or focus
will be diverse, including both physical and emotional aspects such as poverty reduction,


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increased income and sustainable use of natural resources.

Fig. 1. DFID’s sustainable livelihood framework
(Source: DFID (2001), Sida (2003)).

In order to achieve the livelihood outcome, the livelihoods have been built from
a range of choices, based on their assets, transforming structures and processes (DFID,
2001; Soussan et al, 2001; Cahn, 2002). Livelihood strategies are the combination of
activities and choices that people make to achieve their livelihood goals or the set of
decisions to best employ the assets available. This is a continuous process but there are
always key decision-making points that impact on the success or failure of the strategy
(Soussan et al, 2001). These points can include crop selection, selling time, involvement
in a new activity, changing to other activities, and adjusting the scale of activities.
According to Scoones (1998), there are three main livelihood strategies for rural
households: agricultural intensification or extensification, livelihood diversification and
migration. An alternative perspective known as Khanya’s framework focuses on the
relationship with natural resources and categorises the three main livelihood strategies
as natural resource based, non-natural resource based and migration (Hussein, 2002).
Based on other criteria, in particular the relationship to external threats, Rennie and
Singh (1996), and Soussan et al (2001) divide strategies into two categories of adaptive
(long term change in behavior patterns) and coping (short term responses to immediate
shocks and stresses).
Clearly, there is no unique livelihood strategy but rather a range of livelihood
strategies. Therefore, the important issue is how to select or introduce the strategy that is
most relevant to the situation of particular households and which maximizes the utility
of both the individual and society.
The final major component of the sustainable livelihood framework is the

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vulnerability context. This reflects the shocks, trends and seasonality. These factors can
not controlled by people in the immediate or medium terms (DFID, 2001). Therefore,
analysis of sustainable livelihoods not only focuses on how people use assets to achieve
their goals, but addresses the vulnerability context that they may face, and the means by
which people can cope and recover from shocks and stresses (Chambers and Conway,
1992; Soussan et al, 2001; Cahn, 2002).
These core components work together, and interact with each other within a
dynamic livelihood system (DFID, 2001; Soussan et al, 2001; Carney, 2002). As a result,
the issues can be viewed holistically.
The SL approach is people-centred, participatory and operates at multi levels
across sectors. Given its emphasis on sustainability, it is useful in addressing poverty
reduction, rural development, responses to emergencies, and community based planning
where the issues or problems are usually multi-dimensional (Hussein, 2002; Cahn,
2002; Carney, 2002). Also, according to a range of authors, the sustainable livelihood
approach, by focusing and building on strengths that people have rather than on what
they do not have, is forward-looking and positive (Norton and Foster, 2001; Hussein,
2002; Cahn, 2002).
There is also a range of concerns that have been raised relating to the sustainable
livelihoods approach and its application. The first concern is that the framework does
not focus sufficiently on the relationships between the factors (Cahn, 2002). Therefore,
the importance of one or more factors can be underplayed. Linked to this, Carney
(2002) claims that because of existing viewpoints and user experiences, unfamiliar
aspects may be omitted, despite these aspects being crucial to livelihood. In addition,
although the SL approach was developed to be used holistically across sectors, the
reality is that most governmental organizations and agencies are operated and funded in
relation to a specific sector. Consequently, the application of this framework can be very

difficult in reality (Carney, 1999; Cahn, 2002).
Another concern is that although the framework is intended to put people at the
centre, some components such as political capital, gender, and a range of other power
issues, are not emphasized or considered sufficiently (Hussein, 2002). Similarly, Carney
(2002) claims that insufficient attention is given to the need to increase the power and
rights of the poor.
Another important concern is that markets, economic issues and the private
sector are given insufficient attention. This concern comes from the fact that although
the framework encourages researchers to understand the complexity of livelihoods and
to take local contextual factors into account, its use as an analysis framework has
largely been undertaken by non-economist, social scientists (Carney, 2002).


