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Connecting the Right Dots: Economic Integration and Solidarity/Social Economy Supply Chains

9 Apr 2013


Connecting the Right Dots: Economic Integration and Solidarity/Social Economy Supply Chains
This is part of a series of think pieces by scholars and practitioners working on a broad range of issues within the field of Social and Solidarity Economy. The series is being published in conjunction with the UNRISD conference “Potential and Limits of Social and Solidarity Economy”. The conference took place on 6-8 May 2013 in collaboration with the International Labour Organization and the UN Non-Governmental Liaison Service.

Mainstream economic and business management theorists have often used large for-profit firms as their default units of analysis, and measures such as return on investment as proxies for performance. Once the determinants of performance are identified, they are distilled into models that are disseminated across the economy through universities, consultancy firms and policy experts. These models tend to become standardized across for-profit firms, not-for-profit organizations, NGOs and government agencies. In contrast, paying specific attention to the case of the well-developed Brazilian solidarity economy movement offers strategies that could prove useful to Social and Solidarity Economy (SSE) movements around the world. One strategy that suggests a powerful and different form of economic integration is the formation of supply chains, yet this strategy is also subject to pitfalls given the ways that supply chain management has tended to focus on large for-profit firms.

Maliha Safri is an assistant professor in the economics department at Drew University, and has published on political economy in Signs, the Middle East Journal, the Economist's Voice, Rethinking Marxism, and edited book collections. She has also been involved with popular education seminars and courses with activists, and with worker cooperatives in the NJ and NY metropolitan area.


Social and Solidarity Economies and Mapping


The concept of Social Solidarity Economies has a long theoretical pedigree and has been developed by academics in concert with a set of social movements which span the globe. For example, in the UK, this research has focused on the development of a social economy, with particular attention paid to the role that progressive financial institutions and enterprises directed by social missions might play in producing a different kind of economic development. In francophone Europe, on the other hand, researchers have focused more on the role of associations, cooperatives and mutuals. In contrast, the Brazilian conception of the solidarity economy places heavy emphasis on worker cooperatives and reflects the country’s long history with landless worker movements (Mance, 2002). These different social movements and theories all describe economic activities that prioritize the fulfillment of social needs over financial gain, be they in the private, government, not-for-profit or social economy sector.

The most comprehensive effort towards mapping Social and Solidarity Economy networks has taken place in Brazil starting in 2005, under the aegis of the Brazilian Forum on Solidarity Economy (FBES).



This massive national mapping project was funded by the National Secretariat of Solidarity Economy in the Ministry of Labour and Employment (SENAES), and involved mobilizing hundreds of interviewers from universities and social movements to visit 23,000 enterprises in order to document the commodities or services produced, inputs required and management structures deployed. The mapping exercise included legal and informal solidarity economy entities dedicated to the production or commercialization of goods and services, as well as those entities providing credit or technical assistance to the former, irrespective of size. The project served to fill a gap in knowledge about the reality of the solidarity economy in Brazil and became an important tool for planning public policies, increasing its profile in society as a whole (Bertucci et al. 2009).

The criteria that were used to include an entity on the solidarity map stipulated that it should have an economic nature, be constituted by more than a family, and be formed, run and collectively managed by its workers. If a firm met the criterion of social solidarity or a commitment to healthy environmental practices but not worker self-management, it was excluded. The map and database finally included:
  1. worker-managed cooperatives dedicated to the production, commercialization and provision of goods and services;
  2. solidarity funds and community banks;
  3. cooperative networks, and
  4. solidarity economy support organizations providing direct support to the solidarity economy enterprises, such as training, advice, incubation, organizational and technical assistance and monitoring.

