Categories
eCommerce News Tech & Startup News

Sustainability Suffered Unintended Consequences Due to Complex Global Supply Chain

Because buyers now expect answers from suppliers instantaneously in response to changes in business conditions, businesses have been left with little time and under-equipped to consider the unintended consequences on environmental and social sustainability

By Albert Hu, PhD

B2B commerce relies on a complex system, a global supply “web” or network to allow the fastest delivery of goods and service. This instantaneous, adaptable supply network, like many other complex systems, can lead to unintended consequences — the butterfly effect, if you will. One such consequence is the negative impact on global environmental and social sustainability.

In a recent MIT Review article, the author detailed how today’s global supply chain practice had exacerbated, not eliminated, the problem of starvation in certain human societies. Starvation is simply morally unacceptable in this age of abundance and great advancement of food and agriculture technology. Another example of unintended social unsustainability is cobalt mining, which is used in today’s fast-growing electric vehicle industry for environmental sustainability. If we continue some of the current mining practices for cobalt, we may face social unsustainability due to the health risks involved and controversy surrounding possible labor issues, etc.

Today’s complex global supply network with the need to respond to dynamic demands pose a burden on companies trying to fulfill their corporate social responsibilities (CSR) goals, including and especially in environmental and social sustainability. Because buyers now expect answers from suppliers instantaneously in response to changes in business conditions, businesses have been left with little time and under-equipped to consider the unintended consequences on environmental and social sustainability.

Centrality of Sustainability in Today’s Zeitgeist

While B2B companies are still struggling with lingering global logistics issues after the unprecedented pandemic, the sustainability challenges continue from the edge of the attention span to that of center stage in today’s global zeitgeist.

The first Nobel Prize Summit, which focused on “Our Planet, Our Future” was held in April 2021. It was sponsored by the Nobel Committee, the US National Academy of Sciences, international political governing agencies and organizations, and major corporations. Its impact on the 21st century zeitgeist has been reinforcing and permeating through the global media and capital markets. This urgent call for action entered the global political mainstream faster than many corporate decision makers had anticipated.

Indeed, just two month later in June 2021, at the end of the 2021 G7 Summit, the developed nations issued the Carbis Bay Communique. This Communique emphasized G7 member nations’ shared leadership responsibility on sustainability, fair trade, the push against inequality, and focus on the developing world. It also emphasizes protecting this planet for future generations. Never has the G7 Summit issued a social democratic, center-left, message in such unanimity, as commented by Financial Times.

As global sea levels rise, urban planning realities become major challenges. The increasing difficulty for families to reach and maintain a middle class standard of living, in both developing and developed nations, will continue to radicalize some fractions of societies. The environmental and social sustainability challenges will therefore continue to occupy the center stage of zeitgeist and media attention. This social democratic tilt will not be whimsical or cyclical; this tilt represents the G7 and the United Nations addressing the worsening sustainability reality in the environmental and social fronts. B2B companies need to—and have to—follow suit. Unsustainable practices are no longer an acceptable option.

Challenges to B2B Corporations’ Reputation and Operations

This G7 Summit’s proclamation is the harbinger of ever-increasing attention and regulation on corporate social responsibilities, including both environmental and social sustainability.

B2B companies’ images and operations can be suddenly thrown into very unfavorable situations and viewed in a negative light, given the complexity of global commerce — which corporations often have no control over. We are now in a heightened uncertainty, not certainty, due to the complexification of global logistics.

Combined with this fact and the centrality of sustainability in today’s real-time media reporting and government regulations, B2B companies need to commit and be proactive to take sustainability measures in order to mitigate the uncertainty and the significant risk.

Regarding sustainability challenges, the best short and long term strategies for corporations today (in a game theory-compatible manner), is to integrate global sustainability considerations into day-to-day operations and long-term corporate strategic planning. We will explain why this approach is the best game theory strategy later.

