Sustainable supply chain Finance:Towards a research agenda

Sustainable supply chain Finance:Towards a research agenda

Journal Pre-proof Sustainable Supply Chain Finance:Towards a Research Agenda Fu Jia, Tianyu Zhang, Lujie Chen PII: S0959-6526(19)33550-4 DOI: http...

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Journal Pre-proof Sustainable Supply Chain Finance:Towards a Research Agenda

Fu Jia, Tianyu Zhang, Lujie Chen PII:

S0959-6526(19)33550-4

DOI:

https://doi.org/10.1016/j.jclepro.2019.118680

Reference:

JCLP 118680

To appear in:

Journal of Cleaner Production

Received Date:

28 April 2019

Accepted Date:

30 September 2019

Please cite this article as: Fu Jia, Tianyu Zhang, Lujie Chen, Sustainable Supply Chain Finance: Towards a Research Agenda, Journal of Cleaner Production (2019), https://doi.org/10.1016/j. jclepro.2019.118680

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Journal Pre-proof

Sustainable Supply Chain Finance: Towards a Research Agenda

Fu Jia, PhD (First Author) Chair Professor of Supply Chain Management The York Management School University of York, UK Heslington, York YO10 5DD Tel: +44 (0)1904 324855 Email: [email protected] Tianyu Zhang (Second author) The York Management School University of York, UK Heslington, York YO10 5DD Email: [email protected] Lujie Chen (Third and correspondence author) International Business School Suzhou Xi'an Jiaotong-Liverpool University, Suzhou, China Email: [email protected]

Acknowledgements This work was supported by the Natural Science Foundation of China under Grant No. 71902159. Key Program Special Fund in XJTLU under Grant No. KSF-A-13 and KSF-A-06.

Journal Pre-proof Sustainable Supply Chain Finance: Toward a Research Agenda Abstract Supply chain finance (SCF) as an effective method for improving supply chain (SC) financial performance has attracted attention from both academics and industries in recent years. In the development of SCF research and practice, there is growing interest in how SCF solutions help to promote SC sustainability performance. However, the research on sustainable SCF (SSCF) remains scant; both scholars and managers have not fully realized the significant economic, environmental, and social value behind this concept. This study, based on a systematic literature review of 47 articles related to SCF and sustainability, summarizes SSCF motives, practices and outcomes. In addition, to further investigate this emerging topic, this review discusses how SSCF solutions may help to drive sustainable SC enablers as well as mitigate sustainable SC barriers, which, in turn, improves sustainable SC performance. Based on the descriptive and thematic findings, this review then develops a conceptual framework that facilitates the conceptual development of SSCF. Finally, it identifies gaps in the existing literature and provides recommendations for future research. Keywords: supply chain finance; sustainable supply chain; sustainable supply chain finance; literature review 1. Introduction Supply chain finance (SCF) practices have undergone rapid development over the past decades (Wuttke et al., 2013). SCF refers to the solutions provided by financial institutions and fintech companies that integrate cash flow with product and information flows along the supply chain (SC) to ensure cash-flow optimization from the SC perspective (Wuttke et al., 2013). There is growing interest among academics in extending SCF capabilities beyond optimizing SC cash flow, and in exploring SCF functions in relation to promoting other SC capabilities, one of which is the potential for improving SC sustainability. Business for Social Responsibility (BSR), a non-profit organisation in the US that specializes in corporate sustainability, first proposed the idea of sustainable SCF (SSCF) in June 2018, revealing enormous opportunities and value behind this concept. BSR (2018, p. 5) defined SSCF as follows: Supply chain finance practices and techniques that support trade transactions, in a manner that minimizes negative impacts and creates environmental, social, and

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Journal Pre-proof economic benefits for all stakeholders involved in bringing products and services to markets. This concept has advanced academic discourse concerning the role of SCF in sustainability improvement (Aliabadi et al., 2018; Tseng et al., 2018; Zhou et al., 2018). Though the role of SCF in improving SC sustainability performance has been brought into focus in industry, it remains under-researched in academia (Tseng et al., 2018). In a recent and comprehensive review of SCF, Xu et al. (2018) demonstrated that there is a lack of research connecting SCF with sustainability. Previous research has generally explored the role of SCF in SC economic sustainability but has ignored its potential for promoting environmental and social performance. Additionally, to the best of our knowledge, no previous research on SCF and sustainability has systematically reviewed the literature on SCF in the context of sustainability. In light of this, the purpose of this paper is to address the following question: How can SSCF solutions facilitate SC sustainable performance? To answer the question, this paper reviewed 47 papers rigorously identified in the Scopus research data base from 2003 to 2018. It examines how the concept of SSCF has developed, the motives, practices, and outcomes of SSCF, and the potential of SSCF to boost overall SC sustainability by satisfying sustainability requirements and overcoming barriers to sustainability. We conclude by identifying the important gaps in the existing research and proposing recommendations for future research directions. Furthermore, this review provides a working definition of SSCF based on the results of literature review. SSCF refers to innovative SCF solutions that can either incentivize and reward the sustainable performance of suppliers and/or retailers, thus facilitating the enablers and mitigating barriers towards sustainable SCM practice, and therefore improve the sustainable performance of the entire supply chain. Following the introduction, Section 2 describes the necessity or rationale for combining SCF and sustainability. Section 3 describes the research method and details the search terms and literature selection process. Section 4 presents the results of the descriptive and thematic findings. Section 5 provides an in-depth discussion of the effects of SCF on sustainability enablers and barriers to sustainable SC management (SCM). Then, on the basis of the findings and discussion, we propose an integrated conceptual framework for SSCF. Section 6 discusses the identified research gaps in the current literature and provides recommendations for future research. Section 7 provides a comprehensive conclusion to this paper.

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Journal Pre-proof 1.

Theoretical Perspective

2.1

Necessity of combining SCF and sustainability

For companies, sustainability challenges in their SCs are considered both risks and potential opportunities; therefore, developing and implementing a sustainability program has become a common practice for enterprises to manage the environmental, social, and economic issues within their SC (Carter & Easton, 2011; Gopalakrishnan et al., 2016). Although the research on sustainable SCM or green SCM has flourished over the past decades, environmental and social issues remain, and there is a call for innovative solutions (e.g., SSCF) (Zhou et al., 2018). Rajeev et al. (2017) conducted a literature review of sustainability in SCM, and noted that while the current literature tends to concentrate on corporate sustainability strategy, it is important to ensure wider consideration of incentives for SC participants to promote sustainable SC on the whole. The viewpoint of Rajeev et al. (2017) is echoed by Zhan et al. (2018), who stated that innovative approaches could further stimulate necessary sustainable development in the SC. Financial barriers are recognised as an obstacle that hinders suppliers’ willingness and enthusiasm to engage in sustainability (Côté et al., 2008; Birkin et al., 2009; Glover et al., 2014). This is particularly true for individual suppliers or small and medium enterprise (SME) suppliers; because of their weak position in the SC, such suppliers tend to be cash constrained or have problems obtaining loans from banks at affordable interest rates (Zhou et al., 2018), which hampers their ability to enhance their sustainability performance. From a buyer’s perspective, a lower level of supplier sustainability engagement can severely affect the efficiency and sustainability of the entire SC. Given the need for innovative approaches to stimulate SC sustainability and the negative effect of financial barriers on ensuring integrated sustainability improvement in the SC, academic research has begun to realize the potential and necessity for considering SCF as an enabler of sustainability (Aljazzar et al., 2018; Liang et al., 2018). In industry, an increasing number of focal companies are realizing the importance of using novel methods to ensure their SC sustainable performance. For example, Puma, a German-based giant in the global apparel industry, has started to integrate the concept of sustainability into their SCF projects. The preevaluation of Puma’s SCF program is not exclusively economically focused, but extends the assessment into other sustainability criteria, which incentivizes sustainable performance in the SC (SCF Briefing, 2017). Also, similar behavior can be observed in the China-based Alibaba Group’s agriculture SCF (Ant Finance). In this project, SCF is used as a reward for better sustainable performance, providing individual suppliers with access to cheap and convenient

