Harnessing Value Chains for the SDGs: How Far Have We Come, and What Next to Deepen Scale and Impact?

Businesses, by harnessing their value chains, can be powerful drivers of social, economic and environmental progress and, consequently, can play a critical role in achieving many of the draft SDGs, most notably: Goal 1: ending poverty, Goal 2 ending hunger, Goal 5: achieving women economic empowerment and gender equality, Goal 8: promoting sustained, inclusive and sustainable economic growth, Goal 12: ensuring sustainable production and consumption patterns, Goal 13: taking urgent actions to combat climate change and its impacts, and Goal 15: protecting terrestrial ecosystems.  

A growing number of companies are actively integrating social, environmental and economic improvements in to core business operations and their value chains, working with certification schemes like Fairtrade and Rainforest Alliance, and through sector and issue specific focused platforms and initiatives.

As the world starts to gear up to adopt and deliver the SDGs, this online discussion will draw on the perspectives of leading businesses, civil society organisations and development agencies, to take stock of where progress is being made to harness value chains for social, environmental and economic impact.  Contributors will consider how to build on progress to deepen impact and increase scale, and identify key enablers and barriers for business including governance and regulatory environments, and how to strengthen them.

Key questions to be addressed are:

  1. Where has the most progress been made in harnessing value chains for social and environmental impact, and where do the challenges remain for companies looking to translate principles in to practice?
  2. What are we learning about the key enablers for business seeking to improve their ESG performance, including the role of good governance and regulatory environments?
  3. How can businesses and development partners collaborate more effectively to take ESG performance to the next level of scale and impact, including the reporting of impact?

 

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Hi, Quintin Lake here from Fifty Eight - working with companies to address modern slavery challenges in their value chains. Really looking forward to our discussion today.

I think there has been great progress in the sense that there is now an emerging consensus amongst businesses that they have a responsibility for their impacts across not just immediate operations, but their business relationships.  Recent research from the Economist makes it clear that most businesses (83%) accept that they have responsibilities for human rights alongside governments. Human rights impacts are seen predominantly- but not exclusively- in the value chain in geographies where protections for the rights of individuals, particularly children, are often weak.

 

We also have an accepted framework for managing these impacts- the UN Guiding Principles on Business & Human Rights-  and particularly the concept of human rights due diligence, whereby businesses need to identify, prevent, mitigate and account for how they address their impacts on human rights, particularly with respect to vulnerable groups such as children. It’s true that the practical implementation of these Principles has proven challenging, but with Unilever releasing its first Human Rights report this month, there is clearly movement. 


Zahid Torres-Rahman said:

Let's start with the first question:

Question 1: Where has the most progress been made in harnessing value chains for social and environmental impact, and where do the challenges remain for companies looking to translate principles in to practice?

Giving a perspective on the garment sector good progress has been made at a factory level, with reduced water use, less and better chemical management and more attention on workers rights.  More to do!

But the cotton sector has many challenges -  a fragmented supply chain, with many brands relying on Tier One suppliers to undertake sourcing on their behalf, due to the complex nature of transactions.

Greater transparency from farm to garment is needed in order to connect brands and manufacturers to the beginning of the supply chain.  We are beginning to see a step change here, with brands increasingly establishing sourcing teams in India and China and with some developing vertically integrated supply chains.

Hello everyone. On Zahid's first question - I think the most progress has been made in supply chains where commodities are traceable or revenues can be made transparent (e.g. oil, gas, diamonds, conflict minerals etc). Similar, progress has been made where labour can be contextualised within international standards (e.g. ILO Better Work etc.). 

But the remaining challenges are many. Not least the fact that for some products - such as Ready Made Garments - price remains the overwhelming concern and this affect's labour conditions. There are two fundamental challenges in my view: (i) to move away from audit-led approaches to the supply chain to those focusing on impact and (ii) to involve the wider value chain, including investors and eventually consumers themselves. At the moment there are just not enough incentives and disincentives for action in most value chains.


