Project for the course Trade for Development in the Age of Global Value Chains.

1. Trading for Development in the
Age of Global Value Chain
Lessons learned for development of NGOs
support mechanisms

2. Fashion Value
Chain
Characteristics
Impact of
Asymmetries
Sustainable
Supply Chain
Benefits of SMEs
in the Fashion
Global Value
Chain
Turning
Challenges Into
Opportunities
References

3. FASHION VALUE CHAIN
CHARACTERISTICS
 One of the largest global industries, with the global market share being highly competitive and
fragmented.
 Complex with SMEs prevalent across the entire supply chain, providing 80% of jobs and 60-70% industry
turnover in Europe (UECD 2017).
 Marked power asymmetry with 90% of profits concentrated at retail end and distribution inequalities
further upstream, located mostly in developing countries.
 Development constrains vary with textiles (weaving, spinning etc.) being capital intensive and apparel
(assembly) labor intensive, and set upgrade boundaries.

4. Source: Baldwin et al., 2014
There is a tendency for developed countries to concentrate in higher value activities
than developing countries.

5. IMPACT OF ASYMMETRIES
 Upstream capability development depend on supplier capabilities and their
customers needs that are price driven.
 Upstream activities and SME’s lack leverage and are dominated by informal
practices and activities to reduce costs.
 Disproportionate shift of environmental costs and social impacts between
developing and developed countries.

6. Source: https://www.eib.org/attachments/dalberg_sme-briefing-paper.pdf
Fashion SMEs:
• lack access to financial
opportunities.
• face challenges in screening the
regulatory environment.
• have slow rates of upgrade with
and without GVC incorporation.
Majority of SMEs have different structures than large enterprises to absorb poor
regulation and asymmetries in the global supply chain.

7. SUSTAINABLE SUPPLY CHAIN
The most important challenges the fashion companies face to verify that suppliers
and SMEs meet industry social/labor and environmental standards are:
 Orders represent a small portion of the supplier’s production capability.
 Audits and other assessments are cost prohibitive.
 Industry initiatives are cost-prohibitive.
 No visibility over the suppliers.
 Audits and other assessments processes are not effective.

8. Climate Impact across the global apparel value chain. Source: UNEP, 2020
While individual footprint may be low, the aggregated environmental impacts are
attributed to production processes that are taking place in the majority in developing
countries that often lack regulatory bodies.

9. Survey by OECD for SMEs in the textile industry. Source: OECD, 2021
To become suppliers to
multinationals, SMEs are
increasingly required to adhere to
codes of conduct and programs for
sustainable supply chain
management, including best
practices on issues such as health
and safety, labor and human rights,
anticorruption practices and
environmental impact.
SMEs are squeezed between low costs and buyer’s bargain.

10. BENEFITS OF SMES IN THE FASHION
GVC
SMEs have a key role in shifting innovation models towards sustainable pathways:
 Competitive edge in terms of flexibility.
 Ability to integrate new instructions.
 More agile and adaptive organizational culture.
 Greater cohesion and sense of collective purpose.
 Use of ancestry knowledge and regenerative practices.
Source: OECD, 2021

11. The SMEs can be supported by enhanced
GVC participation in exchange of
experience in regenerative models and
collective purpose.
Some of the companies that have help
support SMEs are Patagonia, Fjällräven, or
North Face.

12. ENHANCE GVC PARTICIPATION BY
 Promoting linkages between domestic supplies, SMEs and GVC lead firms.
 Building sector specific skills and management capabilities.
 Strengthening natural and regional innovation systems with the use of technology (for
example infrastructure, blockchain etc.).
 Support in achieving standards.

13. HOW FASHION NGOS HELP SMES AND THE
FASHION INDUSTRY:
 Build sector specific skills and management capabilities via capacity
building.
 Support in achieving standards that showcase the environmental and social
contribution of regenerative/social practices that are currently not covered
by harmonized standards.
 Give a voice to people that operate in the grey and black areas.
 Promote a systemic change by shifting from a price-based to value -based
leverage.

14. REFERENCES
Introductory paper on SMEs and Responsible Business Conduct in the Garment and
Footwear, OECD 2021
Baldwin, John Russel, and Beiling Yan. Global value chains and the productivity of
Canadian manufacturing firms. Statistics Canada= Statistique Canada, 2014.
Sustainability and circularity in the textile value chain — Global stocktaking, UNEP
2020
OECD (2018), Fostering greater SME participation in a globally integrated economy,
Discussion paper, Plenary session 3, SME Ministerial Conference, Mexico City.
Trading for development in the age pf global value chains, World Bank report, 2020.
: https://www.eib.org/attachments/dalberg_sme-briefing-paper.pdf

15. THANK YOU FOR YOUR
SUPPORT.