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Journal Pre-proof financial resources if the fertilizers and pesticides they use comply with Alibaba’s corporate sustainability standards (Zhou et al., 2018). 2.2

Development of the SSCF concept

In the past decade, the role of financing mechanisms or other approaches in achieving overall sustainability has been widely discussed among academics. The function of SCF as an innovative financing mechanism for encouraging sustainability (Liang et al., 2018) has been gradually developed in the literature (Zhan et al., 2018). Table 1 lists the papers that have promoted the development of the SSCF concept, and summarizes their major contributions to the development of the SSCF concept. [Insert Table 1 here] Glover et al. (2014) conducted a case study of a dairy SC in the UK and stressed access to financial resources as the key barrier to supplier sustainability engagement. In the UK construction industry, Upstill-Goddard et al. (2016) found that lack of financial incentives was another barrier. To overcome these barriers, researchers such as McDermott et al. (2005) believe that suppliers should be offered greater access to financial resources on the basis of sustainable behavior because this may stimulate their sustainability engagement. In exploring the connection between land contamination and the financial viability of SMEs in the context of the UK, McDermott et al. (2005) advocated the idea of using financing strategies to inspire suppliers’ sustainable behavior because their environmental performance can directly affect their access to financial resources. In a social sustainability context, Bhuiyan et al. (2017) and Sim and Prabhu (2017) illustrated that SCF can provide suppliers with better access to financial resources, which is important in improving the livelihood of suppliers, particularly those in rural areas or developing regions. When SCF solutions had been more frequently applied in SC transactions, researchers began to examine financing mechanisms in the SCF context, and gradually related SCF to sustainability, focusing on the relationship between trade credit (a specific type of SCF solution) and sustainability. Tsao (2015) used a modelling method to find that trade credit is important in establishing a carbon-efficient SC, crucial for SC sustainability (Preuss, 2005). To further strengthen the relationship between trade credit and sustainability, Dye and Yang (2015) explored sustainable trade credit in the context of carbon-emission regulations, and

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Journal Pre-proof demonstrated that these regulations tighten the credit period for achieving a carbon-emission reduction. Qin et al. (2015) conducted conceptual development research in which a model was formulated to investigate sustainable trade credit under carbon cap-and-trade and carbon tax regulations, and identified that credit policies can favor reduction of carbon emissions. Moreover, Tsao et al. (2017) formulated a newsvendor model to consider carbon emissions, uncertain demand and trade credit simultaneously, and discovered that retailers’ decision on trade credit (i.e., credit period) can be altered under different carbon control policies (carbon tax, carbon cap and carbon-emission price). Tiwari et al. (2018) stated that trade credit policy can enrich SC sustainable performance by optimizing green production lots and payment times. Zhao et al. (2018), examining the manufacturing industries, stated that trade credit has positive effects on sustainable SC coordination. Aljazzar et al. (2018) focused on the distribution stage of the SC, and noted that taking trade credit can enhance both the environmental and economic performance of the SC. As an increasing number of companies choose to use financing mechanisms, particularly SCF solutions, to seek opportunities for improving sustainability, there are more real-world cases of business integrating sustainability into SCF—this has accelerated research on the concept. For example, Nestlé, the world’s leading food and beverage company, collaborated with local banks in China to offer capital to farmers suffering from capital shortages, not only to resolve their financial difficulties but to encourage them to comply with a sustainable corporate strategy (Gong et al., 2018). The Alibaba Group’s SCF program (Ant Finance) was comprehensively analysed by Zhou et al. (2018), from the perspective of all three dimensions of sustainability (economic, environmental and social), regarding the role of SCF solutions in the agriculture industry in boosting suppliers’ sustainability performance in China. The function of SCF is no longer limited to relieving suppliers’ cash-flow pressure to achieve economic sustainability; it is now thought that SCF can assist suppliers to be more environmentally friendly and optimize social sustainability along the entire SC (Zhou et al., 2018). Zhan et al. (2018) used a quantitative approach to reiterate that SCF solutions, such as reverse factoring, are effective in improving SC efficiency and sustainable development for suppliers and retailers. Liang et al. (2018) discussed the interface between SCF and sustainability from the perspective of SCF providers, and demonstrated that when implementing SCF programs, SME sustainability performance should be evaluated rather than assessing performance only in relation to operational and financial status. The term ‘SSCF’ was first adopted by Tseng et al. (2018), who explored Vietnam’s textile industries and stated that 5

Journal Pre-proof SSCF can facilitate establishing balance among the aspects of the triple bottom line (TBL), and as a result, can reap benefits for SCF providers in terms of risk control and for suppliers in relation to sustainability. 2.

Research Method and Descriptive Analysis

3.1

Research method

The purpose of this paper is to analyze recent research on the overlap between SCF and sustainability. To extend the scope to identify articles relating to SCF in the sustainability context, this paper adopts the approach to a systematic literature review proposed by Tranfield et al. (2003). To capture all the themes in SSCF, we first identified all possible combinations between (‘supply chain’ OR logistics OR ‘value chain’ OR sourcing OR inventory OR procurement OR purchasing) and (Financ* OR ‘trade credit’ OR ‘bank credit’ OR ‘early payment’ OR ‘dela* payment’ OR ‘advanc* payment’ OR ‘capital constraint’ OR ‘financial constraint’ OR factoring OR ‘limited liability’ OR ‘cash conversion cycle’) and (‘corporate social responsibility’ OR CSR OR ‘triple bottom line’ OR environment* OR sustainab*). Then, we put all three strings together in one search to obtain our initial results. The keywords relating to SC or finance are based on Xu et al. (2018), and keywords relating to sustainability are based on Jia et al. (2018). We used the Scopus research database for the initial searches in the ‘Article title’, ‘Abstract’ and ‘Keywords’ search fields. We adopted the following process. We first set a limitation on language type to English only, and on document type to ‘article’. We then limited the areas to the most relevant subject area (see Figure 1). Given that more than 90% of papers in the initial search results were published after 2003, we set the study period from January 2003 to December 2018. After setting these restrictions, 2,204 items were identified in the initial search. These papers were then analyzed by scanning the titles and abstracts according to two broad inclusion criteria (see Figure 1). This process identified 106 papers for the secondround selection, which employed more detailed inclusion and exclusion criteria (see Figure 1). After reading the full text of these 106 papers, we selected 41 to include in the review. To ensure the scope of the review, we also examined the references in the selected papers. If important references were cited, the original sources were considered in the final review. Of these sources, we identified an additional six papers that warranted analysis. As a result, 47 papers were included in the review for the content analysis. The detailed review methodology is presented in Figure 1. 6

Journal Pre-proof [Insert Figure 1 here] 3.2

Descriptive analysis

Figure 2 presents the number of papers relating to SSCF published during the period (2003– 2018). Three stages can be identified. Stage 1 runs from 2003 to 2014. During this stage, a limited number of papers were published each year on the topic (i.e., two or three papers). The total number of papers published from 2013 to 2014 is 14. Stage 2 runs from 2015 to 2017. In 2015, the annual number of papers published increased to six, with approximately the same number of papers published in the following two years (i.e., 2016 and 2017). Thus, a total of 19 papers were published during Stage 2. Significant growth in the number of papers published is found in Stage 3—the year 2018. In 2018 alone, the number of papers published on SSCF was 13, which accounts for more than one-quarter of the total number of papers included in this literature review (47). From the annual distribution of the publications, it is observed that interest in considering the combination of SCF and sustainability continues to increase; therefore, it is expected that there will be more publications in the future. [Insert Figure 2 here] Figure 3 presents the sources that have published two or more papers on this topic. Among all these sources, the Journal of Cleaner Production contributed the greatest number of papers (10), followed by the International Journal of Production Economics (6), Sustainability (3), and Business Strategy and the Environment, Outlook on Agriculture, Journal of Business Logistics, International Journal of Operations & Production Management and Engineering, Construction and Architectural Management, each of which published two articles during the study period. More than 60% of the papers were published in these eight journals, indicating that these journals have played an essential role in SSCF research. The distribution of the journals also suggests that SSCF is an attractive research area in various journals. [Insert Figure 3 here] In relation to our review of the research methodologies adopted in the literature, we found that the modelling method is the dominant method used to examine SSCF, accounting for 68.5% of the research, while the qualitative method ranks second, accounting for 21.0% of the research.

