8.6 Key Sustainability Challenges in Value Chains
Learning Objective
5. Identify key sustainability challenges in value chains and recommend solutions.
Consider This: Possible Challenges to Sustainability Initiatives
The following material is adapted from Addressing the Challenges to Sustainable Initiatives in Value Chain Flexibility: Implications for Sustainable Development Goals by Dwivedi, Agrawal, Jha, Gastaldi, Paul, & D’Adamo (2021) under Creative Commons Attribution License 4.0.
The value chain refers to the source of competition to facilitate organizations to maximize and sustain value for their consumers. Value chain flexibility is necessary to build sustainable initiatives in addressing ambiguity.
Thirteen potential challenges to sustainable initiatives in value chain flexibility are identified. Lack of supplier commitment to sustainable products and lack of knowledge toward sustainability in value chains are the challenges that achieved the highest driving power according to an analysis. The challenge ‘inadequate communication among the suppliers in the value chain’ is at the highest level in the analysis.
Table 8.2
Key sustainable challenges in the value chain
| N0 | Challenges |
|---|---|
| 1 | Lack of consumer orientation toward sustainability in value chain |
| 2 | Lack of distribution flexibility in the value chain |
| 3 | Lack of supplier commitment towards sustainable products |
| 4 | Lack of knowledge towards sustainability in value chain |
| 5 | Lack of IT integration in value chain |
| 6 | Insufficient government rules towards sustainable initiatives |
| 7 | Financial constraints towards sustainable initiatives |
| 8 | Capacity constraints in value chain flexibility |
| 9 | Lack of trust in the value chain |
| 10 | Inadequate Information sharing in value chain |
| 11 | Lack of top management commitment towards flexibility in value chain |
| 12 | Lack of manufacturing flexibility in the value chain |
| 13 | Inadequate communication among the suppliers in the value chain |
m-TISM Model Presenting Interrelationships Among the Challenges to Sustainable Initiatives in Value Chain Flexibility
The challenges are distributed into four different categories:
- Autonomous challenges: The identified challenges that include weak driving power and dependence are categorized under the first quadrant. In this study, there are no autonomous challenges from our identified potential challenges.
- Dependent challenges: Identified challenges that have weak guidance but strong dependence are categorized under the second quadrant. From the obtained list, challenges such as ‘lack of top management commitment toward flexibility in value chain (B11)’, ‘lack of manufacturing flexibility in the value chain (B12) and ‘Inadequate communication among the suppliers in the value chain (B13)’ are posed as dependent challenges because they represent strong dependence but relatively weak driving power.
- Linkage challenges: The identified challenges that have high dependence and high driving power are categorized under the third quadrant. In this study, linkage challenges among our identified potential challenges are ‘insufficient government rules toward sustainable initiatives (B6)’, ‘financial constraints toward sustainable initiatives (B7)’, ‘capacity constraints in value chain flexibility (B8)’, ‘lack of trust in the value chain (B9)’ and ‘inadequate information sharing in value chain (B10).
- Independent challenges: Identified challenges that have strong driving power but weak dependence are categorized under the fourth quadrant. In this study, challenges such as ‘lack of consumer orientation toward sustainability in value chain (B1)’, ‘lack of distribution flexibility in the value chain (B2)’, ‘lack of supplier commitment toward sustainable products (B3)’, ‘lack of knowledge toward sustainability in value chain (B4)’, and ‘lack of IT integration in value chain (B5)’ are classified as independent challenges because they reflect strong driving power but weak dependence. The construct for the dependence and driving power analysis.
(Dwivedi et al.,2021) CC-BY-4.0
Recommended Solutions
The following material adapted from Addressing the Challenges to Sustainable Initiatives in Value Chain Flexibility: Implications for Sustainable Development Goals by Dwivedi, Agrawal, Jha, Gastaldi, Paul, & D’Adamo (2021) under a Creative Commons Attribution License 4.0.
