Small- and medium-sized enterprises and sustainable development: In the shadows of large lead firms in global value chains

Abstract

The purpose of this paper is to shed light on the potential contribution of small- and medium-sized enterprises (SMEs) to the Sustainable Development Goals (SDGs) and derive implications for policymakers based on the insights. Our findings indicate that despite their comparatively smaller size, SMEs can contribute significantly to the achievement of the SDGs. We conclude that both lead firms and policymakers need to take a more differentiated approach in their interactions with SMEs. Instead of universally regarding smaller firms as standard takers, lead firms and policymakers need to acknowledge that they can make a significant contribution to standard-setting and standard-adapting efforts. Consequently, SMEs need to be regarded as an important resource in multi-stakeholder initiatives regarding the SDGs.

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ACKNOWLEDGEMENTS

We gratefully acknowledge comments received from Rob van Tulder (Rotterdam School of Management, Erasmus University, NL), Suzana Braga Rodrigues (Universidade FUMEC, BR), Heinz Tüselmann (Manchester Metropolitan University, UK and UNCTAD, CH) and participants at the AIB 2019 Annual Conference in Copenhagen. Financial support was received from the Economic and Social Research Council (ESRC, ES/J013234/1), and the Alliance Manchester Business School (AMBS) Lord Alliance Strategic Research Investment Fund (LA-SRIF AA14179).

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Correspondence to Rudolf R. Sinkovics.

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Accepted by Suzana Rodrigues, Guest Editor, 11 December 2020. This article has been with the authors for three revisions.

Appendices

Appendix

Appendix 1: Interview Guidelines

(1) Background. Nature and history of your business. Founding member(s), Origin of idea for business.
(2) Position in the GVC and relationship with buyers and suppliers. Position in the value chain (from raw materials to the final product). Assessment of freedom to conduct business as management intends to. Main influencers on the way business is conducted. Relationship with buyers/clients. Main requirements that buyers/clients ask for. Characteristics of buyers. Relationship with suppliers. Main requirements of suppliers.
(3) Firm responsibility and community impact. Description of organization’s impact on environment/society/local communities/workers/employees. Procedures/processes to determine social, labor, and environmental impact. Description of design and implementation of social responsibility initiatives.
(4) Addressing Sustainable Development Goals (SDGs). Familiarity with the SDGs. Active contribution to particular SDGs. Motivation for adopting particular SDGs and addressing them.
(5) Impact of buyers upon firm and its responsibility. Position of buyers regarding social, labor, or environmental impact. Values of buyers regarding impacts. Communication with buyers about SDG-related topics. Standards and their adoption. Reasons for (non)adoption and extent of implementation. Overall impact of standards on firms.

