Sustainability and Resilience in the Extended Value Chain: The Case of STMicroelectronics

Abstract In recent years, both academics and institutions have acknowledged the crucial role multinational enterprises (MNEs) can play in addressing sustainability challenges, as formalized by sustainable development goals (SDGs). Nevertheless, because of their extensiveness design country-level targets, SDGs proven challenging to operationalize at a firm level. This problem opens new relevant avenues for research international business (IB). chapter attempts frame topic extended value chain IB literature. particular, it addresses specific topic, that is, how resilience-building practices interact global chains (GVCs). To do so, present study develops case STMicroelectronics (ST), one biggest semiconductor companies worldwide. Keywords Sustainability Resilience Global Semiconductor industry Responsibility Citation Sacco, F. Magnani, G. (2023), "Sustainability Extended Value Chain: The Case STMicroelectronics", Ghauri, P.N., Elg, U. Hånell, S.M. (Ed.) Creating Sustainable Competitive Position: Ethical Challenges International Firms (International Business Management, Vol. 37), Emerald Publishing Limited, Bingley, pp. 197-218. https://doi.org/10.1108/S1876-066X20230000037011 Publisher: Limited Copyright © 2023 Federica Sacco Giovanna Magnani License work is published under Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate create derivative works these (for commercial non-commercial purposes), subject full attribution original publication authors. terms this licence be seen http://creativecommons.org/licences/by/4.0/legalcode. 1. Introduction On January 1, 2020, firms woke up into ‘Decade Action’: 10 years should lead achieving SDGs. Herein, private sector – representing 75% gross domestic product (Guterres, 2019) was ascribed leading accomplishing (Van Tulder et al., 2021) MNEs an active this. transition towards ways organizing activities strategic imperative 2021). Yet, many still not fully incorporated general ‘their core strategies, operations, cultures’ (Deloitte, Recent calls action (Baldassarre 2020; Ghauri highlight importance need further on MNEs’ responses climate change strongly impacts ‘strategy, models, operations across different national systems’ (Ghauri 2021, p. 5). fragmented globe last 40 encouraged rise trade liberalization, technological improvements communication coordination opportunities increase cost efficiency (e.g. lower labour costs emerging economies). phenomenon has become so prominent United Nations Conference Trade Development estimated 2013 about 80% world took place within so-called GVCs (UNCTAD, 2013). A GVC includes range are required bring good or service from conception through phases production delivery final consumers well disposal after use (Cattaneo 2010; Gereffi & Fernandez-Stark, 2011). perspective ‘global factory’ Buckley (2004), identified ‘orchestrators’ GVCs: they coordinate globally dispersed more precise ownership location strategies (Buckley, Despite most dynamics becoming shorter and/or concentrated (Ciravegna Michailova, 2022; Economist, 2022), responsible greatest majority intermediate goods exchanges globe. World exports increased 21% fourth quarter accounting $2,629 billion, with yearly recovery 28% if compared peak year COVID-19 pandemic (WTO, 2022). Moreover, available data show Added reached $82,962 billion worldwide 2018, 6.3% respect previous (OECD, 2021a). Finally, first half 2022, foreign direct investment (FDI) flows $972 recording largest levels since complex structures analysed four interconnected perspectives (Bair, 2009; 2011): (i) input–output structure, which encompasses all VC; (ii) geographical configuration activities; (iii) governance structure (iv) institutional context VC operates. Firstly, allows identify main segments its analysis provides insights each segment sourcing preferred suppliers) (Gereffi level closest operational identifies where created. From perspective, issues such (Guo 2016) circular economy (CE) models (De los Rios Charnley, 2017). Secondly, increasingly offshored activities, relocated parts locations, irrespectively mode (Kinkel Maloca, 2009). Nowadays, often usually carried out world. potentially hinder enhance company’s ability address challenges depending local resources. Thirdly, according ‘authority power relationships determine financial, material human resources allocated flow chain’ (Gereffi, 1994: 97). choose outsource some obtain semi-finished products, finished products services outside company traditionally performed internally (Simchi-Levi 2004). aspect important too: largely pushed public opinions, considering non-financial factors when making decisions. There trade-off between benefits outsourcing control subcontractors implement standards (Narula, 2020): example, Samsung dedicated external audit discover among Chinese suppliers 33 broke