How can sustainable business models distribute value more equitably in global value chains? Introducing “value chain profit sharing” as an emerging alternative to fair trade, direct trade, or solidarity trade

Elizabeth A. Bennett, J. Grabs*

*Corresponding author for this work

Research output: Indexed journal article Articlepeer-review

4 Citations (Scopus)

Abstract

Global supply chains often distribute value inequitably among the Global North and South. This perpetuates poverty and contributes to indecent work in raw material-producing countries, thus creating challenges to sustainable development. For decades, corporate social responsibility, social entrepreneurship, and sustainable business model innovations have aimed to distribute value more equitably across global value chains, for instance via fair trade, alternative trade, and direct trade. This article examines a novel and hitherto understudied innovation for equitable value distribution in global supply chains: “value chain profit sharing.” We draw on interview and archival data from two cases of social entrepreneurs working in the coffee sector to develop a generalized model. One of the model's key features is that the entrepreneur pays suppliers in multiple installments that reflect market conditions (as opposed to a single lump sum based on prediction). We show how this can increase value creation, appropriation, and equitable distribution. Although our research suggests that this model may be highly contingent on leaders' skills, resources, sense of place, and accountability to suppliers, we find no evidence that its applications are limited to specific countries or sectors. Our research further extends extant theory by showing how “value chain profit sharing” may relieve some of the tensions often associated with sustainable business models, including distributing value to suppliers while maintaining financial solvency; creating value while pursuing a social mission; providing benefits to suppliers without curtailing their market opportunities; responding to market conditions while maintaining commitments to suppliers; and scaling without diluting benefits. It thereby contributes to the literatures on sustainable business model innovations, equitable value distribution in global supply chains, novel application of revenue-sharing contracts, and innovative methods of profit sharing. It furthermore provides actionable guidance for social entrepreneurs, corporate social responsibility practitioners, and supplier cooperatives aiming to achieve more equitable value distribution and sustainable supply chains.

Original languageEnglish
Number of pages21
JournalBusiness Ethics, the Environment and Responsibility
Early online date24 Mar 2024
DOIs
Publication statusE-pub ahead of print - 24 Mar 2024

Keywords

  • coffee
  • fair trade
  • social entrepreneurship
  • sustainable business models
  • sustainable supply chains
  • value distribution

Fingerprint

Dive into the research topics of 'How can sustainable business models distribute value more equitably in global value chains? Introducing “value chain profit sharing” as an emerging alternative to fair trade, direct trade, or solidarity trade'. Together they form a unique fingerprint.

Cite this