By Matthew Hengesbaugh, Simon Hoiberg Olsen, Nobue Amanuma, Mayuko Ono, Eric Zusman (IGES), Cristina Martinez, David Williams, Laurel Anderson Hoffner, Joni Simpson (ILO), Jittin Kapoor, Kentaro Endo (APO), Masaki Wada, Miki Watanabe (ASSC)

A growing number of businesses are adopting the Sustainable Development Goals (SDGs) to make their operations sustainable and resilient to future shocks. This movement has gained added importance as the COVID-19 pandemic has exposed vulnerabilities in businesses with expanding national and international supply chains. Nevertheless, understanding how efforts to integrate the SDGs into business beyond corporate offices, including to supply chains and to all of the firms within them, remains limited.

As the world needs to intensify efforts to achieve the SDGs, filling these knowledge gaps is critical. This is particularly true since COVID-19 and interest in green recoveries have prompted some developed country policymakers to reconsider how to make their supply chains more resilient and sustainable. The EU’s 2019 Circular Economy Action Plan and the EU Green Deal exemplify policies with a focus on supply chain sustainability that originated prior to COVID-19 but have become more salient of late. More recently, the EU and United States have begun considering the implementation of “carbon border adjustments” to account for the GHG emissions along supply chains.   

Yet, some potentially unintended side effects of these policy reforms are that they may result in piecemeal applications of the SDGs. For instance, supplier companies in developing countries may struggle to keep pace with more stringent environmental regulations and cherry pick implementing some efforts at the expense of others. For example, labor standards and social protections may be weakened in order to comply with environmental restrictions. Moreover, recent developed country environmental reforms could be perceived as unilateral trade barriers and raise serious equity questions. Therefore, it is necessary to strengthen cooperation across actors, countries and sectors over the multidimensional and cross-national impacts of supply chain sustainability.

Some of the implications of supply chain sustainability were explored during a High-level Political Forum (HLPF) side event led by the Institute for Global Environmental Strategies (IGES), together with the International Labour Organization (ILO), the Asian Productivity Organization (APO), the International Trade Union Confederation (ITUC), and the Global Alliance for Sustainable Supply Chains on 13 July 2021.  Following a summary of key points, this commentary offers suggestions that research groups like IGES and partners can explore to encourage businesses, governments, and organized labor to constructively deliver on the environmental and social dimensions of the SDGs. 

Achieving the SDGs: The Integral Role of Business 

Following opening remarks on the important role the international business community must play in helping to implement the SDGs, the side event moved to a framing presentation from IGES on key findings of a recent survey report on the successes and challenges of the Japanese private sector in delivering on the SDGs. The report—one of several joint publications annually produced by IGES and the Global Compact Network Japan (GCNJ) based on surveys targeting GCNJ members—indicated that companies in Japan are progressively integrating the SDGs into their core businesses. Encouragingly, this progress is coupled with enhanced awareness of the SDGs not just among top management but also among employees. The report also found that companies increasingly work with their suppliers for the SDGs and that 42% of respondent companies are reinforcing weak links in supply chain to grow stronger in the COVID era, indicating that supply chain is a critical aspect of the SDGs action by companies. However, companies’ limited attention to human rights/ labor issues arising at suppliers (12%) to grow stronger in COVID era suggest that their understanding and actions on supply chain may focus chiefly on economic resilience to shocks. The report also noted that most of the respondent companies (75-76%) are taking actions on SDG 12 (Responsible Consumption and Production) and SDG 13 (Climate Action). However, the report revealed that certain SDGs key to making supply chain sustainable, such as SDG 14 (Life Below Water) and SDG 15 (Life on Land) are not as prioritized (38-39%). Many companies have also placed less emphasis on human rights. These findings point towards the need for Japanese companies to ensure that the full set of SDGs serve as a blueprint for making supply chains environmental and social sustainability.

Similar sentiments were echoed by a representative from the International Trade Union Confederation (ITUC), who noted that a shift to greener production processes and enhanced automation may ultimately have a negative impact on workers either through losses in wages or general job displacement. ITUC then spoke on the importance of using established multilateral agreements such as UN Guiding Principles for Business and Human Rights and the 2030 Agenda on Sustainable Development to inform social dialogue between workers and employers and such unintended consequences. To this end, Occupational Safety, Health and Environmental Committees have been established in many Philippine enterprises to ensure workers—particularly female workers—are adequately represented and have a voice in workplace decision-making.

Noting that various efforts to green supply chains, such as changes to procurement policies and regulatory frameworks, are having differing impacts on many small and medium enterprises (SMEs), the Asian Productivity Organization (APO) emphasized the need for promoting proven approaches to enhancing sustainability performance.  In this context, Green Productivity— put simply, a strategy for simultaneously boosting business productivity while reducing environmental impacts, resulting in overall benefits for socio-economic development—was discussed as a means to increase the agility of supply chain management.  The APO continues to advocate for capacity building of SMEs as well as promote the use of Green Productivity tools and techniques for strengthening competitiveness of enterprises across various sectors, including by piloting a range of projects and initiatives to demonstrate its proof of concept. These efforts can be compatible with advancing favorable social outcomes including more gender equality and diversity in the labor market.