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Journal Pre-proof The empirical method (i.e., survey or secondary-data analysis) is the least frequently used method (10.5%) in the current research. In relation to whether the research focus is on industry or regional, we found that most of the papers discussed this topic by providing a general background without applying a specific research context. Only five papers limited their scope of discussion to a certain industry; these industries included agriculture (Zhou et al., 2018), textiles (Tseng et al., 2018), manufacturing (Zhao et al., 2018), dairy (Glover et al., 2014), and construction (Upstill-Goddard et al., 2016). Only six research papers explored SSCF within the context of a specific region; these regions included Ghana (Bunyaminu & Issah, 2012), the UK (Glover et al., 2014; Upstill-Goddard et al., 2016), Bangladesh (Bhuiyan et al., 2017), Vietnam (Tseng et al., 2018), and China (Zhou et al., 2018). 3.

Thematic Findings

4.1

Motives for SSCF

The reviewed literature connecting financing mechanisms and sustainability inductively identifies four categories of motives that drive the implementation of SSCF: (1) sustainabilityoriented motives, (2) finance-oriented motives, (3) technology-oriented motives, and (4) moraloriented motives. Table 2 introduces the detailed content of these motives and lists all the references accordingly. [Insert Table 2 here] 4.1.1

Sustainability-oriented motives

We identified two major themes related to sustainability-oriented drivers. The first theme is the requirements of stakeholders. When aware of the negative effects of multinational companies’ SCs on the environment and social equity, stakeholders (e.g., non-government organisations, local governments and customers) tend to require companies to engage in higher levels of corporate social responsibility. This places great pressure on companies to manage the environmental and social performance of their SC (Seuring et al., 2008; Carter & Easton, 2011). Zhou et al. (2018) noted that companies are seeking new approaches to mitigate the environmental and social effects generated by their SC to meet their stakeholders’ expectations. Further, Tseng et al. (2018) argued that stakeholders’ satisfaction with corporate sustainable performance can provide companies with a higher level of brand reputation and customer

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Journal Pre-proof loyalty to sustain their competitive advantage (Markley & Davis, 2007), which provides an important incentive for SSCF implementation. The second sustainability-oriented driver is the urgency to manage social issues in developing countries. To reduce the total cost of production, companies tend to outsource their production stages to developing countries, where labor and/or material costs are lower (Mani et al., 2018). However, developing regions generally have incomplete laws and regulations, leading to serious social issues, such as manufacturing using sweat workshops and child labor (Awaysheh & Klassen, 2010). Marshall et al. (2015) stressed that the health and wellbeing of people in the SC is an obvious influence on corporate integrated sustainability performance. Consequently, to ensure a sustainable overall SC, it is necessary for focal companies to ensure that all their suppliers work in accordance with sustainability standards, particularly suppliers that operate in developing regions (Awaysheh & Klassen, 2010). This need has motivated companies to explore innovative methods for better control of their suppliers’ behavior, and, therefore, has encouraged companies to adopt SSCF solutions as a new method to improve performance of the SC in relation to social issues (Tseng et al., 2018) and social inequality (Zhou et al., 2018). 4.1.2

Finance-oriented motives

We identified two major themes relating to finance-oriented drivers. The first is SMEs’ urgency to obtain easier access to cheaper financial resources (Pfohl & Gomm, 2009; Wuttke et al., 2019). Liang et al. (2018) found that SME development is restricted by financial difficulties created by various factors, including enterprise scale (Zhu et al., 2016) and the business growth cycle (Hasan & Cheung, 2018). The lack of access to financial resources not only imposes great pressure on SMEs’ development of core competitiveness, but also hampers their engagement in sustainable practices (Birkin et al., 2009; Patil et al., 2016). As discussed, to ensure integrated sustainability performance along the SC, focal companies need to ensure that all suppliers are conducting their business in accordance with the suppliers’ code of conduct. However, insufficient financial resources impede SMEs’ sustainability engagement and negatively affect achievement of a sustainable SC. In this case, both the focal company and the SME supplier are encouraged to implement SSCF to solve suppliers’ liquidity issues and provide suppliers with more available capital to invest in sustainability improvement (Tseng et al., 2018). The second finance-oriented driver is the need for incentives to ensure sustainability is considered by academics and enterprises. Crals and Vereeck (2005) found that SME suppliers are generally unwilling to prioritize sustainability improvement because it is not directly related 9

Journal Pre-proof to their core business, and will not generate short-term benefits. Thus, suppliers’ sustainability engagement needs to be motivated by immediate financial benefits; otherwise, they consider it a costly and unnecessary activity (Upstill-Goddard et al., 2016). Moreover, Ito (2004) used a case study of prawn farming in Bangladesh to demonstrate that a sustainable restructure may positively influence the livelihood of SME suppliers. Thus, it is advisable for focal companies to provide such suppliers with financial rewards as compensation for the resources allocated on non-core sustainability business and as an incentive to boost their sustainability performance (Ito, 2004; Fenger et al., 2017). As stated in relation to the finance-oriented motivation of the requirements of stakeholders, SCF makes direct contributions to SMEs’ financial performance (Tseng et al., 2018); thus, stimulating SMEs’ sustainability through SCF solutions contributes an important motivation to SSCF implementation. 4.1.3

Technology-oriented motives

The technology-oriented motives for SSCF are not frequently discussed in the literature. However, the case study of the Alibaba Group conducted by Zhou et al. (2018) identified a positive association between the use of technology and SSCF implementation. This is because technology enables financial service providers to simplify the financial service process, assisting in cost reduction and increasing their ability and willingness to serve (Zhou et al., 2018). In addition, Wuttke et al. (2013) found that the implementation of technologies has increased the automation of SCF programs, and enhanced information transparency in SCs, which, in turn, decreases the difficulty of managing and evaluating suppliers’ sustainable behavior. Thus, employing technology enables innovative SCF solutions and promotes SSCF implementation. 4.1.4

Moral-oriented motives

Apart from those extrinsic motives (sustainability, finance, and technology), we noted that there is an emerging argument that the factors motivating corporate sustainable initiatives are not only extrinsic but intrinsic (Müller & Kolk, 2010; Morais & Silvestre, 2018). Müller and Kolk (2010) argued that corporate social performance is highly related to management commitment to ethics, and therefore, that organizational values and ethical principles can act as driving forces behind corporate sustainable performance. This perspective is echoed by Morais and Silvestre (2018), who argued, based on six case studies, that companies’ commitment to SC sustainability may be intrinsically motivated, and may encourage companies to seek SC collaborations and other innovative methods to reinforce sustainable performance along the SC. 10

Journal Pre-proof Therefore, moral-oriented factors can boost SSCF development and implementation, as SSCF is an innovative approach that can achieve better SC sustainable performance and collaborative relationships between focal companies and their stakeholders (Tseng et al., 2018; Zhou et al., 2018). 4.2

SSCF practice

Given that the concept of SSCF has only recently been proposed in 2018 (BSR, 2018; Tseng et al., 2018), there is limited literature on the detailed practices involved in SSCF. Most research that builds a connection between sustainability and SCF tends to build the correlation between SCF and sustainability without demonstrating or discussing any specific SSCF practices. However, from this limited literature, two detailed SSCF practices are identified. The first is using SSCF as incentives to sustainable performance in the SC by setting sustainable criteria in the SCF program (Liang et al., 2018; Tseng et al., 2018; Zhou et al., 2018). This practice extends the focus of pre-evaluation of an SCF program from a purely economic assessment to considering the sustainability performance of SCF receivers (Liang et al., 2018). In this practice, the level of supplier sustainability engagement may affect the ability to gain benefits from the SCF program (e.g., a better discount rate for accounts receivable). For example, Puma uses a system that evaluates suppliers on how they perform in terms of environmental and social criteria; Puma also started an SSCF project named Puma Vendor Financing Programme, which offers better financing to those suppliers who achieve higher sustainability ratings or devote themselves to green manufacturing to ensure the Puma SC performance (SCF Briefing, 2017). This practice has provided companies with a more comprehensive mechanism for supplier assessment, and enhanced the collaborative relationship with suppliers in sustainable SCM (Zhou et al., 2018). Thus, using SCF as incentives by setting sustainable criteria in the SCF program effectively promotes sustainability performance along the SC. Another specific SSCF practice detailed in the literature is using SSCF as rewards for sustainable performance in the SC by providing loans for suppliers’ sustainable initiatives. This practice was used by the Alibaba Group’s agriculture SCF (Ant Finance), which provides individual suppliers access to finance if they choose materials (e.g., fertilizers and pesticides) that comply with corporate sustainability standards (Zhou et al., 2018). Zhou et al. (2018) argued that this practice enables companies to ensure suppliers’ sustainable behavior in the production stage, which leads to a stricter supplier-monitoring system that eventually promotes the sustainable development of the SC. In addition, this practice solves the problem of lack of 11