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2.2. Adoption and application of the sustainable livelihoods approach
Based on the main framework as described, the SL approach has been widely
applied and adopted by governmental organizations, non–governmental organisations,
researchers and practitioners. The most intensive and frequent use of the approach has
been in relation to poverty reduction and rural development. The applications include
project design, implementation, monitoring and evaluation at both macro and micro
levels. Organisations to have used the SL approach include DFID, the World Bank, the
IMF, FAO, International Fund for Agriculture and Development (IFAD), Save the
Children (UK), Society for International Development (SID), European Commission
(EC), Swedish International Development Cooperation Agency (SIDA), UNDP, CARE
and Oxfam. Reports on these applications have been widely published (Turton, 2000;
DFID, 2001; Hussein, 2002; Carney, 2002; Sida, 2003).
Besides poverty reduction purposes, the SL approach has been widely applied to

different sectors like natural resource management and fishing development (Alliison
and Ellis, 2001; Allison and Horemans, 2006) or tourism development and livelihoods
(Simpson, 2007; Tao and Wall, 2009). Market factors have begun to be exploited for
livelihoods improvement, particularly in tourism studies, but only relating to particular
aspects rather than the overall market system.
3. Market, livelihoods and linkages
Hussein (2002, p. 36) refers to Oxfam’s belief that “improved access and or
power in markets [is] critical to the livelihood of the poor producers and improve[ment
in] wages and employment conditions for women”. However, it seems that the linkages
between markets and livelihoods have not been widely explored. Important issues
include both input and output markets, and both commodity and non commodity
products.
According to Dorward and Kydd (2005), there are three main exchange
mechanisms. These are gift exchange, hierarchical exchanges and market exchange.
These mechanisms may exist together in a livelihood system.
The gift exchange is based on shared values and reciprocity. Hierarchical
exchange is based on allocation of resources through command and control. In contrast,
market exchange is based on voluntary participation and a ‘win win’ relationship which
is precise in terms of quantity, quality, space and time. This market relationship
normally has a supporting requirement of a monetary currency and an enforceable legal
system.
Globalisation and trade liberalisation are the dominant tendencies across most
countries of the world. As part of this trend, commercialisation of agriculture is also
occurring in most countries, although the rate of change varies across regions and


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sectors. As a consequence, it is contended here that the livelihoods of people, including
the poor, cannot be separated from the development of both input and output markets.
Subsistence agriculture may have elements of gift exchange and reciprocity,
where surpluses are gifted to others. In contrast, commercial agriculture operates under
a market exchange system. This market can be a highly efficient mechanism for
allocating resources, goods and services, but markets do not always operate well
(Dorward, Poole, Morrison, Kydd and Urey, 2002). Accordingly, it is contended here
that an understanding of market opportunities, constraints, and mechanisms, together
with their limitations, is very important for improving the livelihoods of people.
If markets are to function efficiently there is a need for an institutional and
infrastructure framework that allows all parties open access combined with transparency
of information. Markets of relevance include land markets, physical input markets,
labour markets, credit markets and output markets. The development of these markets
impacts not only on the accessibility and accumulation of assets, but also on selection of
livelihood strategies. The converse also applies, in that poor people are often
constrained from participating in these markets because of their lack of financial, social
and human capital (Barrett et al, 2001; Dorward et al, 2003).
Labour markets are of particular significance in the Vietnamese context. This is
because population density in rural areas is high and there is typically a surplus of
labour. Labour markets are important for transforming the labour force both between
sectors and regions.
A number of authors, including Carney (2002) and Dorward et al (2003) have
identified that the development of markets can increase the vulnerability of some groups
within society. Typically this can occur when some groups are either excluded or
disadvantaged by power and institutional relationships that create asymmetry of
information and bargaining power. Dorward et al (2003) also contend that over
emphasis on non-farm activities relative to agricultural development can negatively
impact on the poorest groups. Accordingly, it is contended here, and in relation to this
study, that markets and livelihood analysis should be combined together in analyzing
the constraints and opportunities for better livelihoods of the poor, particularly in the

context of trade liberalisation and commercialisation.
4. Commercial-based /market- based sustainable livelihoods
Although the role of markets in relation to livelihoods has been increasingly
recognized by researchers and policy makers, questions remain as to the best way to
bring markets and livelihoods together within an analytical framework. One way would
be to analyse markets and associated supply chains alongside livelihood analysis as
separate but complementary analyses. An alternative is to consider market development
and associated supply chains as a specific factor that can be a transforming process