ILO further emphasized the need for informed and gender-responsive decision making on environmental issues in the business sector, highlighting the importance of ensuring transparency at all stages of the supply chain. Drawing attention to the ILO’s Just Transition Guidelines, the representative discussed the need for customizing principles of social dialogue between workers, employers and governments across different sectors. ILO’s ongoing work in the garment and textile-manufacturing sector in Asia and the Pacific provides an example on where further action is needed: while many countries in the region have environmental and climate policies in place, regulatory enforcement in the sector is often lacking. In this regard, ILO’s Just Transition Toolkit for the textile and garment sector can be used to ensure environmental and social justice issues are put on an equal footing, holding governments and businesses to account while also catalyzing efforts to advance decent work and achieve the SDGs. The UN’s Climate Action for Jobs Initiative also offers technical assistance, project implementation and funding support to facilitate inclusive and sustainable communities.

The Global Alliance for Sustainable Supply Chain (ASSC) provided additional insights into promoting sustainability in key industries, referencing its ongoing work supporting human rights due diligence and reporting in the Asia and Pacific region. In addition to its engagement in Thailand’s fishery and poultry sectors, the organization has been supporting a number of brands with supply chain audits to ensure associated manufacturers comply with international standards and conventions. ASSC emphasized, however, that greater ambition was needed from companies to demonstrate relevant requirements are met.  

Concluding Thoughts

The side event underscored that effective engagement with the business community remains critical for achieving the SDGs. While a growing number of companies are taking a more proactive approach to SDG implementation— clearly demonstrated by Japan—greater efforts are needed to mobilize different actors to fully embed the SDGs across global value chains. In particular, corporate offices need to better understand how their suppliers, particularly SMEs based in industrializing countries, are integrating the SDGs into their operations. This will require not only taking a coordinated approach to supply chain management, but also establishing effective gender-responsive and tripartite social dialogue platforms and building new leadership models, starting with companies engaging in strategic partnerships with governments, regulators, organized labor and civil society. As business has a key role to play in achieving the 2030 Agenda for Sustainable Development, these types of coalitions should be well represented in international discussions on the SDGs.

There is also a need to think more systematically about how changes in one aspect of the supply chain affect overall business implementation of the SDGs. Indeed, without due consideration of how environmental, social, and governance (ESG) investment criteria applies to international supply chains, it is likely that unsustainable aspects of the production process will be diverted to SMEs or even end consumers. For example, it is possible that the adoption of cleaner manufacturing processes, such as those aimed at meeting GHG reduction targets may lead to job losses, lower wages, or other decent work violations across supply chains. A just transition will require looking to more holistic business development strategies that consider social and environmental costs both upstream and downstream while promoting the benefits of greener and gender-responsive production and green job creation.  International codes of conduct on the part of multinational enterprises need to be updated and revised to reflect these new realities. Investment costs and returns associated with a just transition also need to be shared fairly and equitably.

Moreover, continued dissemination and awareness raising on the SDGs is needed within the business sector, especially among SMEs. In addition to guiding employees towards adopting good practices and making use of various tools and techniques to minimize the environmental impact of business operations, all industries should make continued efforts in exploring ways of improving factor productivity, understanding that actions to optimize energy, raw materials, and labor can lead to strengthened competitiveness and stronger profit margins. This requires increasing collaboration with international organizations, which are instrumental in carrying forward successful capacity building and knowledge management initiatives at the global level.

Similarly, policymakers in both developed and developing countries will also need to consider how domestic structural reforms as well as international trade policies can contribute to supply chain transparency and delivery of the SDGs. Governments in importing countries will need to examine the impact of environmental trade measures on human rights, and more generally, the rights and conditions of workers in countries that house the companies that create the products that are consumed in developed countries. Likewise, policymakers in exporting countries will need to strengthen institutional and technical capacities to ensure both international social and environmental standards and domestic regulations are uniformly enforced. Doing so may require tailoring education and training systems to new labor market conditions and skills demands, including those aimed at meeting more stringent environmental requirements.  

In addition to supporting international policy dialogue on these themes, IGES and its partners will continue researching and analyzing opportunities where sustainable and gender-responsive supply chain approaches can lead to the successful implementation of the SDGs. Moving forward, providing a sound evidence base for policy will remain critical to accelerating a just transition with gender equality wherein businesses, policymakers, and organized labor are equal partners in advancing more circular and socially inclusive economies the world over.

By Matthew Hengesbaugh, Simon Hoiberg Olsen, Nobue Amanuma, Mayuko Ono, Eric Zusman (IGES), Cristina Martinez, David Williams, Laurel Anderson Hoffner, Joni Simpson (ILO), Jittin Kapoor, Kentaro Endo (APO), Masaki Wada, Miki Watanabe (ASSC)