Manufacturing and Value Chains

How innovation and commitments can shape the future of inclusive value chains

'We have a unique opportunity to integrate social enterprises and diverse businesses into value chains more effectively.' Image: Unsplash

Scott Russell
Member of the Executive Board, Customer Success, SAP
Francisco Betti
Head, Global Industries Team; Member of the Executive Committee, World Economic Forum
Carolien de Bruin
Head, COVID Response Alliance for Social Entrepreneurs, World Economic Forum
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  • The COVID-19 crisis has made clear the need to rethink value chains so that they work better for people and societies.
  • Responsible and social sourcing can help ensure that value chains are more inclusive, diversified and resilient.
  • The World Economic Forum Sustainable Development Impact Summit 2021 provides a unique platform to unpack the principles, policies, and partnerships needed to shape more sustainable operating and business models.

The COVID-19 pandemic disrupted our societies in an unprecedented way, affecting those who were already most marginalised before the crisis. Consumer and stock markets were put under significant pressure, and many value chains were not able to operate, increasing the volatility of commodity prices and goods and preventing products from flowing across geographies.

As companies and governments rethink their manufacturing and industrial development strategies for a new normal, the world has a unique opportunity to reshape operating and business models, not only to make them more productive and sustainable, but also more inclusive.

Responsible and social sourcing – which refers to using an organisation’s buying power to generate social value above and beyond the value of the goods, services or construction being procured – can play an important role in integrating disadvantaged communities to value chains. In addition, by doing so they can help manufacturing companies become more resilient while minimizing the impact of crises on the economies in which they operate.

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What is Responsible and Social Sourcing or Procurement?

According to the World Bank, global public procurement spend alone was at least EUR 13 trillion in 2020. Even if only 1% of that spend went to social enterprises, those organizations would be given new impetus to tackle some of the world's most pressing social and environmental challenges.

Examples of social enterprises getting into the lead are plentiful. Take Kuli Kuli, a creator of sustainable superfood snacks and naturally energizing moringa powders focussed on improving the health of women and the planet - now a supplier to large corporations such as Whole Foods Market, Walmart, Costco, and 11,000 other grocery stores nationwide. Or Polymateria, a British business developing a new standard in biodegradable and compostable plastics to combat plastic pollution.

Also, a World Economic Technology Pioneer, Polymateria, has mandated itself not only to provide quality, sustainable, and circular products, but also to “redesign the rules of an entire industry”. The collaboration with social enterprises in these cases shows how manufacturing companies can benefit not only from the insights, but also from the impact, and innovation that social entrepreneurs bring.

We have a unique opportunity to integrate social enterprises and diverse businesses into value chains more effectively. In 2020, SAP launched its 5 & 5 by ‘25 initiative as part of which the firm targets to have 5% of its annual addressable procurement spend involving social enterprises and diverse businesses by 2025. Likewise, Unilever committed to spend 2 billion USD annually within its value chains with suppliers owned and managed by people from under-represented groups, by 2025. In the garment industry, Ralph Lauren committed in 2019 to sustainably sourcing 100% of its cotton and viscose and using 100% recycled polyester by 2025, and has – over time – increasingly been working to diversify its supplier base, and to partner with its existing suppliers to shift their operations towards being more sustainable and inclusive.

Corporations from all sectors - Gap, Inter IKEA, J&J, Mars, Unilever, and Verizon to name a few - have made similar commitments. All at a time when their suppliers have also begun to embrace more inclusive models and practices. Next month, Acumen, a member of the COVID Response Alliance for Social Entrepreneurs (CRASE), will publish its list of 100 ‘corporate-ready social enterprises’ - all social entrepreneurs who are working with large corporations to transform their operations and business models. Be it by ensuring the digital infrastructure exists to build transparent, traceable supply chains; by offering products and innovative solutions that can help corporations to deliver on their procurement goals; or by financing the transformation of such value chains, an area where governments can play a catalytic role.

Have you read?

This week, as part of and alongside the World Economic Forum’s 2021 Sustainable Development Impact Summit (SDIS), multiple conversations will be held and publications launched that touch on the urgency to commit and act towards building more inclusive value chains. They will help further the efforts of those companies, entrepreneurs, professional services firms, and governments who are ready to roll up their sleeves and transform their value chains. Examples of efforts include those led by Bain, EY, Yunus Social Business, the Social Enterprise World Forum, and Euclid Network.

Multi-stakeholder dialogue and cross-sector collaboration are vital to boosting companies’ ability to build a diversified and inclusive supplier base, for more resilient value chains. The time to unpack the principles, policies, and partnerships needed to enable inclusive economic growth is now. The World Economic Forum – through its Advanced Manufacturing and Value Chains Platform and the COVID Response Alliance for Social Entrepreneurs - provides a unique platform for stakeholders to exchange ideas and best practices, agree on a common agenda on responsible and social sourcing, and incubate the collaborations needed to drive action and impact.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Manufacturing and Value ChainsStakeholder CapitalismHealth and Healthcare Systems
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