Partnership story

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Are Products Safe? If Yes, the Market is Open…

Summary

By: Gerardo Patacconi, UNIDO

“Less developed businesses” find new market opportunities as UNIDO implements a supplier development and compliance program with the METRO Group.

In developing countries and economies in transition, owners of small- and medium-size enterprises (SMEs), either farms or manufacturers, always identify “the market or the demand” as their main concern. But when market opportunities present themselves, for example by retailers, industries, or government procurements contracts, SMEs are often unable to comply with the market requirements as they lack the know-how as well as the technical and financial means to cost-effectively produce goods that are safe, of high and constant quality and of sufficient quantity. Thus, inclusiveness efforts must be pursued to integrate “less-developed businesses” into “formal” trade, which in turn can positively impact the livelihood of producers, workers and their families and increase the availability of safer, higher quality and more affordable products for consumers.

To this end, the United Nations Industrial Development Organization (UNIDO) aims at building trade capacities of developing countries’ businesses through its “3Cs” approach by enabling them to better Compete, Conform to market requirements and Connect with markets. UNIDO promotes partnerships and the implementation of trade agreements which facilitate linkages with markets and thus helps farmers and producers in developing countries reap the benefits of globalization. In this connection, and taking into account the significant role played by public-private partnerships in building trade capacity, UNIDO seeks to tap into the full cooperation potential with the private sector. In this way, UNIDO also works towards improving the trade-off between business and development objectives.

As such, UNIDO plays a key role in standardization and compliance. It assists developing countries in setting up the required quality infrastructure and helps governments, businesses and consumers to understand, apply and comply with standards and regulations, thus ensuring that they do not become an unnecessary burden or a barrier to trade and that they increase the availability of quality and safe products. Furthermore, and in addition to its long-standing cooperation with international standard-setting institutions such as the International Organization for Standardization (ISO), UNIDO became active in the Global Food Safety Initiative (GFSI) in 2009. The GFSI is managed by the Consumer Goods Forum which brings together CEOs and senior managers of about 650 leading retailers, manufacturers, service providers and other stakeholders across 70 countries. Members have combined sales of EUR2.1 trillion, which represents immense market opportunities for producers and consumers, also in the developing world.

As a knowledgeable and reliable partner to both suppliers and buyers, UNIDO is a member of the GFSI’s Advisory Board and contributes to its Technical Committees, where the GFSI Global Markets Protocol is developed. The protocol is a model based on the continuous improvements of the food safety system for “less developed businesses” that seeks to reduce the burden of multiple standards and certifications while increasing safety for consumers in both developing and developed countries.

Within the framework of its cooperation with GFSI, UNIDO is building a strong and effective partnership with the METRO Group, one of the world’s largest retailers. The METRO Group’s MAKRO Cash & Carry brand is making considerable investments in Egypt, opening 2 stores in 2010, and expanding its retail activities with more than 10 additional outlets in the coming years. Since the METRO Group’s principle of local sourcing for local distribution requires over 80 percent of the merchandise to be sourced and resold locally, this represents a tremendous opportunity for local suppliers. Each METRO store requires around 20,000 products on the shelf every day. Can local suppliers comply with the required quality and safety standards? What can be done to help them seize these new opportunities? The ongoing UNIDO-METRO pilot program is one such answer.

To qualify local suppliers, improve their compliance with market requirements (including local legislation, international and buyers’ standards and practices) and connect them with local and international markets, UNIDO and MAKRO Cash & Carry implemented GFSI’s Global Markets Protocol in less than 5 months. In great part, this achievement was made possible by the Agriculture and Agro-Industrial Technology Centre (ETRACE), a center of excellence on food safety, quality and traceability established by UNIDO in 2004 through the Italian-Egyptian Debt-for-Development Swap, now part of the national network of technology centers.

Initially, MAKRO Cash & Carry selected 18 potential suppliers for their stores. Then, together with UNIDO/ETRACE, assessments of suppliers and personnel competencies were successfully carried out; training and mentoring were also provided to ensure compliance with the GFSI protocol. The results of this pilot program showed a significant improvement in the compliance with basic food safety standards of the assessed companies (45% increase) as well as in the individual competencies (13.6% increase in food safety knowledge). Therefore, the first pilot program concluded that the GFSI Protocol is effective, namely that less developed businesses can access new markets, while retailers can sell high-quality and safe products to their customers. Moreover, it is conducive to a virtual cycle of continuous improvement of the food safety systems.

Based on the encouraging results of the pilot program in Egypt, UNIDO and the METRO Group have committed to pursuing more joint activities. This endeavor was marked by a partnership agreement that was signed by UNIDO’s Director-General Kandeh K. Yumkella and METRO’s CEO Eckhard Cordes in December 2009.

UNIDO is looking to further expand its activities through implementing supplier development and compliance programs with other leading retailers and food manufacturers, including those that are members of GFSI and of the Global Consumer Forum. Currently, UNIDO is planning new joint programs with the METRO Group to cover countries such as India, China, Morocco, Vietnam, Pakistan, Kazakhstan, Russia and Ukraine. Cooperation with other Consumer Goods Forum’s members and development partners are also under discussion to implement similar programs in Africa, Asia and South America as well as on how to extend the scope to non-food products and sustainability standards.

For more information, please contact: Gerardo Patacconi, Chief, Quality, Standards and Conformity Unit, Trade Capacity Building Branch, UNIDO.