Responding to sustainability challenges in multi-tier supply chains

Kirjoittaja Axel Zehendner palkittiin huhtikuussa 2024 LOGYn kannusteapurahalla LUT-kauppakorkeakoulussa tekemästään väitöskirjatyöstä. Hänen väitöskirjansa nimi on “Managing sustainability in multi-tier supply chains: Understanding and tackling the challenges of extending sustainability to lower tiers”.

Managing sustainability beyond first-tier suppliers in supply chains is becoming increasingly relevant for companies. Just recently, the European Union approved a new legislation that “will significantly increase the liabilities and obligations of large companies to mitigate any possible adverse impacts of their own operations and those of their subsidiaries and business partners” (Valtioneuvosto, 2024).

While the upcoming ‘Corporate Sustainability Due Diligence Directive’ is certainly a step in the right direction towards creating a ‘level playing field’ for businesses within the European Union, news headlines and stories about sustainability issues suggest that many companies are still struggling to ensure sustainability at all levels of their supply chains. Managing supply chains has become much more difficult. Most of today’s supply chains are not only longer in the number of tiers but also consist of more diverse members, often located in multiple countries with different laws and norms. This raises the question of how companies can successfully respond to the challenges and complexities involved in achieving sustainable supply chains.

My doctoral research focuses on the topic of sustainability management in global multi-tier supply chains. The aim of my research is to offer insights that can be helpful to both academics and practitioners. In addition to a forthcoming literature review study that will provide an overview of the current state of research on ‘multi-tier sustainable supply chain management’ and attempt to steer the academic field towards theoretically and practically impactful studies, my dissertation includes two (empirical) case studies that have potential implications for the management of multi-tier supply chains. The following paragraphs describe the empirical studies, which are primarily based on interviews with experts from companies located across the multi-tier supply chains of their respective industries.

The first case study has already been published. It explores some of the complexities of sustainability management in multi-tier supply chains. Specifically, the research seeks to uncover underlying sustainability paradoxes and associated strategies that businesses can employ to address them. The study focuses on the electronics industry, which is known for its complex supply chains and sustainability challenges.

Among other sustainability paradoxes, our findings indicate that many companies aim for sustainable and responsible practices in their supply chains, while simultaneously sourcing from countries with systemic problems that contribute to unsustainable behaviors. The latter is often necessary to maintain economic and technological competitiveness. Additionally, we have found a paradoxical situation where boycotts of certain regions and countries, aimed at reducing sourcing risks related to sustainability, can marginalize producers and suppliers, such as small-scale miners. Boycotts can force these actors to engage in unsustainable practices and enter unsustainable markets out of economic necessity.

Our findings highlight the importance of business alliances and third-party collaboration in addressing the systemic paradoxes that often underlie sustainability issues and paradoxes in supply chains and organizations. Collaborating across the industry can also help to work around the structural complexities of individual supply chains, which often create blind spots for companies. Additionally, we found that companies can mitigate underlying paradoxes to some extent by contextualizing them. This can be achieved by credibly communicating about challenges and complexities to relevant stakeholders, such as key transaction partners and the general public.

The second case study will soon be submitted to an academic journal. Its objective is to understand how companies in a multi-tier supply chain can implement and ensure sustainable practices in their suppliers’ operations, even when some of these members are located in challenging contexts for sustainability. This topic is explored by analyzing the supply chains of the cocoa and coffee industries.

Many agricultural producers face institutional voids that hinder their ability to meet downstream supply chain expectations. Our findings suggest that purchasing companies in the Global North should not only strive to increase the commitment of agricultural producers to meet the sustainability expectations in supply chains but also foster a sense of belonging among these suppliers to the global supply chains community. This can be achieved through individual and collective efforts with other members of the supply chain. While training can help suppliers understand and appreciate the value of producing sustainably, long-term sourcing contracts are beneficial in ensuring that producers in challenging contexts commit to meeting the sustainability expectations and demands of the supply chain community. Our findings also indicate that financial incentives and fair prices are important factors in keeping producers engaged, allowing them to make necessary investments in better practices and earn a living wage. They also reduce economic pressures on producers that often contribute to undesirable practices and behaviors in cocoa and coffee supply chains.

Overall, my research seeks to contribute to the ongoing discussion on sustainable supply chain management, which still primarily focuses on first-tier suppliers. By analyzing the relevant literature and providing empirical findings from multi-tier supply chains in different industries, I hope that my dissertation will at least provide some actionable insights for practitioners navigating the complexities of modern supply chains.

Axel Zehendner
Junior Researcher
LUT Business School