Challenges and propositions - Part 3 of 5

Dealing with increasing complexity is the third emerged challenge in making supply chains sustainable.

The first dimension that contributes to this complexity is related to difficulties in evaluating sustainability in supply chains due to: subjectivity in defining their changing boundaries and involved organizations and individuals; multiple ways that their interactions and activities affect or are affected by their surrounding environments (natural, organizational, business, and social environments); as well as multiplicity of interests and differences in: expectations, cultures, social practices, local conditions, contextual settings in which the decisions are made, and legal requirements.

Due to these, evaluation of sustainability in complex supply chains lacks a meaningful, adequate, or unified indicator, standard, or label. The indicators, standards, or labels neither consider the changes over time nor the interactions among all the triple bottom lines. It might also be counterproductive to measure or assess all the negative effects of supply chains activities. Furthermore, it might be difficult to measure or assess sustainability in intangible resources or shared responsibilities or corporate responsibilities especially when they vary at different stages of development.

The second dimension is related to leakage/spillovers in open supply chains as a result of the shift of emissions from one sector to another (e.g. from transport to production of electricity) or from one country to another. Leakage might also happen when a stakeholder evades its responsibilities or externalizes its social and environmental degradation costs by transferring to/sourcing from places or stakeholders with looser regulations and standards.

The third dimension is related to several trade-offs existing in sustainable development of supply chains whereas making one part sustainable leads to unsustainability in another part. There are also several conflicts of a paradoxical character which simultaneously exist in managing, governing, and developing sustainable supply chains.

One example of the trade-offs is between economic gains and environmental damages. For instance, exports, free trade, or geographical positions might lead to imbalances in both goods and resources flows and even increase mobility and consequently environmental damage/degradation. Shorter delivery times, just-in-time (JIT), lean production, and higher service levels might be counted as a competitive advantage by leading to economic gains while speed up the supply chains, sacrifice full utilization of resources [due to small order problems, less than truckload (LTL), empty running], increase packaging and handling services, and lead to transport and traffic intensities. E-commerce might also decrease person transport while increase goods transport. Another exemplary observation in recent years is that shifting/off-shoring the upstream parts of supply chains to developing/emerging countries has accelerated social and economic growth while might decelerated employment in the home country and at the same time deteriorated the natural environment due to longer transport distances among the supply chains stakeholders.

There are also examples of trade-offs in re-bound effects when, for example, energy efficiency or cheap fuel encourages higher consumption and mobility; improvements in infrastructure increase safety and security while at the same time encourage mobility and consequently lead to environmental degradation. Another example is the trade-offs existing in the production of non-fossil fuels. To cite an instance, extracting biofuels from biomass may lead to higher income for rural communities, increase food output per hectare (productivity), and industrialize agriculture and forestry, while at the same time increase land price, food prices, hunger, deteriorate the cultural carrying capacity, or endanger biodiversity. Urbanization and industrialization may also strain the availability of biomass sources especially in developing countries.

Some examples of paradoxes in managing, governing, and developing sustainable supply chains are: a) coopetition (simultaneous existence of cooperation and competition); b) increase in the self-regulatory survival capacity by an increment in variety which is also a hindrance to rapid adaptation; c) simultaneous processes of innovation, i.e. learning and internalizing new ways and discarding those ways that are older and less effective; d) increasing freedom and autonomy for sake of self-organization and creativity while setting restrictions and rules for sake of controlling the work routines, management, and governance or taking advantage of capabilities emerged by bundling the resources; e) increasing diversity while organizational unity and integrity; f) pollution reduction from goods, services, and resources in parallel with increasing diversity for (co-) evolutionary sustainability or for developing intangible resources; g) encouraging increased consumption for economic growth while decrease it for environmental protection; h) investment during economic recession; i) developing core competency/division of labor/division of perception and being multi- as well as inter disciplinary/holistic; j) centralization of decision-making for increasing efficiency and simultaneously its decentralization for making the supply chains/networks democratic, resilient, and robust.

Complexity profile (please refer to my doctoral dissertation) can facilitate recognition of primary and secondary stakeholders and degree of environmental, social, and economic responsibilities to each stakeholder. Nonetheless, due to nonlinearities of interactions, even a small or secondary stakeholder may have a great impact on the supply chains over time. Investigating the complexity profile can also be beneficial in benchmarking, life cycle assessment (LCA), and labeling of goods and services by clarifying the scales and details in description of supply chains. Although subjectivities in evaluation cannot be omitted, setting globally agreed minimum schemata/ norms/ codes of conduct/ requirements/ standards can reduce subjectivity, ambiguity, and leakage/ spillovers. As supply chains are open systems with global interactions and  damages, such an agreement sounds beneficial. It can also simplify benchmarking and labeling of goods and services and ultimately make the choice easier for customers and end consumers. Those who behave proactively by creating and following further criteria might gain a competitive advantage. However, what should reactively be considered and what should be proactively done is an opportunity for further research and empirical investigation.

To deal with the trade-offs, a more holistic view on the system as well as the investigation of the complexity behavior (i.e., effects of interactions) should be taken into account. However, paradoxes simultaneously co-exist and cannot be completely resolved, since the generation of solutions only creates new paradoxical situations in new circumstances. A complexity theory perspective can also be beneficial in correct handling of changes and context-dependency in making supply chains sustainable. It may help the stakeholders to learn from the interrelationships and grasp emergent properties as well as gradual/ evolutionary, radical/ revolutionary, co-evolutionary, and (co-) adaptive changes over time.