logo

Wake up daily to our latest coverage of business done better, directly in your inbox.

logo

Get your weekly dose of analysis on rising corporate activism.

logo

The best of solutions journalism in the sustainability space, published monthly.

Select Newsletter

By signing up you agree to our privacy policy. You can opt out anytime.

Three Jevons Paradoxes for the Future of Sustainable Supply Chain Management — and One Way to Resolve Them All

By CSRWire Blogs
CorrellPost022315.jpg

Submitted by David Correll

This is the most recent article in our series on Supply Chain Sustainability. For more articles, go to
http://www.csrwire.com/blog/series/75-supply-chain-sustainability-special-focus/posts

In Economics, a “Jevons Paradox” has two parts. First, improvements in a technology (say, an engine) cause that technology to use resources (say, fuel) more efficiently. This seems all well and good, until you meet the second part.  In the second part of a classic Jevons Paradox, people consume more of the resource as a result of the new, more efficient technology — because, hey, why not right?  Now we can afford it! Therein lies the paradox: in attempting to conserve resources, sometimes our technological advances end up making them less costly, and thereby increasing their consumption by the general public – the exact opposite of the intended effect. 19th century Economist William Stanley Jevons first described this phenomenon in his observations of coal consumption in England following the introduction of the steam engine.

A Jevons Paradox is a funny —and maddening— bit of social science that has played out again and again throughout world history. Now, it is one that portends real changes for sustainable supply chain management in 2015 and beyond. Technological advancements are conspiring to force business sustainability and supply chain management thinkers to meaningfully ask ourselves an important question: why did we start pursuing business sustainability in the first place? After all, when oil and gas are cheap; as developments in advanced and additive manufacturing erode the sustainability spillover effect of localism; and as we look ahead to re-imagining our supply chains in the emerging and asset-less, “sharing economy”: what happens to the purported link between “going green and saving green” that has undergirded business sustainability thinking since at least the 1980s?  In a future with less linkage between sustainability and profitability, what is the enduring business rationale for supply chain sustainability? 

Short-Term (2015):  The Supply Chain Sustainability Paradox of Falling Fuel Prices

That the world price of oil and thereby associated commodities like gasoline and natural gas has fallen precipitously in 2015 is old news. But, that many analysts believe that, for the short-term anyway, ~$50/barrel crude oil, ~$2/gallon  gasoline, and ~$3/MMBtu natural gas is the new American normal is extraordinary news that threatens to topple one of first pillars holding up the conventional business case for sustainability —that ‘going green saves green’. A founding principle of business sustainability efforts has always been that burning less fossil fuels conserved a scarce resource and mitigated CO2 emissions, while also reducing expenses on hydrocarbon inputs that were, heretofore, expected to become ever more costly.  But in 2015, when fuel prices are low and are expected to stay there in the short-term, why continue to invest in supply chain re-design to conserve fuel? This change in thinking is already underway as, for example, auto dealerships report shuffling their lot inventories away from once popular hybrids and back again to meet recently renewed demand for heavier and sportier vehicles.

Medium-Term (2015 – 2020): The Supply Chain Sustainability Paradox of Advanced and Additive Manufacturing Technologies

Another related, but distinct pillar supporting the classical business case for sustainable supply chain management relates to proximity and localism. As socially-aware personal and commercial consumers, we have been endlessly encouraged to shop locally, source locally, and in some cases even “on-shore” or “re-shore” our production facilities closer to consumers in the name of community and stakeholder engagement. Once upon a time, of course, this also made its own kind of business sense too — especially when it once took weeks to ship product (often times from gigantic Asian production facilities) to the largest consumer markets (mostly in the Western world). Putting production facilities closer to consumers once cut lead times for prototyping and for mass production, availing early adopters of more agile, on-trend supply chains that carried less inventory on their books and in their warehouses. This confluence was, again, part and parcel of the old business case for supply chain sustainability. But, it too is a pillar that is crumbling under technological change.

