00:00:07 Introduction to the topic and Valentina Carbone’s background in supply chain management and sustainability.
00:01:19 Rising sustainability attention in supply chains.
00:02:26 Companies optimizing for efficiency or environment.
00:03:40 Sustainability of current supply chains questioned.
00:06:38 Harmful practices and complex technocentric solutions.
00:08:02 Global intelligence need; Israel’s water tech case.
00:09:57 Tech’s impact on large investments, environment.
00:10:57 Public discourse on climate change momentum.
00:12:31 Collapseology concept’s impact on climate action.
00:14:08 Plastic pollution in oceans; shift focus.
00:16:05 Environmental symptoms guide decisions, actions.
00:17:45 Individuals, companies’ roles in environmental change.
00:19:16 Companies must foster natural environmental sustainability.
00:21:10 Predicting next generation’s sustainability approach.
00:23:43 Tech’s role in environmental sustainability.
Summary
Host Kieran Chandler led a conversation on supply chain sustainability with Valentina Carbone from ESCP Europe and Joannes Vermorel of Lokad. They discussed the role of efficiency in supply chains, the potential for unintended consequences in sustainability efforts, and the importance of considering broader impacts. Carbone highlighted the need for a systemic approach, shifting from weak to strong sustainability, encompassing environmental, social, and economic aspects. Vermorel stressed the importance of natural behavior alignment in system design and the constructive role of “corporate greed” in driving efficiency. Both expressed optimism about the future, seeing increased awareness and movement towards sustainability.
Extended Summary
Kieran Chandler, the host, initiated a discussion with Valentina Carbone, a professor from ESCP Europe and Joannes Vermorel, founder of Lokad, on sustainability in supply chains. Valentina shared her academic background, focusing on supply chain management, sustainability, and the emerging fields of circular economy and sharing economy, and how these factors impact societies and businesses.
Joannes expressed his observations over the years, highlighting the rise in discussions about supply chains and sustainability in media and polls. He pointed out that companies had been attempting to optimize their supply chains for decades to reduce waste, but the current effort was a continuum and intensification of these previous initiatives.
Valentina concurred with Joannes that efficiency-driven measures have been present in the supply chain field for years. She noted that being green often means being lean, and environmentally friendly measures can directly impact the bottom line positively. There has been a sharp increase in investments in this field due to the tensions surrounding climate change and overproduction and consumption. Valentina further questioned whether a purely efficiency-oriented approach was sufficient in addressing these challenges.
Joannes described supply chains as complex systems involving people, machines, and software. His concern was that introducing change into such complex systems could lead to unintended consequences. He advocated for careful planning in order to avoid potential pitfalls, using the example of electronic waste, which, despite best intentions, often ends up dumped in developing countries, causing substantial environmental damage.
Valentina echoed Joannes’ caution about the unintended consequences of sustainability efforts, pointing to the technocentric culture where one problem is solved without considering the broader impact, potentially creating other negative outcomes. She mentioned the example of wind turbines as a supposed sustainable solution. While they do reduce CO2 emissions, their production involves the use of rare, geopolitically sensitive materials that are difficult to recycle, which creates other environmental and supply chain issues.
Joannes added an example of a successful sustainability effort. He referenced Israeli institutes’ work on desalinating seawater, which led to Israel, a country with limited freshwater resources, being able to export fresh water. He implied the need for a more comprehensive, intelligent approach in tackling supply chain sustainability issues.
The conversation then shifted to the current environmental concerns championed by individuals and groups such as Extinction Rebellion and Greta Thunberg. Valentina Carbone, a professor and researcher specializing in supply chain management, economy, and sustainability from ESCP Europe, acknowledged that climate inaction had been prevalent at both individual and company levels. She cited the book “Losing Earth” by Nathaniel Rich, which asserts that we have known about climate change and environmental risks for decades but have failed to take sufficient action.
Carbone indicated that the current momentum towards addressing environmental crises can potentially act as a barrier to action, due to the creation of closed communities and a sense of fear which can lead to inaction. She defended Greta Thunberg against criticism, appreciating her simple yet impactful call to politicians to address climate change.