Commitments and Actions by B2B Corporations

The United Nations published and organized The 17 Sustainability Goals for sustainable development on environmental and social fronts: zero hunger, clean water and sanitation, clean energy, sustainable economy, biodiversity, climate actions, to list a few. After decades of advocacy and inter- and supra-government coordination, all B2B corporations will be impacted by global regulations and policies to align with:

● Goal 12 for responsible production and consumption
● Goal 11 for sustainable transportation and urban infrastructure
● Goal 16 for strong institutions for peace and justice
● Goal 5 for gender equality
● And the other urgent calls for action as described in The 17 Goals

A corporate culture of ignorance or willful avoidance of sustainability goals will lead to the use of suppliers or transportation providers who also lack awareness. Companies who do not comply or attempt positive change may face negative publicity and legal consequences when public opinions and government regulations are stepping up sustainability measures. This willful ignorance will then increase your companies’ operation and reputation risk. Unsustainable practices will lead to both moral and legal hazards in today’s heightened public awareness and tightened regulations in all parts of the world.

It is in any B2B corporations’ own interests to understand, commit, and act accordingly to help achieve these sustainability goals.

Sustainability Practice Contributes to Corporate Growth – Short Term and Long Term

B2B companies practicing sustainability and advertising their efforts will attract sustainability-conscious business buyers and sellers, as they see less risk of reputation and legal complications when doing business with sustainable firms.

Increasing an enterprise’s sustainability efforts doesn’t necessarily mean higher costs; instead, these efforts can come with lower cost and less risk, if B2B professionals are willing to explore. The recent malware extortion of a US gas pipeline company lay bare the fragility and danger of the sole reliance on fossil fuel mid-mile trucks and last-mile cars. What used to be viewed as “alternative,” such as electric cars and drone deliveries, are quickly becoming mainstream, no longer the alternative. Exploring electric last-mile vehicles and mid-mile trucks, at today’s competitive prices, is a wise and prudent, lower cost, and risk-mitigation homework given the pipeline extortion scenario. This in the meantime helps companies to fulfill corporate social responsibility (CSR) to their neighbors and global communities.

Sustainability and Long-Term Global Prosperity

Global sustainability practice is the foundation for sustained global prosperity in the decades to come. The more prosperous the global economy, the more prosperous B2B commerce will inherently be; this in turn yields benefits to all B2B stakeholders.

Joseph Stiglitz is a Nobel economist studying the impact of asymmetric information using the Game Theory framework. After all the study, knowing the advantages associated with superior information, he concluded that, “The only sustainable (global) prosperity is a shared prosperity.” The world has come around to his view. The best game, long term and global, is to make all societies and companies, big or small, sustainable and therefore prosperous.

As B2B professionals, we have to look and plan for both short and long term time horizons. Let us take one step back; take a global view and plan for the longest time horizon — planning for our kids and grandchildren living on this planet. Let us engage our counterparts, be they our buyers or suppliers, to also consider the importance of global sustainability for future generations. These collaborative efforts will allow you, your company, and your counterparts to experience the alignment and enjoy the ultimate benefits.

We need to buy and sell, as B2B companies, for global sustainability.

About the author

Dr. Hu is a co-founder of Bizconnect and a pioneer in the deployment of Machine Learning (ML) and Artificial Intelligence (AI). His Ph.D. thesis on the application of the Bayesian algorithm (now called ML) is ranked as the most cited in its field by Google Scholar. He was a tenured track faculty in both electrical and mechanical engineering departments before he received venture capital financing to be the founder, CEO, and board director of his semiconductor firm in Silicon Valley. He has served as president, advisor, and board member in multiple technology firms.

He is currently a columnist on AI and ML for an international robotics review. He advises on global technology markets. He now leads an AI and machine vision robotics education program whose participants include a 2020 Best California non-profits and national laboratories.

Albert received his Ph.D. and MS degrees from MIT. He is a graduate of Stanford Business School’s Executive Program for Growing Companies (EPGC) and Executive Program on Negotiation and Influence Strategies.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *