SWP Working Paper · SWP
Towards a Smart Mix 2.0 - Harnessing Regulatory Heterogeneity for Sustainable Global Supply Chains
Over the past three decades, efforts to address human rights and environmental risks in global supply chains have spurred a plethora of industry self-regulation, third-party certification schemes, voluntary due diligence guidelines, and mandatory supply chain regulations. The resulting heterogeneity of initiatives, instruments, and standards has been subject to much debate, with academics and policymakers calling for a “smart mix” of measures to strengthen the governance of transnational business conduct. In addition to creating public-private complementarities, this includes recent calls for a better interplay of governance actors located at the demand side and supply side of global supply chains, often linked to the “North” and the “South” of the world economy. In this paper, we explore the opportunities and challenges of harnessing regulatory heterogeneity for sustainable supply chains through such a “smart mix 2.0”. On a conceptual level, we show how public regulators can improve the design, uptake, and compliance with private sustainability standards through information provision, capacity building, economic incentives, and legal recognition. Conversely, private sustainability standards may compensate for some of the weaknesses of public regulation by offering more speedy, flexible, and less bureaucratic implementation. Moreover, bringing Southern actors into the governance mix promises to create regulatory regimes that are more context-sensitive, equitable, inclusive, and comprehensive in their coverage. However, there are also major challenges. This includes overly optimistic assumptions in the smart mix literature about the prospect of enabling and sustaining complementary and progress-oriented patterns of governance interactions between actors with often diverging interests, worldviews, and power resources. In our critique of
the concept, we bring these issues to the fore, thereby advancing an analytical perspective that is more attuned to the political dimensions of smart governance mixes. In a case study of forest-risk supply chains (palm oil), we explore these issues empirically. We canvass the increasing regulatory heterogeneity and evolving nature of “smart mix politics” in this supply chain setting, illustrating that the road towards integrating governance measures across sectors and geographies is not a well-paved highway, but a winding road with many potholes, construction sites, and the occasional U-turn.
Full publication is available on: DOI 10.18449/2022WP07