Supply chains, or social chains?

By Dr. Alicia Martinez de Yuso, ZLC Project Manager.

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Back in January 2020, we reported on ZLC’s participation in the EU Horizon funded NextNet project, which aimed to identify gaps and deficiencies in education, training and research around supply chains and logistics.

NextNet correctly identified some of the trends and developments that were going to be significant in shaping the supply chains of the future – for example, growing concerns that globalisation and off-shoring of sourcing to distant regions in the Far East and elsewhere may have gone too far, and that greater emphasis needed to be place on creating supply chains that contributed to the solution, rather than the problem, of climate change and other environmental issues. Almost inevitably, NetNext, although aware of environmental and social issues, was somewhat focused on the economics of supply chains.

But the world has changed, quite dramatically, since that work – the impact of the Covid pandemic, most obviously, but also the Russo-Ukrainian war, and other geopolitical issues, have meant that ‘supply chain’ is now correctly seen not as a rather boring business function, but as something that directly impacts real people – as employees, as consumers, and as citizens of societies that are in many ways shaped by how supply chains work: or as we have seen recently, sometimes don’t work.

So in October a new three year Horizon Europe-funded project, ReSChape, has been launched, again looking at future and innovative supply chain structures, but with a much greater focus on the social implications. The project is being coordinated by our friends at Consiglio Nazionale delle Ricerche in Italy, and ZLC is participating in a number of areas, as well as leading communication and dissemination.

The ReSChape objectives are to analyse social (as well as economic and environmental) changes and disruptions impacting on supply chains at levels ranging from the relationships between countries to the impact on employment. We aim to propose new, innovative (or perhaps rediscovered) supply chain models that will allow integrated and global strategies but will at the same time reflect the need to be resource-efficient, closed-loop, and humanitarian, and help improve EU resilience and sustainability in a world which does not necessarily give Europe a free pass.

We particularly want to look at how digitalisation can be used, not to impose from the top, but to establish new paths for social inclusion, in both urban and rural areas. We will be looking in detail at a number of important industry sectors, from fashion to machine tools, and hope to develop innovative tools to assess trade patterns and define mechanisms to evaluate the effects of disruptions, short and long term.

Crucially, we aren’t just looking at the P&L accounts of businesses or sectors: we want to analyse the effects on income inequalities, ‘decent’ work environments, social cohesion, and social disparities (including gender, race and other factors). A significant element, building on the Net Next findings, will be around skills in logistics: those that are in short supply or little-understood, and by implication those that we are training for but may no longer be particularly relevant.

The aim is to recommend innovative policies for future global value chains that can inform EU, national, and sectoral policy-making and will contribute to shaping fair, inclusive and sustainable trade, value, and supply chains – although of course they also have to be effective for manufacturing and production!

For ZLC, and indeed our partners, this emphasis on social, rather than purely economic, factors and effects, will be somewhat novel. We expect to be particularly involved in analysing the potential impact of new supply chain models on social indicators; identifying those, and creating models to evaluate impacts and the ‘social’ value created (or perhaps destroyed) along value chains. Outputs should include self-assessment tools for companies to use, as well as recommendations for companies, politicians, and other parties. The implication, inevitably and rightly, is that citizens should have more of an (informed) say in how the supply chains that serve them actually operate.

As this is work centred around society, we will have to take input not just from economics and academia. We will have to look at, for example, the newspapers, to see what the real impact of outsourcing (local or global) is, both objectively and subjectively. What are the impacts on social sustainability, for example if in an area dependent on logistics and distribution activities, many employees are on a short-term or ‘gig economy’ basis? Does the insecurity outweigh a possibly higher hourly wage-rate? Does that vary by gender or age? Does it affect decisions on buying or renting accommodation? Does what the community believes about the benefits and disbenefits of a supply chain model actually correspond with ‘reality’? And if not, why not?

We will need to create KPIs for these sorts of issues, some of which will undoubtedly be novel, and talk them through with, for example, experts from ‘good’ outsourcing industries to validate them – although how to identify ‘good’ in this context is itself an issue. But, can we evaluate the social impacts of outsourcing – can we make recommendations that will make things better for employees and the communities in which they live, without of course making the business unviable!

Ultimately, the aim of ReSChape is to create a public platform around our findings, which will display the KPIs, the social impacts, and developed scenarios that will help companies, politicians or regulators to understand the likely effects of different models. Our output of policy briefs, specific policy recommendations, and worked-through scenarios, may be quite controversial – but then, it should be!

For more information, contact Alicia Martínez de Yuso at amartinez@zlc.edu.es.