Sustainability of Production Chains in Latin America

Resources of small-scale companies to leverage their growth and development include the strengthening of their links with larger companies that can help them access new markets and adopt better productive practices.

These types of collaborative integration between companies lead to the consolidation of productive chains, in which larger-scale companies develop strategies that transcend commercial activities, so that their suppliers of inputs and services can build their capacities and adequately meet their own needs and those of the end market.

Thus, large companies that decide to pursue initiatives to strengthen their supply networks, assume a type of leadership that—when optimally implemented—ushers in advantages throughout the chain. The literature describes these leading companies as anchors, tractors, among other definitions; and in Latin America, they have become enablers of access to international markets while maintaining high quality standards, and thus leveraging the competitiveness of productive systems of our countries. In addition, the incorporation of sustainability-oriented components in production chain management has enhanced efficiency, as well as attention to social and environmental issues that are becoming increasingly relevant and prioritized in the markets.

In order to discover good practices and the needs of the region’s production chains, and in an attempt to promote sustainable models, CAF conducted a study in 2022, which analyzed the strategies of 20 anchor companies from five countries (Colombia, Ecuador, Mexico, Panama, and Peru). Using a methodology that combined surveys to people in charge of supplier management in each of the companies, and a review of secondary sources, the study identified practices that have positively impacted MSMEs linked to larger-scale companies.

The composition of the sample analyzed, although it is not representative of the overall behavior of this type of companies in the region, shows great diversity in terms of the core activities of our anchor exporting companies, since the agribusiness branch included meat, dairy, fishing, aquaculture, fruits and vegetable producers. Other industries included metallurgy, retail, forestry, textile and production of household appliances.

The supplier networks linked to the companies participating in the study are also diverse in terms of their scope. The smallest anchor company had 7 local suppliers, while the largest firm surveyed manages a network of more than 10,000 suppliers in different countries. The scale in sales of anchor companies ranges from USD 3 million to 9 billion. Furthermore, those companies that keep of record of participation of women in their supplier networks reported female leadership in 45% or less of their linked MSMEs.

Regarding the incorporation of initiatives with a sustainable focus on the collaboration with suppliers, as can be seen in the following graph, noteworthy is the presence of specialized programs on productivity issues, and specifically in the transfer of good production practices for the different industries involved in the chains.

Another recurring issue was related to the strengthening of suppliers in terms of quality, food safety and occupational risks, due to the need to comply with national and international regulations.

The issue of regulation is also reflected in the large share of anchor companies strengthening their suppliers in terms of administrative governance, given the requirements of transparency in billing, among other guidelines that are part of the legal systems of each country.

The main challenges to promote the sustainable management of value chains were seen in aspects such as the gender approach of the programs, as well as issues such as energy efficiency or reduction of solid fuel consumption. Indeed, issues related to environmental management showed, on average, slower development in supplier support programs, which translates into an important opportunity to foster the sustainability of regional productive chains, with approaches that also have an impact on productivity, to the extent that they implicitly contain the efficient use of resources and, therefore, cost savings for linked MSMEs.

Thus, the region’s challenge is to promote business relationships that enable greater guidance, mainly, around the following Sustainable Development Goals (SDGs): 5 (gender equality), 7 (affordable and clean energy) and 12 (responsible production and consumption). This guidance would lead to greater balance in the sustainable productive development agendas of our productive matrices.