How is your breakfast linked to forest fires and child labour?

While eating your breakfast this morning, did you wonder if the butter on your bread might have contributed to the recent forest fires in Indonesia? Did you decide to put on clothes that are free of child labour? And while drinking your cup of coffee, did you think: “I wonder if the coffee farmer at the other end of the global value chain got a fair price for his beans and sent his kids to school?”

Every day, we all play a role in global value chains − usually at the end of the line, as consumers. But for most of us the link between the forest fires in Indonesia and our breakfast is not an obvious one. Still less do we feel responsible for it.

But the reality is that global value chains now make up more than 70% of global trade. They create a high level of interconnectedness and interdependency, making it hard to steer changes in the direction we desire, towards a more sustainable world.

Who wants to buy products that are made by exploited children or that harm the environment? People feel they have a right to fair products, produced without human-rights violations and environmental damage. But it’s not enough to rely on consumer behaviour alone: citizens look to their governments to regulate these issues, even if they occur outside their own country. They also expect companies to prevent and mitigate these issues in the places they operate.

Global value chains have a high impact on developing countries. The opportunities that come with internationally traded goods are a blessing, but the damaging effects of unsustainable production are a curse. All too often the curses and blessings are unevenly distributed. At the beginning of the chain, producers are faced with the biggest challenges, shifting to environmental, smart and socially just production systems. In developing countries, support systems and regulation are often lacking. The more dependent we become on international value chains, the more the curses become risks for business. Thanks to the internet and social media, any misconduct in a particular chain quickly becomes public knowledge. Risks are not good for business; too many risks scare other businesses away. And without business there’s no sustainable economic development. No country can develop on aid alone.

In the new “trade for all” strategy, European Union commissioner Cecilia Malmström aims to create better coherence between development and trade policies, with a focus on sustainable value chains and responsible business conduct. Dutch minister Lilianne Ploumen has been combining foreign trade and development cooperation for several years now, to address the challenges of global value chains more effectively. In the run-up to the Dutch EU presidency, the Netherlands set the scene for an ambitious European agenda, with the EU and Global Value Chains conference in December 2015.

When aligning aid and trade policies, EU institutions and member states can support and accelerate sustainable market transformation in four ways. They should:

  1. Stimulate innovation for sustainable production, trade and business models. Innovation is the spark that triggers market transformation and makes European companies competitive in the decades to come.
  2. Support and facilitate multistakeholder platforms. Companies and civil society need to set clear sustainability targets and plot out a way to get there – together. The bigger the market share represented in the platform, the greater the effect. Competition laws need to provide scope for collaborating on sustainability targets.
  3. Combat illegal practices throughout the value chain, and support other governments to strengthen their law enforcement and improve laws and regulations. They should also support civil-society organizations as they develop and emerging countries as they exert more influence on policy-making.
  4. Stimulate sustainability through smart regulation as well as trade and investment agreements. These are pivotal in shaping the global production system. In addition, the EU must reach out to emerging consuming markets to collectively increase global demand for sustainable goods.

The conference was not about if, but how governments, companies and NGOs can strengthen one another’s policies and activities, to support poverty reduction, social justice and gender equality and to halt deforestation. In support of the Paris Agreement on Climate Change, the conference delivered three milestone declarations of the European palm oil industry and EU governments to help decouple palm-oil production from deforestation and halt deforestation all together: 

These tangible commitments are a firm and significant step in the right direction. Now we need to build on the momentum and translate these pledges into accelerated action and robust change on the ground. Sustainable global value chains are fundamental for achieving the Global Goals for Sustainable Development. The required market transformation has no easy answers, no silver-bullet solutions. Businesses, governments, NGOs, trade unions and consumers each have to play their part and intensify their cooperation to build the future we want.

Author: Paul Schoenmakers is responsible for sustainable value chain policies at the ministry of foreign affairs of the Netherlands, department for sustainable development. @Paul_Schoen

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