Managing sustainability tensions in global supply chains: specific investments in closed-loop technology vs ‘blood metals’

Abstract

This paper discusses how problems of eco-opportunism in metals markets escalate due to market failures because of the increasing scarcity of precious metals. Establishing the right sourcing strategy for recycled material, therefore, is crucial for supply chains and for managing corporate sustainability tensions. We analyse the transaction costs in three strategic models of sourcing from ‘make’ inside the supply chain to contract, and ‘buy’ in the grey market for metals. ‘Blood metals’ leak into the grey markets when there is lack of control, information asymmetry in global supply chains and eco-opportunism in recycling of electronic products. Consequently, the need for traceable supply encourages companies to integrate closed-loop recycling of their products. Furthermore, scarcity of valuable metals along with consumer preferences for sustainable products lead to specific investments in product design and robot technology that disassemble end-of-life products. Together, these factors provide an integrated system that reduces transaction costs and increases recycling efficiency. Therefore, specific assets designed to facilitate reuse of scarce metals like the Apple robot Daisy is a key corporate strategy to secure sustainable performance. Specific investments in disassembling technology like robots in the smartphone industry, should, according to transaction cost theory, be organised as a vertically integrated circular economy. The integrated closed-loop model presented here, control eco-opportunism and the unsustainable character of grey markets for recycled material in electronics.