The conversation then moved to the idea of local supply chains as a potential solution for the future. Vermorel underscored the need to avoid unintended consequences and self-serving actions in the name of addressing environmental crises. He illustrated his point with the issue of plastic in the oceans, suggesting that the root cause lies in a few major rivers, primarily in Asia, rather than the oceans themselves.
Carbone agreed with Vermorel’s assessment, emphasizing that the problem with plastic in the oceans is more about the end-of-pipe approach. She lamented the current over-reliance on virgin material in plastic production, with only 3% being recycled material.
She expressed skepticism about the efficacy of individual actions, noting studies indicating that these could at best reduce environmental impact by 2%. Despite this, she emphasized the significant role of individual actions in cultivating long-term behavioral changes, particularly with regard to consumption habits passed down through generations.
Joannes Vermorel, founder of Lokad, expressed a differing view. He argued that expecting users or consumers to change their behaviors was a flawed approach. Drawing an analogy to software companies, he explained that software upgrades often expect users to adapt to new changes, something they typically resist. Vermorel suggested an alternative, the “pitfall of success”, in which people naturally gravitate toward the right direction without any conscious effort due to the structuring of the system.
Continuing on this topic, Vermorel emphasized the importance of designing systems that are both appealing to those naturally inclined towards sustainable behaviors and resilient to adversarial behaviors. He pointed out that a small percentage of individuals may act in ways detrimental to environmental sustainability for various reasons. The challenge is to ensure that such behaviors do not undermine collective efforts.
Moving to the future, Carbone expressed faith in the upcoming generation’s ability to adapt and change their approach towards sustainability. She anticipated a cultural shift driven by human intelligence and the necessity of preserving the planet. However, she also emphasized the urgent need to shift from a weak sustainability approach - characterized by a trade-off game between social, economic, and environmental aspects - towards a strong sustainability approach. Here, these aspects are seen as nested within one another, with the environment as the outermost layer.
In the final section of the interview, Vermorel expressed his hope that future generations would not have to place a greater emphasis on environmentalism due to mistakes made by the current generation. He spoke about the work of Lokad in developing highly efficient optimization systems which can be tailored to optimize for various factors, such as CO2 emissions. He expressed a belief in the constructive potential of “corporate greed” to drive efficiency and profitability, contributing to environmental sustainability.
Carbone gave the final word, expressing a belief that society is at a turning point in terms of sustainability. While she acknowledged that not enough has changed yet, she was optimistic about the energy and commitment she sees towards making the transition to a more sustainable world.
Full Transcript
Kieran Chandler: Today, we’re delighted to be welcoming Valentina Carbone, a professor from ESCP Europe. We’re going to discuss whether this pressure has permeated the world of supply chains and whether companies are altering their operations to function in a more environmentally friendly manner. So, Valentina, thank you very much for joining us today. To start, could you tell us more about your background and your research interests?
Valentina Carbone: Thanks a lot for inviting me. First of all, as you mentioned, I’m a professor at ESCP Europe, where I focus on teaching and researching in two primary areas: supply chain management and sustainability-related issues. In recent years, I’ve taken a particular interest in the circular economy and the sharing economy, as well as their impact on societies and businesses. Additionally, I co-direct a chair sponsored by Deloitte on circular economy and sustainable business models. So these keywords—sustainability, supply chain, circular economy—significantly represent my identity in both research and teaching.
Kieran Chandler: Fantastic. Our topic today is sustainability in supply chains. So, Joannes, what have you observed in the last couple of years?
Joannes Vermorel: Well, like everybody else, I’ve noticed a surge of these topics in the media, and also in professional supply chain discussions. For me, it’s been more of a continuous process. Industrials, retailers, wholesalers—they’ve been attempting to optimize their supply chains, motivated mainly by profitability, for decades. Minimizing waste has been a central effort, and I see the current focus as a continuation, perhaps an intensification, of these efforts, which began long before they became a media focus.
