Exploring Environmental Supply Chain Innovation in M&A

Abstract

Organisations are challenged with executing innovation for sustainable development within the context of their operations and value networks—networks which are increasingly fuelled by mergers and acquisitions (M&As), and which accounted for USD 4 trillion in global deal value in 2019. While outcomes from M&As may produce mixed results, merger synergies fundamentally change the environmental, social and governance (ESG) footprint of an organisation and its product-supply chain. These compounding challenges of innovation for sustainability and ESG product-supply chain due diligence are not adequately explored in the operations management literature or practically considered during M&As. In this article, we consider those factors that determine “how innovative is the deal?” and explore how environmental supply chain innovation for sustainability might inform M&As. A case study approach is adopted, drawing upon an exemplar deal within the global food product-supply chain for ingredient production, where high M&A deal-interest and ESG sustainability considerations exist. The theoretical lens is the resource-based view (RBV) of the firm. A deal analysis framework, integrating key concepts from strategic environmental supply chain management and the M&A process literature, is defined. These findings suggest that product design and technology selection factors represent sources of M&A value creation when exploring an innovation for sustainability deal thesis. The implication for firms with ambitious environmental agendas or motives is that the M&A process needs to be reconfigured, such that product design and technology selection, currently secondary factors, are considered primary drivers. Together, these drivers form substantive strategic considerations and new merger motives of both theoretical and practical relevance, informing a new perspective of operations sustainability targeted M&A.