India's food processing industry can become a leader in the global supply chain by ensuring investments, sourcing, and operations are responsible

Speech delivered by Mr Satoshi Sasaki, Deputy Director and Officer-in-Charge, ILO DWT/CO-New Delhi, at the Global Investors Summit in Andhra Pradesh.

Statement | 03 March 2023
• Honorable Minister
• Respected Special Chief Secretary Industries
• Dignitaries on the dais
• State government officials
• Valued representatives from the industry, business associations, colleagues, and friends
Namaskar and Good Afternoon!

A very warm welcome to all of you. It is a privilege indeed for the ILO to be in this global investment summit. Many of you present here may wonder about the ILO’s relationship with investment or businesses, because of the word ‘labour’ in its name. Let me explain. The ILO is the only United Nations agency, which has a tripartite structure with equal representation from the government, employers or the businesses, and workers. Therefore the ILO promotes the interests of both the businesses and workers, to promote equilibrium between the economic actors, necessary for sustainable development. And the ILO has been doing this for more than 100 years, since its inception in 1919.

The agro and food processing industry today assumes a lot of significance in driving economic growth as it links the primary producers, the majority of whom are located in rural and remote locations, to the domestic and global urban markets. Andhra Pradesh is well-positioned to be a leader in the food sector. Endowed with a long coastline, and favourable climatic conditions, the state is already commanding an impressive share in the production of a variety of agro-products, fruits, vegetables, and marine produce, in the domestic market and exports. However, Andhra’s journey in transforming these resources into wealth with a multiplier effect will largely depend upon its upstream progression in the value chain, product diversification, and the market preparedness and responsiveness of the key actors in the sector in the state, in particular, the small and medium enterprises.

To access and penetrate export market, it additionally calls for understanding consumer preference, investment in product development, and importantly the rules and regulations in importing countries. While food safety norms are non-negotiables in this industry, it is important to note that compliance with international standards related to labour and environment is increasingly guiding decisions by countries. Today, globalization has accelerated trading of food across borders, and accelerated diversification of the supply chain in the food industry. Faced with ever-thinning margins, companies are sourcing from low-cost suppliers around the world, the majority of whom are MSMEs and FPOs, and often in the informal economy. These suppliers often achieve low costs by compromising on working conditions and the environment, instead of reducing resource waste and minimising inefficiencies due to poor management practises, systems, technology, and a low-skilled workforce. Globally studies show these factors contribute to non-performance and eventual closure of supplier MSMEs, which adversely impacts overall competitiveness of the sector.

MNEs and large companies have a big role to play here as through their sourcing decisions they can influence and build capacity of their suppliers to upgrade management practises and align to international standards. Technological advances and social media are increasing traceability of food safety, social and environmental footprints, in particular, working conditions in the supplier units. Accordingly, the companies and governments worldwide are also adopting stricter and more sophisticated regulations for standards. The European Union is in the legislative process of adopting a Directive on corporate sustainability due diligence. Once adopted, it will require companies to undertake due diligence to ensure that they do not have an adverse impact on people and planet in their own operations and supply chains. In 2022, the Government of Japan issued its Human Rights Due Diligence Guidelines for Japanese companies. So we can see the convergence of expectations of government and consumers for responsible business practises.

The recent regulatory developments have already prompted many leading food companies to set internal standards, including compliance mechanisms not only in their own production sites but also for their suppliers, that often go beyond what is required by national legislations. As you are aware, international labour standards, which are set by the ILO, feature prominently in the due diligence or compliance mechanisms of companies. Many MNEs and large companies today refer to the ILO Tripartite Declaration of principles concerning multinational enterprises and social policy, or MNE Declaration, in their corporate policies and supplier codes. It is a key reference point for industry and multi-stakeholder initiatives, government institutions such as bilateral and multilateral development banks, and numerous trade and investment agreements. The MNE Declaration provides guidance on how to maximize the positive impact of investment and trade on local enterprise development and creation of more and better quality jobs in host countries. I would also like to remind everyone present here, that the beneficial effects of ensuring respect for international labour standards do not go unnoticed by foreign investors either. Studies have shown that foreign investors rank workforce quality and political and social stability higher than low labour costs in their decision making process on investments and sourcing.

International labour standards are also increasingly integrated into trade agreements. Around half the trade agreements concluded in the last decade (2011-2020), contained labour provisions, compared to only 22 per cent in the previous decade (2001-2010). Against this backdrop, the proposed New Industrial Policy by AP reaffirms Andhra’s commitment to balancing industrial growth and the sustainable development goals of the state. The new policy to which ILO had the privilege to contribute is a testimonial of the State’s progressive steps in creating an enabling environment for the promotion of sustainable enterprises, and exports.

Towards the state’s endeavour, the ILO implements a project in AP, ‘Promoting Sustainable Enterprises in India or PSEI’ funded by the Korea International Cooperation Agency. The project is supporting the development of the MSMEs in the food processing sector and their integration into the supply chain, with the aim to create more and better jobs. It is closely working with the government, industry associations, workers’ organisations, and corporations to promote entrepreneurship in the missing segment of the food processing value chain and build the capacity of MSMEs food processors in upgrading management practices to meet minimum industry standards.

The food processing industry in Andhra is currently at a nascent stage with the domination of primary producers and informal enterprises. This offers immense opportunities for growth and returns to investors, MNEs and large companies. It also provides opportunities to become a ‘change agent’ and partner in the transformation of the food industry in the state. This, however, requires you to ensure your investment, sourcing, and operations are responsible.

In conclusion, I wish to compliment the State of Andhra Pradesh for holding the top rank in ease of doing business for three consecutive years. To sustain this momentum, a strong foundation built upon trust and regular dialogue between industry, worker organisation and government will be essential.

Thank you for your attention!