Taking into consideration the characteristics of modern supply chains (the theoretical account including the responsible SCM and SSCM, as well as the challenges for establishing responsibility and sustainability in SCM), this section identifies and discusses potential avenues for managing supply chains in a responsible and sustainable way. These solutions consist of three interdependent provisions, that is to say: innovation; multi-stakeholder approach; and supra-agent responsibility and governance of supply chains. This study argues that these solutions serve as an effective response to SCM challenges discussed in the previous section and have the potential to enhance responsibility and sustainability in SCM.
Innovation
Increasingly, companies are facing disruption and change in managing their supply chains. Global competition, frequently shifting markets, rapidly changing customer requirements and new continuously emerging technologies force major changes in SCM. The dynamic and complex nature of supply chain urges companies to innovate in SCM. SCM is on the cusp of major technological transformation, which is already altering how businesses exchange and share information and assets. Traditional linear supply chains are insufficiently flexible in responding to highly dynamic conditions and to the ever-changing ecosystems (Deloitte
2017). Therefore, SCM strategies shift to support global competitiveness, new products, process and service innovation and introduction, in addition to, rapid market responsiveness (Shen and Norrie
1999). The next generation supply chains should then be strongly time-oriented, while still focusing on cost and quality. Furthermore, growing stakeholder pressure to realising more responsible and sustainable paths in SCM requires changes of behaviour and organisational, as well as technological, innovations (Isaksson et al.
2010). As shown by Chakrabarty and Wang (
2012) high research & development (R&D) intensity provides a positive platform for the development and long-term sustenance of sustainability practices bringing both financial returns and a positive impact on the natural environment, society, and economy. R&D, which is a part of innovation situated at the front end of the innovation life cycle, equips companies with technologically innovative capabilities and skills to fulfil the sustainability requirements (Chakrabarty and Wang
2012). New technologies expand and bring new forms of work and collaboration, like virtual networks (Zink and Zink
2008). According to Deloitte (
2017), next generation technologies will allow for new and more advanced collaboration, that ultimately will enhance efficiency, transparency and data sharing. As the result, supply chains are managed, largely, in a digital way.
Technology, research and innovation offer the necessary solutions for efficiency, accountability and governance of supply chains. At the same time technological advances help to address and reduce negative societal and environmental consequences that a company may cause, while still maintaining economic competitiveness (Lee et al.
2006; Golicic and Smith
2013). Quickly developing technologies such as internet of things (IoT), smart sensor networks, business intelligence, smart distribution techniques, information sharing, robotics and 3D printing bring opportunities for more responsible and sustainable supply chains. Nevertheless, to take advantage of the possibilities created by digitisation in supply chains, the business community, government and scientists will have to utilise ICT opportunities together (Dutch Blockchain Coalition
2018a,
b,
c). The next subsections discuss two examples of innovative technologies, namely big data and online platforms and blockchain technology, which have a potential to revolutionise supply chains and contribute to robust responsibility and sustainability.
Big Data is increasingly becoming a vital factor and resource for companies in the innovation of products, processes, services, and business models. The definition of “big data” refers to the size or volume of the organisation’s data, but also to the variety and velocity (Hazen et al.
2014). Big data is perceived as an emerging competitive area that will transform the way in which supply chains are managed and designed (Manyika et al.
2011; Cecere
2013; Waller and Fawcett
2013; Zhou et al.
2014). Companies struggle with the question how to deal with massive amounts of data, and how to leverage and apply predictive analytics (Schoenherr and Speier-Pero
2015). The widespread use of digital technologies and an increasing amount of data has led to the emergence of big data business analytics (BDBA) that enables companies to make better decisions (Muhtaroglu et al.
2013), particularly in SCM (Wamba et al.
2015).
While Big Data is still in its infancy, it already provides several promises for SCM. Big data responds to a number of challenges for responsible and sustainable SCM identified in section 4. Real-time risk management and dynamic resource optimisations (Schoenherr and Speier-Pero
2015) improve the visibility, flexibility, and overall integration of global supply chains processes (Wang et al.
