Assignment 4: Nokia

In the video we saw a representative of Nokia going to its phone supplier in China. During her trip she exposed the supplier’s violations of the Chinese law, like under-payment and too many working hours for the employees. At the end of the visit the people in charge of running the facility were confronted with these violations.

 1. Would this approach be an effective way of diffusing sustainability criteria as well?

Nokia is one of the largest cell-phone companies in the world. This implicates that they have multiple suppliers, also probably in China to cut costs. So Nokia will view the supplier as ‘one of many’. But the supplier will view Nokia as one of its major customers, and it will do (almost) anything to keep it that way. This and the fact that Nokia is one step up in the supply chain makes the position of Nokia very powerful. They can afford it to switch suppliers, but the supplier will see its turnover drop dramatically when they are dropped. So to my opinion this is the most effective way of diffusing sustainability criteria to the supply chain.

Companies like Nokia are also in a unique position to diffuse their criteria. They have the brand, the thing that the consumer knows and wants. In most cases the other companies in the supply chain like the distributor and the manufacturer do not have unique attributes. This makes it easy to replace them. Indirectly, there are also mining companies that supply Nokia. And so Nokia could go even further and tell their suppliers to impose sustainability criteria on their suppliers. And so on. In the case of a mining company the situation is rather different, however. Mining companies are generally huge companies; the investment required for exploiting a mine is significant. This makes it difficult to pressure them. Also, because materials (mostly metals) are getting scarce these companies will sell their products anyway.

2. How would another governance mechanism improve on this?

Another option for Nokia to make its supply chain sustainable is to manufacture and distribute their phones themselves. This makes it easier to implement sustainability measures, as the factory will do as the board tells them to. It also has economic benefits; the profit made by the supplier would go to Nokia instead. But this will prove very hard for Nokia, as they only have experience in designing the phones. Setting up their own factory will require big investments and will prove to be loss-making in the short term.

Another option to impose sustainability criteria
I found it rather surprising to see Nokia (being a company) striving for better social conditions at its supplier without external pressure, except the threat of being thrown out of the Dow Jones Sustainability Index. How to persuade other companies to do the same, and to speed up the transformation towards truly 'green' products?
Industrial ecologist Peter Tom Jones sees the civilians as the group to convince to strive for a ‘green’ future, as described in his book Terra Reversa. A distinction is made between government, companies and comsumers. This is visualized in the scheme (Stevenson and Keehn, 2006), arrows are added by Peter Tom Jones.

In his vision neither companies nor governments will to go on a sustainable path intrinsically. The objective of the companies is maximize profits, and by implementing (strong) sustainability measures profits are lost. Then the aim for governments is to get reelected. This makes them mainly think in terms of four years, instead of the required twenty, or even fifty years. And so governments will barely invest in a green future. A shift towards a truly sustainable society requires significant investment in, for example, smart grids and renewable energy technology. And on the other hand travel by plane, meat consumption and consumption in general should be reduced. This would require a lot of investment (taxes) and impopular (tax)measures, in the short term. It is likely then that the government will not be reelected. The civilians, in turn, have the power to persuade both the companies and the government. They have the option not to buy certain goods and to vote for other parties then the current government. And so the civilians are the group to seduce, to strive for a less materialistic 'green' future. But how?