SOIL Report 2008 - ACCESS Development Services

The Contribution of Corporate Supply Chains to the Livelihoods of the Poor2. Modernising supply chains and livelihoodsBefore proposing a framework of analysis, some international evidence on corporate retail supply chainsand their effects on livelihoods must be summarised in order to gauge what one may expect in India.First is the argument that supply chains more tightly integrated to markets make for better ‘ethics’. Asfirms build their brands, they are said to have a growing interest in reputation, which may induce themto push for fairer practices in their supply chains (Weiser 2001, 101; Singh, Kundu et al. 2005). But this iscountered by the evidence that brand retailer giants are disinclined to build long and steady relationshipswith suppliers. Their wealth resides increasingly in the ‘intangibles’ of marketing, the creation of shoppingenvironments and the rapid churning of ‘new’ products on their shelves. “The faster the productcycle time and the shorter the planning horizons, the less pressure there is for a company to considersocial and environmental issues in its business planning” (Weiser 2001, 101). The evidence suggeststhat supply chains of global brands are not only geographically distant but also often fragmented andopaque, making it hard to push through front-end CSR initiatives. Moreover, if a reputation among one’scustomers must be managed, this can be achieved in ways other than making fundamental changes inthe chain (Oxfam 2004; Barrientos 2006).It is perhaps not so much CSR or ‘ethics’, which travel from front- to back-end in the supply chain ofcorporate retailers, as new forms of regulation and product specification. These regulations and normsrelate to how business should be done between trading partners, and to the quality and product requirementsof the retailer. They influence who, among chain producers and intermediaries, makes the gradeto join and remain within the chain. Ponte and Gibbon (2008) argue that such regulations can be understoodas “conventions, normatively-based sources of coordinated economic conduct”. The authorsdevelop the idea of ‘soft power’ by which the participation of supply chain players in economic activityis governed by these informal rules and norms.An IFPRI-commissioned study illustrates how such ‘soft power’ is applied across procurement centresfor supermarkets in developing countries. “Chains and their specialised wholesalers tend to move fromspot markets to preferred supplier lists when the need for quality and consistency is high and whenfarmers or processors are associated or individually large” (16). The study finds that supermarkets tendtowards sourcing from larger suppliers (particularly in meat and dairy), but that “small farmers are notexcluded, except when certain factors affect the farmers’ capacity to implement certain technologies thathave an impact on quality, productivity, costs, or the ability to plant or harvest at the necessary timesduring the year” (20).Anna Tsing (2008) brings a similar analysis to bear on the suppliers of Wal-Mart worldwide. She showsthat in its suppliers’ code of conduct, Wal-Mart is clear that it wants control, but only over some things(e.g. prices, marketing, logistics) and not others (e.g. labour arrangements, environmental practices andsubcontractors’ investment strategies) (Tsing 2008, 14). 6 “Compliance [to the supplier code] is both voluntaryand required. Such practices remind us that supply chains weave complex corporate dependenciesinto the fabric of their commitments to the independence of firms” (14).In this new ‘soft’ regulatory imperative, the IFPRI study shows that non-capital asset factors play a keyrole in determining who can participate, for example, a farmer’s educational level and access to goodroads, irrigation and cold storage infrastructure. It also shows that those who secure a foothold in thechain, over time, experience tension with their supermarket buyers, who typically pay after a time lag,impose a series of fees on suppliers, and demand post-harvest services from them, apart from imposingstringent quality and product standards (Reardon and Gulati 2008, 21).6Tsing quotes Petrovic and Hamilton’s study of Wal-Mart, ‘Making global markets: Wal-Mart and its suppliers’, in Lichtenstein, N (2006), ed, Wal-Mart: the Face of Twenty-First Century Capitalism, WW Norton.It is perhapsnot so muchCSR or ‘ethics’,which travelfrom front- toback-end in thesupply chainof corporateretailers, asnew formsof regulationand productspecification.In this new‘soft’ regulatoryimperative, theIFPRI studyshows thatnon-capitalasset factorsplay a key rolein determiningwho canparticipate,for example,a farmer’seducationallevel and accessto good roads,irrigation andcold storageinfrastructure.153