Debajyoti Biswas, ESSEC Business School, Hamed Jalali, NEOMA Business School, Amir H. Ansaripoor, Curtin Business School, and Pietro De Giovanni, Luiss University, examine whether the benefits of traceability are worth the costs to sustainability.
Traceability vs Sustainability: Sophie’s Choice? by CoBS Editor Pavan Jambai. Related research: Traceability vs. sustainability in supply chains: The implications of Blockchain; Debajyoti Biswas, Hamed Jalali, Amir H. Ansaripoor, Pietro De Giovanni; European Journal of Operational Research, Elsevier.
From a time when produce was fresh, local and bio by default to now where all these have become labels for products, supply chain management has undergone a massive transformation. Consumers are increasingly demanding transparency in the supply chain. This demand stems from both the desire to consume quality products and the skepticism of the supply chain itself.
In today’s supply chain management, traceability is a crucial factor. It matches consumers’ expectations in terms of goods safety, responsibility, and quality with the supply chain members’ actions and processes. But there is also a cost, both literally and metaphorically, in implementing traceability in the supply chain.
Blockchain: Flagbearer of Traceability
Blockchain is the go-to means to achieving traceability in the current supply chain market. Quite literally, Blockchain refers to a chain of interconnected blocks each with an individual “cryptographic fingerprint”. Since the data is decentralized and the individual blocks are interconnected, Blockchain mitigates the problems of fake data, user privacy, and data security.
Numerous companies have already implemented Blockchain in an effort to increase transparency and traceability in their supply chain. Although it is most commonly used by industries that are prone to counterfeiting, such as luxury goods and wines, and by the food industry, other industries such as retail, manufacturing, etc. are also recent adopters.
Blockchain is not without its problems. There are two main costs of implementing Blockchain: the literal monetary cost and the metaphorical environmental cost. While Blockchain reduces some costs associated with supply chain management, implementing Blockchain by itself is a significant cost. However, the monetary cost is not the major worry for the stakeholders.
Trade-off: Traceability vs Sustainability
The highest cost to consider is the environmental cost of implementing Blockchain itself. The technology consumes a tremendous amount of energy for its functionality – making it a highly contentious issue in current discussions regarding climate change and global warming. Furthermore, it is less energy-efficient than traditional systems resulting in high environmental degradation.
The research results from Debajyoti Biswas and his colleagues are a showcase of the business reality the world has been facing for the past decades. It should come as no surprise that, in most cases, the bottom line of the issue is the profit and loss statement of the company. However, not all companies have this liberty.
The onus of the cost as well as the environmental impact lies disproportionately on the retailer who is in direct contact with his customers. The suppliers, meanwhile, do not face difficult decisions except when there is a particularly high amount of environmental damage directly associated with them.
This imbalance affects the implementation of Blockchain technology by the retailer. While it might be wise to assume that retailers will be inclined to implement Blockchain when there is a high level of consumer distrust of the company, this research proves otherwise. When the level of distrust is high, it is difficult to recover from that even with the implementation of Blockchain.
Greener Technology for a Greener World
There is no doubt that Blockchain is a promising and effective technology in operations management. It would be wonderful if there was no need for such a technology with no information asymmetry between companies and consumers. Since we live in a less-than-perfect reality, it is to our benefit to have these measures in place to ensure our well-being.
Current Blockchain technology, however, appears to be technologically handicapped, especially in its ability to consume and use energy efficiently. While it is beyond doubt that Blockchain developers are constantly working to find greener solutions, time is not our immediate ally in this issue.
Having the technology, even a greener one, at hand is not enough. The imbalance of power between various stakeholders must also be addressed for technology to be implemented seamlessly throughout the supply chain. As the saying goes, ‘Alone we can do so little; together we can do so much’.
- Link up with Debajyoti Biswas, Hamed Jalali and Pietro De Giovanni on LinkedIn
- Read a related article: Designing solutions for resilient raw materials supply
- Discover ESSEC Business School and apply for the ESSEC MSc in Sustainability Transformation
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