The Brazilian solidarity economy database is designed to support the search for a specific commodity or input in any city or state, making it easy for solidarity firms to do business with one another, and helping create non capitalist supply chains such as the Justa Trama (Fair Chain), which was formed as a network to produce bags, t-shirts and other textiles for the 2005 World Social Forum. The core of the network was formed by five worker cooperatives that worked together to produce clothing and toys from organic cotton. Coopertextil engages in the production of raw organic cotton. Cooperative Acai uses seeds and shells from local plants to make buttons and belts, and both cooperatives sell their products directly to Cooperativa Fio Nobre, which transforms the cotton into thread and fabric. Cooperativa Fio Nobre itself is a recovered factory, whose workers seized control of the workplace and created a worker cooperative to run it. Cooperativa Fio Nobre and Coop Acai sell their products as inputs to Univens and Coopstilus, two urban seamstress cooperatives in Porto Alegre and Sao Paulo, which transform them into final items of clothing and toys. With the creation of Justa Trama, cooperative members reported increased stability vis-à-vis long-term purchase contracts and higher annual sales, which also generated other changes in the production process. For instance, with the assurance of long-term contracts, Coopertextil made a switch to a different kind of cotton suited to the arid climate and soil of their region, and was “able to get a fair price for their production without having to resort to middlemen” (Esteves, 2006: 271). Additionally, all the cooperatives pooled revenue, so that, in the words of a worker member of Univens, “the cooperatives that have better results transfer part of their leftover revenue to those in need... we do that instead of applying it all on internal investment, so that one or more cooperatives will not end up growing disproportionately in comparison with the others” (Esteves 2006: 272).

Be Careful Where You Pick Things Up


Such a solidarity economy supply chain functions very differently from those models governing capitalist firms. Called supply chain capitalism by some critics, such commodity chains are “based on subcontracting, outsourcing, and allied arrangements in which the autonomy of component enterprises is legally established even as the enterprises are disciplined within the chain as a whole” (Tsing, 2009).

In the early 1980s, a burgeoning business management literature on supply chain management (SCM) emerged. Long-term relationships connecting producers, retailers, and suppliers were, as in the case of WalMart, characterized by some as an extreme governance form of vertically integrated hierarchy. Much of the mainstream literature has bypassed the power dynamics and negative social impacts of the standard SCM process, and instead focused on the reduced costs, tailorized input production and higher profit rates resulting from the “successful” implementation of SCM. Some SCM research centers (including those at the business schools of MIT, Stanford, and Northwestern University) have strong partnerships with multinational corporations. Since this produces research opportunities and internships that are targeted to issues that partner firms find pertinent, critical inquiry into the SCM literature is compromised and disincentivized.

However, some critical work on sustainable supply chains, thus integrating social and ethical issues into SCM, did begin to appear after 2000. Some began to focus on the so-called triple bottom line imperative, where “profits and profitability are only one element in the long-term success of companies and the economies. Also important are the future of people (internal and external to companies) and the future of planet Earth” (Kleindorfer et al., 2005: 483). This triple bottom line of people, planet and profits requires new forms of accounting, reporting and auditing, as well as new metrics for gauging performance and socioenvironmental impacts. Ideally these new metrics and indices should offer more standardization and different pathways to assess social goals such as equality and sustainability. However, thus far, many have chosen the problematical solution of weighting factors unevenly across the triple bottom line. For instance, the Dow Jones Sustainability Index weights economic performance at 30.1, environmental performance at 7.2, and social factors at 14.55, with 30 per cent of their sustainability criterion based on reports written by the companies themselves. For many within sustainable SCM or triple bottom line approaches, one thing is clear: the horizon of politics is within capitalism alone.

As Brazil and worldwide networks increasingly adopt supply chain formations as a key part of their project, solidarity and social economy theorists and practitioners will need to pick and choose carefully from the SCM literature for ideas for their policies and strategies that are appropriate for their different approaches. Research investigating holistic approaches to sustainability, decentralized forms of governance, not-for-profit organizations, and the public sector offer possible insights. Public sector SCM specialists understand that a public supply chain differs from a private one since it is not solely concerned with efficiency (or cost-minimization concerns), but also with effectiveness in balancing a citizenry’s concerns and rights. To approach government as purchaser of a series of end goods and services is different to acknowledging the multidimensionality of generating a public good such as elder care. It is a process which draws multiple government agencies, the elderly and other stakeholders into a value chain that is supposed to yield welfare and well-being. Most public procurement researchers and practitioners deploy a narrow conception of public sector SCM, focusing on only one link: the government as both purchaser and the most sizeable consumer. In addition to its macroeconomic significance, public procurement is governed by legislative rules (for instance, 23 per cent of federal US government contracts must go to small businesses) mandating transparency and accountability. Many public procurement specialists concentrate on adapting the private sector’s best practices on cost-reduction, tweaking around the edges to include necessary changes due to public legislation.