Journal Pre-proof short-term tangible benefits affecting suppliers’ sustainability engagement (Tseng et al., 2018). Thus, using SCF as rewards by providing loans for suppliers’ or retailers’ sustainable initiatives effectively promotes the sustainable performance along the SC. Apart from these two SSCF practices, from the literature, we also noted that trade credit has potential in promoting SC efficiency, and hence increasing SC environmental sustainability. Although trade credit is not an innovative SSCF solution, it still helps to build the link between SCF and sustainability achievement. Aljazzar et al. (2018) noted that trade credit can benefit carbon-emission reduction in the SC, especially in the distribution stage. Under the trade credit solution, buyers can enlarge the amount of each order, thus reducing the number of orders (Tsao, 2015) and increasing truck capability utilisation, inducing a reduction in the number of trucks used for shipment (Aliabadi et al., 2018). Consequently, carbon emissions along the SC are lowered (Aljazzar et al., 2018; Sarkar et al., 2018). 4.3

Outcomes of SSCF

Using SCF as a method to tackle sustainability issues can lead to several positive outcomes for SCF participants. The positive outcomes generated from SSCF solutions are categorized into environmental benefits, social benefits, and economic benefits. The detailed content of each outcome and the related references are shown in Table 3. [Insert Table 3 here] First, SSCF can lead to environmental benefits because SSCF can be used as an incentive to motivate suppliers to promote green products in the upstream SC (Liang et al., 2018; Zhou et al., 2018). Zhou et al. (2018) researched the Alibaba Group’s SCF program (Ant Finance) in the agriculture industry, and noted that suppliers are encouraged to purchase environmentally friendly fertilizer and other production materials with the ‘purchase credit’ offered by the Alibaba Group. This program is effective in restricting suppliers’ material selection, thus reducing supplier consumption of contaminated materials and improving the environmental performance of the entire SC. Liang et al. (2018) also argued that under the risk of being constrained or even having access to SCF resources terminated, suppliers tend to pay more attention to their sustainability performance in the stages of material selection and production processing, thus decreasing their negative environmental externalities in the production stage. Tseng et al. (2018) explored the Vietnamese textile industry, and found a positive relationship

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Journal Pre-proof between adopting SCF and the level of investment in green technology. Thus, offering SME suppliers SCF can encourage their engagement in environmental sustainability. Carbon emissions within the SC can also be reduced with the help of SCF. Solutions such as trade credit policies can lower carbon emissions (Qin et al., 2015) because under trade credit policies, buyers tend to increase the amount of each order, leading to fewer orders (Tsao, 2015). This in turn decreases the number of annual shipments and increases truck capacity utilisation, which directly leads to a smaller number of trucks being used for shipment (Aliabadi et al., 2018). Thus, the SC’s total carbon emission is reduced (Aljazzar et al., 2018; Sarkar et al., 2018). Second, apart from environmental outcomes, social sustainability can be accomplished through SSCF. Because of SCF programs, suppliers in underdeveloped areas have greater opportunities to access financial resources (Sim & Prabhu, 2017). With the assistance of cheaper loans, suppliers’ profitability is likely to increase. Thus, suppliers have more available money to access better education or expand their business (Bhuiyan et al., 2017). Thus, SCF is useful in alleviating poverty, particularly for individual suppliers. Social equality is also enhanced through implementing SCF programs. In the agricultural industry, the high requirement for collateral in traditional financial approaches excludes small suppliers with financing needs; however, SCF solutions offer such suppliers affordable and available trade credit, which to some extent alleviates social inequality (Zhou et al., 2018). Zhou et al. (2018) also noted that SSCF in the agricultural context can ameliorate the food-safety problem because the materials used in the cultivation and production stages are strictly controlled by the SSCF contract for cleanliness and sanitation, as only selected material purchasing can be financed according to the agreed SSCF contract. Third, given that the primary goal of SCF is to manage suppliers’ financial issues, economic outcomes of SCF have been far more widely discussed in the literature than have environmental and social outcomes. Tseng et al. (2018) noted that for suppliers, accepting SCF services can alleviate liquidity issues and lead to corporate profit and economic growth (Sim & Prabhu, 2017; Zhan et al., 2018). For focal companies, implementing SSCF increases the level of supplier compliance with corporate sustainability strategies and enhances trust in the SC (Thomas et al., 2016), resulting in a better SC relationship (Seuring et al., 2008). Meanwhile, adopting SSCF can also lead to an integrated sustainable SC and a favorable corporate image, thus gaining greater competitive advantage (Beske-Janssen et al., 2015). Competitive advantage and improved SC relationships then facilitate corporate sustainable economic development (Zhou et al., 2018). 13

Journal Pre-proof An economically sustainable outcome for SCF providers appears to be omitted in the literature. Liang et al. (2018) argued that considering the TBL in SCF evaluation is also significant for SCF providers’ economic sustainability because of its ability to promote risk mitigation; if SCF adopters do not comply with sustainability standards, they face the risk of shutdown. The closure of SCF adopters may inevitably cause tremendous losses for the SCF provider (Liang et al., 2018). Thus, clearly, offering SSCF can reduce suppliers’ default risk and create more sustainable economic growth for SCF providers. 4.

Discussion

As stated in the thematic findings, it is noteworthy that current literature relating to SSCF tends to focus on the motives for and outcomes of SSCF, while a focus on sustainable practices (i.e., on how SSCF influences sustainability) is relatively scarce. Therefore, in this section, to further investigate the role of SCF in promoting a sustainable SC, we extend the scope of the analysis of the literature on SCF and make a link to sustainable SCM. To achieve this, we identify two types of mediators—sustainable SC enablers and barriers—that mediate the relationship between SSCF solutions and SC sustainable performance. An integrated conceptual model, based on the discussion and literature review, is proposed. 5.1

SCF and sustainable SC enablers

To achieve an integrated sustainable SC, focal companies should ensure that their SC operates with efficiency and responsiveness (Hall et al., 2011). Silvestre (2015) summarized integration, collaboration and innovation as three interrelated enablers that contribute to a sustainable SC by satisfying the need for efficiency and responsiveness of SC players. Zhou et al. (2018) argued that SCF is critical for the SC to reach comprehensive sustainability through strengthening SC collaboration and cooperation. Therefore, there are potential connections between SCF and a sustainable SC. 5.1.1

SC integration

SCF solutions can improve SC sustainability by enhancing SC integration. Integration is essential for promoting sustainability performance in SCs, mainly because the higher degree of integration can result in more efficient material and information flows (Silvestre, 2015). In the context of SC networks, Van Bommel (2011) indicated that SC structure is not simply linear; rather, it is a sophisticated net structure that involves multiple players in the SC, which highlights the importance of SC integration in achieving a sustainable SC. Among the elements 14