Appendix 2: Observed Patterns

SME Case ID Governance type Responsible action enablers Responsible action Action’s centrality to business model Depth of action Outcome Connection to SDG
SH Independent Geographical distance between SME and producer (low) Coop management Business model Root cause Improve supplier capacity 8.2, 2.4, 2.3
    Charity foundation Individual action Root cause Access to education 4.1
    Recyclable packaging Business model Symptom Reduce plastic waste 12.5
   Ethically disposed leadership (high) Sell product with health benefits Business model Symptom Relieve eczema discomfort 3
   Resource constraints (high) Informal, irregular supplier site visits Business model Superficial Reduce labor violations 8.8
AN Independent Geographical distance between an SME and its producers (high) Pay above premium or market rate Business model Root cause Farmers paid more 1.1, 8.5
   Resource constraints (high) Irregular supplier site visits Business model Superficial Reduce labor violations 8.8
NB Independent Geographical distance between an SME and its producers (low) Recyclable packaging Business model Symptom Reduce plastic waste 12.5
   Ethically disposed leadership (high) Pay above premium or market rate Business model Root cause Farmers paid more 1.1, 8.5
   Resource constraints (high)      
NA Independent Geographical distance between an SME and its producers (low) Support sustainable farming Business model Symptom Pesticide-free production 12.4, 2.4
    Cash loans to growers Business model Symptom Minimize farmer risks 1.4
    Recyclable packaging Business model Symptom Reduce plastic waste 12.5
    Turn waste into renewable energy Business model Symptom Reduce food waste 12.3, 12.5
    Donate excess food Individual action Symptom Reduce societal hunger 12.5
AK Loose Geographical distance between an SME and its producer (low) Coop management Business model Root cause Improve farmer capacity 2.3, 2.4
    Health check-ups for workers Individual action Symptom Minimize health risks 3.8.1
    Fairtrade certification Business model Symptom Farmers paid more 1.1, 8.5
    Income diversification Business model Symptom Minimize farmer risks 2.3
   Long-term commitment with supplier (high) Cash loans to growers Business model Symptom Minimize farmer risks 1.4, 9.3.1
   Ethically disposed leadership (high) Support sustainable farming Business model Symptom Reduction in deforestation 15.2
CV Loose Geographical distance between an SME and its producers (low) Pay above certification premium Business model Root cause Farmers paid more 1.1,8.5
    Support sustainable farming Business model Root cause Farmer capacity-building 2.3, 8.2
    Recyclable packaging Business model Symptom Minimize crop failure 2.4
   Long-term commitment with supplier (high) Pension and healthcare insurance for rural farmers Business model Symptom Reduce plastic waste 12.5
   Ethically disposed leadership (high)     Farmer social security, 3.8.2
DR Loose Ethical disposed leadership (high) Fairtrade certification Business model Symptom Farmers paid more 2.3
   Long-term commitment with supplier (high) Top up payments Business Model Symptom Minimize farmer risks 1.5
   Geographical distance between an SME and its producer (high) Farmer training program Business model Symptom Farmer capacity-building 2.3
UR Loose Geographical distance between an SME and its producers (low) Pay above certification premium Business model Root cause Farmers paid more 1.1, 8.5
    Farmer training program Business model Symptom Farmer capacity-building 2.3, 8.2
   Long-term commitment with supplier (low) Income diversification Business model Symptom Minimize farmer risks 2.4
    Support sustainable farming Business model Symptom Reduce harmful pesticides washed into rivers 6.3
   Ethically disposed leadership (high) Recyclable packaging Business model Symptom Reduction in deforestation 15.2
       Reduce plastic waste 12.5
    Fund school engagement projects Individual action Symptom Promote biodiversity projects 15.5
JF Loose Geographical distance between an SME and its producers (high) Source from Global Gap certified supplier Business model Superficial Reduce food safety risks 12
JC Loose Ethically disposed leadership (low) Source from Global Gap certified supplier Business model Superficial Reduce food safety risks 12
GG Moderate Lead-firm pressure to comply with formal standards (high) Third-party audits Business model Superficial Reduce labor violations 8.8
   Geographical distance between an SME and its producer (high) Presentations and supply-chain evaluations Business model Superficial Reduce labor violations 8.8
SP Moderate Lead-firm pressure to comply with formal standards (high) Pay certification premium Business model Symptom Farmers paid more 2.3
   Geographical distance between an SME and its producers (high) Electric vehicles Business model Root cause Remove carbon emitting sources 7
JG Moderate Ethical disposed leadership (high) Charity for promoting sport Individual action Root cause Sport participation for disadvantage groups 3