A solidarity economy supply chain, in the forms that has been institutionalized thus far in Brazil and the USA, differs perforce from models used in capitalist firms including those that focus on sustainability or public procurement. Even if such supply chains share with conventional supply chain managers the goal of minimizing inefficiencies (for example by seeking to transform functions that are consistently difficult to perform), they privilege distinct goals and adopt different intercooperative principles. Returning to Justa Trama’s supply chain strategies, they have contributed to member cooperative growth by allowing increased sales, but they have also been carefully managed to produce meso-level equity through their redistributive mechanisms. Workers pool together surplus not only at the individual cooperative level, but also at the network level, to be redistributed to other cooperative firms. This is not about profit maximization at all costs, but growth that is balanced and geared to optimizing worker well-being. Workers express solidarity not only with one another at the firm level, but also at the level of groups of firms, similar to the redistributive mechanisms of the Mondragon Cooperative Corporation (MCC) in Spain. In 2012, when one of MCC's worker cooperatives (Fagor Electrodomésticos) faced a disastrous decline in demand for its home appliances as a result of the Spanish recession, Mondragon Assembly's workers (members of a solar machine factory cooperative that at the time enjoyed economic growth) voluntarily reduced their wages by 7.5 per cent. Mondragon Assembly redirected that amount to their sister cooperative so that workers in Fagor Electrodomésticos would have to take a pay cut no larger than 7.5 per cent in order to keep employing all the current worker-members. This is yet another example of how distributional politics differ within a non capitalist network, producing a strategy of reciprocity and equity in response to economic crisis. There is no one best-practice rule, but those within each network struggle to enact solidarity with very different entities precisely because they identify as actors coming together in a network where solidarity is a shared principle organizing economic interaction.

Currently, researchers from New York, Philadelphia and the state of Massachusetts are working collaboratively on a project that will produce comprehensive solidarity economy databases and solidarity economy maps in all three US sites. The project is designed to:
  1. assess geographical density and dispersion;
  2. estimate the aggregate economic impact of the solidarity economy, and
  3. provide a way for the entities in this economy to engage in supply chains similar to Justa Trama.
By conducting a census of the solidarity economy (identifying a population, counting what and how much they produce, how many employees they support, how much tax revenue they generate), they are hoping to engage in politics in order to both demand state resources given their sizable aggregate economic impact, and institute new forms of governmentality.

As more and more Social and Solidarity Economy movements undertake mapping efforts, create databases and attempt to build different kinds of supply chains that privilege participatory democracy, equality and sustainability above the profit-seeking motive, they will need to pick very carefully from existing SCM techniques and literatures.


This UNRISD thinkpiece draws on an article that has been accepted for publication by Organization, entitled “Mapping noncapitalist supply chains: Toward an alternate conception of value creation and distribution.”
REFERENCES

Bertucci J, Alves de Silva RM and Schiochet V (2009) Solidarity economy system of information-SIES: Visibility and strengthening of solidarity economy in Brazil. www.social-innovation.org/wp-content/.../sies-wien-29_01_09.doc Last accessed 19 October 2012.

Esteves A (2011) Grassroots mobilization, co-production of public policy and the promotion of participatory democracy by the Brazilian Solidarity Economy movement. Ph.D. Dissertation, Department of Sociology, Brown University.

Kleindorfer PR, Singhal K, and Van Wassenhove L (2005) Sustainable operations management. Journal of Production and Operations Management,14(4): 482–492

Mance EA (2002) Redes de Colaboração Solidária (Solidarity-based Cooperation Networks). Petrópolis: Vozes.

Tsing A (2009) Supply chains and the human condition. Rethinking Marxism, 21(2): 148-176.

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This article reflects the views of the author(s) and does not necessarily represent those of the United Nations Research Institute for Social Development.