Journal Pre-proof that enhance this integration, a coordination mechanism is considered essential for promoting SC integration (Cagliano et al., 2006) and sustainability (Silvestre, 2015; Tasdemir & Gazo, 2018). One of the major contributions of SCF solutions to the SC are their capability to improve the coordination mechanism along the SC (Lee & Rhee, 2011). Caniato et al. (2016) summarized the literature relating to SCF and SC coordination mechanisms, and noted that by relying on financial-flow management, SCF solutions can positively influence the coordination of the SC as a whole (Lee & Rhee, 2011). Insufficient financial management in the SC might lead to capital issues for both suppliers and buyers along the SC, thus lowering the efficiency and effectiveness of the SC and exerting a negative effect on the coordination mechanism (More & Basu, 2013). Zhao et al. (2018) argued that SCF solutions can decrease financing costs, and that in such a case, coordination can be promoted because the financing costs and transfer payments are shared among the related participants. Lee and Rhee (2011) further proposed that providing suppliers with trade credit may encourage them to coordinate with retailers’ decisions, and therefore improve the coordination mechanism within the SC. Zhao et al. (2018) concluded that profit win–win outcomes resulting from coordination are key to a sustainable SC. SCF solutions are an advisable method for attaining mutual benefits for suppliers and retailers. Adverse factoring can provide financial benefits for suppliers (Zhan et al., 2018), while delay-in-payment can provide economic benefits for retailers (Aljazzar et al., 2018; Zhan et al., 2018). Consequently, the effectiveness of the coordination mechanism is influenced by SCF (Zhao et al., 2018). In addition, Silvestre (2015) argued that the extent of information and communication technology affects the result of coordination, while Wuttke et al. (2013) noted that the popularity of platforms applied to SCF solutions can increase the extent of technology implementation in the SC, and therefore can enhance the coordination mechanism of the SC. Thus, SCF can benefit the coordination mechanism and as a result influence SC integration. Given that integration is required in an integrated sustainable SC, SCF can benefit SC sustainability performance by satisfying the requirement for SC integration. 5.1.2

SC collaboration

SCF solutions can promote SC collaboration and further facilitate the achievement of SC sustainability. Collaboration among SC participants can enable a sustainable SC (Silvestre, 2015; Chen et al., 2017; Zhan et al., 2018). Among all the collaborative relationships in SCF practices, collaborating with suppliers is highly valuable (Kim & Rhee, 2012; Walker & Brammer, 2012; Marshall et al., 2014; Feng et al., 2018) because it contributes to attaining the 15

Journal Pre-proof resources and capabilities for sustainable development (Chen et al., 2017). There are several viable approaches for enhancing collaboration with suppliers; for example, communication (Walker & Brammer, 2012), developing mutual trust (Kim & Rhee, 2012), and supplier assessment and monitoring (Marshall et al., 2014). In relation to SCF, most studies have focused on how collaboration can facilitate SCF implementation; few have focused on how SCF can impress collaboration in the SC. Caniato et al. (2016) highlighted the significant role of collaboration in effective financial-flow management in the context of SCF, and considered collaboration the basis of an effective SCF solution. Therefore, implementing SCF can drive focal companies to pay more attention to establishing better relationships with SC participants to allow a higher level of integrated collaboration. In a case study of six European companies, Wuttke et al. (2013) found that the implementation of an SCF program can increase the communication frequency of suppliers and the focal company, thus contributing to the development of collaboration with suppliers in terms of ameliorating financial issues in the SC. Apart from enhancing communication, SCF can benefit collaboration in relation to supplier assessment (Liang et al., 2018; Tseng et al., 2018) and monitoring (Zhou et al., 2018). There is a call for broadening the supplier-assessment dimension before implementing SCF. It is considered inadequate to simply consider the economic aspects of suppliers; the sustainability performance of suppliers should also be included in assessments (Tseng et al., 2018). Liang et al. (2018) further stressed that assessment should comply with the TBL, thus coordinating social performance and environmental performance. A full-scale assessment can positively affect supplier collaboration, resulting in better supplier sustainability performance (Sancha et al., 2016). Additionally, in their case study of the Alibaba Group, Zhou et al. (2018) concluded that SCF can act as a supplier-monitoring mechanism to encourage suppliers’ sustainability performance. Thus, SCF can lead to more integrated supplier assessment and monitoring, which may directly guarantee suppliers’ sustainability performance, while integrated supplier assessment and monitoring may satisfy sustainable SC requirements for collaboration, which also has potential in tackling sustainability issues in the SC. Further, Kim and Rhee (2012) explored the interaction between mutual trust and supplier collaboration, finding that emerging technologies adopted in SCF programs (e.g., blockchain) are effective in improving information transparency (Gelsomino et al., 2016), thus helping to solve trust issues among the SC participants (Francisco & Swanson, 2018). As discussed, SCF can improve the sustainability performance of the SC because it promotes SC collaboration, which is one of the enablers of a sustainable SC, by means of 16

Journal Pre-proof realizing better communication, integrated supplier assessment and monitoring, and establishing mutual trust between SCF providers and receivers. 5.1.3

SC innovation

SCF solutions enable SC innovation and thus encourage sustainable SC development. Silvestre (2015) argued that implementing a sustainable SC relies on innovation, which can enable SC participants to explore and adopt new capabilities, in turn boosting the development of more sustainable practices within the SC. Wuttke et al. (2013) considered SCF as a tool of financialmanagement innovation to provide companies with novel capabilities to solve their liquidity issues, stating that SCF serves as a catalyst for SC innovation. Moreover, Oke et al. (2013) identified the interaction between SC integration, collaboration and innovation and confirm that higher integration and closer collaboration within the SC favor innovation performance along the SC. Referring back to the previous discussion on the positive relationship between SCF and SC integration and collaboration, both SC integration (Lee & Rhee, 2011; Zhan et al., 2018) and collaboration (Zhou et al., 2018) are promoted by SCF adoption; thus, SCF adoption can indirectly boost SC innovation by enhancing the level of SC integration and collaboration. This discussion demonstrates the possible connection between SCF and enablers of a sustainable SC. Thus, research finds that SCF can promote sustainability performance and lead to a more comprehensive sustainable SC by promoting the sustainable SC enablers of SC integration, collaboration, and innovation. 5.2

SCF and sustainable SC barriers

Although a focal company might generally devote itself to engaging in sustainable practices, the outcomes of this engagement are affected by obstacles in the SC, which can complicate and prevent effective and efficient sustainable practice (Seuring & Müller, 2008). Seuring and Müller (2008) noted the significant influence of supplier-related barriers on sustainability. Crals and Vereeck (2005) focused on SME suppliers and identified lack of financial resources, lack of short-term gain and poor supplier management as major obstacles that severely impede SME suppliers’ sustainable behavior and integrated SC sustainability. To solve these issues, Zhan et al. (2018) proposed the idea of adopting SCF as an innovative method to manage SME suppliers’ sustainability obstacles and encourage the sustainability performance of the entire SC (Liang et al., 2018; Zhou et al., 2018).

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Journal Pre-proof 5.2.1

Financial barriers

SCF solutions are able to promote SC sustainable development through easing financial barriers for SME suppliers. Lack of access to convenient and low-cost financial resources is one of the major barriers jeopardizing SME suppliers’ sustainable development (Crals & Vereeck, 2005; Côté et al., 2008; Glover et al., 2014). Capital is indispensable for sustainable development (Seuring & Müller, 2008; Zhou et al., 2018) because it can be leveraged to purchase green technology, which will enrich environmental sustainability, or used to engage in philanthropy to contribute positively to social sustainability. The entire SCM is promoted by the focal company. This company tends to set sustainability strategies and guarantee the compliance of all the participants along the SC (Grimm et al., 2016). Focal companies are generally economically powerful and engage in cooperation with various governmental and financial institutions. However, owing to weak positions in the SC, some SME suppliers have liquidity issues as their bargaining power is relatively low compared with focal companies, and therefore have problems in shortening their cash conversion cycle. Being influenced by factors such as business scale and financial status (Zhu et al., 2016), such SME suppliers neither have access to available and affordable loans via traditional financing methods nor are prioritized in the lending list of financial institutions, and are thus unable to relieve their cash-flow problem (Liang et al., 2018). Such liquidity issues limit these SMEs’ resources available for sustainable development (Birkin et al., 2009; Glover et al., 2014). These supplier liquidity issues may be solved by adopting SCF solutions. Solutions such as reverse factoring enable SME suppliers to leverage their high-quality buyers’ credit risk to lower their own credit risk (Gelsomino et al., 2016), thereby increasing financial institutions’ willingness to arrange credit for weak SC members (Gelsomino et al., 2016). In addition, through reverse factoring, suppliers’ debt cost is generally lower than traditional financing cost (i.e., short-term loan), which further alleviates supplier liquidity issues, thus contributing to profit and economic growth (Tseng et al., 2018). Such SCF solutions mitigate suppliers’ problems in accessing adequate and affordable financial resources (Wuttke et al., 2019), which can eventually encourage their participation in sustainability initiatives (Zhan et al., 2018). 5.2.2