2016). Therefore, big data analytics could help to facilitate the geographical distance, the complexity of the supply chain and communication with suppliers by filling the information and knowledge gaps. This would lead to enhanced transparency and traceability supporting monitoring and auditing. Furthermore, big data analytics could enable strategic planning in terms of sourcing and supply chain network design, as well as product design and development. Such enhancements would lead to improved compliance and stakeholder relationship, since these activities are based on collaboration and communication along the chain (Wang et al.
2016). Increasingly “data” is perceived as an important driver of innovation and a significant source of value creation and competitive advantage (Tan et al.
2015). Using advanced analytics, companies can study big data to understand the business environment (Russom
2011) and then connect these insights directly into their business processes in real time. The smart collection, analysis and use of data can provide unique insights into maintenance cycles, ways of lowering costs and enabling more targeted business decisions as well as provide feedback into market trends and customer buying patterns (Wang et al.
2016). These attributes of big data respond to the key elements of responsible and sustainable SCM. Big data could ensure the realisation of economic goals, while putting attention to environmental and social objectives. At the same time, it could facilitate collaboration among supply chain actors enhancing stakeholder relationships. Big data is particularly useful when applied in the digital platforms known as platform business models. Such platforms use technology to connect people, organisations, and resources in an interactive ecosystem and exchange value (Parker et al.
2016).
Academic research into big data in SCM has been scarce (Schoenherr and Speier-Pero
2015), nevertheless practitioners and consultancy companies have already started using big data analytics to improve SCM. One example is a full-service Big Data cloud platform created by the SAP Ariba (SAP), one of the world’s largest platform business models, which supports over 3.3 million companies in over 190 countries (CIO
2018). The platform uses enabling technologies and trends such as artificial intelligence (AI), IoT and blockchain technology to analyse a companies’ data and enhance their operations (SAP). SAP has placed a large emphasis on “procurement with purpose”. Data from commerce transacted on the platform and suppliers on the network, is used to enhance responsible and sustainable supply chains, particularly regarding corruption, child labour, slavery/forced labour, conflict minerals, human trafficking and poverty (CIO
2018). The SAP Ariba is doing so in two ways. Firstly, a supplier risk module makes risk due diligence a natural part of the procurement process (CIO
2018). The module is fed by syndicated data from more than 600,000 sources and uses continuous monitoring and machine learning techniques to analyse over 200 environmental and social factors that companies can use to profile their suppliers against (CIO
2018). Secondly, to help clients gain real-time, actionable insights into their supplier network, SAP teams up with several partners such as Made in A Free World (CIO
2018). The organisation is a supply chain risk management software provider, which built the world’s first ever Slavery Footprint platform (Made in Free World).
Despite great promises of big data, there are significant challenges in its application. Firstly, Tan et al. (
2015) argue that despite a variety of analytical techniques that companies can use to mine and analyse unstructured data (i.e. predictive analytics, data mining, case-based reasoning, exploratory data analysis, business intelligence, and machine learning techniques), we lack ‘analytical tools and techniques to assist firms to generate useful insights from data to drive strategy or improve performance’ (Tan, Zhan et al. 2015). Secondly, as emphasised by Hazen et al. (
2014) ‘management decisions informed by the use of these data analytic methods are only as good as the data on which they are based’ (Hazen, Boone et al. 2014). Therefore, while the technological solutions might work perfectly, the data quality problem may occur in terms of accuracy, timeliness, consistency and completeness (Hazen, Boone et al. 2014). Since BDBA is a relatively new area, a responsible application of Big Data requires training of next-generation data scientists (Schoenherr and Speier-Pero
2015) and further research and testing to ensure their robustness.
Blockchain Technology
Recently, distributed computing platforms, also known as blockchain technology, are increasingly being touted as an answer to ongoing challenges in a whole range of disciplines. Blockchain is a decentralised online database that permits a master ledger of data and transactions to be accessed securely by multiple stakeholders (Pilkington
2016). Blockchain has been much in the news because of the cryptocurrency market and Bitcoins, however one of the most promising application of blockchain is for SCM. As claimed by Dickson (
2016), it has a potential to ‘transform the supply chain and disrupt the way we produce, market, purchase and consume our goods’. This technology can offer various opportunities to transform products, services and processes into digital supply chain networks and platforms, particularly through safer and more efficient ways to connect with business partners (Deloitte
2017). It serves as a database for recording transactions and events, which are then shared through a peer-to peer community.
