Agile Capabilities for Maximising Sustainable Supply Chain Performance: Empirical Evidence from Oil and Gas Industry

Abstract

Energy companies are facing rapid and unpredictable changes in their business environment. The growing competition, shifting energy demand, changing climate, technological advancements, an impending energy transition, and other social factors presented the biggest challenges for the industry. Agility capabilities and sustainability strategies have been identified as key foundations for sustained competitive advantage in new business environments. It has been established that agility could induces better operational performance, while sustainable practices could help enhance indicators of social and environmental sustainability, the interactive effects of both have not been examined. There is no empirical work investigating the role of sustainable supply chain practices in conjunction with agile supply chain capabilities.
To address this research gaps, the thesis is grounded in a capability theory combined with the dynamic capability theory and contingency perspective. The purpose was to investigate if sustainable supply chain practices have performance effects that is mediated by agile supply chain capabilities (as would be the case if the central function of the former is to develop the latter). Secondly, examine how agile supply chain capabilities and sustainable supply chain strategies jointly influence organisational performance. Thirdly, explore the efficacy of sustainable practices under different contingency variables (such as, managerial experience, business age, size, industry sector, and dynamism). Finally, explore the taxonomy of agility strategies that have the greatest impact on specific competitive priorities include social and environmental sustainability priorities. For such purposes, a conceptual model was established with proposed hypotheses deriving from existing literature.
A survey of high carbon and energy-intensive supply chains in the UK was carried out with a net of 311 respondent companies. The study uses structural equation modelling (SEM) to test proposed hypotheses. The taxonomy of agility strategies was developed with methods of cluster analysis and is based on the relative importance attached to eleven competitive priorities including social and environmental sustainability priorities. The underlying dimensions of agile capabilities along with the three strategy groups differ were investigated based on factor analysis and canonical discriminant analysis.
The results show that sustainable supply chain practices have a significant positive effect on agile supply chain capabilities and all two dimensions of performance outcomes. Also, the results indicate that agile supply chain capabilities do have a significant positive influence on both sustainability performance and operational performance. Whilst the correlation between agile capabilities and operational performance is not new, what is new here is the connection between agile supply chain capabilities and sustainability performance. In addition, the findings show that the performance effects of sustainable supply chain practices are fully mediated by agility capabilities. Also, the results reveal a positive interaction between sustainable supply chain practices and agile supply chain capabilities, suggesting that they function as complements in affecting performance outcomes. Importantly, the results show that high carbon intensive sectors positively moderate the relationship between sustainable supply chain practices and performance outcomes, while the other managerial experience do not. In other words, the research shows that agile capabilities are important enablers/facilitators for maximising the outcome of implementing sustainable practices. As such, manager who want to maximise the outcomes of sustainability campaign should consider joint implementation of sustainable strategies and agile capabilities. Further, experts should consider market turbulence as a competitive factor in line with the complementarity effect of sustainable strategies and agile capabilities. This consideration would contribute to explain better sustainable performance.
Three distinct cluster of agility strategy groups were observed across the industry surveyed: high agile companies, moderate agile companies, and less agile companies. High agile companies are characterised by high priorities on flexibility, speed, quality, innovation, social and environmental sustainability, high values attached to all performance and high importance given to flexibility and speed. Moderate agile companies are oriented towards reliability and flexibility. They do not emphasise social and environmental sustainability, and they attached low important to innovation. While less agile companies placed poor values on all performance objectives, they had the lowest percentage of the mean difference scores. At best, nonagile companies focused on benefits such as cost efficiency, quality, and delivery reliability improvements with less emphasise on flexibility and speed. They give the poorest importance to innovation and sustainability. The lack of agile capabilities could be behind the non-agile companies’ lowest focus on future performance, sustainability, and innovation. This research shows to companies that competitive priorities are replaced with sustainability priorities. While social and environmental priorities contribute to competitive performance when complementing supply chain agility strategies.