Analyzing a business perspective, some authors show that risk management culture, supply chain flexibility, and internal integration are able to increase the financial performance of firms through resilience efforts. In addition, internal and external sources of change require the adoption of a dynamic model in which flexibility can play a key role. Flexibility is the ability of a company to respond to changes in the environment, technology, organization, and strategy both quickly and at a low cost. Thus, it consists of initiatives geared toward improving efficiency and organizational performance. In particular, the optimization process is oriented toward assessing the best economic solution. The relationship between SDGs and flexibility requires that this optimization also takes into account the social and environmental side. The interaction between sustainable models and Industry 4.0, which aims to foster the automation and digitization of production systems, leads companies to rethink their strategies by identifying new business models. The current amount of funding and investment related to the SDGs is considered to be less than what is needed, and this appears to be particularly true in developing countries.
A conceptual framework emphasizes that sustainable supply chain flexibility increases in correspondence with managers’ environmental attitudes and when managers’ cognitive style is intuitive. The key findings of this study emphasize that two challenges out of all are the ones that can achieve the highest driving power: lack of supplier commitment toward sustainable products and lack of knowledge toward sustainability in the value chain. In fact, sustainable initiatives require a change not only in the way of doing business but also in the way of managing the public good. Climate change is objective evidence, and initiatives aimed at developing new economic models and strategies based on the green economy, the circular economy, and the bioeconomy represent a challenge that cannot be ignored by anyone, especially by governments. Consequently, in the presence of insufficient government rules toward sustainable initiatives, there is a strong risk of penalizing not only the present development of an area but also its future .
Sustainable optimization is based on the principle of proximity with supply chains that should be shortened to reduce the environmental impact of infrastructures. However, the balance between supply and demand with economic profit may be preferred. It is difficult to change this principle, which is the basis of doing business. However, it is necessary to communicate the advantages associated with the use of natural resources, of working in conditions of minimum risk to the health of citizens, of no exploitation of people. In fact, where the organization and the worker have the same objective, the benefits translate directly into the well-being of the company and the ability to generate income for the entire community. Inadequate communication among the suppliers in the value chain deriving by information asymmetries would lead to a loss of value for all the shareholders.
There is a gap between attitude and behaviour, as people struggle to transform their sustainability ideas and propensities into purchasing decisions. Often financial constraints toward sustainable initiatives are a barrier that does not allow to reach such development goals. A policy of subsidies, which are granted according to the actual level of sustainability associated with actions and practices in which the environmental benefit is quantified, must be flanked by a policy of taxation on what pollutes and on what causes serious damage to human health. So green finance would appear to be decisive support, as would a significant increase in the cost of CO2 compared to current values (in recent years we have gone from 20 €/tonne to 40 €/tonne).
Businesses that incorporate sustainability principles into their strategies and practices can be competitive in the local market by fostering the development of a local supply chain. This process includes the creation of smart networks in which companies share their resources in order to be competitive in a global market. The results show that inadequate communication among the suppliers in the value chain has among the lowest driving power. In addition, governments using public money to encourage the use of resources with a high environmental impact would risk favouring investments with only short-term effects, since in all sectors demand is very green and therefore supply should be able to meet it.
(Dwivedi et all.,2021) CC-BY-4.0
Check Your Understanding
Identify key sustainability challenges in value chains and recommend solutions.
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Overall Activity Feedback
It is important to understand key sustainability challenges in value chains and recommend solutions. Also, it is necessary to communicate the advantages associated with the use of natural resources, of working in conditions of minimum risk to the health of citizens, of no exploitation of people. In fact, where the organization and the worker have the same objective, the benefits translate directly into the well-being of the company and the ability to generate income for the entire community. Inadequate communication among the suppliers in the value chain deriving by information asymmetries would lead to a loss of value for all the shareholders. Two challenges out of all are the ones that can achieve the highest driving power: lack of supplier commitment toward sustainable products and lack of knowledge toward sustainability in the value chain. In fact, sustainable initiatives require a change not only in the way of doing business but also in the way of managing the public good. Climate change is objective evidence, and initiatives aimed at developing new economic models and strategies based on the green economy, the circular economy, and the bioeconomy represent a challenge that cannot be ignored by anyone, especially by governments.