Blockchain technology has a potential to address a number of responsible and sustainable SCM challenges. Blockchains could enable the tracking and tracing of products as well as components (Dutch Blockchain Coalition (a)). Therefore, it responds to the call for responsible and sustainable SCM regardless of the geographical distance and complexity of the supply chain, through improved communication with suppliers, traceability, covering the information and knowledge gaps strengthening transparency. As emphasised by Abeyratne and Monfared (
2016), blockchain allows for collection, storage and management of key product information of each product throughout its life cycle. All members of the network can verify the transactions in the block (Hackius and Petersen
2017). This approach ensures more equal distribution of power among actors in the chains. Since every member of the network has access to the same data, blockchain provides a single point of truth (Tapscott and Tapscott
2016). This technology involves peer-to-peer interactions based on the digital signatures, thereby it enables communication and trust among the involved parties (Anjum et al.
2017). Therefore, blockchain improves relationships with stakeholder, firstly, among suppliers, contractors, and joint-venture partners resting on information sharing and collaborative partnerships; secondly, among customers, governments and the society thanks to reduced information and power asymmetry. Blockchain also enhances responsibility within the tiers of supply chain. It ensures the quality and safety of a product by reducing counterfeits (e.g. in the pharmacy supply chains) (Apte and Petrovsky
2016; Hackius and Petersen
2017). Blockchain serves as a tool for identifying misconduct from any part of the supply chain’s tier, and reduces supply chain carbon footprints addressing the environmental dimension of responsibility and sustainability in SCM (Dutch Blockchain Coalition (a)). Blockchain provides a full audit trail of record along a supply chain thanks to real-time data and deep insights into a production process means (Beck et al.
2017). As a result, blockchain technology has a potential to enhance compliance with responsibility and sustainability requirements and objectives. Since blockchain transactions are timestamped and tamper-proof, they provide a single source of data integrity and therefore allow for greater oversight and control. One of the blockchain applications is smart contracts, which execute commercial transactions and agreements automatically and enforce the obligations of all parties in a contract without intermediaries (Deloitte
2016). Furthermore, blockchain could ensure credibility of responsibility and sustainability standards (e.g. Fair Trade and Organic) by verifying the integrity of the claims made by these certifications (Abeyratne and Monfared
2016). Blockchain technology can result in greater levels of performance generating economic benefits. At the same time, it is also expected to enhance environmental and social goals through improved collaboration and relationships with stakeholder.
Over recent years, there has been a proliferation of projects applying blockchain technology to strengthen SCM. One of them is the Blockchain Supply Chain Traceability Project using digital technology in the fresh and frozen tuna industries of the Western and Central Pacific region (WWF Global
2018). The objective is to improve tuna traceability to help stop illegal and unsustainable fishing practices in the Pacific Islands tuna industry (WWF Global
2018). The World Wildlife Fund (WWF) pilot project tracks fish from vessel to the supermarket, using a combination of radio-frequency identification (RFID) tags, e-tags/quick response (QR) code tags and scanning devices to collect information about the journey of a tuna at various points along the supply chain (WWF Global
2018). The information is automatically uploaded to the blockchain. Tuna industry struggles with illegal and environmentally dubious fishing practices, as well as forced labour. Blockchain technology is expected to improve traceability, compliance, flexibility and stakeholder management of tuna supply chain and enable consumers to shop ethically, legally-caught, sustainable tuna with no slave labour or oppressive conditions involved (WWF Global
2018).
Another example of the blockchain application in the SCM is a Responsible Cobalt Initiative in Congo, which has been joined by tech giants such as Apple and Samsung. The initiative aims to ensure that cobalt, one of the minerals used in electronics, come through supply chains free of rights abuse, especially child labour (Reuters
2018). The electronic sector is a highly competitive, and companies’ existence and a success depends on innovations (Rangi et al.
