Harnessing Digitalisation for Greener Supply Chains in LDCs

Knowledge Graph of Debate

Session report

Elizabeth Kirk

Digital technologies, such as blockchain, have the potential to revolutionise supply chains by enabling the tracing of product sustainability from their origin to consumers. For instance, these technologies can be used to trace the sustainability of a cotton T-shirt or the source of leather in shoes. This use of digital tracking aligns with the growing emphasis on environmental and social governance (ESG) standards.

Successful implementation of these technologies requires cooperation along the value chain. Collaboration between big brands, situated downstream and facing consumers, and upstream suppliers is essential. By working together, brands and suppliers can overcome challenges and ensure the effective adoption of digital tracking technologies, ultimately contributing to sustainable development.

Furthermore, it is important to recognise the role of these technological efforts in promoting exports of developing countries and Least Developed Countries (LDCs). By leveraging digital tracking technologies, developing nations can overcome trade barriers and harness opportunities for economic growth. A high-end supply chain example showcased the potential benefits that this approach could bring to developing countries and LDCs if scaled up.

It is worth noting that different value chains require different strategies and tools for digital tracking. For example, tracing cotton into a T-shirt necessitates different methods and technology compared to tracing leather into shoes due to variations in bulk and physical marking requirements. Therefore, tailored approaches must be adopted to accommodate the specific needs of different value chains.

Sustainable development encompasses three crucial elements: social, environmental, and economic. These aspects are interconnected and must be considered holistically to achieve genuine sustainable development. As a result, efforts towards sustainability should balance these elements and address the complex challenges that arise.

The textile industry is facing increasing levels of regulation. The EU, for instance, has multiple legislative acts under development that will impact textile companies. While these regulations aim to promote responsible consumption and production, they also pose challenges, particularly for countries in the global South. It is crucial for textile companies to adapt and comply with regulatory frameworks while navigating the complexities of the global market.

Cooperation along the value chain plays a vital role in addressing challenges and establishing long-lasting relationships. By working together, suppliers and brands can navigate the complexities of sustainability initiatives and mutually benefit from cooperation. Building long-term collaborations strengthens the value chain and supports the achievement of sustainability goals.

However, developing nations face unique challenges in accessing digital infrastructure and producing sustainably. Limited access to digital infrastructure and inadequate skills pose obstacles to harnessing the potential of digital tracking technologies. Additionally, there may be insufficient capacity to produce sustainably. Addressing these challenges requires concerted efforts to bridge the digital divide and build the necessary capacity for sustainable production.

In conclusion, digital technologies, particularly blockchain, can enhance supply chain transparency and traceability, ensuring products meet ESG standards. Cooperation along the value chain is essential for the successful implementation of these technologies and the promotion of sustainable development. Efforts should be made to overcome trade barriers and increase exports of developing countries and LDCs. Sustainable development should encompass social, environmental, and economic aspects, taking a holistic approach. The textile industry is experiencing increased regulation, and cooperation within the value chain is vital for adapting to these changes. Developing nations face challenges in accessing digital infrastructure and producing sustainably, highlighting the need for supportive measures.

Audience

During the discussions, several topics were explored, including trade barriers, inclusive growth, climate change mitigation, sustainability initiatives, digitalization, and the global supply chain. One important issue highlighted was the pricing disparity in the textile industry, particularly in developing countries. It was noted that in a $10 T-shirt sold in New York, the cotton produced in countries like Pakistan only earns the farmer a mere five cents. This pricing disparity was seen as a hindrance to inclusive growth and development in these countries.

The participants also discussed the need for developing countries to play an active role in climate change mitigation measures. It was argued that developing nations should take responsibility and actively engage in efforts to address climate change. However, concerns were raised about the recurring issue of reckless accrual of debt by the political class in these countries, even as they profess commitment to climate actions. Instances where the nation’s macroeconomic structure has been damaged due to reckless borrowing were pointed out, indicating the need for better financial management.

