Supply chain management in response to climate change: A system dynamics approach

Abstract

As companies intensify efforts to decarbonize their supply chains to mitigate climate-related risks, their responses often remain fragmented and uncoordinated, limiting overall effectiveness and missing opportunities for synergy. This study analyzes disclosures from 1095 European firms reported to the Carbon Disclosure Project (CDP) to examine these varied responses. Using qualitative thematic coding, we identified six macro-themes, each representing a distinct causal-effect pathway that companies adopt in their decarbonization efforts: (i) diagnosing climate-related risks, (ii) collaborating within the supply chain to reduce emissions, (iii) adopting energy-efficient practices, (iv) implementing sustainable practices that minimize waste, (v) fostering enablers of sustainable behavior, and (vi) redesigning supply chain networks. These pathways highlight the strategies companies use to address climate risks within their supply chains. Adopting a systems dynamics perspective, we map the feedback processes governing these decarbonization strategies, illustrating how different pathways interact and generate either beneficial or detrimental outcomes. The findings contribute to the field of sustainable supply chain management by elucidating the dynamic interplay between various climate risk response strategies, their impact on supply networks, and their ultimate influence on climate risk performance. Specifically, we demonstrate the iterative nature of diagnostic efforts and associated responses, and how collaboration can drive a continuous cycle of innovation that integrates incremental and transformative efforts. The causal loop diagrams developed in this study provide managers and policymakers tools to anticipate the outcomes of their supply chain strategies, enabling better-informed decisions that align with sustainability objectives.