2015). The complexity of links in the supply chain that include extraction, production and disposal, have spurred sectoral initiatives such as Ethical Trading Initiative (ETI), Conflict-free Tin Initiative or Conflict Free Sourcing Initiative. Nevertheless, Responsible Cobalt Initiative is different in this regard, because of the blockchain application. Blockchain technology is already used in the diamond industry, where gems are given a digital fingerprint, which is then tracked by blockchain (Reuters
2018). Nevertheless, tracking cobalt is far more complex since cobalt is being processed in the supply chain. Therefore, the pilot project experiments with already proven approaches from other industries, especially from the food industry, e.g. a mass balance approach used for Fairtrade certification of products like cocoa, indelible marks that survive the refining process, or bolting blockchain onto computer technology (Reuters
2018).
Despite the enthusiasm about great opportunities that the blockchain technology may generate, it also raises concerns (Yli-Huumo et al.
2016; Xu
2016; Anjum et al.
2017). According to the Dutch Blockchain Coalition, large-scale blockchain applications can only be realised if all relevant stakeholders are willing to collaborate and appropriate political, administrative, legal, economic and social conditions are in place (Dutch Blockchain Coalition (
b)). These conditions are necessary to reduce risks related to the use of the technology, including regulations and the creation of markets, legal liabilities, privacy, consumer protection, conflict mediation and arbitration and contract law. Such conditions are also needed in the establishment of new roles of trusted third parties, roles of identifying and certifying parties, functioning of smart contracts, the right to erasure (former “the right to be forgotten”), and new possibilities and roles for compliance and audit functions (Dutch Blockchain Coalition (
c)). As emphasised by the Wold Economic Forum (
2018), blockchain technology is at relatively early stage; ‘anchoring on blockchain without consideration of associated risks, including, among others, cost, security and the relevant industry’s regulatory environment, can be detrimental.’
Therefore, even though technological advances could enhance responsibility and sustainability of SCM, issues such as conflicts, climate change, and modern slavery – are political questions and they cannot be resolved without political, social, ethical and economic solutions. Technological answers alone are unlikely to be sufficient. Ferrell et al. (Ferrell et al.
2013) argue that ‘the unbalanced focus on technological innovations requires oversight by supply chain members to develop programs that inform about mutual ethical risks and to address solutions to ethical and social issues. This makes it necessary to have communication and coordination about ethical decisions throughout the supply chain’ (Ferrell et al.
2013). Therefore, despite technological solutions, responsible and sustainable SCM requires the engagement of various stakeholders. The next section discusses the second potential avenue for responsible and sustainable supply chain, thereby multi-stakeholder approach.
Multi-Stakeholder Approach
Research, innovation and technology can improve efficiency and sustainability of supply chains e.g. reduce resource utilisation (empty miles) through smart logistics. Nevertheless, without the intensified coordination and cooperation between the tiers of supply chains, technological innovations cannot improve the impact on the society and environment by itself.
The main characteristic of supply chains is their multi-tier nature, engaging various stakeholders from manufacturers, intermediaries, and end users, to a host- and home country’s government and local community. Increasingly, collaboration in the forms of stakeholder engagement and multi-stakeholder approaches in SCM, also known as cross-sector social partnerships (CSSPs) (Doh et al.
2010; Van Huijstee and Glasbergen
2010; Ritvala et al.
2014), is considered as the most effective way to achieve more responsible and sustainable SCM. Multi-stakeholder approaches are expected to overcome the limitations of top-down approaches toward promoting responsibility and sustainability (Vurro et al.
2009). Now we observe the proliferation of such initiatives as the Ethical Trading Initiative (ETI), an alliance of companies, trade unions and NGOs that promotes respect for workers’ rights, and the Initiative to improve the Food Supply Chain, the European Commission’s initiative to improve the governance of the food supply chain with regard to unfair trading practices, producer cooperation and market transparency. The engagement of various stakeholders in the discussion about responsibility and sustainability of supply chains was a response to disillusionment with previous CSR initiatives and codes of conduct. As pointed out by Utting (
2002), they were designed and implemented exclusively by companies, and as a result they were ineffective and often aimed at marketing purposes rather than substantial improvements in societal and environmental performance (Utting
2002). Multi-stakeholder approaches encourage stakeholder dialogue and “social learning” (Utting
2002). The success of working towards more responsible and sustainable management of supply chains heavily depends on the involvement and contribution of other actors, such as governments, suppliers, NGOs and communities (Van Opijnen and Oldenziel
2011).
