Developing environmental and social sustainability in a supply chain has many benefits. Companies that bring transparency into their supply chain processes about their environmental and social performance can increase their business reputation, gain trust from stakeholders and attract talent or capital, among others.
Ignasi Martí: We are here today with Annachiara Longoni, Associate Professor at Esade Business School, who has just presented her work in our Social Innovation Institute Research Seminar. Today we will discuss with Annachiara her fascinating work on supply chain transparency. Annachiara – before talking about your study, would you tell us something about yourself and the kind of work you do?
Annachiara Longoni: First of all, thank you very much for giving me the opportunity to talk about my research. I’m an Associate Professor at Esade in the Operations, Innovations and Data Sciences Department. My research area is sustainable operations and sustainable supply chain management. The main aim of my research is to study possible trade-offs between social, environmental and financial performances from the perspectives of operations and supply chain management.
Ignasi Martí: The work you presented today is about supply chain transparency, would you please clarify what you mean by that?
Annachiara Longoni: Yes, so let me take a step back. Before talking about how to improve sustainability in a supply chain it is important to understand what is happening in a supply chain. And for this reason we talk about supply chain transparency. Specifically, in supply chain management we talk about three levels of information possibly available in a supply chain.
Members who are part of a supply chain that is transparent can identify potential risks and become more efficient
The first level is supply chain visibility, which is related to the efforts of managers to give information about their supply chain, about who their suppliers are, where they are located, and so on. The second level of information possibly available is related to supply chain traceability, which means a company being able to trace back its materials and goods. The third level of information sharing is supply chain transparency, which means disclosing environmental and social performance regarding supply chain members to the public.
Ignasi Martí: For people who are not necessarily experts on supply chains and supply chain transparency, is it something new? Or is this something that has been there for some time?
Annachiara Longoni: We have been talking a lot about supply chain traceability, which means being able to understand where a product is from, but the focus on environment and social performances in the supply chain is something that has appeared in recent years.
Ignasi Martí: Can you briefly summarise the objective of the study that you presented today?
Annachiara Longoni: The problem is that for a focal firm to provide supply chain transparency about environmental and social performance, including supplier and sub-suppliers, is very challenging. For two main reasons: the first reason is that the focal firm has limited visibility and control over suppliers beyond the first tier in the supply chain. And the second challenge is that it is very costly to collect, analyse and disclose information regarding all the members of a supply chain. For example, for a focal firm operating in the electronics industry, it is very complex to collect, verify and disclose information regarding the presence or not of conflict minerals in its supply chain.
If supply chain transparency is achieved, this will provide benefits for all the supply chain members
In this research we investigate supplier and sub-supplier disclosure of their environmental and social information, and see if there is a collective behaviour by suppliers in the supply chain.
Ignasi Martí: Okay. Why should companies and suppliers provide that data as this is sensitive information?
Annachiara Longoni: Yes, that’s true. Some of this information is sensitive, and it may be challenging for a company to disclose this information. However, if supply chain transparency is achieved, this will provide benefits for all the supply chain members. There are two categories of benefits. The first category is related to the supply chain itself. Members who are part of a supply chain that is transparent can identify potential risks related to sustainability, for example, environmental or social accidents that might stop their production. As a result, they become more efficient.
The second category of benefits is related to the benefits coming from the disclosure of information outside the supply chain to the public and external stakeholders – and in this case the advantage is related to better reputation, gaining trust from stakeholders and attracting talent or capital.
Ignasi Martí: During your presentation about supply chain structure, you suggested that it is very important to develop supply chain transparency. Would you tell us more about that and why it is important?
Annachiara Longoni: In this study I focus on the link between the supply chain structure and the behaviour of suppliers in the supply chain. The idea is that sociological studies show that the social structure is a powerful mechanism to explain how people collectively behave in, for example, social movements or other collective movements.
We consider the same to be true for a supply chain in which companies interact as a social network. Given that a focal firm cannot collect and disclose information for all supply chain members, what we want to do is to see if certain supply chain structures are more conducive for collective behaviour between suppliers (as these may be influenced by their peers and other suppliers) to disclose more about their environmental and social performances.
Ignasi Martí: What are your main findings?
Annachiara Longoni: Our main finding is that suppliers and sub-suppliers behave collectively and we found that suppliers in different supply chains have different behaviours in terms of environmental and social information disclosure. And this depends on the density of the interactions that take place in the supply chain. So what is really important for environmental and social information disclosure by suppliers is to foster interactions between them. The members of a network influence each other and they stimulate each other to disclose environmental and social information.
Ignasi Martí: Okay, thanks for that explanation of the main findings of your study. Now could you tell us more about how you did the study? What methodology did you use in your research?
Annachiara Longoni: As this is our first study in relation to supply chain transparency, we decided to use a quantitative methodology and test the links between the supply chain structure and suppliers – and environmental and social information disclosure. It’s very difficult to find data about supply chains and suppliers. So we used secondary data because it is more available, and specifically, there is a new source of information made available by Bloomberg.
We used the Bloomberg supply chain database (Bloomberg SPLC) to identify the relationships between the suppliers and sub-suppliers and focal companies. And we also used the Bloomberg ESG (Environmental, social and governance) database to measure environmental and social disclosure, as this database includes information about the performances of companies regarding environmental and social sustainability.
Ignasi Martí: And now just to conclude: what could be the future avenues for this research?
Annachiara Longoni: Thanks for this question. I think it is very important now for our research to take another step, to better understand what are the mechanisms that facilitate the creation of a dense network of interactions between suppliers and sub-suppliers to stimulate environmental and social disclosure. The next step is to investigate from a qualitative perspective specific supply chains and identify mechanisms to stimulate this dense network of interactions – such as meta organisations and multi-stakeholder organisations that connect buyers, suppliers and sub-suppliers to stakeholders.
Ignasi Martí: Annachiara, thank you very much for sharing all this today with us. It’s been a pleasure and we are eager to know more about your research on how this evolves in the coming months and years. Thank you very much.
Annachiara Longoni: Thanks again for the opportunity to share something about my research and we will keep in touch with news and updates.
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