Managing sustainability-related risks in supply chains

Abstract

This doctoral dissertation investigates the capabilities that a focal company needs in order to manage environmental and social sustainability-related risks arising from its supplier base. Stakeholders increasingly expect comprehensively sustainable products and services, which go beyond the minimum requirements of the legislation. Hence, sustainability in supply chains cannot be anymore just empty rhetoric in a company’s marketing speeches or supplier selection processes but must be taken as a prerequisite for doing business. The research has shown that non-sustainable business practices in supply chains have negative performance effect upon stakeholder value and investor decisions. Moreover, the research has shown that the intersection of environmental, social and economic sustainability performance, known as a triple bottom line, provides also the best financial performance in the long-term. Nevertheless, little research has been conducted regarding the sustainability-related risks in suppliers’ practices, and practically no research has been carried out to understand the competencies and capabilities a focal company must develop to manage these risks and ensure sustainability in its supply chains. The main objective of this study is to extend the knowledge, and conceptual basis of supply chain management literature by exploring the capabilities that enable a focal company to efficiently manage sustainability-related risks. The study also includes insights on how these capabilities can be continuously maintained in order to achieve competitive advantage.

Empirically, this study is a multiple-case study, and the main data was collected in semi- structured interviews with eight case companies from different industries in Finland. Furthermore, the research used an expert evaluation and an Analytic Hierarchy Process, as well as utilized quantitative data to investigate the phenomenon. The main theoretical contribution of this dissertation is the new concept of sustainability-related risk management capability, consisting of four elements: supplier sustainability management, stakeholder management in sustainability issues, sustainability-related risk mitigation, as well as collaboration and future orientation towards supply chain sustainability. The empiric results indicated that currently, primary logistics buyer companies do not possess the characteristics of this capability completely. Instead, big global logistics service providers seem to completely coincide with the theoretical construct in the role of logistics service buyer.