Transparent value chains for sustainability
Transparent value chains for sustainability28 March, 2021 •
Promoting sustainable supply chains and improving standards for dignified work
Supply chains are intrinsically complex flows of goods, money and services. Their traceability refers to the collection, documentation, and application of information related to all processes in the supply chain in a manner that provides guarantee to the end-user and other stakeholders along the supply chain on the provenance, location and life history of a product. It represents the ability to conduct a full backward and forward tracking to determine characteristics of the good by means of records. In line with the UN’s sustainable development goals, the sustainable management and traceability of these supply chains can positively affect lives to receive a higher income around the globe – which is especially true in low income countries, where 63% of the employed population still work in the agricultural sector.
Often, the opaqueness of supply chains hinders customers from understanding the provenance of a product, as well as its social and environmental impact for smallholder farmers and other participants of the supply chain. While increasing numbers of customers seek out organically produced goods, industry fails with the demand to provide such goods at a satisfactory standard. Currently, the only way for customers to be promised higher standards is through certification schemes. These schemes tend to be too costly for single smallholder farmers and even corporates may shy away from the investment. Hence, farmers and workers may carry on receiving low prices for goods that could be distinguished as sustainably sourced. Customers experience a lack of comprehension of existing sustainability labels and a lack of clarity on the detailed origin of goods. They lack comprehensive information on, for example, the emission occurring along the chain and the human rights situation in production locations.
This uncertainty is understood to be a barrier to increasing purchasing behaviour for sustainably sourced goods for customers with a high purchasing power. The lack of transparency along complex supply chains, thus makes it difficult to unveil the low wages for smallholder farmers, the poor working conditions for farm and factory workers, the environmental impact and the lack of sustainable farming and processing practices. The lack of transparency in supply chains stems, among other things, from their complex nature that commonly involves a wide range of stakeholders: farmers, processors, marketers, handlers, consumers, governments, and the general public. Along the chain, participants have their own interests and are reluctant to share economically sensitive information that can generally cause barriers on the exchange. Smallholder farmers are the weakest actors and have the least bargaining power in the supply chain to actively influence prices and payouts.
Read the note which unpacks the need for sustainable supply chains, the advantages and challenges of using Blockchain technology to track supply chains, the ideal application context and current initiatives.
This work forms part of a body of work conducted by GIZ with a focus on agricultural supply chains and textile supply chains. Find out more at GIZ.