Zahid Torres-Rahman said:

Let's start with the first question:

Question 1: Where has the most progress been made in harnessing value chains for social and environmental impact, and where do the challenges remain for companies looking to translate principles in to practice?

Yes, I agree. There is a challenge in terms of the transition from a traditional process for determining corporate sustainability priorities (considering the impact on an amorphous group of ‘stakeholders’ combined with ‘materiality’ or business relevance) towards the concept of salience as defined by the UN Reporting Framework on Human Rights. The former means that some impacts on people may be ignored if they don’t have an effect on the performance of the business. This latter would urge prioritisation of issues on the basis of the company’s most severe potential negative impact on individuals, families and children.



John Morrison said:

Hello everyone. On Zahid's first question - I think the most progress has been made in supply chains where commodities are traceable or revenues can be made transparent (e.g. oil, gas, diamonds, conflict minerals etc). Similar, progress has been made where labour can be contextualised within international standards (e.g. ILO Better Work etc.). 

But the remaining challenges are many. Not least the fact that for some products - such as Ready Made Garments - price remains the overwhelming concern and this affect's labour conditions. There are two fundamental challenges in my view: (i) to move away from audit-led approaches to the supply chain to those focusing on impact and (ii) to involve the wider value chain, including investors and eventually consumers themselves. At the moment there are just not enough incentives and disincentives for action in most value chains.


Zahid Torres-Rahman said:

Let's start with the first question:

Question 1: Where has the most progress been made in harnessing value chains for social and environmental impact, and where do the challenges remain for companies looking to translate principles in to practice?

NGOs have come an extremely long way in market systems approaches in the last few years,  understanding the processes of facilitation rather than prevailing upon beneficiaries to produce something and then thinking about how to market it.  Millions of people,  a majority of them women, have been successfully re-orientated towards enterprise development and creating jobs for themselves and others in a world where formal sector employment opportunities are diminishing. Companies have been willing to enter in to dialogues where bottleneck in supply chains are identified. 

Where companies have undertaken impact assessments, this has helped focus where value chains and expertise can be harnessed for positive impact. If a company integrates the voices of the most vulnerable into its human rights impact assessments, it will be better placed to determine where to focus its efforts to positively support the delivery of the SDGs. This is clear from the experience of the telecoms company Millicom. After conducting a child rights impact assessment across its supply chain with Unicef, Millicom supported the creation of a new SMS service in Tanzania that allows parents to register new births as well as those of children under five on any mobile phone, straight to a centrally-run database. Birth registration- the subject of another SDG target- rose from nine per cent to 40 per cent in the pilot region of Mbeya in six months.

This isn't an easy process however. There is a challenge in that determining the impacts of a business (and therefore the opportunities to best support desirable social outcomes) requires consultation with stakeholders that are potentially or actually affected by a company’s operations and supply chain, particularly vulnerable groups, rather than with those organisations that have best managed to grab the company’s attention. Impacts on individuals take place in specific geographic locations at specific times and while it might be easier to undertake stakeholder consultation with NGOs HQ’d in London, businesses really need to get as close as possible to the voices of those at the sharp end of impacts in the value chain.

 

For Unicef UK, that means bringing the voices of children into the due diligence process so that a company can understand how they affect their lives beyond the traditional focus on child labour (which remains a grave issue with 168 million child labourers worldwide). Children are important stakeholders for business - as consumers, family members of employees, young workers, and as future employees and business leaders- but are rarely treated as such. Almost every business activity can leave a footprint on children’s lives - whether through employment conditions of parents, product safety, marketing practices or environmental impact.


Zahid Torres-Rahman said:

Let's start with the first question:

Question 1: Where has the most progress been made in harnessing value chains for social and environmental impact, and where do the challenges remain for companies looking to translate principles in to practice?

