Cascading value: how to break cycles of poverty?
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Regarding large retail, and its value chains, I would like to leave a short reflection on the enormous challenge, but also the great opportunity for social innovation – and, also, I would say, for social elevation -, which constitutes the need to guarantee fair conditions of remuneration and dignity for suppliers, and which is often a subject of delicate balances and balances, in which it is difficult to define responsibilities and limits. But, I would say, that everything – as almost always happens – depends on the perspective you adopt.
Alan Jope, CEO of Unilever in 2021 (today, the new CEO, appointed last year, is Hein Schumacher), successor to the mythical CEO Paul Polman, stated, at that time, and I quote, that “the two biggest threats the world faces today it is climate change and social inequality.” In the same year that this company made a commitment to guarantee that, by 2030, everyone who provides goods and services directly to the company would earn at least a minimum wage. He also added that annual investments of 2 billion euros would be made until 2025, in companies owned or managed by underrepresented groups in society – small and medium-sized companies managed by women, ethnic minorities or people with disabilities. And he finished by saying that this, in his opinion, would help break the cycle of poverty.
And this is, in my opinion, the fundamental point – breaking cycles of poverty. Because everyone, including large retail businesses, naturally benefits from this breaking of cycles of poverty. Especially if these businesses, with their power and ability to mobilize resources, are the main drivers of change at this level.
In a Report from the Competition Authority, dated April 2023, in which they make a series of recommendations relating to the value chain of consumer goods, a consideration is given to the impact that the current context of inflation – caused mainly by the disruption of global agricultural markets generated by the war in Ukraine, climate change and the increase in the cost of energy -, has had the index for unprocessed food products, which registered, in February 2023, an increase of 20.1%. An indicator that should concern us and that, in my opinion, should be an additional reason to be more effective in preventing social inequalities that may also arise from this current situation.
But more than talking about the risks of competition due to price fixing or excessive concentration, I think the most important thing is to amplify what is positive already resulting from many commercial practices that have been adopted, in Portugal, by large retail chains. to feed.
Namely the growing investment that has been made in local commerce, in proximity commerce, leading these groups to be closer to neighborhoods, neighborhoods, in large urban centers.
This phenomenon, which is transversal to the sector, and which has obvious and clear advantages for consumers, who have increasingly more – and increasingly simplified – access to a growing range of offers at this level, also involves, on the other hand, some risks , such as being able to imply the disappearance of many other surrounding local commerce initiatives that, no longer having subsistence conditions, end up closing, and could contribute to increasing cycles of poverty. But this risk can, in my opinion, be transformed into an opportunity. For all. Opportunity to carry out social innovation.
And this opportunity crosses the different points of the value chain. To do this, simply look at the value chain as a set of real partners (and not as “mere suppliers”, in the more traditional, and not so constructive, sense of the word) and see the risks of negative impact of activities, as opportunities to create something new, generating value for society. As?
– Entering into partnerships with suppliers to create new businesses, or to expand existing businesses, or just investing in their development;
– Creating strong Corporate Social Responsibility (CSR) strategies, in alignment with your business, that more than eliminating negative externalities from the activity, seek to bring innovation and multiplication of social value, contributing to creating more resilient and stronger communities;
– Or implementing more conscious procurement practices, which create opportunities, for example, for so-called social businesses (businesses that have, at the center of their mission, the creation of value for society) – the so-called Social Procurement, about which I have already discussed the opportunity to speak in another context.
I know that, in Portugal, large retail companies, such as Sonae and others, have followed these paths and that there is already a high level of awareness, which goes much further than “business as usual”. But I would say that many other opportunities are yet to be explored. And it is important that this wave not only does not stop, but grows exponentially. As long as there are points in this great system that are fragile and in rupture, the entire system will be harmed. And poverty, the great “bogeyman” that worries us all, will continue to be on the horizon.
I am one of those who believe that this can be reversed, and that it all starts with the way of looking at the challenge: Is it a burden, a responsibility, or is it, rather, a great opportunity? I choose the latter.
And I believe that’s what it’s all about – a matter of choice. And, as such, responsibility. To create prosperity? Yes. But in a cascade.
Mario Henriques
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