Kieran Chandler: Do you agree with that? Would you say that companies are operating as efficiently as possible, or are they maximizing profits at the environment’s expense?
Valentina Carbone: First of all, I agree that efficiency-led measures have been present for years, especially in the supply chain field. Research has shown that “going green” often means being lean. Environmentally friendly measures can have a direct, positive impact on the bottom line. So, as for the efficiency part, as for operational decisions, I agree that companies are enhancing their operations. It’s not clear whether they do that for the sake of their bottom line or for saving the planet, but there is certainly a marked increase in their investment in this field. However, given current concerns about climate change and overproduction and overconsumption models, we must ask whether an efficiency-oriented approach is sufficient.
Kieran Chandler: Do you think the way we’re currently operating our supply chains is sustainable for the future?
Joannes Vermorel: My perspective is less ambitious. Supply chains are complex systems, composed of people, machines, and software, and that’s something we deal with all the time at Lokad. When dealing with such a system, you have to be careful about introducing changes that don’t result in a host of unintended consequences. It’s crucial to ensure that efforts to, say, reduce CO2 emissions don’t inadvertently make things worse. And regarding the sustainability question, I hope so. I want my children to live as comfortably as I have, if not better. But I worry about rushing towards superficially attractive solutions that, when applied to a complex system, might backfire. We need to be careful about what we wish for.
Valentina Carbone: I want to pick up on that, because I also think that there are a lot of unintended consequences. It’s not just because we underestimate the complexity of the systems in which we need to introduce improvements and innovations. Often, there’s a strong technocentric bias. Take, for example, wind energy, which is presented as an alternative to CO2 emissions. While we do perform better in some CO2 emission areas, these large pieces of equipment are made from rare earth materials that we don’t possess, introducing geopolitical issues that can threaten the stability of our supply chains and their environmental impact. Plus, they’re hard to recycle. Wind turbine blades, for instance, are made of composite materials that are difficult to recycle.
Kieran Chandler: You mentioned electronics wastage. What activities have you observed as particularly harmful, and who are the biggest culprits?
Joannes Vermorel: Regarding electronic waste, we’re aware that it represents the largest waste trade in the world, much of which ends up dumped in places like India and China. We must be mindful of unintended side effects, which is challenging when dealing with intelligent humans and increasingly smart software. Addressing these problems requires us to consider the ultimate consequences of any action. Even with the best intentions, when dealing with complex systems, good intentions are not enough—we need solutions that work.
Kieran Chandler: So, the unintended consequence is, in a way, a result of a technocentric culture where one problem is solved without considering its potential impacts on other areas. You may just displace the problem or create other negative consequences. We definitely need more global intelligence. Joannes, would you like to dive into this?
Joannes Vermorel: Funny you should mention that. Around 20 years ago, people saw access to fresh water as a significant problem. However, about a decade ago, several institutes in Israel managed to significantly improve desalination techniques. Now, Israel, a nearly desert country, is exporting fresh water. It’s quite a contrast to 20 years ago when they didn’t have enough water for themselves. Today, the technology is so affordable that they’re actually exporting it, even though it consumes energy. But when you’re producing fresh water, you can use solar energy. You don’t care if you only produce fresh water during the day because it’s easy to store. So, it’s an ideal case for renewable energy.
What I’m getting at is that 20 years ago, people were greatly concerned about access to fresh water, resulting in potentially misguided large scale investments. Some of these investments might have ended up being a net loss for the environment because building large-scale infrastructure like dams is not environmentally friendly.
This ties in with the issue of supply chain problems. If you try to solve a supply chain problem through large-scale investments that have an environmental impact, and then technology progress makes your infrastructure obsolete, that’s an issue. It’s particularly relevant when the timeframe for global action, whether through political means or NGOs, is a multi-decade effort. My advice would be to ensure that whatever you do, through political entities or private consortiums, is something that would still make sense even a century from now. Otherwise, you might end up having an agreement that becomes moot ten years down the road, with lots of bad investment along the way.
Kieran Chandler: Let’s build on that then. Would you say that it is very much a flavor of the month type thing? We see Greta Thunberg and Extinction Rebellion on our news every single day. Would you say that it’s currently a bit of a craze, and why is now the time for that?