Short-term returns

SCF can boost sustainability performance by resolving the problem of inadequate short-term returns in the sustainability program. It is believed that insufficient short-term returns to sustainability are also a barrier to SME suppliers’ engaging in sustainable behavior (Crals & Vereeck, 2005). To ensure the sustainability of the SC as a whole, focal companies demand that 18

Journal Pre-proof suppliers engage in sustainability activities (Grimm et al., 2016). Thus, suppliers are required to reject less sustainable approaches to doing business and engage in practices that maintain a balance between economic, environmental, and social performance (Carter & Easton, 2011). However, SME suppliers can face difficulties in allocating resources to activities that are indirect to their core business (Côté et al., 2008) because of the lack of a guarantee of shortterm returns to these sustainable activities (Crals & Vereeck, 2005). Therefore, SME suppliers, particularly those that have financial problems, may consider sustainable development an unnecessary expense (Upstill-Goddard et al., 2016). Thus, improving the expected short-term returns for sustainable behavior is important for enhancing supplier sustainability engagement (Côté et al., 2008). As discussed, SCF can provide immediate benefits for adopters’ liquidity status and lead to economic growth (Tseng et al., 2018), thus satisfying suppliers’ expectation of short-term returns. Before implementation, suppliers are evaluated according to their economic indicators (e.g., asset quality and profitability) (Liang et al., 2018). However, there is discussion on the benefits of adding innovative thresholds to the evaluation system, which may mean that financial status is not the only measurement criterion, and that sustainability performance is also evaluated before providing suppliers with SCF support (Liang et al., 2018). Such a strategy means that only suppliers that sufficiently engage in sustainable practices qualify to receive the economic benefits of SCF programs. This practice integrates sustainable practice with SCF, and uses access to SCF support as a reward for supplier sustainability performance, thus ultimately promoting supplier enthusiasm for engaging in sustainable practices by offering them shortterm returns for such engagement. 5.2.3

Poor supplier management

Adopting SCF can improve supplier assessment and monitoring to solve the issues of poor supplier management in the SC, thereby facilitating the achievement of better SC sustainability performance, particularly when businesses are located in developing countries. The expansion of the corporate global market means that SCs of focal companies operate across the world (Silvestre, 2015). As a result, an increasing number of suppliers are located in developing countries. These suppliers’ compliance with sustainable practices is essential for the sustainability performance of the entire SC, as suppliers’ sustainable practices are closely related to the sustainable performance of the buying company, which directly contributes to that of the entire SC (Awaysheh & Klassen, 2010). However, owing to the absence of institutional regulations in developing regions, unsustainable behavior, such as informal 19

Journal Pre-proof activities, emerges in the upstream SC (Silvestre, 2015). In addition, diversity in geography and culture further complicates communication with suppliers in different regions (Carter & Rogers, 2008), thus resulting in poor supplier management. The increasing number of suppliers in various regions adds functional complexity to the SC, which abets misconduct, such as corruption, within the SC (Arnold et al., 2012; Silvestre et al., 2018), thereby diminishing the sustainability of the entire SC. SCF helps to improve supplier management issues through improving communication, and supplier assessment and monitoring. SCF programs facilitate relationship building between suppliers and focal companies because they increase the communication frequency between these parties (Wuttke et al., 2013), which in turn reinforces supplier management (Theodorakioglou et al., 2006) and helps to control SC corruption (Azevedo et al., 2012). It is also enhanced by technology implementation in SCF, which enables a higher level of information transparency among SC participants (Gelsomino et al., 2016). Apart from enabling better communication with suppliers, adopting SCF can further results in stricter monitoring mechanism for suppliers, thereby ameliorating supplier management in SC (Zhou et al., 2018). There is a trend towards considering non-economic indicators in supplier evaluation before SCF implementation (Liang et al., 2018; Tseng et al., 2018). With a more comprehensive pre-loan investigation, SCF can act as a monitoring mechanism in developing countries, where suppliers adopting SCF solutions are strictly assessed and monitored in relation to material selection and ethical operations (Zhou et al., 2018), leading to supplier management improvements. This discussion has identified the role of SCF in overcoming barriers to sustainable SCs. The discussion finds that it is possible to leverage SCF to improve the sustainability of the SC by resolving issues that hinder sustainability performance. 5.3

Integrated conceptual framework

On the basis of the thematic findings and the discussion above, this paper proposes an integrated conceptual framework of SSCF (see Figure 4). [Insert Figure 4 here] Motives for SSCF are shown on the left of the framework, where the motives are categorised into three types according to their distinct attributes. Stakeholder requirements and need to tackle social issues in developing countries are categorised as sustainability-oriented motives; 20

Journal Pre-proof SME suppliers’ needs for access to financial resources and incentives for sustainability engagement are categorized as finance-oriented drivers; technology implementation in the context of SCF is categorized as a technology-oriented motive; and organizational value and ethical principles are categorized as moral-oriented values. In the middle of the framework, major SSCF practices or mechanisms are identified from the reviewed literature, including adopting trade credit for SC efficiency improvement to achieve sustainability, SCF as incentives by setting sustainable criteria in the SCF evaluation, and SCF as rewards by offering loans for suppliers’ sustainable behavior. Next, the framework lists the enablers of and barriers to sustainable SC, and regards these as two mediators that affect the effectiveness of SSCF in sustainable SC performance. The framework further elaborates the mediators and concludes that sustainable SC enablers, including SC integration, collaboration, and innovation, are facilitated by SSCF solutions, leading to sustainable SC performance improvement. Meanwhile, this framework identifies barriers to SC sustainability, such as insufficient financial resources, short-term incentives, and supplier management. These barriers to SC sustainability may be mitigated by SSCF solutions. In this case, SSCF may indirectly facilitate SC sustainable performance through promoting sustainable SC enablers and resolving sustainable SC barriers. The outcomes of implementing SSCF solutions are categorised into economic, environmental, and social sustainability improvements, and are listed at the right side of this framework. 5.

Gaps and Future Research Directions

Although there is discussion among academics on integrating SCF with sustainability, only 19 articles in the reviewed literature directly establish a relationship between sustainability and SCF, and only two articles refer to this combination as ‘SSCF’. As an emerging research topic, SSCF should receive further research attention. Through the literature review, this paper has identified several gaps in the literature on SSCF, and proposes recommendations to address each identified gap. Both the gaps and recommended research directions are listed in Table 4. Additionally, this paper illustrates the connections between the gaps and provides recommendations for future research, which are presented in Figure 5. [Insert Table 4 here]

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Journal Pre-proof 6.1

Gaps and future research directions in SSCF in general

First, the major gap in the current SSCF literature is the lack of SSCF practice, principally because the discussion on SCF tends to focus on financial and operational improvements, and sustainability is not prioritized. Recent research related to SSCF focuses on the motives for and outcomes of SSCF, while few studies (Zhan et al., 2018; Zhou et al., 2018) focus on exploring how SSCF can benefit sustainability along the entire SC. Thus, research on this topic should focus on the innovative solutions provided by SSCF that can facilitate building a general theory for SSCF. Second, unlike topics such as sustainability or SCs, in which various theories are applied, SSCF lacks theoretical support. All the selected articles that contribute to the development of the concept of SSCF do not use theory as a theoretical basis for SSCF, showing the topic is at an early stage of development. Future research should embed appropriate theories into SSCF research. Third, lack of industry focus is identified as a gap in the literature. Discussing SSCF within the context of a particular industry can add value. However, there is only limited literature that discusses SSCF in a particular industry, for example, agriculture (Zhou et al., 2018), textiles (Tseng et al., 2018), manufacturing (Zhao et al., 2018), dairy (Glover et al., 2014), and construction (Zhao et al., 2018). Future research should provide industry-focused explorations related to SSCF. This may be particularly useful in the agricultural sector, where sustainability is particularly important because of the consumption of natural resources and the labor-intensive nature of the agriculture SC (Maloni & Brown, 2006). The major barrier to sustainable development in the agricultural industry is poor access to financial resources for SMEs and individual suppliers. This lack of access hampers their capability and willingness to engage in sustainable practices (Patil et al., 2016; Zhou et al., 2018). Zhou et al. (2018) examined the Alibaba Group’s agricultural finance program, in which SCF solutions are adopted as both enablers and rewards for sustainability performance in the agricultural SC. This research demonstrates that setting a threshold for sustainable practice in the SCF program before implementation can encourage suppliers’ sustainable behavior regarding green production, addressing environmental issues and social issues in the production stage (Zhou et al., 2018). Thus, future research should examine SSCF in the agricultural sector to provide evidence that helps to justify the use of SCF in promoting sustainability in agricultural SCs. Fourth, there is insufficient regional focus in the present SSCF research. Future research on SSCF can investigate SSCF in different regions with distinct economic characteristics in 22