The multi-stakeholder approach is rooted in the stakeholder theory and a relational view, where companies’ success depends on building and maintaining sustainable and durable relationships with the members of its stakeholder network (Tencati and Zsolnai
2009). The widely used definition by Freeman (
1984) describes stakeholders as ‘those groups who can affect or are affected by the achievement of an organisation’s purpose’ (Freeman
1984). The identification of stakeholder should be structured and exhaustive (Achterkamp and Vos
2008). The multi-stakeholder approach in the SCM derives from the concept of collaboration and collaborative enterprise, where companies ‘seek to build long-term, mutually beneficial relationships with all stakeholders and want to produce sustainable values for their whole business ecosystem’ (Tencati and Zsolnai 2008). Collaboration enhances companies’ relationships with stakeholders through better coordination of the company with its suppliers, customers, or other stakeholders to jointly improve social outcomes (De Bakker and Nijhof
2002) and try to generate long-lasting “win–win” solutions (Tencati and Zsolnai
2009). Thus, the sustainability of the company depends on the sustainability of its stakeholder relationships (Tencati and Zsolnai
2009). This understanding of the multi-stakeholder approach clearly addresses responsible and sustainability challenges in terms of collaboration and communication along the chain as well as equal distribution of power among actors in the chains.
Through engaging in collaborative multi-stakeholder initiatives, companies may be better equipped to monitor and trace supply chain activity, while an individual company may not have the resources to consider the societal and environmental impacts of its activities (Clarkson
1995). Nevertheless, multi-stakeholder collaboration requires deeper relationships which might need a much longer time horizon to develop, implement and yield performance benefits and monitoring capabilities (Klassen and Vereecke
2012). The role of NGOs is crucial, as they bring ‘on the ground’ knowledge and experience from working with a particular group of stakeholders e.g. consumers or local communities. This knowledge provides companies with data allowing for more accurate decisions and adaptation in the dynamic SCM context. Furthermore, the engagement of various stakeholders ensures greater credibility of company operations. Multi-stakeholder collaboration encourages companies to participate in initiatives setting societal, environmental, ethical and human rights standards. Such collaboration also encourages monitoring compliance, promoting social and environmental reporting and auditing, and certifying good practice (Utting
2002). Furthermore, the interaction with various stakeholders assists in risk management, e.g. local NGOs can help companies to identify and understand the risks and opportunities in a particular country, develop plans for mitigating those risks, conduct outreach to local communities, and assess compliance with laws and responsibility and sustainability requirements. This learning process is not unilateral. Through a collaborative approach, working together and sharing information, stakeholders are better equipped to address various supply chain concerns collectively. Shared learning and joint problem-solving enables the development of best practices around SCM challenges. Each group of stakeholders brings their own unique perspective and contribution. The management of responsibility and sustainability along the supply chain is more feasible when a company considers specific stakeholder demands instead of broad societal or environmental issues (Maignan et al.
2002). High levels of cooperation and integration between partners strengthens trust and reduces or eliminates abuse of power among companies in the supply chain (Drake and Schlachter
2008). Studies of the processes by which sustainability is integrated and managed along the supply chain agree that the best performers are able to build and maintain integrated approaches toward SCM, on the basis of long-term cooperation, shared knowledge, and joint development of competence both upstream and downstream (Maignan et al.
2002, Shepherd and Gunter
2006, Strand
2009). Stakeholders are the agents that bring broad societal, environmental, ethical and human rights demands to the attention of individual company’s (Maignan et al.
2002). A multi-stakeholder approach incorporates elements of responsible and sustainable SCM by allowing the equal consideration of all three dimensions of sustainability (economic, environmental and social), the cooperation of the partners in the chain, strengthening long-term relationships and responding to requirements of the stakeholders of a supply chain.
Multi-stakeholder approaches to SCM are co-produced by multiple stakeholders, public and private, and increasingly change the notion of governance and regulation, as well as the traditional understanding of business and politics (Hofferberth
2011).
