The International Labour Organization (ILO), Systems Change Initiative and Swedish International Development Cooperation Agency released a brief on using a systems approach to foster decent work deep in supply chains (September 2025).
Human Level’s Take:
- Decent work deficits are common in lower-tier suppliers due to informality, weak governance, limited oversight and lack of capital, unlike first-tier suppliers who are often subject to stronger regulations and buyer pressure.
- Poor working conditions in lower tiers affect entire supply chains, causing over a third of disruptions and undermining resilience and compliance for top-tier enterprises.
- Taking a systems approach can help companies and their partners tackle root causes of poor working conditions and business performance, rather than just symptoms, through sustainable, scalable and locally led solutions.
- Examples of systems interventions include strengthening support functions for micro, small and medium-sized enterprises (e.g., access finance, new technology, sector coordination) and advocating to strengthen rules and regulations, including both hard law and voluntary standards.
- Companies can take three steps to apply a systems change approach to tackle decent work deeper in the supply chain. First, analyse the system by mapping supply chain stages, support services, and regulatory environments to identify key constraints and leverage points.
- Second, build a long-term vision that includes multiple types of interventions and is sustainable and commercially viable beyond the project phase. Third, engage capable stakeholders, ensuring partners have—or are supported to gain—the will and skill to sustain change.
Some key takeaways:
- Why decent work is a challenge in lower tiers of the supply chain: Supply chains drive development for micro, small and medium-sized enterprises (MSMEs) and participation in supply chains offers these companies access to market information, new technologies and skills, helping to increase competitiveness, growth and job creation. However, supply chains have typically benefited companies in the first tier, as these tend to be larger, formalised businesses operating in the formal economy. Tier one suppliers also tend to have stronger labour practices than companies lower in the supply chain, because they have greater regulatory oversight and face greater pressure to uphold customers’ labour and environmental standards. Meanwhile, MSME suppliers at lower tiers of the supply chain are more likely to have poorer working conditions because they may operate in environments with weak governance, rule of law and enforcement of labour laws, especially in informal contexts, and responsible business regulations generally do not yet permeate to the lower tiers of supply chains. In addition, they tend to be smaller and operate in close competition with others, meaning their margins are smaller and they have less capital to invest in improving working conditions, for example through higher wages, benefits and health and safety systems. Poor working conditions in lower-tier suppliers can disrupt entire supply chains, with over a third of disruptions linked to these tiers. Ultimately, decent work deficits in lower tiers undermine resilience and hinder compliance for top-tier enterprises.
- How a systems approach can help: A systems approach seeks to jointly tackle the root causes of poor working conditions and poor business performance, rather than addressing the symptoms. It also takes a long-term view and focuses on solutions that can be locally led. Taking a systems approach can be more resource-effective than working one-on-one with a few suppliers, as focusing on broader change can elevate practices across many suppliers and can create more sustainable, scalable approaches. The ILO identifies two common systemic factors that affect how well MSMEs can implement decent work practices: (1) strength of supporting functions like access to financial services, infrastructure, standards, access to technology, sectoral coordination and dialogue; and (2) strength of rules and regulations, which can include both hard laws and policies as well as social norms and voluntary standards.
- Steps to implement a systems approach: The brief outlines three steps organisations can take with other partners to implement a systems approach deep in supply chains. First, analyse the system to understand the dynamics at work and identify which are the key challenges to tackle and the levers that can help. This can include mapping all stages, processes and exchanges that are part of the supply chain; looking at the available supporting functions for MSMEs; and understanding the rules and regulations that govern transactions along the supply chain. Second, build a vision for a pragmatic, long-term change, which includes a variety of multi-faceted interventions, addressing constraints like poor coordination, limited services, lack of finance and weak regulation. For example, systems interventions could include creating mechanisms for better sector coordination, providing data to support implementing better working practices, working with the government to strengthen labour enforcement and set up training on decent work priorities, and ensuring access to finance. Third, bring in stakeholders who are well-positioned to handle the issue and ensure it is commercially viable even after the initial project concludes. This includes stakeholders that have both the will to lead the change process and the skill (i.e., technical capacity and competence) to do so. The ILO points out that, if a potential partner lacks either the will or the skill, providing the needed support could as be part of the systems change project.
