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In order to understand today's supply chains, it is important to consider how they were formed and developed over time. In this section, we look at the roots of modern supply chains and their associated risks and responsible investment implications.

Deep Dive – Systemic Causes of Supply Chain Risks & Impacts

Jon Mowll Jon Mowll Responsible Investment Analyst
Edentree Insight reports

Supply Chains: At the heart of business

Jon Mowll

Responsible Investment Analyst
23 Oct 2020

Chapter 6

Deep Dive – Systemic Causes of Supply Chain Risks & Impacts

Enterprise owners or financial backers in the 16th or 19th centuries might be familiar with many of the risks and impacts outlined above: deforestation, slavery, poor working conditions in factories, and so on. Why might that be the case?

The proximate causes of many of the problems in supply chains are context-specific, localised or regional in nature. However, a growing number of ecological economists – and others – suggest that they are more fundamentally the result of the way in which we perceive our relationship to each other and the rest of Life.18 They argue that many of today’s environmental crises have their modern roots in the rise of European/Atlantic capitalism over the long-sixteenth century (circa 1450-1640). Capital owners in this period sought out lower costs of production, appropriating artificially cheap (often slave) labour and cheap nature, with disastrous socio-ecological consequences that far outstripped anything that had gone before.

These same scholars also contend that capitalist systems are fundamentally programmed for expansion, that they have an in-built ‘growth imperative’.19 What we call ‘the economy’, they argue, is simply an open system, nested within the biosphere, which all supply chains reach into and rely upon. As an economy grows, it – and the supply chains within it – metabolise more material, more ‘nature’; and production expands into new areas. The result is certain of the environmental and ecological problems we considered earlier in Part I of this Insight, and some of the social issues around land rights which come with them.

Moreover, it is argued that modern globalisation has been facilitated and enabled by governments and international trade rules, established principally in the interests of multinational corporations and countries in the Global North. We considered this briefly in our 2019 EdenTree Insight ‘Mind the Gap: Economic Inequality in the 21st Century’. In essence, the globalised economy is now characterised by national borders made porous to flows of materials, capital, and people.

We sometimes hear that globalisation of supply chains has led to a ‘race to the bottom’ in terms of workers’ rights, wages, and environmental protection. But if we think about longer-term trends, it may be more accurate to suggest that it was the other way round – it was a ‘race to the bottom’, which has been playing out over centuries, that spurred the modern globalisation of supply chains. This is important. If the problem is capitalist relations with nature and labour (and not ‘just’ post-war globalisation), and indeed a growth imperative, then the solution may need to be highly structural.

The country that does the poorest job of internalizing all social and environmental costs of production into its prices gets a competitive advantage in international trade… As national economies confront limits to their growth aspirations imposed by the carrying capacity of their territory and the extent of their national markets, they strive, by globalization, to grow into the ecological and economic space of all other countries, as well as into the remaining global commons.” - Herman Daly

Slavery and Nature in Early Capitalist Supply Chains

Early capitalism displayed a powerful tendency to exploit Nature and Labour. From 1530 to around 1700, Brazil’s Atlantic forests were clear cut to make way for what we would recognise as industrial sugarcane production.

This period also saw the near-extinction of Brazilwood (Caesalpina echinata), harvested for its timber and, later, dyes. Hundreds of years later, the sugar produced in this region once rich in biodiversity is now used in ethanol.

Several hundred miles away, in the Caribbean, forests were also cleared to make way for sugar plantations. Similar destruction and (re)making of new ecosystems and new ‘Nature’ occurred in the southern United States, where the cash crop of choice was cotton. On these plantations, one of the most pernicious manifestations of capitalism’s need for Cheap Labour was ubiquitous – African slaves.

The Atlantic slave trade involved the transportation of enslaved African people, mainly to the Americas. ‘Modern’ supply chains of cotton, sugar, and their derivatives (such as rum and molasses) – and the wealth they generated in Europe and America – were built on the backs of some 13 million slaves, with an estimated 2 million more dying in the inhuman conditions of slave ships crossing from West Africa. But they were also built on large-scale destruction of ecosystems and biodiversity, with devastating consequences for local indigenous peoples. It is a legacy felt to this day.