Preference for sustainable supply chains growing — researcher

COMPANIES need to heed a growing consumer preference for sustainable practices that help raise the incomes of the small businesses supplying them, an Erasmus University researcher said.

Annette O. Balaoing- Pelkmans, Partnerships Resource Centre (PrC) senior research associate at Erasmus University’s Roterdam School of Management, told BusinessWorld that “fair-trade brands are becoming more attractive to consumers” who are increasingly asking about how the products they consume are sourced.

“Does this come from an inclusive sustainable value- chain or a non- inclusive exploitative value chain? No one will supply if no one will pay for it. It’s just a matter of changing your perspective as your role as a consumer in triggering more inclusion in the value chain.”

Ms. Balaoing- Pelkmans said Philippine companies are still “very early in the process” of adopting inclusive value chains, as they have yet to consider the growing consumer preference for sustainability in their business models.

“The farmers are still so poor so we’re still in an early phase. The only way you can induce growth is to help more firms have inclusive business models,” she added.

“But it’s not like [ large companies] don’t want [to make use of inclusive business models], it’s just that they don’t know how. All we need is to bring out the information of how [to have an inclusive business model]. Because all the models are there.”

Erasmus University’s Rotterdam School of Management, in partnership with the University of the Philippines Diliman, recently studied inclusive business models at Jollibee Group Foundation’s Farmer Entrepreneurship Program, PinoyME Foundation and Caritas Diocese of Libmanan’s Saradit sa Kristiyanong Komunidad Rice Processing Center in Camarines Sur, and Unifrutti Tropical Philippines and Hineleban Foundation’s Transformational Partnership Model.

A key finding of the study was that the creation of sustainable and inclusive business models depended on simplifying the partnership structure to include a lead company, a lead partner and small-holder farmers.

A more typical structure consists of a longer supply chain including consolidators, traders, buyers and agents coming between lead firms and smallholder farmers.

Ms. Balaoing-Pelkmans noted that a shorter supply chain ensures that farmers earn more, giving them more purchasing power.

“These farmers are also their customers. So the more purchasing power the farmers have… they become a huge market for the lead firms.”

In conjunction with the study, the two universities launched the Escaping the Middle-Income Trap: Chains for Change (EMIT C4C) Partnership Center.

The EMIT C4C Partnership Center is housed at the Center for Integrative and Development Studies at UP Diliman. —