Linking small-scale producers in developing countries to larger lucrative markets via integrating them into global value chains are widely recognized as valuable ways to boost the economy hence, poverty reduction. Small-scale producers are by far the majority of farmers in the world, in some estimates producing 70% of the world’s food[1]. Thus, promoting exports of products in compliance with sustainability measures accounting the inclusivity of small-scale producers, became a major policy goal in many emerging economies due to its contribution not only to the environmental and social sustainability, but also to the economic growth of the country.
Sound incentives for businesses to implement sustainable value chains
Sustainability Standards have emerged over the last two decades, penetrating the mainstream market as a new instrument of transnational trade governance. For global retailers and brands, implementing sustainable value chains by setting corporate policies to adopt sustainability standards along their supply chains is one of the most straightforward form of embedding sustainability into their production and manufacturing processes. The tangible benefits are clear from the efficiency of the production methods and, reduced costs will take effect in the long run.
Social inclusivity in question
Today, the Sustainability Map (www.sustainabilitymap.org) of the International Trade Centre (ITC), an inventory of VSS, counts over 240 Voluntary Sustainable Standards (VSS) schemes, in which social and environmental standards was set for transnational production and, also operate certification programs in order to verify compliance in the global value chains. On the one hand, it is inevitable to consider the sustainability standards’ reconciling benefits they contribute to the environmental, social and economic policy objectives, while on the other hand, the impact of these standards on developing countries and especially, small-scale producers remain uncertain. Their ability to partake in the world of sustainability standards and integrating themselves into major global value chains are typically constrained by[2]:
- lack of capital, assets, skills and information to compete in buyer-driven markets
- high business costs in relation to the small size of their business
- limited access to affordable and reliable services necessary to raise productivity and improve quality
- weak bargaining position in local and global markets controlled by buyers
- limited influence on local, national and global policies and government practices that affect the markets they depend on for their livelihoods
Thus, such market opportunities are often perceived as a burden for these marginalized economic actors.
Social demands come with a price tag
With reference to the ILO’s global survey on purchasing practices and working conditions in global supply chains in 2017, the demands for social standards concluded with more than 90% of the surveyed suppliers were expected by their buyers to follow a code of conduct, the proportion is even higher in food and clothing industries. While this demand can only be a positive development, only 17% of these suppliers enjoyed shared audit costs and even less, 9% received financial assistance. So, who pays for the implementation of these sustainability standards?
Producers tend to bear the bulk of the costs, though others contribute. For VSS, producers usually incur the costs of implementing standards and providing compliance (certification costs), according to information from the International Trade Centre (ITC) Standards Map. For some VSS, costs are borne by many different players along the supply chain. Overall, however, producers alone bear certification costs in 55% of the cases and implementation costs alone in 64% of the cases[3]. Smaller and less productive producers, mainly from developing countries find it harder to cover fixed costs to comply with standards and regulations. Moreover, in the case of developing countries, the immediate business environment can also challenge the procedures of certification and implementation because necessary testing facilities and logistics infrastructure are more likely to be lacking.
Survival of the fittest
The most competitive firms will be able to invest and comply with sustainability standards, further leading them to be even more competitive in the market with increased chances of survival while their exports expand. Others, more so for small producers in developing countries, run the risk of exiting the market, if not surviving the bare minimum living standards.
The moral imperative of global governance to address the inclusion of small-scale producers
In the agri-food value chain, there is a significant shift in power gains by larger retailers leaving smaller producers and farmers with little bargaining power. Reducing the asymmetry of information vis-à-vis public awareness will increase transparency that are important to re-empower smaller producers at the lower end of the value chain. The rapid evolution of inclusivity engagement with sustainability standards in developing countries have depended to a large extent, on supports from the international organizations. Thus, UNFSS works closely alongside the National multi-stakeholder Platforms to coordinate and provide support to developing countries and emerging economies through a framework that facilitates knowledge exchange, international dialogues, analytical studies, capacity building among other activities.
The moral imperative for the public governance is to emphasize the importance of inclusive development by including smaller producers into the sustainability certification schemes. Establishing an institutionalized structure through the National multi-stakeholder Platform helps facilitate dialogues among relevant stakeholders at national level with international communities and trading partners, formulate policies that are enabling for smaller producers and SMEs to gain access to the global value chains, and integrating infrastructures that can potentially reduce the burden of sustainability standards compliance for smaller producers.
References:
[1] Bernstein, H. (2015). Food Regimes and Food Regime Analysis: A Selective Survey. A paper presented at the International academic Conference 5-6 June 2015, Chiang Mai University
[2] Penrose-Buckley, C. (2007). Producer Organisations: A Guide to Developing Collective Rural Enterprises. Oxfam GB.
[3] International Trade Centre and European University Institute (2016). Social and environmental standards: Contributing to more sustainable value chains. ITC, Geneva.