regulations insurance, 39 paid fixed wages without compensation overtime, cut pay disciplinary measure 48 let minors (employees aged 16–18) handle chemicals (The Guardian, 2014). exist context, particularly analysing impact sustainability. Local policies substantial chains: example USA–Mexico–Canada Agreement (USMCA) entered force replacing North American Free (NAFTA). Differently NAFTA, protection worker rights enforceability provisions were major concerns throughout USMCA negotiations. agreement requires member states adopt maintain stated 1998 Declaration Fundamental Principles Rights Work, addition acceptable conditions work, including concerning minimum wages, working hours occupational safety health (U.S. Department Labor, 2022a). Mexican executive branch introduced bill that, enacted, would effectively eliminate, cases, Mexico: strengthen employment abolish harm reduce obligations employers (EY, 2020). Consequently, providing specialized operating subcontracting agreements country will evaluate reform’s adjust them accordingly. By reporting ST, aims presenting best practice strategy MNE model relationship other actors. We responsibility well-rounded approach complementary efforts resilience building. 2. defined ‘development meets needs compromising future generations meet own needs’ (World Commission Environment Development, 1987, 24). relevance well-being population, date, clear interpret, (Green 1998). At present, extensive attempt actionable approaches drafting 17 UN Summit 2015: promote joint effort MNEs, businesses improvement environmental, social economic level: leave key actors building behaviours, integrate (Montiel relevant, significantly contribute Bank, 2019). shape depletion finite natural resources, biomass, fossil fuels, metals minerals: 2017, one-third total volume extracted tripled 1970 employed internationally traded Resource Panel, influence amount type waste generated during process: electronics industry, GVC-intensive, produces than 70% toxic US landfills (Holgate, 2018). back-and-forth transport long distances directly contributes CO2 emissions freight transportation, 7% 2015 Furthermore, over past decades, following low-cost imperative, developing countries: time, raised Social McKenzie (2004, 18) entails [all] formal informal processes, systems, [that] actively support capacity current healthy liveable communities[…] equitable, diverse, connected democratic provide quality life. Subcontractors perpetrate unethical times unlawful GVCs. For journalistic investigation reported 18 suicide 14 confirmed deaths Foxconn Apple’s outsourcee China poor living employees subjected More recently, U.S. Labor (2022b) subcontractor Korean car giant Hyundai engaged oppressive child employing young workers age Alabama. Organization (2021) reports 9.6% children 5–17 worldwide, 4.7% being involved hazardous endangers health, moral development. Almost 2 million people die work-related causes year, exposure workplace air pollution, asthmagens, carcinogens, ergonomic risk noise Health Organization, These disproportionately Africa, South-East Asia Western Pacific Region 2021b). Environmental sustainability-related firms’ primary ones,1 regard outsourcees developed countries. Their pervasiveness led researchers issue responsibility. idea ‘extended chains’ emphasizes value-creating extend beyond (Vachani Post, 2012). outsourced mostly regulated contractual limited visibility behaviour, asymmetries entities (Cox, 2001; Strange, first-tier, no but practically creation, exposing serious environmental risks. increasingly, held accountable adoption chain: orchestrators, impactful entity, promoters facilitators cascade (McKinsey, 2016; Montiel 2021; Villena Gioia, been studied supply management: enough build green purchasing strategy, manufacturing process distribution (Badi Murtagh, 2019); make sure customers adhere environmentally friendly practices. moved achieved taking approach. 2015, European launched ‘circular package’: based CE integrates functions non-linear consumption system optimize processes habits itself, rather seeking individual components separately. implementation practices, closed-loop (CLSC), combines large radical changes associated possible (Masi 2017; Murray literature suggests initiators defining requirements (Yamin 2015). However, application depend existing GVC, (Ashby, 2018; De Marchi 2019; Lee, 2016). predominantly investigated headquarter–foreign subsidiary relationships, transfer using entity (Iatridis Kesidou, Tashman Recently, Castaldi al. (2022) widened investigating socially along proposed two come play. hand, audit-based imposing unilateral top-down pressures daily routines (Locke Lund-Thomsen Lindgreen, developmental, capacity-building form (Alexander, 2018) seeks ‘change suppliers’ day-to-day managerial also improved performance’ (Distelhorst 710), MNE’s provision training. conclusion, collaborative under-investigated