Understanding why firms should invest in sustainable supply chains: a complexity approach

Abstract

This paper explores why firms should include sustainable development considerations in supply chains as a means of improving social and environmental impacts of production systems. The recognition of financial, social and environmental elements however creates greater complexity, which makes optimisation approaches to sustainable supply chain problems infeasible. We frame our analysis using Kauffman's (1993) NK theory, with interactions among financial, social and environmental elements identified through empirical research conducted in Brazilian oil and gas, sugarcane ethanol and biodiesel supply chains. We use a matrix of interactions (Baldwin and Clark 1999) as a template, allowing for the identification of key financial, social and environmental elements and their interconnections within and between supply chains. We contribute by arguing that firms focusing on individual sustainable development elements independently are unlikely to find satisfactory solutions to their sustainable supply chain problems. We further argue that certain sectors have a propensity to be socially exclusive, whereas others are potentially socially inclusive; in such cases, firms operating in exclusive sectors may be able to find satisfactory solutions to their broader sustainability strategies by investing in the social and environmental performance of other supply chains.

Keywords:

• Brazilian energy
• complexity theory
• sustainable supply chains
• social exclusion

Acknowledgements

The Social Sciences and Humanities Council of Canada (SSHRC) and the Brazilian National Counsel of Technological and Scientific Development (CNPq) supplied funding for this research. We would also like to acknowledge those that agreed to participate in our field studies.

Notes

Notes

1. The scientific and technical attributes of environmental impacts of biofuels are beyond the scope of this research.

2. In Portuguese, Selo Combustivel Social.

3. According to Simon (1969) the decomposition of a complex system into modules will not be complete, and only a partial decomposition can be achieved.

4. On site interviews were conducted in Brasilia, Campina Grande, Foz do Iguassu, Joao Pessoa, Petrolina, Manaus, Porto Alegre, Recife, Rio de Janeiro, Macae, Campos dos Goytacazes, Rio das Ostras, Salvador and Sao Paulo.

5. See Introducing GS Sustain, http://www.unglobalcompact.org/ docs/summit2007/gs_esg_embargoed_until030707pdf.pdf [Accessed 16 August 2009].

6. Based on their commitment to social and environmental goals. See http://money.cnn.com/magazines/ fortune/global500/2008/accountability/index.html [Accessed 10 September 2009].

7. The scientific and technical attributes of environmental impacts of biofuels are beyond the scope of this research.

8. Details of Lula's programs to reduce social exclusion are available at http://www.fomezero.gov.br/o-que-e [Accessed 11 May 2010].

9. For example, while Brazil produces an average of 7000 litres of ethanol per hectare of sugarcane, the US produces 3800 litres per hectare from corn and the European Union 5400 litres per hectare from sugar beets (IAE 2007).

10. According to EMPRAPA, over 99% of sugarcane production is at least 2000 kms away from the Amazon (Goes and Marra 2008). However, according to an official from a research-based NGO concerned with the protection of the Amazon, increased sugarcane production has had widespread indirect effects on protected areas through displacement of other farming activities.

11. In Portuguese, MST: Movimento dos Trabalhadores Rurais Sem Terra.

12. See http://www.mstbrazil.org/?q¼about [Accessed 21 December 2008].

13. Petrobras President Gabrielli de Azevedo claims that ethanol produced from substandard labor practices do not make it into their supply chain. BBC News Hardtalk with Stephen Sackur interview with Jose Sergio Gabrielli, broadcast 4 February, 2009. Available on-line at http://news.bbc.co.uk/2/hi/programmes/hardtalk/7869663.stm

14. In Portuguese, PNPB: Programa Nacional de Producao e uso de Biodiesel.

15. According to Reid (2007), only about half of Brazil's arable land, excluding protected regions such as rainforests is currently under cultivation.