Janina Grabs

Sustainable Global Supply Chains Report 2022

Global supply chains affect the economy, the environment and social welfare in many ways. Worldwide, economies are experiencing global supply shortages today, affecting key industries such as automotive and consumer electronics as well as vaccine and medical supplies industries. These preoccupy policymakers, who are debating independent national production capacities and restrictions on international trade, but also large companies, which consider reshoring production and abandoning just-in-time procurement. At the same time, the greening of the global economy requires a restructuring of global production to massively decrease its environmental footprint. This creates new supply chain challenges – how to move towards circular economies and how to reorient energy-intensive industries towards renewables and green hydrogen, for example. And let‘s not forget: Consumers are increasingly demanding higher social and environmental standards. Transparency requirements and binding due diligence obligations will in particular affect countries that export raw materials and labour-intensive goods produced under problematic environmental and social conditions. All of this calls for policies that shape global supply chains in accordance with globally agreed social and environmental objectives. Policies along these lines will have to balance the legitimate interests of different countries and they may easily fail to achieve their objectives unless they are firmly grounded in a thorough understanding of the respective structures in supply chains, including the power relations between the actors. Further, the economic, social and environmental effects of alternative policy options need to be well understood. Science can make an important contribution here, especially if it maintains a constant dialogue with politics and society. This is why the international “Research Network Sustainable Global Supply Chains” was initiated by the Federal Ministry for Economic Cooperation and Development (BMZ). It currently comprises about 100 internationally leading scientists from all over the world and is jointly coordinated by our four institutes. Its tasks are: To conduct and stimulate research that contributes to making supply chains more sustainable; and to collect and synthesize the best international research on this topic and make it accessible to policy makers and other societal actors. In addition to its own research, the network organises academic conferences and discussions with policymakers, organises a blog and produces podcasts. With this report – the first in a new annual series – we present new research highlights, provide a forum to debate controversial supply chain topics and identify policy-relevant research gaps for the network‘s future work. The report is, at the same time, an invitation to participate in the discussions on how investment, production and trade will be reorganized in a global economy that has to respond to geopolitical challenges.

Should payments for environmental services be used to implement zero-deforestation supply chain policies? The case of soy in the Brazilian Cerrado

Over the past decade public and private actors have been developing a variety of new policy approaches for addressing agriculturally-driven deforestation linked to international supply chains. While payments for environmental services (PES) have been advocated in many contexts as an efficient and pro-poor environmental policy to incentivize conservation, they have been the subject of intense scrutiny and criticism for leading to mixed and sometimes adverse environmental and social outcomes. It remains unclear whether such an approach is an improvement over existing approaches to govern sustainability in supply chains and especially as a mechanism for reducing ecosystem conversion. Here we conduct an ex-ante analysis to examine the potential outcomes of using a standalone PES scheme versus existing standalone market exclusion mechanisms (MEM) to govern commodity supply chains. The analysis develops a theoretical framework to examine the potential effectiveness, cost-effectiveness, equity, and legitimacy of the two approaches and then applies this framework using qualitative analysis of secondary and interview data. Using this theory-driven evaluation approach we examine the case of the Brazilian Cerrado, where a PES mechanism is currently being proposed to achieve zero-deforestation targets in soy supply chains. We find that both standalone approaches suffer from different strengths and challenges and would be better used in combination. We conclude that a mixture of strict market exclusion with positive incentives and enabling programs that are targeted at the poorest farmers would be more effective, cost-effective, equitable, and legitimate. However, in the future such supply chain focused soy deforestation control efforts in the Cerrado must be complemented by broader jurisdictional approaches to addressing deforestation and sustainable development that include all land use actors, not just soy farmers. These more inclusive and balanced initiatives can help ensure that avoiding deforestation goes hand in hand with supporting sustainable livelihoods for a wider range of actors in the Cerrado.

How to find synergies between effectiveness and equity when designing supply chain sustainability policies

Effectiveness-equity tradeoffs in enforcing exclusionary supply chain policies: Lessons from the Amazonian cattle sector

To address ongoing deforestation for global food commodities production, companies and governments have adopted a range of forest-focused supply chain policies. In the Brazilian Amazon, these policies take the form of market exclusion mechanisms, i.e., immediately dropping suppliers who have cleared their land after a specific cut-off date. Theory suggests that strict exclusionary policies such as these are likely to result in both negative livelihood effects and reduced effectiveness of the policy if some farmers are not able to comply. It is proposed that a more cooperative model of enforcement that uses flexible and negotiated approaches to compliance management may enable more marginal and disadvantaged farmers to achieve compliance, thereby improving both the effectiveness of supply chain policies and their equity. Through our case study of cattle in the Brazilian Amazon, we examine the degree to which a purportedly cooperative supply chain policy exhibits coercive tendencies at different tiers and the degree to which these tendencies influence effectiveness and equity outcomes of the policy. We show that, surprisingly, even cooperative models of enforcement are prone to exhibit coercive tendencies in multi-tier supply chains, leading to severe equity shortcomings. We provide recommendations and a research agenda to mitigate effectiveness-equity tradeoffs in multi-tier, forest-focused supply chain policies in the aim to improve the design, adoption, and implementation of such policies.

Desgning effective and equitable zero-deforestation supply chain policies

In response to the clearing of tropical forests for agricultural expansion, agri-food companies have adopted promises to eliminate deforestation from their supply chains in the form of ‘zero-deforestation commitments’ (ZDCs). While there is growing evidence about the environmental effectiveness of these commitments (i.e., whether they meet their conservation goals), there is little information on how they influence producers’ opportunity to access sustainable markets and related livelihood outcomes, or how design and implementation choices influence tradeoffs or potential synergies between effectiveness and equity in access. This paper explores these research gaps and makes three main contributions by: i) defining and justifying the importance of analyzing access equity and its relation to effectiveness when implementing forest-focused supply chain policies such as ZDCs, ii) identifying seven policy design principles that are likely to maximize synergies between effectiveness and access equity, and iii) assessing effectiveness-access equity tensions and synergies across common ZDC implementation mechanisms amongst the five largest firms in each of the leading agricultural forest-risk commodity sectors: palm oil, soybeans, beef cattle, and cocoa. To enhance forest conservation while avoiding harm to the most vulnerable farmers in the tropics, it is necessary to combine stringent rules with widespread capacity building, greater involvement of affected actors in the co-production of implementation mechanisms, and support for alternative rural development paths.