mechanisms line SDG 17, targets enhancement Partnership complemented multi-stakeholder partnerships mobilize share knowledge, expertise, technology financial achievement 3. GVCs, Alongside sustainability, taken interest Gereffi, Ku concepts recently started associated, early (Fahimnia Although already established management, hold Covid-19 pandemic. particular event dramatically exposed fragility networks vis-à-vis extremely uncertain environments. After outbreak November 2019 China, determined income decline 37% September 2020 (Saurav 2020), decrease FDI 40% greenfield projects cross-border M&A 50% witnessing dramatic consequences, advanced endowment overcome sudden disruptions isn’t exclusively pandemic, wider variety uncertainty factors, degradation geopolitical countries wars actual warfare) 2022) change. latter especially increasing threat disasters (i.e. geophysical, meteorological, hydrogeological, climatological biological) poses distressing continuity logistics (Ghadge Oh Oetzel, An devastating ripple effect Fukushima earthquake 2011 had chain, resulting disruption silicon wafer production, discontinuation memory chips ultimately consumer (Lohr, kind empirical evidence explore touchpoints resilience, conceptualization (Negri conceptual level, overlapping purposes. Previous studies define ‘ability return state move new, desirable state, disturbed’ (Christopher Peck, 2004, 4). aim survival (Mehrjerdi Shafiee, 2021): focussed long-term optimized management resources; prolonging lifespan managing negative consequences disruption. Even though integration sparse, common underlying themes. appear resilience. conceptualized multilevel construct, three perspectives, State. Institutions States, 2021), acting either ‘guide’ decision-making requiring configurations (Dallas unnecessary heterogeneity norms facilitate inputs substitutability 2021b), SMEs workforce capability ad hoc investments White House, UN, negotiate favourable Concurrently, efforts, those emerge Zanten Van Tulder, themselves indicator effective enhancing widely accepted targets. entry modes concur reaction (Song, look structural decisions chain. investigate influenced governance, ‘decisions pertaining learning knowledge resource recombination, details, monitoring’ (Kano 27). sharing processing information collected planning (Sinkovics 2011; Wong Visibility enables identification potential disruptions, allowing better inventories, replacement disrupted short notice rerouting alternative sites (Brandon-Jones 2014; Dilyard Therefore, themes CLSCs gaining view creating care, CLSC highlighted proper reduction exploitation (Soleimani Zhen field dealing (Chen 2015; Ivanov Jabbarzadeh 2018a). dissemination while face (Jabbarzadeh 2018b; Mehrjerdi like considered cultivated alone, nurturing actors, suppliers, institutions, compatible industries stage, Negri definition resilient chains, ‘economic, considerations system, dynamically preparing, adapting reacting unexpected stakeholder improve profitability competitiveness term’ (p. 2868). 4. ST presents focusses Information overview description derived 2021 Form 20-F States Securities Exchange Commission, annual materials investor relations ORBIS database. sources secondary data, news outlets, in-depth semi-structured interview Dr Alberto Della Chiesa, Executive Vice President Supply Chain ST. 4.1. Industry 4.1.1. Semiconductors ubiquitous our life: smartphones, personal computers home appliances 4.0 machinery, enablers contemporary lifestyles. few demand semiconductors surged. Because volumes resource-intensive nature (Ahmad, 2007), today, significant carbon footprint. accounts 2% electricity (Gopalakrishnan 2010). Taiwanese producer exploits much Sri Lanka’s 21-million population expected 12.5% island’s 2025 (Bloomberg, Greenhouse Gas Protocol, set Resources Institute Council 2001, categories Scope 1 arise foundries, primarily gases used phases. 35% typical foundry. indirectly purchased electricity, steam, heating cooling equipment account 45% emissions. 3 include indirect usage containing semiconductors. Many producers acknowledge environment ambitious energy consumption, optimization gas governments incentives evolution industry. August Biden administration approved ‘CHIPS Science Act’: objective foster Act could $67 accelerating growth zero-carbon conducting climate-relevant Atlantic, countries, producers, general, risks included electronic devices silica-based produced forced Xinjiang, region government reportedly detained Muslims reeducation camps 2017 (OHCHR, materials. Scientific trials players demonstrated handling necessary precautions doubled probability miscarriages female urgency, addressed less 4.1.2. Building Against Uncertainty Beyond trying aspects. caused shock supply, dual challenge If, lockdowns imposed initially reduced automotive, explosion others, smartphones PCs what side, there difficulties obtaining before 2020.