Challenges and propositions - Part 4 of 5

The fourth major challenge raised in the research studies is related to difficulties in corporate governance of sustainable supply chains. This is due to the fragmented nature of supply chains as well as the logistics industry since each stakeholder can be a part of several other chains, can belong to a variety of economic sectors and business federations, can have contracts with various organizations, and can be regulated by different rules and laws. Fragmentation can increase because of the increase in outsourcing, offshoring, internationalization, market expansion/ diversification, and moving downstream in the chain.

Corporate governance difficulties are also due to the many contexts in which supply chains operate. These can vary from a local place to urban areas, regions of a country, and different countries. This increases the difficulties in carrying out the following:  audit and control of all the processes, activities, and stakeholders; transparent tractability in the chain; collaboration among the stakeholders; acceptations and adaptation to a wide range of corporate codes of conduct, standards, certificates, labels, norms, bureaucracies, administration processes, rules and laws especially in a multinational environment where consensus among stakeholders or a social dialogue may be lacking.

There is also considerable heterogeneity in sustainability practices between and within industries/ businesses based on their size, constellation, customer demands, segments, and market place. This heterogeneity encourages different governing mechanisms and legislation.

As highlighted in one of the research studies, another obstacle is the reluctance of businesses to accept legislation or to participate in initiatives. One example is night deliveries where the receiver must be present when the delivery is made, which is not always acceptable. There are additional concerns about higher driver wages, higher reception/ dispatch costs, and safety when it comes to night deliveries. Another example is the construction and operations of a UCC (Urban Consolidation Center) initiative that may ultimately be doomed to failure if the potential customers refuse to participate. Some evidence-based studies attest that businesses with frequent, differentiated, and high-volume deliveries are less willing to use UCC services where much of the urban freight is already consolidated at the intra-company level or by parcels carriers. Businesses dealing with valuable goods as well as those which demand higher frequency, punctuality, and logistics quality are more reluctant to participate. Difficulties can also emerge for a single UCC as it may be unable to handle the wide range of goods moving in and out of an urban area, due to such factors as different handling and storage requirements. Obligation and compulsion can also threaten the sustainability of UCCs by making the potential customers as well as the private sector unwilling to participate and/ or pay.

Another research study showed that there are also concerns over transparency, accountability, and credibility of self-regulatory initiatives, standards, and codes of conduct, as well as third-party or external auditors and certifiers.

As mentioned in the previous blog post, investigating the complexity profile can be beneficial to embody a supply chain. It subjectively clarifies the scale of a supply chain (i.e., the contextual level at which it is positioned); the holism of a supply chain (i.e., its boundary and what is included in it); and clusters as well as prioritizes the goods, services, resources, and stakeholders. This can help decision-makers and other actors of a supply chain to understand the extent of the sustainability aspects that have to be developed in goods, services, and emerged resources. It may also help to reduce knowledge asymmetry and tackle corporate governance difficulties by better understanding the nature and degree of the responsibilities of a supply chain in relation to its emerged resources as well as the ones shared among the stakeholders.

Although it was highlighted in the previous blog post that setting globally agreed minimum schemata/ norms/ preferences/ codes of conduct are needed, the schemata should also consider the different requirements of different industries/ businesses. In other words, one shoe does not fit all: one schema cannot be suitable for different industries or markets. Sustainability-oriented schemata should be adapted to different requirements of different types of industries/ businesses – while adjusted inside every industry/ business – and should consider changes at different stages of development. Furthermore, due to co-properties, goods and services offered by a supply chain change and are changed by changes in the surrounding environments. A sustainable supply chain co-adapts with the sustainability-oriented values and schemata/ norms/ preferences defined in its surrounding environments. The new schemata for governing a sustainable supply chain should encourage adaptation of emerging sustainability oriented norms, regulations, technologies, and infrastructures in the surrounding environments.

The subsystems adapt to the schemata by self-organizing without an internal or external controller or centralized decision-maker if they have enough autonomy and the agency capacity for decentralized decision making. However, to increase trust and efficiency as well as to reduce probable opportunistic behaviors, further top-down governing mechanism can be defined. Using further bottom-up mechanisms can bring innovation, democratic values, and competitive advantage to a supply chain.

There is also a need for independent agencies to periodically scan and modify the sustainability licenses and labels. This may increase trust among authorities and stakeholders as well as acceptance of new schemata/ norms/ preferences, standards, requirements, and rules. However, due to the fragmentation of supply chains and the impossibility of controlling all the subsystems, the responsibilities should be shared and integrated into their behavior, strategies, and operations. Without operationalizing the strategies, sharing the responsibilities, taking part and initiatives, turning intent into action, and continuity or commitment sustainability will be washed.