Mitigating sustainability risk in supplier populations: an agent-based simulation study

Abstract

PurposeMany modern firms strive to become sustainable. To this end, they are required to improve not only their own environmental and social performance but also the performance of their suppliers. Building on population ecology theory, we explore how buyers' exposure to supplier sustainability risk and their subsequent risk management strategies at the buyer–supplier dyad level can lead to adherence to sustainability by the supplier populations.Design/methodology/approachWe rely on a bottom-up research design, in which the actions of buyers within buyer–supplier dyads lead to population-wide changes on the supplier side. Specifically, we use experimental data on managing sustainability risk to build an agent-based simulation model and assess the effect of evolutionary processes on the presence of sustainable/unsustainable business practices in the supplier population.FindingsOur findings suggest that buyers' cumulative actions in managing sustainability risk do not necessarily result in effective population-wide improvements (i.e. at a high rate and to a high degree). For example, in high risk impact conditions, the buyer population is usually able to decrease the population level risk in a long run, but they would need both power and resources for quickly achieving such improved outcomes. Importantly, this positive change, in most cases, is due to the fact that the buyer population selects out the suppliers with high probability of misconduct (i.e. decreased supplier population density).Originality/valueDrawing on the organizational population ecology theory, we explore when, to what degree and how quickly the buyers' cumulative efforts can lead to population-wide changes in the level of supplier sustainability risk, as well as the composition and density of supplier population. Methodologically, this paper is one of the first studies which use a combination of experimental data and agent-based modeling to offer more valuable insights on supply networks.

Modern slavery in supply chains: insights through strategic ambiguity

“…Arguably, the duty to report “ … steps the organisation has taken” (UK Government, 2015), as opposed to steps the organisation, has taken with supply chain members and stakeholders, bounds a firm's attention on its processes and risks rather than opportunities for collaborative action to challenge the causes of modern slavery and to generate change. Non-collaborative approaches run the risk of non-compliant suppliers being dropped (Connelly et al , 2011), reducing the diffusion of new practices (Carlos and Lewis, 2018) and creating niche supply markets rather than mainstreaming population-wide changes (Hajmohammad and Shevchenko, 2020).…”

“…Change can be hampered by difficulties in adapting sustainability indicators to fragmented, multi-tier supply chain contexts (Gold et al , 2015). Further, suppliers susceptible to sustainability-related risks can limit the diffusion of change if they are dropped from a firm's supply base rather than being developed (Connelly et al , 2011), creating niche supply markets rather than mainstreaming population-wide changes (Hajmohammad and Shevchenko, 2020). The active engagement of the supply chain is positioned as an important lever for ensuring widespread change in SSSC, yet the extent to which this is reflected in TISC statements is, as yet, unknown.…”

“…The wider sustainability research reveals stakeholders as an additional dynamic, as they can create pressure that encourages firms to move towards sustainable supply chain practice (Foerstl et al , 2010; Gualandris and Kalchschmidt, 2014; Hajmohammad and Shevchenko, 2020). Responding to stakeholder pressure can avoid reputational damage (Hofmann et al , 2014; Roehrich et al , 2014).…”

The hidden side of sustainable operations and supply chain management: unanticipated outcomes, trade-offs and tensions

“…Anticipated negative outcomes have been extensively addressed in the supply chain risk management literature, although attempts to incorporate sustainability-related supply chain risks have been sparse (Foerstl et al, 2010;Hofmann et al, 2014;Miemczyk and Luzzini, 2019;Hajmohammad and Shevchenko, 2020). One exception is presented by Giannakis and Papadopoulos (2016), who identified unwanted, yet anticipated consequences of sustainable management practices.…”

Addressing supplier sustainability misconducts: response strategies to nonmarket stakeholder contentions

“…Future research should investigate whether targeting multiple buying firms increases the chances of successful change in supplier practices or leads to shifting responsibilities among those buyers. In particular, while we found no evidence of target firms' reputation affecting their risk response strategy, future research can rely on empirically grounded simulations (Hajmohammad and Shevchenko, 2020) to investigate whether it plays a role when multiple firms with varying levels of reputation find themselves in contention with nonmarket stakeholders because of a shared responsibility for a supplier misconduct.…”