Effective Governance and Supra-Agent Responsibility
It is increasingly recognised that responsible and sustainable SCM requires effective governance. Nevertheless, modern supply chains are characterised by the fact that they involve many distinct stakeholders operating in various countries and across many legal jurisdictions. Ideally, all agreements up and down a supply chain, and across borders, should be subjected to the same governing law provisions and have the same court jurisdiction, however in practice companies deal with a tangle of law and regulation at multiple levels (Haufler
2001). This situation raises a question of responsibility for maximal positive supply chain impacts and adverse effects such as unfair wages, disregard of occupational health and safety standards, violation of privacy, product quality and product safety or deforestation. The multi-tier nature of supply chains deepens the problem of responsibility by creating a vacuum of responsibility. The problem of “many hands” may lead to a situation when no one is responsible for either preventing and mitigating negative impacts or exercising a positive influence.
Over the past decades, a number of efforts have been made to answer these needs at national and international levels. At the national level, states have expanded the nature and scope of their legislative control and changed the nature of regulation, mostly through extending national law into extraterritorial jurisdiction in order to impose some form of corporate liability (Backer
2012). Furthermore, states have transformed their policies from corporate charity to concrete policies addressing the need to change the legal regulation of corporations (Backer
2012). At the international level the UN “Protect, Respect and Remedy” Framework for Business and Human Rights and Guiding Principles on Business and Human Rights (UN,
2008) provide the first global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity (OHCHR). This rests on three pillars: The State duty to protect against human rights abuses by third parties, the corporate responsibility to respect human rights (to act with due diligence) and greater access by victims to an effective remedy (UN,
2008). Nevertheless, these responsibilities are seen as complementary, rather than shared (Wettstein
2015). Clapham suggests that companies’ responsibility to respect human rights is conceived as a moral rather than legal responsibility. Companies’ responsibilities are understood as a negative responsibility “not to infringe on the rights of others”, in other words “to do no harm” (Pogge
2008; Wettstein
2012). However, Wettstein (
2015) argues that silent complicity, a situation that does not involve an active contribution by the corporation to a specific wrongdoing, may challenge the effectiveness of the Framework, because positive obligations are not included (Wettstein
2015). Furthermore, companies cannot be held responsible in cases ‘in which they were not a causal agent, direct or indirect, of the harm in question’ (Ruggie
2004). In complex supply chains the attribution of harm to specific tier of supply chain becomes increasingly difficult (Green
2012). As Louise Arbour, a former United Nations (UN) High Commissioner for Human Rights, points out ‘the growing recognition that the private sector has responsibilities to respect human rights is also welcome. But means of holding States and non-States actors accountable for their actions in relation to human rights are still wanting’ (Clapham
2006).
Globalisation of markets, rapid growth of transnational corporations, and new technologies require us to rethink some of the certainties of the Westphalian age and state-dominated order to come up with new normative visions and concepts to deal with the new problems with which we are faced in a transnational world (Backer
2012). This changing state of affairs brought up the question of international governance framework that would guide and regulate the activities of companies, and therefore ensure responsibility and sustainability of supply chains. In the absence of effective national and international intergovernmental organisational regulation, nowadays we observe an expansion of “private” alternatives, such as voluntary, self-regulatory initiatives and shared governance by non-state actors where responsibility lies at the supra-agent level (Howlett
2000; Haufler
2001; Gunningham et al.
2003; Ruggie
2004; Bernstein and Cashore
2007; Haufler
2013). These initiatives are also referred by some authors as Transnational Private Regulation (TPR) (Bartley
2007; Bomhoff and Meuwese
2011; Scott et al.
2011; Cafaggi
2013). Supra-agency takes the form of ‘coalitions of non-state actors which codify, monitor, and in some cases certify firms’ compliance with labour, environmental, human rights, or other standards of accountability’ (Bartley
2007). Regulation increasingly becomes co-produced by public and private actors and occurs on different levels (Hofferberth
2011). These private governance mechanisms involve companies, NGOs, and sometimes other actors, such as governments, academia or unions, networks of companies and industry associations, epistemic communities and technical experts to tackle societal and environmental challenges across industries and on a global scale (Utting
2002; Gilbert and Rasche
2007; Büthe
2010; Mena and Palazzo
2012). There is a variety of models engaging businesses, associations of companies and NGOs, sometimes in hybrid form and often including governmental actors (Scott et al.
2011). These initiatives in the majority embody the multi-stakeholder approach (as discussed in the previous section) creating multi-stakeholder initiatives (MSIs). They reflect the idea that it is possible to regulate behaviour without doing so (Bomhoff and Meuwese
2011), thereby direct intervention and enforcement are replaced with ‘allegedly lighter demands on economic actors to institutionalise processes’ (Jordana and Levi-Faur
2004). Although, companies adopt TPRs voluntary, these regulations may be supported with a variety of formal and informal enforcement mechanisms, such as codes of conduct (Haufler
2001). Hutter (
2006) identifies two main types of non-state actor regulations, either by the economic actors, or civic actors. Three main sources of regulation in the economic sector include: (1) industry or trade organisations; (2) companies themselves; and (3) those whose business is selling regulatory and risk management advice or cover to companies (consultancies); while the civic sector consists of NGOs and standards organisations (Hutter
2006).
In terms of enhancing supply chain responsibility and sustainability, non-state actor regimes offer a number of advantages addressing SCM challenges. Non-stake actors regimes may have an advantage in information gathering, hence collation and provision of information about policy issues and problem areas (Hood et al.
2001; Hutter
2006). Therefore, they address the problem of complexity of the supply chain, communication with suppliers and traceability, as well as information and knowledge gaps diminishing transparency. Hutter (
2006) draws on Hood et al.’s (
2001) work on risk regulation regimes, and argues that economic non-state regulators may have higher level of expertise and technical know-how, e.g. compliance officers may be better trained than the state inspectors (Hutter
2006). Moreover, compared to the public sector, businesses have higher level of financial capacity which impacts levels of expert knowledge and training (Hutter
2006). Nevertheless, there is a risk that companies may be reluctant to share information due to competition and risk of revealing business secrets. The majority of non-state initiatives use innovative technologies to improve information and data sharing, for instance through networks of online platforms. Combining non-state actors initiatives with technological advances, such as big data analysis and blockchain, enables real-time monitoring and decision-making ensuring improved compliance and implementation. Regarding compliance and implementation of responsible and sustainable SCM requirements, non-state regimes have a triple role to play. Firstly, they can serve as standard settings processes aimed at setting goals through standards and targets, particularly because non-state actors regulation is more flexible and sensitive to the market and technological innovation than traditional state regulation (Hutter
2006). Secondly non-state actor regimes could play a significant role in behaviour modification of companies and individuals e.g. deterrence or mixed enforcement (Hood et al.
2001). A positive motivation comes from the idea of a “race to the top” and becoming a leader in the sector. Since non-state actors regimes are composed of various organisations, control emerges from both cooperation and competition (Scott et al.
2011). As emphasised by Scott and his colleagues (Scott et al.
2011) ‘these networks stimulate mutual control the competition for members or, more broadly, regulatees can increase the standards to the extent that information is adequate to support the making of choices. The use of public oversight and procedural rules is one among the many potential strategies that TPR can use to increase accountability without reducing effectiveness’ (Scott et al.
2011). Self-regulation has the potential to generate compliance through so-called “regulation-by-information”, where the compliance of one member is monitored by another member. As a result, the network creates an informal feedback and sanctions mechanisms. Lastly, non-state actor regimes are to a great extent risk regulation regimes, that Hood et al. (
2001) define as ‘the complex of institutional geography, rules, practices, and animating ideas that are associated with the regulation of a particular risk or hazard’ (Hood, Rothstein et al. 2001). Nevertheless, one of the crucial concerns is a potential lack of enforcement, which is related to the question of the effectiveness of collective actions ensuring that all companies participate and eliminate ‘free riders’ (Brunsson and Jacobsson
2000).
Non-state actors regimes question the traditional legal order of norms creation and their enforcement. They are part of a broader discussion about better regulation (Bomhoff and Meuwese
2011) and good governance. These new governance models reflect the shift from hierarchical to heterarchical governance and recognise the need to reconceptualise the bases of legitimacy for such regimes at both national and supranational level (Teubner
1997; Scott et al.