What happens in a manufacturing future where there is little social fabric left to invest in and negligible lead time and inventory left for managers to try to minimize? Advanced and additive manufacturing (aka 3D printing) are growing by leaps and bounds, and are poised to make this scenario plausible in the medium-term. Indeed, recent analysis suggests that over 320,00 industrial robots were sold in the last two years alone that are capable of rendering both “blue collar”, and even many “white collar”, jobs extinct from future supply chain and production operations. Moreover, consider additive manufacturing, wherein all of the stocking, sorting, cutting, treating and handling of a traditional manufacturing assembly line can be replaced by a single robotic “extruder”, which is capable of accomplishing all of these once laborious tasks by simply layering thin lines of goo. (In case you missed it, a last bastion of necessary localism — the neighborhood take-out joint — was recently stormed by additive manufacturing, when NASA scientists commissioned a way to 3D print a pizza to space.)  Moving forward, advanced and additive manufacturing are ready to offer all of the old supply chain agility and operational benefits of localism, but with only an insignificant fraction of the old requisite investment in a company’s surrounding local community. Looking ahead, why then would companies invest in improving their surrounding communities, when those communities increasingly stand to become just another place to plug in their robots?

Long-Term (2015 and Beyond): The Sustainability Paradox of the Sharing Economy

Looking even further out, the sustainability-profitability link stretches even thinner. Consider that right now, you can own a cab company without ever owning a vehicle (Uber, Lyft); a global hospitality network without ever owning a bed (AirBnb); and a professional workforce without ever owning a desk (Liquidspace). Given that a huge portion of a firm’s environmental footprint is embodied in its physical buildings and vehicles, why would any sharing economy company carry this part of their environmental footprint on their own books? Couldn’t a company just shove that burden overboard into the vast ocean of networked contractors that brands like Uber and AirBnB rent their physical resources from? Good things about these companies and the sharing economy idea aside (and there are many good things), all of this service to customers without any physical footprint attached to the brand name that the customer sees makes the brand itself a chimera, impossible to ever physically touch, and thereby unaccountable for an environmental footprint that it cannot leave. In a sharing economy, the brand name stands to become so divorced from the physical resources and tangible assets that it consumes, that the old means by which sustainable supply chain management practices were once thought to generate consumer good could weaken to impractical irrelevance. A third pillar crumbles.

Technological advancements in a Jevons paradox, like the classic business case for sustainability, start out with good intentions. But, it is the second part that gets you. In 2015 and beyond, we will all be made to realize that it is the second part that is getting us too. In building a business case for supply chain sustainability that rests on conveniently profit-maximizing pillars, we have, in effect, set up our own rationale for obsolescence. Inevitably, technology marches forward, potentially making supply chain sustainability so easy for companies to affect, that future managers might just take it for granted – a classic Jevons paradox.

Resolving the Paradoxes Confronting Sustainable Supply Chain Management

It is my sincere hope that while reading these dark futurist musings, some internal voice nagged at you saying something like “but XYZ company does business sustainability because it’s the right thing to do!’, or, “hold on, buddy, my company actually cares about the natural environment and the communities that we live and work in!..”. This little voice is important, and handing it the microphone is the single best way by which we can resolve each of the three paradoxes above. Somewhere in the DNA of many companies is the founders’ vision, perhaps differently articulated, but of their business as an ethical act — of their business as an organization that in its own way once set forth to contribute a net positive to its time and place in the world. Because technological changes can, and will, continue to topple the ways that we do things — but never fundamentally why we choose to do the things that we do — I suggest that, going forward, the new business rationale for supply chain sustainability ought to rest on basic personal ethics, and no longer on conveniently profit-maximizing pillars. This strikes me as both the simplest way to answer to the question forced by the three technological changes above (why did we start pursing business sustainability in the first place?), and as perhaps the only enduring rationale for resolving these and the many other unknowable technological paradoxes that will face sustainable supply chain managers in the years ahead.

This is the most recent article in our series on Supply Chain Sustainability. For more articles, go to
http://www.csrwire.com/blog/series/75-supply-chain-sustainability-special-focus/posts