Journal Pre-proof different types of developing country (e.g., medium high income, medium low income, and low income). Corporate activities expanding operations over the globe have had a great influence on society and led to a series of important social issues (Awaysheh & Klassen, 2010). As noted in the thematic findings, tackling social issues in developing countries is considered an SSCF enabler, and SCF solutions are effective in dealing with social inequality and informal activities in the SC, particularly in developing countries. Therefore, future research should explore the role of SCF in improving social sustainability in developing countries. Fifth, modelling is dominant in the current SSCF research, but limited empirical methodologies have been applied in the research. De Boer et al.’s (2017) case study of Starbucks is an exception. De Boer et al. (2017) found that Starbucks collaborates with thirdparty SCF providers to provide suppliers in developing countries with access to lower interest rate financial resources to promote their sustainability performance. In addition, Puma rates suppliers on the basis of the extent to which they adhere to Puma’s social and environmental standards—the greater the level of compliance, the lower the cost of the financial resources they receive (De Boer et al., 2017). By implementing this strategy, Puma leverages SCF as a reward for suppliers’ sustainable behavior (De Boer et al., 2017). Therefore, future research should use empirical methods and case studies to obtain a better understanding of SSCF. 6.2

Gaps and future research directions of SSCF motives and outcomes

Continuing from the gaps identified for SSCF in general, there are gaps specific to SSCF motives and outcomes. Sixth, regarding the gap in relation to understanding SSCF motives, there are disparities in the degree of focus on the three motives (sustainability, finance, and technology). Generally, sustainability-oriented motives and finance-related motives have been widely discussed; however, technology-oriented motives have received less attention. Wuttke et al. (2013) found that increasing technology implementation in SCF programs increases information transparency, and further improves the assessment of suppliers’ overall behavior. Only one paper illustrated the positive effect of technology on SSCF implementation (Zhou et al., 2018). To gain better understanding of how technology enhances the integration of sustainability with SCF, future research should examine the extent to which innovative technologies can enable SCF to promote SC sustainability. Seventh, disparity in the level of research focus is also observed in sustainable outcomes. Most of the reviewed literature has explored the environmental and economic outcomes of adopting SSCF programs, with only limited research mentioning or investigating how SSCF solutions can benefit the social performance of the SC. This gap should be addressed in future research 23

Journal Pre-proof by highlighting the role of SSCF solutions in alleviating social issues, such as food safety or social equity. 6.3

Gaps and future research directions of SSCF in practice

Eighth, there is a gap in the current research in relation to SSCF practice. Most of the research in relation to SCF practice and sustainability tends to explore how carbon regulation may affect the trade credit decision, thus influencing SC sustainability performance, instead of demonstrating the detailed innovative SCF practices that ensure the improvement of sustainability within the SC. Among those papers stating the SSCF practices, we identified only three articles that specifically demonstrate detailed SSCF practices (SCF as incentives by setting criteria for SCF evaluation and SCF as rewards by offering credit for suppliers’ sustainable behavior). However, all other papers discussed this topic in general terms; for example, exploring motives and outcomes or examining the relationship between trade credit adoption and sustainability improvement, rather than studying innovative SSCF practices or mechanisms. Thus, future research should identify and provide in-depth discussion of innovative SSCF practices or mechanisms. Ninth, when exploring the effects of SSCF on SC sustainability, most of the literature focuses on improving upstream (supplier) sustainability performance with the help of SCF solutions such as reverse factoring. Only two studies focused on the downstream SC and investigated the influence of SCF solutions on downstream (retailer) sustainability performance (Zhan et al., 2018; Zhao et al., 2018). Given that a comprehensive sustainable SC requires all SC participants to adhere to the guidelines of corporate sustainability, future research should extend the focus from suppliers to a wider range of SC participants who will also benefit from SCF solutions (e.g., retailers), and aim to demonstrate the positive effect of SCF on the sustainability of the entire SC. Tenth, when examining the role of SCF in enhancing a sustainable SC’s enablers of collaboration, we note that most research examines collaboration with suppliers. However, the collaborative relationships required by a sustainable SC encompass more than the supplier– buyer relationship. Chen et al. (2017) concluded that although supplier collaboration is key to the development of a sustainable SC, the players in the downstream (e.g., customers and other organisations) are also significant to the overall sustainable development of the SC. Moreover, in the SCF context, collaboration with SCF providers (e.g., financial institutions, fintech companies, and logistics providers) is vital to SCF outcomes (Hofmann, 2005). Therefore, it is worth exploring in future research whether SCF can enhance other forms of collaboration 24

Journal Pre-proof between focal companies and customers or SCF providers, and thus contribute to ensuring a sustainable SC. [Insert Figure 5 here] 6.

Conclusion

This review has investigated the relationship between SCF and sustainability, with the aim of summarizing the role of SCF in promoting SC sustainability. Forty-six papers published from January 2003 to December 2018 were reviewed. In the thematic findings, the development of the concept of SSCF was discussed, and the drivers and outcomes of SSCF identified. To further explore the potential to use SCF as an enabler of sustainability, this review discussed the function of SCF in promoting sustainability enablers as well as in tackling sustainability barriers. The review then synthesized the thematic findings and discussion results in an integrated conceptual framework. Finally, on the basis of the findings and discussion, the review identified several gaps in the current research and suggested viable approaches for future research. This review makes an important theoretical contribution to the SCF literature. First, to our knowledge, it is the first study that systematically reviews all articles relating to SCF and sustainability. Prior literature on SSCF topics tends to review SCF and sustainability separately, thereby failing to build a connection between the two areas of research, and limiting the contribution to the development of the concept of SSCF. By illustrating the potential to use SSCF to facilitate enablers of and mitigate barriers to sustainable SC, this review develops a theoretical framework to explain how SSCF solutions can be leveraged to enhance SC sustainability, thereby justifying the topical feasibility of SSCF. In addition, by identifying research gaps and proposing future research directions, this review enabled the comprehensive development of the concept of SSCF. Second, this review define the concept of SSCF based on findings of the literature review for the first time and proposed a framework that identifies the drivers and outcomes of SSCF, and builds direct connections between SCF solutions and sustainability improvement. Further, this review investigated the role of SCF in promoting SC sustainability by discovering to what extent SCF solutions can promote sustainable SC enablers and overcome barriers to sustainability. Some of the content of the framework (i.e., SSCF practice) was drawn from case study research and corporate reports. This endows this review with managerial contributions,

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Journal Pre-proof as following this framework, companies might better understand SSCF, and adopt SSCF solutions in their SC to optimize their SC cash flow and achieve better SC sustainability. We also acknowledge the limitations of the study. First, the reviewed literature was selected using only the Scopus research database. Extending the search scope by using other databases might reap further insights into this topic. Second, grey references were excluded from the review; however, as an emerging area of research, grey references such as conference papers or research reports might be helpful to gain a better understanding of SSCF. Third, this review focused only on journal articles in English, thus omitting literature in other languages, which may have enlightened this literature review.