Affordability and accessibility of sustainable initiatives for mid-size and local brands emerged as a concern. One participant, an entrepreneur working with micro-small businesses, expressed worry about how these businesses would be able to afford and implement sustainable initiatives. Recognizing the competitive nature of the textile and leather goods markets, the discussion highlighted the potential impact of increasing environmental barriers on jobs and overall growth.

The tension between digitalization and green supply chains was discussed, with one attendee noting that these two concepts can sometimes be conflicting. While digitalization is seen as a driver of economic growth and profitability, there is a need to balance it with environmentally-friendly practices. This raises the question of how businesses can navigate this tension effectively and ensure both economic and environmental sustainability.

Understanding and implementing macro-level trade policies were also identified as a challenge for businesses. It was pointed out that macro-level trade talks often do not make sense to businessmen, and there is a need for policymakers to provide clearer explanations on how these policies can help in practical business implementation. By doing so, it would enable businesses to fully comprehend the benefits and opportunities available from these policies.

Furthermore, the importance of partnerships in driving work in less developed countries (LDCs) was highlighted. One attendee, a businessman, expressed an interest in finding partners to support initiatives in LDCs. This emphasis on partnerships aligns with the SDG 17 goal of fostering partnerships for the goals, indicating the recognition of the collaborative efforts required to achieve sustainable development.

The distribution of value along the global supply chain was identified as another significant issue. The discussions pointed out that this problem extends beyond the raw material sector and also affects the manufacturing sector. Participants highlighted the need to address and attribute value properly along the supply chain, ensuring that all stakeholders receive fair compensation for their contributions.

Lastly, the importance of focusing on the lower levels of the supply chain, such as farmers, when addressing digitalization and environmentally-friendly solutions, was emphasized. One participant shared their experience working in Ethiopia with tech startups and farmers and pointed out the challenges including digital literacy, connectivity, and convincing farmers of the worth of adopting green solutions.

In conclusion, the discussions covered a range of important topics related to trade, sustainability, and inclusive growth. It highlighted the need for fair pricing in the textile industry, active participation of developing countries in climate actions, affordability and accessibility of sustainable initiatives for local brands, finding the right balance between digitalization and green supply chains, addressing challenges in understanding and implementing macro-level trade policies, fostering partnerships in less developed countries, properly attributing value along the global supply chain, and focusing on farmers in the adoption of digitalization and environmentally-friendly solutions. Overall, these discussions shed light on the complexities and interconnectedness of these issues and the need for collaborative efforts to achieve sustainable development.

Yasmin Ismail

In a recent report by the International Telecommunication Union (ITU), it was revealed that the infrastructure and connectivity divide in Least Developed Countries (LDCs) is still widening. This presents a major barrier for these countries in their digital transformation efforts. However, there is hope for improvement, as there is an increasing political will to address this issue. This can be seen in the Doha Programme of Action, which mentions the term ‘digital’ 82 times, demonstrating a clear focus on digitalisation. In contrast, the Istanbul Program of Action only mentions it six times. This increased political will is considered an asset and provides opportunities for digitalisation in LDCs.

One of the key factors that can drive digital adoption in LDCs is their young population. The majority of the population in LDCs consists of young people who are more proficient in using digital tools. This presents an opportunity for LDCs to harness the potential of their youth and encourage widespread adoption of digital technologies.

Furthermore, some countries within the LDC group, particularly those in Group 1, have showcased significant progress in terms of ICT indicators. This indicates that despite the widening connectivity divide, there are success stories within LDCs that demonstrate the potential for digital adoption and advancement.

Another noteworthy observation is the existence of successful examples of digital technologies being utilised to promote greener supply chains in LDCs. For instance, Rwanda has partnered with a technology company that uses satellite imaging to monitor deforestation in coffee farms. Ethiopia has also leveraged online vehicle booking systems to minimise carbon emissions associated with incoming vessels and flights. These examples highlight the positive impact that digital technologies can have on promoting sustainability and responsible consumption and production in LDCs.

However, it is important to note that the adoption of green practices in LDCs requires support from developed countries. The implementation of green standards and protocols is increasing, but without the necessary aid, less developed regions may face difficulties in implementing these practices. Effective partnerships and cooperation are essential to transform barriers into effective needs and ensure the successful adoption of green practices in LDCs.

