International

Labour
Value Chain Development Organization
© T. Falise/ILO

for more and better jobs

Making value chains work for small business

A value chain consists of the activities Micro and small enterprises are frequently held back by poor access to markets, finance
needed to bring a product from the initial and other business services. At the same time these smaller enterprises are the ones
idea and conception to its final market.
creating most new employment. Especially in low-income countries, they suffer from
These activities include design, production,
a limited understanding of markets, have weak bargaining power and lack adequate
marketing, distribution and support
services, up to the final consumer (and knowledge of managing finances. Unable to harness the potential of their value chain
often beyond, when recycling processes are to expand and improve their own competitiveness, they often operate on a precarious
taken into account). basis, with low productivity and poor working conditions. Increasingly, environmental
unsustainability is emerging as a constraint over which Small and Medium sized
Enterprises (SMEs) have little control.
The commitment of the ILO to decent work for all, lies at the heart of its approach
to value chain development, which is designed to strengthen the ability of enterprises
to identify and exploit market opportunities that can also generate employment. In
tackling the key underlying constraints that stop businesses from achieving their full
potential, the ILO aims to create more and better jobs that will contribute to economic
development and poverty reduction.

The ILO approach to value chain development

Case study – Agriculture in Sri Lanka The ILO approach focuses on improving value chains that offer opportunities to
Value chain development in Sri Lanka generate wealth, create jobs, and enhance job quality. After identifying sub-sectors
targeted five agriculture related sectors and value chains with employment potential, the ILO looks at how products get to
- fruit and vegetables, ornamental fish, the final consumer, the market dynamics, and relationships between the different
floriculture, dairy and tourism – in four
actors in the chain. The aim is to strengthen whole market systems - enterprises,
districts.
business relationships, financial networks, supporting functions, rules and norms and
The project had an estimated final impact
on over 50,000 enterprises and increased the business environment – in a way that ensures greater benefits for the poor from
employment by 15%, read more overleaf. economic growth and development.
As of 2014, the ILO was involved in 20 Value Chain Development projects in 15
countries in Africa, Latin America and Asia, covering a wide range of sectors - from
high-value crops to agro-processing, from wood furniture to construction materials,
from creative industries to tourism, and from local markets to the supply and
distribution chains of large multinational companies.

Sustainable Enterprise Programme Value Chain Development for more and better jobs 1
 The ILO in action: promoting holistic solutions focused on jobs

Knowledge creation for market systems The ILO’s value and supply chain development interventions address systems and
development: A new project starting in institutions that drive competitiveness and the creation of quality jobs in specific
2014 called Market Systems Development sectors. The tools build on private sector development strategies, using a “light touch”
for Decent Work - The Lab is exploring how approach with the ILO acting as a facilitator rather than intervening directly. The
to make VCD more effective for job creation
ILO provides technical support, coordination, networking and information, focused
and job quality improvements. It is exploring
on helping existing market systems to perform better rather than distorting them. The
ways to better measure and maximize the
employment impact in value chains by ILO approach is designed to stimulate dialogue, strengthen ownership and develop the
developing new methodologies, tools and capacity of small businesses to upgrade their role and voice in the value chain, thereby
learning products aimed at practitioners. improving working conditions, income generation and employment opportunities.
More information here: www.ilo.org/thelab Furthermore environmental sustainability concerns and resource use are becoming key
in how the ILO looks at market systems by identifying environmental “hot spots”.

ILO Value Chain Development process

Steps Tools and publications

1. Sector selection: selecting those sub-sectors with the best Value Chain Development for Decent work: A guide for develop-
potential for job creation or improvement of working conditions ment practitioners, governments and private sector initiatives
Improving Working Conditions through Value Chain Development:
ILO Value Chain Development Briefing paper 3
2. Analysing value chains to assess economic potential and mar- Value Chain Development for Decent work: A guide for
ket opportunities, identify underlying constraints and addressing development practitioners, governments and private sector
employment-related issues initiatives. www.ilo.org/empent/areas/value-chain-development-
vcd/ WCMS_115490/lang--en/index.htm
Making the Strongest Links: A practical guide to mainstreaming
gender analysis in value chain development (2009). www.ilo.org/
empent/Publications/WCMS_106538/lang--en/ index.htm
3. Facilitating dialogue with government organizations, private An operational guide to local value chain development.
enterprises, workers’ representatives and other actors to develop http://www.ilo.org/empent/areas/value-chain-development-vcd/
intervention models in collaboration with all stakeholders in the WCMS_101319/lang--en/index.htm
value chain from production to consumption.

4. Developing effective Business Models for private enterprises For example through distance and in person training in collabo-
and service providers and equipping public partners with the ration with the International Training Centre of the ILO in Turin:
tools and know-how to support value chain upgrading Distance learning: http://marketdev.itcilo.org/
Tailor made courses adaptable to local contexts:
http://www.ilo.org/empent/Eventsandmeetings/WCMS_167956/
lang--en/index.htm
Engaging with financial service providers and other institutions -
http://mmw-dev.itcilo.org

5. Developing Effective Monitoring and Results Measurement Systems to Based on value chain analysis the DCED results measurement
establish outcomes of value chains development projects standard or its principles are being applied to establish theories
of change, results chains and standard indicators.
Knowledge creation on the effectiveness of value chain develop-
ment through a dedicated project: Market Systems Development
for Decent Work – The Lab: www.ilo.org/thelab