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Journal Pre-proof Müller, A. & Kolk, A., 2010. Extrinsic and intrinsic drivers of corporate social performance: Evidence from foreign and domestic firms in Mexico. Journal of Management Studies, 47(1), pp. 1–26. Oke, A., Prajogo, D.I. & Jayaram, J., 2013. Strengthening the innovation chain: The role of internal innovation climate and strategic relationships with supply chain partners. Journal of Supply Chain Management, 49(4), pp. 43–58. Preuss, L., 2005. Rhetoric and reality of corporate greening: A view from the supply chain management function. Business Strategy and the Environment, 14(2), pp. 123–139. Qin, J., Bai, X. & Xia, L., 2015. Sustainable trade credit and replenishment policies under the cap-and-trade and carbon tax regulations. Sustainability, 7(12), pp. 16340–16361. Rajeev, A., Pati, R.K., Padhi, S.S. & Govindan, K., 2017. Evolution of sustainability in supply chain management: A literature review. Journal of Cleaner Production, 162, pp. 299– 314. Sancha, C., Gimenez, C. & Sierra, V., 2016. Achieving a socially responsible supply chain through assessment and collaboration. Journal of Cleaner Production, 112, pp. 1934– 1947. Sarkar, B., Ahmed, W. & Kim, N., 2018. Joint effects of variable carbon emission cost and multi-delay-in-payments under single-setup-multiple-delivery policy in a global sustainable supply chain. Journal of Cleaner Production, 185, pp. 421–445. Seuring, S. & Müller, M., 2008. From a literature review to a conceptual framework for sustainable supply chain management. Journal of Cleaner Production, 16(15), pp. 1699– 1710. Seuring, S., Sarkis, J., Müller, M. & Rao, P., 2008. Sustainability and supply chain management—An introduction to the special issue. Journal of Cleaner Production, 16(15), pp. 1545–1551. Silvestre, B.S., 2015. Sustainable supply chain management in emerging economies: Environmental turbulence, institutional voids and sustainability trajectories. International Journal of Production Economics, 167, pp. 156–169. Silvestre, B.S., Monteiro, M.S., Viana, F.L.E. & de Sousa-Filho, J.M., 2018. Challenges for sustainable supply chain management: When stakeholder collaboration becomes conducive to corruption. Journal of Cleaner Production, 194, pp. 766–776. SCF Briefing, 2017. How supply chain finance can drive sustainability and CSR. Retrieved from https://www.scfbriefing.com/supply-chain-finance-and-sustainability/

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Declaration of interests ☒ The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper. ☐The authors declare the following financial interests/personal relationships which may be considered as potential competing interests:

Journal Pre-proof Figures and tables—Sustainable supply chain finance

Figure 1. Research methodology

Journal Pre-proof Figure 2: Number of articles published in each year of publication

Years of Publication 16

14

14 12 10 8

7

6

6

6

0

2

1

1

1

11

0

07

1

0

06

2

2

10

4

3

2

1

18

17

20

16

20

15

20

14

20

13

20

12

20

20

20

09

20

08

20

20

20

05

20

04

20

20

20

03

0

Figure 3: Number of SSCF articles published by journal

Journals of Publication Journal of Cleaner Production

10

International Journal of Production Economics

6

Sustainability (Swizerland)

3

Business Strategy and the Environment

2

Outlook on Agriculture

2

Journal of Business Logistics

2

International Journal of Operations & Production Management

2

Engineering, Construction and Architectural Management

2 0

2

4

6

8

10

12

Journal Pre-proof Table 1: References contributing to the development of the SSCF concept Reference

Contributions

Glover et al. (2014); Goddard et al. (2016)

Identifying the financial-related barriers to suppliers’ sustainability engagement

McDermott et al. (2005)

Suppliers’ access to financial resources can be leveraged to promote environmental behavior

Bunyaminu and Issah (2012); Bhuiyan et al. (2017); Sim and Prabhu (2017)

Suppliers’ social performance is improved with better financial access

Dye and Yang (2015); Qin et al. (2015); Tsao et al. (2017)

Carbon policies could alter retailers’ decision on trade credits

Preuss (2005); Tsao (2015); Aljazzar et al. (2018); Tiwari et al. (2018); Zhao et al. (2018)

Trade credits facilitate the carbon-efficient supply chain

Gong et al. (2018)

Nestle uses SCF solutions to encourage their suppliers’ sustainable performance

Zhan et al. (2018)

Reverse factoring could support suppliers’ willingness regarding sustainability

Tseng et al. (2018)

Defining the term “SSCF” and integrating TBL in SCF implementation

Zhou et al. (2018); Liang et al. (2018)

Identifying innovative practices in SSCF

Table 2. Sustainable SCF motivations

Motivation

Content

References

Sustainabilityoriented motivations

Requirements of stakeholders in terms of sustainability performance

Markley & Davis (2007); Seuring et al. (2008); Carter & Easton (2011); Gopalakrishnan et al. (2012); Tseng et al. (2018); Zhou et al. (2018)

Urgency to deal with social issues in developing counties

Awaysheh & Klassen (2010); Marshall et al. (2014); Mani et al. (2018); Tseng et al. (2018); Zhou et al. (2018)

SMEs’ needs for access to financial resources

Pfohl & Gomm (2009); Birkin et al. (2009); Patil et al. (2016); Liang et al. (2018); Tseng et al. (2018)

SMEs’ needs for incentives for sustainability

Ito (2004); Crals & Vereeck (2005); Upstill-Goddard et al. (2016); Astrid Fenger et al. (2017)

Technology-oriented motivations

Technology application

Wuttke et al. (2013); Zhou et al. (2018)

Moral-oriented motivations

Organizational values and ethical principles

Muller & Kolk (2010); Morais & Silvestre (2018)

Finance-oriented motivations

Table 3. Sustainable SCF outcomes Outcomes

Contents

References

Environmental outcomes

Promote green products

Zhou et al. (2018); Liang et al. (2018)

Investment in green technology

Tseng et al. (2018)

Carbon emission reduction

Qin et al. (2015); Tsao (2015); Dye & Yang (2015); Tsao et al. (2017); Aliabadi et al. (2018); Aljazzar et al. (2018); Sarkar et al. (2018)

Social outcomes

Economic outcomes

Alleviating poverty in developing regions Sim & Prabhu (2017); Bhuiyan et al. (2017) Tseng et al. (2018) Increasing social equality and wellbeing

Zhou et al. (2018); Tseng et al (2018)

Solving food-safety issues

Zhou et al. (2018)

Mitigating suppliers’ liquidity issues

Sim & Prabhu (2017); Tseng et al. (2018); Zhan et al. (2018)

Gaining competitive advantages

Thomas et al. (2016); Seuring et al. (2008); Beske-Janssen et al. (2015); Zhou et al. (2018)

Risk mitigation

Liang et al. (2018); Tseng et al. (2018)

Figure 4. Integrated conceptual framework

Table 4. Gaps and recommended research directions Category

Research on sustainable SCF

Sustainable SCF motivations/outcomes

Sustainable SCF in practice

Gaps

Research Directions

1. Lack of SSCF practice

Focusing on the role of SCF in improving overall SC sustainability

2. Inadequate theoretical support

Embedding suitable theories into the SSCF research

3. Few studies focus on specific industries

Exploring the topic in the context of specific industries (e.g., agriculture)

4. Few studies focus on certain regions

Exploring the topic in the context of specific regions, especially developing regions

5. Insufficient variety of research methods

Applying more empirical methods and case studies

6. Less focus on technology-oriented motivation

Examining the role of innovative technology in enabling SCF to promote SC sustainability

7. Less focus on social performance improvement

Focusing more on the social improvement brought by SSCF solutions

8. Lack of focus on detailed sustainable SCF practices or mechanisms

Exploring more innovative mechanisms or practices in SSCF solutions

9. Excess emphasis on suppliers while neglecting other SC participants

Emphasising the effect of SSCF on the sustainable performance of downstream players (e.g., retailers) in the SC

10. Narrow scope of collaboration under Considering collaboration with other SCF participants (SCF the SSCF practices providers) to enhance overall SC sustainability

Figure 5. Links between gaps and research recommendations