I agree with Francis that there is some positive progress in terms of a growing recognition by many multinational companies of their responsibilities not only to ‘do no harm’ but also to ‘do good’, as well as the UN Guiding Principles on Business and Human Rights which provides a framework. And a number of companies are genuinely committed in terms of their global policies to ensure their supply chains are making a positive social and environmental contribution. However, the reality is that many challenges remain including inadequate and ineffective policy frameworks, and continued involvement of people in supply chains in precarious employment, on legal but low wages, smallholder farmers receiving low prices and carrying an unfair share of the burden of risks (including from climate change). 

Hi, Rachael Clay, Director of Ethicore here.

The question of how to translate principles in to practice is a critical one.  Many companies want to move beyond box ticking and reporting, to really focus on solutions to challenging risks and problems.  How can we turn projects and pilots in to real long-term changes in value chains?  What support do you think is required for companies (and INGOs) to translate?

Thanks for your thoughts!

Progress on gender equality has been largely on a case-by-case or project basis – see examples in Equal Harvest report.

Fairtrade aims to increase the proportion of revenue that goes to the poor farmers by paying higher prices – redistributive approach, but also aims to expand the overall amount of value created through improving production techniques, quality of product and sustainability of production. More and more we have made progress in moving into more sustained Producer Facing initiatives and now making effots to move away from complience into impact Standards

Efforts by business to increase social investments have been big, but would need coordination and structuring. Finding the common ground and leveraging on skills and resources.. Such investments should aim as much as possible on reducing in equalities. We need to consider investments that reduce discrimination in access to work by women, ability for women to access 

Behind the Brands Campaign – has forced companies to reconceive the intersection between social justice/society and corporate performance/profit. Companies have sought to develop new skills and knowledge relating to how they can enhance appreciation of societal needs, understanding the basis for company productivity, and ability to collaborate across profit/non-profit boundaries.

Challenges remaining for companies are to find ways to translate principles into practice, getting buy inn from investors and shareholders . There is still need to increase internal awareness-raising and capacity building.  Businesses have rarely approached societal issues from a value perspective but have treated them as peripheral matters, obscuring the connections between economic and social concerns. Companies may need to change the approach of eding social complience issues to government and csos.

There is still need to invest in proper and deeper analysis of the the issues in our value chains especially conducting separate gender analysis so that challenges and constraints that specifically reklate to women who carry the most burdarn are not diminished.

Another challenge can also be found in how businesss is still working with private sector. The model has to change to enable and support and not work against improvement of social accountability.



Zahid Torres-Rahman said:

Let's start with the first question:

Question 1: Where has the most progress been made in harnessing value chains for social and environmental impact, and where do the challenges remain for companies looking to translate principles in to practice?

Yes, in terms of specific issues, wages are clearly an area that remains problematic. Ikea became the first retailer to pay a living wage to all UK staff last week. That’s a fantastic commitment for which they should be commended, but there are still far too many companies (and consumers) that are linked to extremely low wages further down the supply chain – from tea estates to garment factories. Poor wages and working conditions of parents and caregivers impact on children- low income can affect access to health and nutrition and can contribute to child labour; long working hours and insufficient maternity leave may lead to insufficient time for parents and carers to rest and care for children who are left to take care of themselves and/or their siblings. There can also be inadequate policies and support in place for women workers to breastfeed their children when they want to.



Penny Fowler said:

I agree with Francis that there is some positive progress in terms of a growing recognition by many multinational companies of their responsibilities not only to ‘do no harm’ but also to ‘do good’, as well as the UN Guiding Principles on Business and Human Rights which provides a framework. And a number of companies are genuinely committed in terms of their global policies to ensure their supply chains are making a positive social and environmental contribution. However, the reality is that many challenges remain including inadequate and ineffective policy frameworks, and continued involvement of people in supply chains in precarious employment, on legal but low wages, smallholder farmers receiving low prices and carrying an unfair share of the burden of risks (including from climate change). 

Great insights so far! Let's move on to our second question:

2. What are we learning about the key enablers for business seeking to improve their ESG performance, including the role of good governance and regulatory environments?

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