Furthermore, adopting green practices and standards now can lead to cost savings in the future for companies and countries. With increasing environmental awareness among future generations, there is likely to be a rush to adopt green regulations. Failing to comply with these regulations may result in higher costs. Therefore, companies and countries that prioritise the adoption of green practices now are better positioned for a forward-looking and optimised future.

However, the complexity and interdisciplinarity of tasks related to digital transformation and green practices pose a challenge in finding collaboration partners. These tasks often require multiple partners, making collaboration time-consuming and costly. Addressing this challenge and fostering effective cooperation is crucial to provide the necessary support to LDCs and ensure their successful digital transformation.

In conclusion, while the connectivity divide in LDCs remains a significant barrier, there are positive developments and opportunities for digitalisation. Political will, the young population, significant progress in digital adoption, and successful stories serve as blessings that can pave the way for the digital transformation of LDCs. Addressing the challenges and barriers through effective partnerships and cooperation, along with the adoption of green practices, will contribute to a more sustainable and inclusive future for LDCs.

Kemvichet Long

The Pentagon Strategy, implemented by Cambodia, focuses on transitioning the country into a green and digital innovative economy. This strategy is influenced by geo-economic fragmentations, environmental and climate change concerns, and the need to adapt to digital transformation. The strategy has several key elements, including sustainability and readiness for climate change.

One of the main focuses of the Pentagon Strategy is the development of key sectors for economic growth. This is done by incentivising investment in affordable clean energy, which is seen as crucial for fostering economic diversification and enhancing competitiveness. The strategy also emphasises the importance of developing high-value industries, such as through the transformation of commodity exports into high-value products and services to increase value addition.

Cambodia’s support for ASEAN’s vision for transitioning into a green community and digital innovation is also highlighted. This support is evident through the adoption of tools for green transition, such as the Framework for Circular Economy and Strategy for Carbon Neutrality. Additionally, Cambodia’s digital innovation efforts are backed by the Digital Economic Framework Agreement.

Brands are increasingly looking for reduced carbon footprints, which poses a burden on manufacturers in Cambodia. These manufacturers risk losing business if they fail to reduce their carbon footprints, putting pressure on them to meet these sustainability expectations. The garment industry, which employs over 800,000 people in Cambodia, is particularly affected by these demands.

Another important aspect highlighted in the summary is the need for sustainable digitalisation. While digitalisation brings numerous opportunities, it is essential to ensure that it is not a major consumer of non-renewable energy. The energy consumption of big servers used in digitalisation processes should be considered, and the source of this energy should be taken into account to ensure sustainability.

Lastly, good governance is emphasised as a crucial element in policy implementation. In the Pentagon strategy, good governance is placed at the centre, acknowledging the significance of effective governance in ensuring successful implementation and achieving desired outcomes.

In conclusion, the Pentagon Strategy implemented by Cambodia aims to transition the country into a green and digital innovative economy. It focuses on sustainability, readiness for climate change, and the development of key sectors for economic growth. The strategy emphasises the importance of green and digital economic sectors, high-value industries, and good governance. Additionally, brands’ demands for reduced carbon footprints and the need for sustainable digitalisation are key considerations in Cambodia’s economic development efforts.

Moderator

The potential of digitization in greening supply chains in Least Developed Countries (LDCs) is being discussed as a tool for promoting environmental sustainability and inclusive economic development. Digital technologies are believed to play a significant role in reducing the environmental impacts of supply chains in LDCs, promoting transparency, and driving digital adoption. The joint organization of a meeting by the Mission of Cambodia and the World Trade Organization (WTO) highlights the importance of this topic.

In addition to greening supply chains, digitization is seen as a means to explore other opportunities for environmental sustainability and economic development. There is a need to leverage digital technologies to address challenges and achieve inclusive sustainable growth. This can be done by creating an enabling environment for digital adoption in LDCs, fostering partnerships, and promoting transparency.

Promoting sustainable inclusive development is considered a crucial goal for LDCs in their efforts to overcome poverty. By focusing on inclusive development, LDCs can ensure that the benefits of economic growth are shared equitably among all segments of society. This aligns with the United Nations’ Sustainable Development Goals (SDGs) of reducing poverty and inequalities (SDG 1 and SDG 10).

