Professional Documents
Culture Documents
1
Background
Why this research project?
• Shared interest in increasing
contribution of international business
to poverty reduction
• UN Global Compact/MDGs
What is this report about?
• a ‘learning’ project; not an audit of
Unilever or UI.
• The goal: to understand how wealth
generated by a multinational
company’s local operating company
can have positive or negative impacts
on people living in poverty
• To do this, we looked at UI’s entire
value chain from small-scale producer
to low-income consumer to understand
the points of entry and leverage to
reduce poverty. 2
Four areas of research
3
The UI business
4
Foreign exchange, trade & human resource flows
5
UI’s distribution of profits
6
Value Chain
Estimated
employment linked
to UI value chain
(2003)
7
Value Chain
Estimated
distribution of value
generated along UI’s
value chain (2003)
8
The supply chain
Direct suppliers
• UI had 334 suppliers, spending approx Rp 3,591 billion (US$ 419m)
• 80% of suppliers are domestic, 20% are international
• Top 10 suppliers by value are all Indonesian and account for 34% of
purchases
• Domestic suppliers provided 84% of goods and services
• All UI suppliers required to observe Unilever’s Code of Business
Principles
• UI maintains basic standards through negotiations, on-going dialogue, and
a rolling three-year audit programme
• UI supplier companies exceed legal regulations governing wages and
benefits in Indonesia but pay and employment conditions’ for suppliers’
employees and contract workers were lower than those for UI’s direct
workforce
9
The supply chain (cont.)
Producers of raw materials
• UI products are made from raw materials sourced
mainly from Indonesian producers, traders and
processors
• Producers growing agricultural products are among
the poorest people in UI’s value chain
• Five agricultural raw materials entering UI’s local
supply chain stand out in this regard—tea, palm
oil, cassava, coconut sugar, and black soybean
• The market for coconut sugar – a key ingredient
for Kecap Bango—is characterised by oversupply,
with farmers selling through middlemen and
experiencing high levels of debt which keep them
in debt peonage
• Where there is a business case for alternative
supply chains, these can have positive impacts for
poor producers
10
The distribution chain
Employment
• More than 300,000 people (FTEs) make their livelihoods in UI’s
value chain
• More than half this employment is found in the distribution
and retail chain
Value
• Total value generated along the chain was estimated at
US$633m: 1/3 UI 2/3 in the chain; the government receives
(from UI alone) 26% of the total value generated
• The value captured by poorer people working at either end of
the value chain is much lower than the value captured by those
who are in direct interaction with UI
12
Lessons learned from project
• Understand the ‘job’ multiplier in UI’s total value chain, and potential
use of value chain policies as tool in sustainable poverty reduction
• Value-adding activity creates a broad tax base - essential for
development of formal economy and funding of government
programmes
• FMCG value chains can offer poor people an opportunity to gain basic
skills and earn incremental, regular income
• Although imperfect, may be useful first steps towards increasing skills,
accumulating assets, and improving quality of life
• The scrutiny of UI’s relationship with low-income consumers and its
contractor review processes suggested ways in which the company
could improve its interactions with people living in poverty
13
Lessons learned from
project
14
Follow up actions
Unilever
Oxfam GB / Novib
15
Exploring the Links Between
International Business and
Poverty Reduction:
a case study of
Unilever in Indonesia
16