Every large company Levin Sources has worked with knows that the fate of their efforts in sustainability are tied to their ability to partner with and support improvements in the artisanal, small, and medium-sized enterprises (SMEs) along the entirety of their supply chain.
It is not easy being a SME, nor is it easy working with SMEs: it is a process.
Businesses interested in increasing collaboration with SMEs in their value chain can start by considering Shared Values and follow with an Openness to Capacity Building.
These are just the first steps.
During a recent webinar for the Global Good Awards, Mark Jankovich, Founder and CEO of Delphis Eco described how his process of finding partners is ultimately tied to shared fundamental values: “I've kissed a lot of frogs. I've kicked a lot of stones. My toes are all broken trying to find partners that have the same ethos.”
Jankovich’s solution was to sit down and write a supply chain charter, post it to Delphis Eco’s website, and make it an integral part of every conversation, relationship, and partnership the company undertakes from the outset. “I want everybody that works with me to believe in these principles. We're for the long term. We want to work really, really closely with our supplier partners. But they have to have the same set of fundamental principles.”
What is compelling about this approach is that it can broaden the scope of collaboration to include unlikely partners. Starting with a shared foundation of values creates an ecosystem for mutual support and encouragement.
In Delphis Eco’s case, this meant working with a printing B-Corp. This firm’s advances in printing, a field notorious for being chemical-heavy, inspired confidence in Delphis’ own efforts at environmentally favourable disruption: “Here is an industry known for the very bad VOCs they give off and how the fumes create just dreadful places to work. And these guys have invented a chemical-free printing process. It's a waterless printing process. It is amazing. And it's super forward-thinking and the fact that they are out there in the real world doing something that is quite disruptive, just gave me the confidence to keep going in what we were doing.”
A second collaboration with a waste collector “a totally unloved, uninvested difficult business environment” created an opportunity to recycle everything they collect. “They are hugely inspiring for guys like us to keep going. There are people that are out there that are doing this.”
Openness to Capacity Building
Levin Sources frequently works in the artisanal and small-scale mining (ASM) sector. There are over 40 million artisanal miners globally. Many of them work in the most high-risk conditions in a high degree of informality where their basic rights aren't protected by the state and where they do not have the means to properly control risks or professionalise their activities.
The reality for most companies who use minerals and are serious about supply chain sustainability is they will almost inevitably be required to source from SMEs if not the ASM sector. This is especially the case in bull markets where supply is tight, such as cobalt and copper, or where market gatekeepers set conditions for inclusion, as the London Bullion Market Association has just announced with its new ASM programme.
Large companies tend to bring to their relationships with smaller companies up the value chain first-world expectations of professionalism and performance. This is understandable, but what is also necessary is empathy and investment, especially when sourcing from producers in fragile states, and especially from small producers like ASM.
All along the value chains, you will find SMEs with different abilities to be fully formalised. They will have different capacity to operate in a way that a downstream partner would judge as being fully responsible. Like any business, an SME must constantly triage and choose how to apply their capacity and resources.
What we frequently see is downstream companies and stakeholders pushing the boundaries and expectations too hard, too fast, with too little consideration of what it would really mean for a smaller upstream company to comply with their requirements.
This becomes more probable given the proposed EU Corporate Sustainability Due Diligence Directive. It's very likely that small businesses that aren’t equipped to cater to their downstream partners’ due diligence requests, never mind requirements, will be excluded from responsible supply chains - further marginalising them and denying them the opportunity to professionalise and develop.
But this simply won’t do. The United Nations Guiding Principles for Business and Human Rights compels businesses to use their leverage to support suppliers to improve, such that they can remain in the trading relationship. But this is pie in the sky in most contexts, where the operating environment makes responsible business conduct infeasible and thus improbable.
The alternative, of course, is engagement and capacity development. At Levin Sources, we work with some downstream companies who are not just uniquely positioned to make this choice—some companies have the necessary resources of capacity, capital, and time and could act--but are willing to take it on. However, this isn’t universal. Some large brands that we have worked with struggle to find the internal resources to support all high-risk suppliers to improve practices, often because there are so many suppliers in competition for their limited capacity, capital, and time. Prioritisation is essential, and as a result, marginal producers are often disregarded. This is understandable at a company level, but at a sectoral level categories of marginal producers become abandoned, whether artisanal gemstone miners in Nigeria or small-scale tin producers in Brazil. This is where industry coalitions and especially public-private partnerships become essential, to pool resources and build leverage to support these marginal producers who would otherwise be left out in the cold to claim their rights, and to compel governments to govern better so their rights can be protected.
The principle of capacity building and investment is important to me personally, but I also think from a global point of view a truly sustainable supply chain must be inclusive.
The good news is that again and again engagement with small producers creates Win-Win trading relationships that bring mutual benefit and sustainably to both trading partners.
The perspective is also changing. As Jankovich noted, “It’s a fantastic time to be an SME. Big corporations and governments are under enormous pressure to show they are doing something. SMEs are much nimbler, the classic oil tanker changing direction.”
This can’t be left to industry alone, especially for operators in conflict-affected and high-risk areas.
For ASM and other SMEs to have a fair chance of being part of responsible supply chains, then there are also roles for producer governments, donors from the downstream governments imposing these regulations on mineral importers, and of course local civil society and due diligence service providers to build an ecosystem of support and enablement. We have seen this develop successfully for 3TG in eastern DRC, for cobalt in southern DRC, and in play in places like Peru, Mongolia, Colombia, and Cote D’Ivoire. We need to see it in every ASM nation, across mineral categories.
Sustainable supply chains mean collaboration. The good news is that downstream companies can take proactive actions--clearly articulating their core values, investing in capacity building. These steps create opportunities for collaboration, building the trust and capacity necessary for partnerships that couldn’t have existed previously.