The advancement of the digital economy was a key outcome of the recently held G20 Summit. This highlights the global recognition of the importance of digital technologies in driving economic growth and fostering innovation. The G20 Summit, which took place in India, was considered a successful event in terms of advancing the digital economy.

The Moderator has a strong positive stance towards the potential of digitization and the digital economy in fostering inclusive sustainable development. This stance is supported by the joint organization of the meeting by the Mission of Cambodia and the WTO, the discussion of the potential of digitization for greening supply chains in LDCs, and the mention of the recent G20 Summit and its focus on the digital economy.

In striking a balance between the transition to a green economy and meeting basic necessities, it is important to ensure that the transition does not hinder access to basic services, such as power, in countries of the global south. This is highlighted by the fact that many countries in the global south still have populations that lack access to power, which is a basic necessity. The transition to a green economy should consider the basic needs of the people and ensure that access to power is not compromised.

The weak implementation of laws and regulations is identified as a significant problem in developing countries. This weak implementation is often attributed to a number of factors, which hinder the effective enforcement of laws and regulations. This poses a challenge for achieving sustainable development and addressing various issues, including environmental sustainability and combating corruption.

Regional approaches are seen as a viable solution to deal with climate change. Climate issues are considered exogenous and are not confined to the boundaries of a single country but can have regional implications. The understanding developed by the ASEAN body, which emphasizes regional cooperation to tackle climate change, can serve as a model for other LDCs and developing nations.

Sustainability is recognized as a concept with multiple dimensions, encompassing the environment, the economy, and equity. Achieving sustainability requires a holistic approach that considers these dimensions and seeks to strike a balance between various interests and priorities.

The need to revise or reform industrial development strategies is identified as an important step to address the challenges and problems faced by industries in the present context. By reassessing and reshaping their industrial development strategies, countries can better adapt to the changing economic landscape and ensure sustainable and inclusive growth.

The United Nations Economic Commission for Europe (UNECE) focuses on using digital technologies, particularly blockchain, for traceability and compliance with environmental, social, and governance (ESG) standards in value chains. They have developed a system that utilizes blockchain to trace the cotton in a T-shirt, ensuring that consumers are informed of sustainable purchasing choices. This project is supported by the European Commission and highlights the potential of digital technologies for promoting sustainability and responsible consumption.

It is emphasized that digital and green initiatives should create development benefits for the global south and not become trade barriers. Elizabeth Kirk believes that these initiatives should aim to increase exports in developing countries and LDCs through digitization and sustainability. They should be designed in a way that promotes inclusive growth and reduces inequalities.

However, there is a concern that ESG could become a new trade barrier impacting developing and least developed countries. This suggests that there is a need to carefully navigate the potential conflicts between ESG requirements and the economic development goals of these countries. It is important to strike a balance between ESG compliance and the ability of these countries to grow their economies and reduce poverty.

Inclusive development is recognized as a critical aspect of the ESG debate. It is highlighted that ESG is not just about corporate social responsibility but also about creating better jobs and promoting inclusive growth. This emphasizes the need to ensure that ESG policies and practices consider the needs and aspirations of all segments of society.

There can be economic disparities in trade pricing, as illustrated by the example of a T-shirt sold for $10 in a high-end location like Fifth Avenue in New York, while the cotton farmer in Pakistan receives only five cents. This reveals a significant disparity in income distribution within the supply chain.

The moderator expresses concern about how new barriers like ESG could impact jobs, growth, and development if not properly addressed. This emphasizes the importance of considering the potential impacts and unintended consequences of ESG requirements to ensure that they do not hinder economic growth and development.

Balancing green and inclusive growth is deemed necessary to ensure that economic development is sustainable and benefits all members of society. It is recognized that while a focus on environmental sustainability is important, it should not come at the expense of inclusive economic growth, particularly in developing countries and LDCs.