2 Sustainable Enterprise Programme Value Chain Development for more and better jobs
 Case Study

The floriculture value chain in Sri Lanka

Enterprise for Pro-poor Growth (Enter-Growth) was a four- What did the ILO do?
year project of the International Labour Organization (ILO), Using the ILO Value Chain Development approach, Enter-
the Swedish International Development Agency (Sida) and the Growth:
Ministry of Enterprise Development and Investment Promotion
in Sri Lanka. Implemented in four districts between 2005 and • Facilitated the creation of export and trade channels
2009, the project targeted value chains for fruits and vegetables, In collaboration with the Ministry of Export, a new export zone
flowers, ornamental fish, coir, wood furniture, dairy produce and was established to cater for approximately 10,000 existing and
tourism. The aim was to boost market access for micro and small potential new flower growers. Growers can import supplies duty
enterprises, create a friendlier regulatory and legal environment, free, improve contacts with exporters and more effectively meet
improve attitudes to entrepreneurship, and increase access to their requirements thanks to an export-oriented processing and
business development services nationwide. packaging plant. Nearly 100 growers boosted export earnings
from close to zero to between Rs. 500 and 1,000 a week.
Achievements of the Enter-Growth project Meanwhile, flower exports grew by an average of 9% annually
over the project period, generating high net foreign exchange
• A direct impact on the value chains of an estimated 52,000
earnings for the country.
micro and small enterprises
• An estimated tripling of household income in the targeted • Strengthened business association and promoted
districts technology transfer
A new Tropical Floriculture Association, with over 100 members,
• A 15% increase in employment in businesses in the targeted has improved the bargaining power of the flower growers, for
districts. instance, by negotiating on their behalf with input suppliers.
The Association has also enabled members to share technical
Close up of ILO Value Chain Development approach knowledge and advice as well as marketing information. Sri
for flower growers Lanka’s Export Development Bureau is developing links with
The case of the Sri Lankan floriculture sector demonstrates a technical institutes, with the aim of increasing the transfer of
more ‘systemic’ approach to intervening in value chains which technical knowledge.
was eventually adopted as the ILO’s standard approach to
Value Chain Development. Despite its high growth potential, • Enabled access to training, business development and
the floriculture sector faced a number of challenges and support services
constraints that hampered development. Flower growers did Awareness programmes for flower growers and exporters have
not have information on new technologies and more efficient improved understanding of export markets and encouraged
production methods, nor did they sufficiently understand market growers to move towards meeting export standards. Several banks
requirements. They also had limited bargaining power and as a are introducing loan programmes for small growers, for example,
result were unable to influence prices of inputs such as fertilizers. to cultivate flowers in net houses. The Export Development
Exporters, domestic buyers and growers lacked information on Bureau is also providing training to people interested in starting
export markets and communication between the different actors new businesses in the sector.
in the chain was poor. Agreements between growers and buyers
Source: The Enter-Growth project – Sri Lanka, Applying a market
tended to be informal, which removed any incentive for buyers
development lens to an ILO local enterprise development project.
to invest in improving grower capacity. High transportation Employment Sector, Employment Report No. 11:
costs due to security checks on the roads and at the airport
handicapped both domestic and export markets. Available online here:
www.ilo.org/employment/Whatwedo/Publications/employment-
reports/WCMS_152820/lang--en/index.htm

Sustainable Enterprise Programme Value Chain Development for more and better jobs 3
 The ILO and Sustainable Enterprises
The ILO Sustainable Enterprise Programme helps create more and better jobs through enterprise
development. It connects business growth and competitiveness with the needs of people to make a
decent living in a healthy environment - today and in the future. Anchored in the ILO’s mission to
create decent work for all women and men, this programme is centred on three pillars:
• An enabling environment for enterprises - Creating the right framework that enables businesses
to start, grow and create decent jobs;
• Entrepreneurship and business development - Helping entrepreneurs, in particular youth, women
and marginalized groups, to start and build successful enterprises;
• Sustainable and responsible workplaces - Demonstrating the link between productivity gains and
improved working conditions, good industrial relations and good environmental practices.
The programme combines evidence-based policy development with capacity building and
enterprise support services, delivered at the international and country levels, through advisory
services and a large portfolio of technical cooperation. It works with governments, employers’ and
workers’organizations, in partnership with other UN agencies, financial and academic institutions,
donors and others.

Further reading
ILO’s guide: Value Chain Development for Decent Work:
www.ilo.org/empent/areas/value-chain-development-vcd/WCMS_115490/lang--en/index.htm
ILO: Value Chain Development homepage - www.ilo.org/valuechains
ILO: The Lab homepage - www.ilo.org/thelab
ITC/ILO: Distance learning course on value chains and market systems -
www.itcilo.org/marketdev
ILO: Value Chain Finance - www.itcilo.org/synergies
ILO Social Finance Programme homepage - www.ilo.org/socialfinance
ITC/ILO: The Summer Academy on Sustainable Enterprise Development -
www.itcilo.org/enterpriseacademy
DCED: The Donor Committee for Enterprise Development website -
www.enterprise-development.org
DCED VCD Knowledge base - www.valuechains.org

Contact details
Small and Medium Enterprises Unit (SME) Tel: +41 22 799 6862
Enterprises Department Fax: +41 22 799 7978
International Labour Organization E-mail: sme@ilo.org
4 Route des Morillons www.ilo.org/valuechains
CH-1211 Geneva 22 Merten Sievers,
Switzerland Global Coordinator/Specialist
Value Chain Development, Entrepreneurship and
SME Management Training
Email: sievers@ilo.org

4 November 2014 Sustainable Enterprise Programme Value Chain Development for more and better jobs