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within the livelihoods framework. Within this approach, markets can be considered
positive in that they lead to increasing living standards. They can also be negative in
that they may increase vulnerability either through encouraging non sustainable
practices or through further marginalization of specific groups within society.
The risk with undertaking value chain analysis separately from livelihoods is
that there will be undue emphasis on products and relations between actors within the
chains, rather than exploring how people can use their assets or capital to create these
products, and on the overall impact on livelihoods.
According to Kanji et al (2005), the combination of livelihood analysis and
value chain analysis can complement each other. The livelihood analysis can allow an
assessment of possible trade-offs between choices (strategies and outcomes) while
supply chain analysis can provide the essential picture of how the local market interacts
with the global market. This combination also provides a more comprehensive
understanding of both the structure of markets and the way in which markets for
particular commodities interact with livelihood strategies. Both analyses can be
conducted in a participatory way in which quantitative and qualitative elements can be

used to complement each other. Thereby, interventions can be more effective in
improving the livelihood of the poor.
Although the idea of integrating sustainable livelihoods and supply chain
analysis has been introduced within this section, the application of this integrated
approach is still not well developed. Accordingly, the framework of Dorward et al
(2003) (Fig. 2) is modified here to explicitly include markets and their interrelationships
within the livelihood framework (Fig. 3).

Fig. 2. Modified sustainable livelihoods framework (Source: Doward et al (2003))


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Fig. 3. Modified commercial based-sustainable livelihoods framework

Within this framework, the livelihood is still the centre of analysis as it is within
the conventional sustainable livelihoods framework. However, the interaction between
livelihoods and markets is explicitly explored. In particular, consideration is given to
different types of markets together with the possibility that these markets will impact in
differing ways. The enabling factors (required interventions) such as transport systems
and roading infrastructure for different types of markets, and the way that each market
interacts with other elements of the livelihood system, become important elements of
this framework. This includes fundamental elements such as changes in the pattern of
household food consumption, and changes in production activities. The interaction
between markets and policies, institutions and processes is also emphasized in this
commercial based sustainable livelihood framework.
Markets include inputs and output markets and their respective input and output
chains. Input markets include land, labour, credit, and physical inputs. Output markets

include commodity and value-add outputs. The benefits from the development of these
markets and agribusiness chains can include direct employment creation, facilitation of
new technologies and hence increased production, and reduced transaction costs thereby
increasing economic efficiency. Market developments can be both facilitated and
constrained by government policies, interventions and institutions. Market
developments can themselves lead to new policies and institutions. Similarly, markets
are not only impacted by shocks and trends, but can generate shocks themselves, create
new risks, and thereby increase the vulnerability context.
Land markets create opportunities for aggregations through both sales and
leasing. These markets can also facilitate consolidation to reduce fragmentation, which
itself impacts on commercialisation opportunities.


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Labour markets include local, regional, national and also international markets
in the context of globalisation. The efficient operation of labour markets facilitates the
transition of labour out of the agricultural and rural sectors. This process not only
creates more non-farm income but also creates opportunities to apply new labour saving
technology.
Physical input markets include machinery, seeds, livestock, fertilisers, pesticides,
and weed killers. Accessibility influences not only transaction costs, but also creates
new production opportunities. The consequent increase in production are enabling for
further development of output markets.
Output markets are driven by changes in patterns of food consumption that are
caused by increases of income, globalisation, and westernisation. However, traditional
eating habits, culture, seasonal events and festivals also influence demand. Output
agribusiness chains include information flows that link price, quality and volume,

thereby helping to shape livelihood opportunities and behaviours.
5. Conclusions
The sustainable livelihood framework is a holistic and contextualised approach.
The framework is widely used by both researchers and development agencies at
multiple levels and with diverse emphases. However, the role of markets has not
received sufficient emphasis.
The sustainable livelihood framework can be integrated with supply chain
analysis. This provides a necessary commercial focus to livelihood analysis. It also
adds a holistic perspective to supply chain analysis that gives consideration to broader
issues of empowerment, vulnerability and equity.

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