What is a supply chain? A supply chain tracks the flow of material, information, capital, and labour, in delivering goods and services to consumers. A value chain focuses more on the activities, rather than materials, when analysing production, supply, distribution, usage and end-of-life for products and related services.
The Systems Change Observatory (SCO) explores this month how a supply chains perspective can help us understand systems better and guide us in improving them. Jessica Jacobson and Dr Sudhir Rama Murthy spoke to Skoll Scholar (2018) Kevin Warner, who works on supply chain certification and academic researcher Dr Tatianna Mello Pereira da Silva, whose ‘follow the object’ approach analysed PET bottles in Brazil. The discussion identified supply chains offer three strengths for systems change, particularly where industrial activity is intricately linked to environmental or societal problems.
1. Demarcating system boundaries for problem-analysis
Systems change is problem centric: an environmental or societal problem is often placed at the centre of analysis to help identify the relevant stakeholders in the system. However, the broad range of primary and secondary stakeholders in the system can be overwhelming, making it difficult to demarcate a system boundary. In contrast, supply chains have traditionally adopted a material centric approach to boundary demarcation. In a short supply chain, the consumer knows and trusts their local farmer or other product supplier, while in a global supply chain the consumer and producer are connected through various actors across international borders. By using material flows to demarcate boundaries, the system can be analysed for stakeholders, activities, benefits and burdens. But this simplification and clarity for analysis can conceal externalities with broader global reach (e.g. greenhouse gas emissions)
2. Understanding power dynamics in supply chains
Power analysis receives limited attention in supply chain research but is an important consideration for practitioners working to make supply chains fairer and more sustainable. Research with waste pickers in Brazil and interventions with smallholder cacao producers in West Africa have shown that those at the bottom end of a supply chain have limited power to negotiate better pay or terms. Fair Trade interventions have shown the importance of organising smallholder producers, but this needs to be complemented by other efforts in the system to regulate the supply chain and build a market for such products. Understanding how power is distributed across supply chains offers insights into how systems are working, in whose favour, and who is bearing the costs within it. If we can understand the power structure of a supply chain, we can then look for points of intervention to either shift this power or to at least manage for it.
3. Identifying interventions for systems change
A supply chain perspective can help identify interventions for systems change. For example, various concerns regarding workers’ rights and climate change are guiding certification and standard-setting efforts to regulate supply chains. Initiatives such as the Sustainable Supply Chain Initiative (SSCI) aim to act as a harmonising benchmark to which numerous global social sustainability standards can align. And standards such as Sustainably Grown, Fair For Life, and Regenerative Organic Certification (ROC) promote socially and environmentally fair and responsible supply chains. However, implementation challenges remain with regard to regulating actors across the supply chain, and simultaneously building a market for these more sustainable, but more expensive, goods.
Beyond regulation, a supply chain perspective can also help completely reimagine the system, or economy, in which a supply chain works. For example, a Circular Economy envisions a restorative and regenerative use of finite resources. A Circular Economy enterprise is essentially making a supply chain intervention to tackle a systemic problem: environmental degradation. The intervention can be through a social enterprise which closes the material loop, by transacting with powerful large multinational corporations. A successful intervention requires cognisance of both material flows and power dynamics in supply chains.
So what does this mean for you?
Taking a supply chain perspective shows that micro-level individual consumer and macro-level policy decisions can have system-wide impacts, including through redistribution of power within systems. Further, understanding system-level interventions as supply chain decisions would bring them within the remit of corporate managerial practice. How could individuals, enterprises and other institutions apply such a supply chains perspective to systemic problems? Let us know on social media!
Authors: Dr. Sudhir Rama Murthy is a postdoctoral research fellow with the Systems Change Observatory (SCO) at the Skoll Centre for Social Entrepreneurship. Read more about his related work. Jessica Jacobson is the Programme Manager for Research and Insights at the Skoll Centre for Social Entrepreneurship.