Governance and corruption are identified as significant hurdles in achieving climate goals and promoting sustainable development. The implementation of climate change initiatives and sustainable practices is hindered by problems such as corruption and misused funds. These issues need to be addressed to ensure effective governance and the efficient utilization of resources.

The complexity of bringing sustainable initiatives to local and mid-sized brands is acknowledged. This involves challenges related to scalability and affordability. The need for support and assistance in overcoming these challenges is recognized to promote sustainable practices in a wide range of businesses.

Singapore is acknowledged as a role model for LDCs in terms of good governance. The country has been recognized for its minimal corruption, and the leadership of Lee Kuan Yew is cited as an example of effective governance. This illustrates the importance of good governance in achieving sustainable development.

Small businesses may face conflicts between greening the supply chain and digitization. The compatibility of these two initiatives is questioned, particularly in the context of small businesses where digitization is seen as a means to increase profits. This highlights the need to carefully balance environmental sustainability with the economic realities faced by small businesses.

There is a gap in understanding and application between high-level trade policies and their implementation in practical business operations. This poses challenges for businesses on the ground who may struggle to comprehend and implement trade-related policies. Efforts to simplify trade talk and translate policies into practical help for businesses are needed.

The textile sector is increasingly regulated, with multiple legislative acts under development in the European Union that will impact textiles and clothing companies. These regulations will cover various aspects, including green claims, labels, waste, and due diligence. This highlights the growing focus on sustainability and responsible consumption in the textile industry.

The need to assist countries in the global south to respond to these regulations is emphasized. Projects aimed at helping countries trace products and prove compliance with ESG standards are seen as crucial in ensuring that these countries can adapt to changing regulatory requirements.

The project for sustainable initiatives is recognized as not yet scalable or affordable. The cost of the final product resulting from the project is high, making it inaccessible for many consumers. This highlights the need to address scalability and affordability challenges to ensure the widespread adoption of sustainable practices.

The importance of cooperation along the value chain is emphasized. By mapping farms and small suppliers and fostering long-lasting relationships, suppliers can gain access to premium markets. This highlights the role of collaboration and partnerships in promoting sustainable practices and improving competitiveness.

The adoption of climate goals by big brands has implications for manufacturers in export countries such as Cambodia. Manufacturers may face losing orders if they cannot meet the carbon footprint reduction requirements set by these brands. This highlights the impact of global sustainability initiatives on industries and economies in developing countries.

It is emphasized that tackling climate goals and implementing sustainable practices requires collaboration and involvement from various stakeholders, including government and more developed partners. Manufacturers alone cannot address these challenges, and the collective effort of all stakeholders is needed to achieve meaningful change.

Digitization, while offering opportunities for SMEs to maximize their profits, must also be mindful of its environmental impact. Digital technologies consume a significant amount of energy, and it is important to ensure that the energy source used is green. This underscores the need for a holistic approach to digitization that considers both economic benefits and environmental sustainability.

The importance of good governance is highlighted as a core element of strategies to achieve peace, justice, and strong institutions. Good governance ensures effective implementation of policies and fosters trust and accountability in society. It is seen as essential for achieving sustainable development and addressing various challenges.

Effective cooperation is emphasized as necessary to support lesser developed countries (LDCs) in overcoming challenges. LDCs often face funding constraints and complex issues that require the support of more developed partners. Effective cooperation can ensure that LDCs receive the necessary support to implement necessary changes and achieve their development goals.

The conflictual nature of digitization and green standards and their adoption by the private sector is recognized. While they may present conflicting priorities or requirements, it is believed that a forward-looking perspective should be adopted to optimize future standards. The increasing awareness of green issues among future generations makes green standards more attractive and necessary.

The interdisciplinary and complex nature of the topics being discussed is acknowledged. This complexity requires the involvement of multiple partners and increases the time and cost involved in finding solutions. It highlights the need for collaborative approaches and a comprehensive understanding of the various dimensions and challenges involved.

Finding partners to support LDCs is identified as a challenge due to a lack of funding and the complexity of the issues they face. LDCs require support from developed partners to address their challenges and overcome barriers to sustainable development. The need for financial resources and appropriate expertise is crucial in helping LDCs achieve their development goals.

Speakers