Institute for Sustainable Commodities (ISCOM)

Transforming international product chains into channels of sustainable production - the imperative of sustainable chain management

- By:

Courtesy of Courtesy of Institute for Sustainable Commodities (ISCOM)

1 Background

1.1 Sustainable development

Although command-and-control measures have had a significant beneficial impact on the environment, it is now generally recognised that ecological sustainability requires further integration of environmental concerns into the strategies that basically define corporate identity. Moreover, it is increasingly considered that sustainable development involves three main aspects of productive activity: the economic, social and environmental.

1.2 Corporate responsibility

The relevance of this triad is particularly manifest in the international trade relationships involving large international trading and manufacturing companies that obtain their major inputs from lowincome regions in the world. Many of these large international companies—based mostly in advanced economies in the European Union, Australasia and North America—are now facing growing demands for corporate responsibility and accountability. The mixed blessing that globalisation is thought to be is also leading to further pressure on companies operating in developing countries on issues such as labour rights and environmental management, especially when the countervailing powers of good government and civil society are weak and poverty prevails.

1.3 War against poverty

Parallel to these developments, in a world of development aid and international cooperation, it is increasingly being realised that the war against poverty is primarily to be waged by becoming competitive actors in the world economy. Even though in the past business and  non-governmental organisations (NGOs) represented two different, antagonistic, worlds, nowadays there is a growing realisation that the provision of schools and clinics cannot bring sustainable well-being if the population remains impoverished and without a means to generate wealth. In this respect, NGOs cannot afford to ignore the international business community, which is beginning to broaden its scope in terms of social and environmental concerns.

1.4 Mainstreaming

The above considerations underline the relevance of sustainable chain management. This means working towards enhancing the social and  environmental performance as well as the economic performance (quality) of the processes that are necessary to grow, process, transport and sell a product. This makes it possible for organisations in the different links of a product chain to work together to create a sustainable product and bring it to market. There are now cases where NGOs have actively helped to create separate market niches for social and environmental products or, in a broader sense, sustainable products. These projects benefit small farmers and manufacturers and at the same time prove that different, more sustainable, modes of doing business are possible.

In terms of volume, these initiatives have only a modest effect. Therefore, calls are increasingly being made for mainstreaming— that is, for the adoption of sustainability standards by the large manufacturers and sellers of those products whose ingredients originate in developing countries. This means not only increasing the standards that overseas small producers have to meet but also actively enabling them to achieve such standards.

Achievement of direct contact with large purchasing companies requires considerable commercial skills from the upstream producers. In sustainable chain management, rather than selling their products to intermediaries that pool the wares of a great number of producers, the upstream producers make direct contact with the final purchasing company. Product quality is a key issue in such a relationship. How to cope with all these new requirements is a great challenge for actors at both ends of the international product chain. There is a pressing need for inspiring stories of good practice, good management instruments and adequate government and NGO policies in this field.

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