Valentina Carbone: For decades, we have been seeing inaction on climate at various levels, from individuals to companies. It’s difficult for us to accept catastrophic scenarios at a personal level because our brains are not wired to think about the future in such terms. At a company level, there has been a lot of inaction, with some companies moving forward, while others work in the background with a lot of lobbying.
Consider the book “Losing Earth” by Nathaniel Rich, where he explains that between 1979 and 1989, we knew everything we know now about climate change and environmental risks. We were almost at the point where we were going to tackle the issues, but then everything reversed at the political and company level.
But still, there is momentum now. However, this momentum can also be a barrier for action. One of the main archetypes to tackle the issues of environmental crisis and climate change is collapseology, the study of the end of the world as we know it. Nobel Prize laureate Krutsen warns that we are exiting our geological era, the Holocene, and entering the Anthropocene, an era where human activities have such a large impact that nature is reacting violently. But this catastrophic approach can also be a lever for inaction, for creating closed communities, or fear. Fear can lead to inaction.
As for Greta Thunberg, she has been criticized a lot. I find it shameful. She’s a smart young girl who has simply read the synthesis of the IPCC report and is calling on our politicians to do the same and take measures to counteract this catastrophic situation. What she has achieved at her age is impressive.
Kieran Chandler: I couldn’t agree more. Shifting the discussion towards local supply chains, do you see that as a solution for the future? Can you see people acting in that manner?
Joannes Vermorel: It’s essential to avoid unintended consequences. So how can you do something where you don’t end up with people building a rent around catastrophism? How do you end up in a situation where people don’t end up capturing funds primarily to promote themselves and make their perspective even more dominant? For example, let’s consider plastic in the oceans. I’ve seen many ocean-related laboratories manage to secure loads of funds to study and solve that. It’s pretty bad having megatons of plastic in the oceans. But once you analyze the root cause, you realize 80% is from just a handful of rivers in Asia. If you consider the top 40 rivers, they contribute 99% of the plastic. So the problem isn’t fundamentally in the ocean, it’s in the rivers that carry the plastic into it.
Valentina Carbone: I would build on that. The problem is also that we just think in terms of the end of the pipe approach.
Kieran Chandler: The end of the pipe approach, whether it’s China or Europe. What’s the percentage of virgin material, including all the plastic we produce?
Joannes Vermorel: Exactly. It’s 97%. We only use recycled material to produce plastic at the level of 3%.
Kieran Chandler: So it’s super slow and super small.
Joannes Vermorel: Yes, that’s correct. But what I wanted to highlight is that the problem lies with solutions that focus on the ocean because that’s where the pollution is most visible. It’s a symptom. What we need to be cautious about is the tendency to be driven by catastrophism.
Valentina Carbone: I agree. Especially when you consider actions like New York investing in building dams around the city. These turned out to be less useful as their problems are more related to storms, not because the sea is rising. This is an extreme weather problem that is very different in terms of type and nature from sea rise.
Joannes Vermorel: That’s right. What I’m saying is that catastrophism can lead you to intense actions on the symptoms. While this isn’t inherently bad, it’s not very productive and doesn’t make good use of your resources. People often fail to realize that supply chains are basically a game where resources are constrained. We need to make the most of what we have.
Kieran Chandler: So we’ve spoken a lot about companies here. Is all of the blame and the burden with companies or is there stuff that we can do as a consumer? How much of an actual impact can that have?
Valentina Carbone: The change must be systemic. So everybody has to play their part in their own domain, whether they are states, companies, individuals, or NGOs. However, studies show that individual-based action may at best reduce the environmental impact by only 2%. If we don’t reshape the supply system, we will quickly reach a plateau. What’s important for individual action is that when you take on the burden of doing something for the planet, you raise awareness. It’s for pedagogical reasons which counts. This could mean that future generations will be in a consumption paradigm which is different from ours and our parents, who felt the need to consume and over-consume after the World Wars.
