Today’s value chain models are not fit for the increasingly volatile future we face, so how can they be reconfigured from a system that perpetuates unhealthy dynamics to just and regenerative ones? Here, Forum’s Principal Programme Manager, Hannah Cunneen, outlines the seven shifts that could transform how businesses and their value chains operate. Get in touch with Hannah to find out more about how you can work with Forum to build future-fit value chains.

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In a world where many industries have prioritised short-term profit maximisation and supply chain optimisation above other priorities, the idea of reconfiguring value chains might seem like a daunting and complex task. 

Drawing from over 25 years of expertise in driving systemic, transformative change, Forum breaks down how value chains currently work and shares seven pivotal shifts that have the potential to revolutionise the way businesses operate.

1. From unhealthy power dynamics to ensuring all key stakeholders have a fair opportunity to influence their role and involvement in the value chain.

In traditional value chains, power dynamics often favour a few key stakeholders, giving them disproportionate control over market decisions. They can dictate terms and impose their decisions on people, often at their own expense. This unhealthy power dynamic has long been accepted as the norm.

Instead, value chains - or “value networks” - can foster representation, good governance, collaboration, and inclusivity, ensuring that no one entity wields excessive and/or unfair levels of control. When all key stakeholders have a seat at the table, decisions become more balanced, shifting dialogue and decision-making, and incorporating insights from those who are at the forefront of nature and the production end of a business. Examples, such as those offered by the Nature-Based Solutions Initiative show that these efforts benefit the resilience of industries, given that these stakeholders are oftentimes the most active stewards of the land, and can support businesses in reducing scope 3 emissions the quickest, as demonstrated by Unilever’s collaborative approach to supply chain decarbonisation. 

Reconfiguring value chains means shifting towards a system where all key stakeholders, regardless of their size or position in the chain, have a fair opportunity to influence decision-making. 

2. From harmful exploitation to supporting wellbeing, regeneration and resilience

One of the darker sides of traditional value chains is the willingness to exploit people and nature for short-term gains. It can be a race to the bottom with some companies prioritising reducing costs at any cost. 

This mindset is detrimental to the well-being of people and planet. We’ve overrun our planetary boundaries, with ecological tipping points already being realised. And, whilst complex supply chains, and the contracts which tie them together, offer important opportunities to many, they also often present serious human rights risks that many companies have failed to mitigate. This snowballs into many knock-on effects, including the “push-pull” of economic, social and environmental labour migration

By adopting just and regenerative practices, future-fit companies, like CafeDirect, have seen that such approaches build traceability and trust with their producers, preference with consumers, enhance their brand reputation, and contribute to a healthier producer base and planet whilst also turning a profitable and viable business. 

Reconfiguring value chains shifts the focus from harmful exploitation to supporting the long-term wellbeing, regeneration, and resilience of people and nature.

3. From unfair pricing and contracting to reflecting the real costs of production and supply

In the world of value chains, particularly in commodity markets, unfair pricing and terms have been the norm. Purchasers impose prices and terms on suppliers that don’t reflect the true economic, social, or ecological costs incurred; nor the risks of production. This practice not only harms suppliers but also undermines the overall quality of products and services, causing further production-level anxieties and harmful ecological practices, while the labour force faces compounding financial insecurity. 

Recognising and respecting the true price of production, including the true environmental and social costs, ensures that everyone in the value chain receives a reasonable share of the benefits, promoting economic and environmental stability and equity. Fairer prices also benefit business as sectors become fit for the future as the labour force and planet begin to  revive and thrive. Excitingly, some businesses, like Veja, are providing proof of concept and others, like Dutch retailer, Albert Heijn, are in the process of finding out.

Reconfiguring value chains means adopting a fairer approach to pricing.

4. From generic requirement-setting to creating context-specific action and solutions

Historically, retailers and brands, have placed generic quality and supply requests on producers and manufacturers. Now, industries are experiencing an onslaught of regulatory and consumer expectations, creating further pressure and anxieties across the tiers of the value chains. These requirements  overlook the specific needs of the industry, and ignore the specific needs of communities and landscapes. 