    One-off fresh produce donations Individual action Superficial Reduce hunger 2.1
   Geographical distance between an SME and its producers (high) One-off donation to sponsor fruit conference Individual action Superficial Enhance reputation  
BW Moderate Lead-firm pressure to comply with formal standards (high) Electric vehicles Business model Root cause Remove carbon emissions 7
    Fund water project Individual action Symptom Provide access to water 6.1
    Pay Fairtrade premium Business model Symptom Farmers paid more 1, 8, 2.3
    Carbon offsetting Business model Symptom Minimize carbon emissions 7
    Recycle waste packaging Business model Symptom Reduce plastic waste 12.5
    Training young people into farming Business model Symptom Upskilling young people 4.4, 8.6, 9.3
   Geographical distance between an SME and its producers (high) Supplier audits Business model Symptom Avoid labor violations 8.8
   Long-term commitment to supplier (high) Research on consumer plastic consumption Business model Superficial Provide data for government research 17
MA Moderate Lead-firm pressure to comply with formal standards (high) Charity foundation to alleviate poverty Individual action Root cause Provision for poor families 1, 8.5
    Advocacy by promoting best practice Collective action Root cause Lead industry sustainability 17.9
    Occasional charitable giving Individual action Symptom Fund health center 3
    Training young people into farming Business model Symptom Upskilling young people 4.4, 8.6, 9.3
    Reusable cups Business model Symptom Reduce plastic waste 12.5
   Ethical disposed leadership (high) Pay Fairtrade premium Business model Symptom Farmers paid more 1.1
   Lead-firm pressure to comply with formal standards (high) Supplier audits Business model Superficial Avoid labor violations 8.8
LM Tight Lead-firm pressure to comply with formal standards (high) Provide safety equipment and safety training Business model Symptom Minimizing risk of injury 8.8
    Supplier audits Business model Superficial Reduce labor violations 8.8
   Geographical distance between an SME and its producers (high)      
GF Tight Lead-firm pressure to comply with formal standards (high) Build water canal for community Individual action Symptom Provide access to clean water 6.1
    Supplier audits Business model Superficial Reduce labor violations 8.8
   Geographical distance between an SME and its producers (high)     Creates financial burden for supplier  
   Ethical disposed leadership (high) Support suppliers with access to export markets Individual action Root cause Increases supplier business resilience and economic growth 8.3, 2.3
MK Tight Lead-firm pressure to comply with formal standards (high) Supplier audits Business model Superficial Reduce labor violations 8.8
    Provide safety equipment and training Business model Superficial Minimizing risk of injury 8.8
   Geographical distance between an SME and its producers (high) Climate spatial data research Business model Superficial Data on future climate risks 13.2
   Risk adversity (high) Sustainability initiative member Collective action Superficial Sharing best practices 17
AG Tight Lead-firm pressure to comply with formal standards (high) Supplier contract termination if non-compliant Business model Superficial Reduce labor violations 8.8
   Geographical distance between an SME and its producers (high) Supplier audits Business model Superficial Reduce labor violations 8.8
RH Tight Lead-firm pressure to comply with formal standards (high) Renewable energy sources Business model Root cause Remove carbon emitting sources 7
   Geographical distance between an SME and its producers (high) Supplier self-assessment audit Business model Superficial Reduce labor violations 8.8
   Risk management (high)      
JM Tight Lead-firm pressure to comply with formal standards (high) Supplier contract termination if non-compliant Business model Superficial Reduce labor violations 8.8
    Occasional charitable giving Individual action Symptom Fund cancer research 3.4
RG Tight Lead-firm pressure to comply with formal standards (high) Supplier self-assessment audit Business model Superficial Reduce labor violations 8.8
    Waste avoidance Business model Root cause Prevent food waste 12.5
   Risk management (high) Donate food waste Individual action Symptom Reduce hunger 2.1

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Sinkovics, N., Sinkovics, R.R. & Archie-Acheampong, J. Small- and medium-sized enterprises and sustainable development: In the shadows of large lead firms in global value chains. J Int Bus Policy (2021). https://doi.org/10.1057/s42214-020-00089-z

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Keywords

  • Sustainable Development Goals (SDGs)
  • global value chains
  • small- and medium-sized enterprises (SMEs)
  • multinational enterprises (MNEs)
  • responsible business
  • flexible pattern matching