Kieran Chandler: But if a larger proportion of the responsibility lies with companies, can they always be trusted to do the right thing? After all, their shareholders are primarily interested in profitability.
Joannes Vermorel: My own belief in this respect is different. I think we’re tackling the problem from the wrong perspective. In software companies, for example, we learned that expecting users to change their ways is not effective. It’s like having a software upgrade, changing everything, and then expecting people to relearn everything. People hate that and resist it. Instead, we need to make the right direction the path of least resistance, so people naturally gravitate towards it without having to make a conscious effort. This approach also makes the system resistant to adversarial behavior. Even with the best intentions, there will always be a small percentage of people who, for whatever reason, are actively trying to disrupt or even destroy the system. We need to plan for that.
Kieran Chandler: Why? Because they are crazy. Because they have then agenda that is weird. Whatever the reason doesn’t matter. It’s the fact that in every human society, you have rebels for whatever reason, and I’m not making a moral statement. I’m just saying that whatever you think is the norm, there is a small percentage that will disagree. The question is, how do you make sure that it doesn’t undo all your efforts and everything?
Joannes Vermorel: Yes, but what about the 99% who are not having an adversary? Yes, obviously, you want to make things as easy for them, but that’s exactly the pitfall of success. It should steer them gently for those that are naturally inclined and be resilient to the ones that are adversarial.
Kieran Chandler: Okay, let’s build on that then. How do you see the next generation adapting and changing their approach and the next generation supply chains adapting?
Valentina Carbone: I trust our students, our children. I think that a cultural shift is going to take place, and I trust that in the end, it’s human intelligence which has to make sense of the preservation of the planet. I also see a big role of experts, consultants, academics, whatever, in really shifting the paradigm. Shifting the paradigm from this very soft consensus around sustainable development where the social, the economic, the environmental are in a kind of trade-off game.
I think it’s urgent to move towards a strong sustainability approach, where the three spheres are one embedded into the other. The external one is the environmental, the ecological. Our planet can’t contain us anymore, then you have the social and then you have the economic. Of course, it’s a huge shift because company wise we live in the shareholder era.
There are different forms of capitalism, but until now, the trade-off between social, environmental and economic, the shareholder value label, was on the top of the priorities and is stamped on managers and CEOs, and decision-makers. So there is really this governance issue, both for companies and global value chains, the north, the south, the inequality issue which needs to be pushed.
It’s a wishful thinking, but I think that the transition doesn’t happen if these political grounds are not revisited.
Kieran Chandler: Yeah, is that something you’d agree with, Joannes? Do you believe that future generations will have a higher importance and a higher need for greater environmentalism?
Joannes Vermorel: I hope not. First, obviously, I would prefer because if they have a greater need, that means that we collectively messed up badly and thus they have to fix the damage. So my hope is that they don’t need to rely too much on future human ingenuity to fix a problem that my generation might have created. But that’s wishful thinking.
Overall, at Lokad, we are trying to build efficient optimization systems. This sort of technology is agnostic about what you’re optimizing for. You can put whatever metrics you want as drivers for the optimization. If you want to optimize for CO2, you can optimize for CO2.
But as long as you don’t have such a technology, you don’t have the means to optimize anything. So first, we are trying to build is a very efficient technology. Then, what we put in this equation for optimization? I believe that will be a mix of regulation, good corporate greed, which from my perspective, having companies that are greedy and want to get better and more profitable is a good thing. That’s what drives more efficiency.
Kieran Chandler: We’re going to have to start wrapping up. Valentina, would you say with regards to sustainability, things have changed, things are currently changing. Would you say we’re heading in the right direction?
Valentina Carbone: I think we are at a turning point. I don’t think things have changed enough, but I see energy, not fossil-based energy, but human energy that is moving around to make the transition happen.
Kieran Chandler: Brilliant, a nice positive way to finish things. Anyway, thank you both for your time.
Joannes Vermorel and Valentina Carbone: Thank you.
Kieran Chandler: So that’s everything for this week. Thanks very much for tuning in, and we’ll see you again next time. Thanks for watching.