Avoiding a “one-size-fits-all” approach to procurement, information and innovation, and instead centering decisions and plans on the diverse contexts, qualities, opportunities, constraints, and histories of your operations,can drive engagement,collective action and innovation, as Silver Fern Farms have found through their Net Carbon Zero programme. 

Reconfiguring value chains involves a shift towards establishing dialogue that ensures key stakeholders can co-create solutions that are reflective of local context and history. 

5. From unfair demands and burdens to fairly sharing the responsibilities, costs, risks, and administrative burdens of change

Another challenge in traditional value chains is the unfair imposition of costs, risks, and administrative burdens on those with less power. This unequal distribution of responsibilities can hinder the uptake and buy-in of stakeholders, particularly when the outcomes of the requests are by no means assured or clear. 

Given the world’s urgent need to decarbonise many retailers and brands have adopted the aggressive decarbonisation targets required. However, many have imposed their scope 3 targets onto their suppliers unilaterally.. Many key value chain stakeholders do not have the means and knowhow to meet these targets, nor do they have the flexibility and financial buoyancy to survive should they fail in their pursuit to meet these needs.

Initiatives such as Kering’s Regenerative Fund for Nature, show a strong commitment to equitable action and responsibilities by distributing the financial, technological and operational burdens across the value chain. This is  the only effective way to drive and meet our collective environmental, social and economic goals.

Reconfiguring value chains involves sharing the costs, risks, and administrative burdens to change – such as those required to meet climate positive targets.

6. From exploitative use of data to empowering stakeholders through sharing the value that data can offer

Data plays a crucial role in value chains but historically, it has been extracted from reluctant and/or oftentimes over-burdened producers, then aggregated, monitored, commoditised and used in ways that disadvantage many stakeholders, or is of benefit to the big businesses without remuneration or benefit to the initial data providers. 

Instead of using data as a tool of control, data can become a tool for joint empowerment, as demonstrated by Tony’s Chocolonely. Remunerating and sharing the benefits of data across the value chain can foster necessary collaboration and drive a reciprocal relationship between stakeholders which respects people and planet, and builds in the capacities needed to build more just, regenerative and resilient businesses. 

Reconfiguring value chains means valuing, managing, and sharing data in ways that build the capacity of all key stakeholders to become more resilient and equitable

7. From lack of visibility to full traceability and transparency

The identity of all value chain participants is often shrouded in secrecy due to the complex web of globalisation and (sub)contracting. This lack of transparency - often in the name of optimisation - has created multiple predicaments, particularly in ensuring accountability, upholding human rights abuses, overlooking critical information required to support environmental needs, and neglecting the important role that collaboration can play in building sustaining and resilient businesses.

There are various approaches that can be incorporated to establish greater traceability and transparency in your supply chain. This can include high-tech forensic traceability testing, others include data capturing by the likes of World Wildlife Fund’s ‘transparenC’ app. There are also less technological approaches, such as conversation-based mapping, which can support you in capturing a snapshot of your supplier base. Many businesses are now incorporating traceability requirements in their business processes, finding that it’s instrumental in meeting environmental and social targets, but also in ensuring safety standards, meeting regulations, and driving efficiencies within their businesses. 

Reconfiguring value chains means we will better-equipped to meet increasing traceability and transparency requirements.

Putting principles into practice

We don’t see these seven principles as a distant, hopeful dream. Smart innovators and sustainability leaders are putting them into practice already. Given the disrupted and volatile operating context that all businesses face in the decade ahead, nothing less than value chain transformation will be needed for your organisation to survive and thrive. Fortunately, we made the rules of how value chains have operated, which means we can choose to change them.

Interested in working with us to make your value chains more future-fit? Get in touch with Hannah Cunneen, Forum’s Principal Strategist to explore how we could reconfigure value chains together.