2011). Curtin and Senden (
2011) investigate an accountability perspective of TPRs and propose two distinct alternatives for the top down approach to the control and accountability of TPRs. Firstly, the advantage of “choice” of regulators who regulates them and of consumers which self-regulatory regimes protect (Curtin and Senden
2011). Secondly, networks of mutuality, rooted in the interdependence of actors, not only between regulatees but also between regulators and those protected by the regime (Scott et al.
2011). Non-state actors regimes have a potential to improve collaboration and relationships with stakeholder, and become a realisation of two key elements of responsible and sustainable SCM – meaningful multi-stakeholder relations and stakeholder engagement where preferences of all stakeholders and the varieties of perspectives are addressed (Scott
2010). As a consequence such an approach may lead to novel forms of democratic governance, at transnational level, which are not tied to national electoral politics (Scott et al.
2011). These changes into outsourcing and privatisation of public management functions reflect changes in broader patters of social control (Cohen
1985; Hutter
2001).
These regimes can serve as powerful governance mechanisms. Nevertheless, they are unlikely to govern effectively if they are based exclusively on companies’ strategic interests for compliance (Meidinger
2017). While the responsibility of companies in the form of accountability and legal liability is broadly discussed in the literature as well as among practitioners, non-state actor regimes are not accountable to states. As a result, organisations leading non-state actor systems cannot be held responsible either for its own misconduct or misconduct of its members. In order to be effective they must establish “political legitimacy” uniting companies, NGOs, and other SCM stakeholder into a community that accepts ‘shared rules as appropriate and justified’ (Bernstein and Cashore
2007).
Summary of the Proposed Solutions
Section 5 identifies three potential solutions for challenges to responsible and sustainable SCM taking into consideration the theoretical account for responsible and sustainable SCM. This consists of the concepts of CSR and SSCM with three key elements of responsible and sustainable SCM, namely the equal consideration of all three dimensions of sustainability (economic, environmental and social), the cooperation of the partners in the chain, strengthening long-term relationships and legitimate requirements of the stakeholders of a supply chain. Moreover, the potential avenues are determined by the challenges for responsible and sustainable SCM. Firstly, innovative technologies, such as big data and blockchain, offer solutions for the enhancement of positive and reduction of negative societal and environmental consequences that a company may cause, while still maintaining economic competitiveness. Through digitalisation of supply chains they enable communication and collaboration among supply chains stakeholders leading to deeper relationships. Secondly, a multi-stakeholder approach ensures inclusion of various supply chains stakeholders and their legitimate requirements. Thirdly, non-state actor regimes provide new governance models for more responsible and sustainable SCM. These solutions address the claim, that companies should be responsible for issues of public concern not only within their company boundaries, but also along the complex and dispersed supply chains (Scherer
2018). Since companies’ responsibility may have a different nature, the solutions address this diversity. Innovative technologies serve as a technological instrument enabling realisation of responsibility and sustainability within SCM. Multi-stakeholder approach has a political character, focusing on a company’s political power and relationship with society. Supra-agent responsibility and effective governance responds to the call for the ethical responsibility of companies and building a good society.
This paper argues that there is a potential interplay between the technological, political and ethical solutions. Innovative solutions, such as big data and blockchain, could be used to facilitate multi-stakeholder initiatives and non-state actor regimes by providing a forum for the involvement and collaboration of various supply chain actors. Many non-state actor initiatives use innovative technologies to support information and data sharing among various stakeholders, particularly through multi-stakeholder digital platforms connecting people, organisations, and resources. This approach enhances compliance and implementation through mutual control. Digital platforms applied in the context of multi-stakeholder non-governmental initiatives, enable transparency leading to cooperation and integration between partners strengthens trust and reduce or eliminate abuse of power. At the same time, technological innovations require oversight by multiple supply chain stakeholders to enable communication and coordination about ethical decisions throughout the supply chain (Ferrell et al.
2013). Moreover, non-state actor governance models should be based on multi-stakeholder collaboration and mutual control to ensure a credibility and legitimacy of the initiative. Lastly, a combination of technological, political and ethical solutions involving the development of sound, multi-stakeholder business and governance models supported by innovative technologies, have a potential to address a variety of challenges in SCM from a responsibility and sustainability point of view.