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Driving digital sustainability in global value chains: Multinational enterprises as chief orchestrators

Journal: Academy of Management Perspectives

Date: 2024

Author: Claire Kilpatrick, Kieran M. Conroy

Abstract:
Digital sustainability has the potential to transform how multinational enterprises (MNEs) capture, create and distribute value in their global value chains (GVCs). Yet, a real problem persists in understanding how MNEs drive digital sustainability across their GVCs. This is a complex and evolving process that requires MNEs to coordinate with and collaborate across a multiplicity of globally dispersed partners. Adopting an orchestration perspective, our paper constructs a novel take on digital sustainability in several ways. First, we reimagine the role of MNEs as ‘chief orchestrators’ in GVCs, driving digital sustainability through orchestration activities underpinning coordination and collaboration, which in turn generates opportunities for value capture and creation along the GVC. Second, we disentangle the impact of MNE-driven digital sustainability, unpacking the undesired consequences for GVC partners relating to dependency, power dynamics, transparency and supplier squeeze or exclusion. Our insights temper claims about the transformative potential of digital sustainability, challenging scholars, practitioners and policymakers to reflect on and respond to the double-edged effects of MNE-driven digital sustainability in GVCs. Our arguments are demonstrated through three illustrative cases from firms across industries (agriculture, energy and fast-moving consumer goods). We identify implications for management practice and policy and offer guideposts for future research.

Link: Google Scholar

Background and Context

Digital Sustainability Concept

Digital sustainability refers to an organization's ability to advance UN Sustainable Development Goals through effective deployment of digital technologies and solutions.

MNEs as Orchestrators

Multinational enterprises face complex challenges in coordinating digital sustainability across globally dispersed value chains with multiple partners having conflicting agendas.

Research Approach

This qualitative study uses an orchestration perspective and examines three illustrative cases from agriculture (Cargill), energy (Shell), and fast-moving consumer goods (Unilever).

MNEs as Chief Orchestrators Driving Digital Sustainability in Global Value Chains

MNE Chief Orchestrator Suppliers Distributors Tech Partners Customers Digital Sustainability
  • MNEs act as chief orchestrators in global value chains rather than simply "lead firms" focused on control.
  • Orchestration requires MNEs to coordinate with multiple partners across geographically dispersed global value chains.
  • Digital sustainability initiatives must span the entire ecosystem of suppliers, distributors, technology partners, and customers.

Coordination and Collaboration Drive Value Creation and Capture in Digital Sustainability

Coordination Monitoring Compliance Risk Reduction Value Capture Collaboration Knowledge Sharing Innovation Joint Problem Solving Value Creation Digital Sustainability
  • Coordination activities enable MNEs to monitor sustainability practices and capture value through risk reduction.
  • Collaboration activities facilitate knowledge sharing and innovation, creating value across global value chains.
  • Digital sustainability requires balanced orchestration of both coordination and collaboration to be effective.

Digital Technologies Enable Value Creation and Capture Throughout Global Value Chains

IoT AI Blockchain Digital Twin Knowledge Mobilization Monitor Sustainability Enhance Innovation
  • IoT technologies enable real-time monitoring of sustainability metrics across the global value chain.
  • AI and machine learning facilitate accurate demand forecasting, reduced wastage, and optimized resource use.
  • Blockchain and digital twins enhance transparency, trust, and collaboration between global value chain partners.

The Double-Edged Impact of Digital Sustainability in Global Value Chains

Benefits for MNEs Enhanced Value Creation Improved Monitoring Knowledge Integration Competitive Advantage Consequences for Partners Dependency Power Imbalances Transparency Issues Supplier Exclusion
  • Digital sustainability creates clear value for MNEs but may have unintended negative impacts on GVC partners.
  • Digital asymmetries deepen dependency imbalances, especially for smaller partners with limited digital capabilities.
  • Less digitally capable partners risk exclusion from global value chains, threatening economic sustainability efforts.

Digital Sustainability Applications Across Agriculture, Energy, and FMCG Industries

Agriculture (Cargill) Satellite Monitoring AI for Crop Health Blockchain Traceability Energy (Shell) AI Emissions Reduction Digital Twin Technology IoT Equipment Monitoring FMCG (Unilever) Supply Chain Tracking AI in R&D Deforestation Monitoring Balancing Value Capture with Partner Impact
  • Cargill uses AI and satellite monitoring to verify sustainable farming practices and reduce deforestation.
  • Shell drives digital sustainability through AI optimization that significantly reduces emissions in LNG facilities.
  • Unilever employs Google Cloud and blockchain to monitor supply chains for improved sustainability transparency.

Contribution and Implications

  • MNEs should offer training and financial support to help smaller GVC partners adopt digital sustainability technologies.
  • Smaller GVC partners need to understand data value and ensure fair compensation for data contributed.
  • Policymakers should develop regulations enabling democratized value sharing and supporting firms in digital sustainability transition.
  • Digital sustainability represents a double-edged sword that requires balancing MNE benefits with potential negative impacts on partners.
  • Effective orchestration requires balancing coordination and collaboration to distribute value across the global value chain.

Data Sources

  • Visualization 1 is based on the conceptual framework presented in pages 1-4 of the article.
  • Visualization 2 draws from the orchestration perspective outlined on pages 4-6 of the article.
  • Visualization 3 is derived from the section on driving digital sustainability through orchestration (pages 5-6).
  • Visualization 4 reflects the undesired consequences framework described on pages 6-7 of the paper.
  • Visualization 5 synthesizes information from all three case studies (Cargill, Shell, Unilever) presented on pages 8-12.