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Sustainable Supply Chain Management: Evolution And Future Directions

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Question:

Critically evaluate how a business can embed sustainability throughout its supply chain?

 

Answer:

Introduction

Organizations are increasingly under pressure by non-governmental organizations to operate in a sustainable manner (Wolf, 2014). Examples include campaigns against Nestle (anti-deforestation), Nike (child labour), Apple (sweatshop labour) and Mattel (toxic materials) (Wolf, 2014). Pressure from stakeholders hold an organization accountable for its actions and decisions regarding its product design, sourcing, production and distribution (Wolf, 2014; Parmigiani, et al., 2011). On the other hand, as argued by Shrivastava (1995, cited in Carter and Rogers, 2008), sustainability has benefits beyond addressing stakeholder pressures, with the potential to reduce long-terms risks associated with fluctuations of energy prices, management of pollution and waste as well as product liabilities.

Thus sustainability is not just a matter of being perceived as having good corporate social responsibility, but is also an essential pillar of smart management (Savitz & Weber, 2006). As argued by Kevin O’Marah (2007) in the Financial Times, supply chain management (SCM) has become the key to meeting the expectations of shareholders for strong profitability growth with minimum volatility, of regulators and the press for social and environmental responsibility, and of customers for delivering on promises made to them (Carter & Rogers, 2008).

Sustainability:

Sustainable SCM (SSCM) is “the strategic, transparent integration and achievement of an organization’s social, environmental, and economic goals in the systemic coordination of key inter-organizational business processes for improving the long-term economic performance of the individual company and its supply chain.” SSCM helps managers identify strategies for an organization’s survival and success over long term horizons (e.g. up to 20 years and more) (Carter & Easton, 2011). Carter and Rogers (2008) suggest that sustainability initiatives and SSCM in particular are a necessity for long-term organizational success (Carter & Rogers, 2008; Carter & Easton, 2011). It may be referred to as a holistic perspective of the process of supply chain as well as the technologies that goes beyond delivery, cost and inventory. The theory is based on the products and services that are socially responsible involving practices that are environment-friendly.

 

There are many supply chain (SC) activities that permit an organization to simultaneously positively impact the environment and society as well as provide long-term economic benefits and competitive advantage to the organization (Carter & Rogers, 2008). These sustainable activities can potentially result in benefits such as (Carter & Rogers, 2008):

Cost savings due to reduced packaging waste and the ability to design for reuse and disassembly.

Reduced costs for health and safety, recruitment and employee turnover due to improved safety and working conditions.

Reduced labour costs due to increased employee motivation and productivity and reduced absenteeism.

Influence future government regulations, and thus potentially creating difficult to replicate competitive advantages, by proactively addressing environmental and social issues

Reduced costs, shorter lead times and improved product quality associated with application of standards (such as ISO 14000) that provide a framework for environmental management systems

Improved reputation with customers, suppliers, shareholders and potential employees.

Organizations and businesses seeking to implement SSCM can examine their value chain for areas in which social and environmental initiatives could have the greatest economic impact (Carter & Rogers, 2008; Porter & Kramer, 2006), including in-bound and out-bound logistics (e.g. packaging, disposal, transportation impacts), operations issues (e.g. emissions, energy use, hazardous materials, worker safety and human rights) and after sales service (e.g. reverse logistics, including disposal and disposition). Support activities within the value chain can also be the targets of SSCM initiatives (e.g. relationships with educational institutes to develop qualified supply chain managers; asking suppliers to  participate in initiatives; buying from and developing suppliers owned by racial minorities; joint planning with value chain partners to design for disassembly, reuse and recycling) (Carter & Rogers, 2008).

There are many examples of how an organization can apply and embed SSCM. Starbuck Coffees has partnered with farmers to grow high quality coffee in an ecologically sound manner, simultaneously stabilizing farmer wages and reducing purchasing cost by eliminating the middleman (Argenti, 2004, as cited in Carter & Rogers, 2008). General Mills implemented a vertically integrated closed-loop SC to ensure a consistent supply of recycled material, simultaneously reducing the packaging for its products (Carter & Rogers, 2008). Another example is Natura, a multinational of Brazilian origin operating in the cosmetics, toiletry and fragrance industry (Carvalho & Barbieri, 2012). Natura drives sustainable innovation by engaging it suppliers to reduce negative social and environmental impacts throughout product lifecycles (Carvalho & Barbieri, 2012). Natura adopted a supplier development strategy using outsourcing partnerships that reduces costs and environmental impacts by shortening transportation distances of products usually manufactured in Brazil; values important relationship concepts important to Natura, such as partnership and co-construction; and values organizations with local knowledge and good social and environmental practices (Carvalho & Barbieri, 2012). Natura Ekos products, for example, use technologies that reduce environmental impacts throughout the SC; use renewable raw materials whose origin can be traced to sources such as organic farming and sustainable forestation; and prioritize refills and packaging made of renewable or recycled material (Carvalho & Barbieri, 2012).

Conclusion:

Sustainable business aims at driving better values and bringing improvements at the same time. Sustainability in supply chain means reduced packaging as well as energy efficiency amidst all others. Organizations collaborate internally as well as externally and essentially all employees need to identify it and be supportive of the desired sustainable goals. It is equally vital for suppliers to know what is expected of them from the environmental standpoint.

 

References

BITC, 2009. How to: manage your supply chains responsibly, London: BITC.

Carter, C. R. & Easton, P. L., 2011. Sustainable supply chain management: evolution and future directions. International Journal of Physical Distribution & Logistics Management, 41(1), pp. 46-62.

Carter, C. R. & Rogers, D. S., 2008. A framework of sustainable supply chain management: moving toward new theory. International Journal of Physical Distribution & Logistics Management, 38(5), pp. 360 - 387.

Carvalho, A. P. d. & Barbieri, J. C., 2012. Innovation and Sustainability in the Supply Chain of a Cosmetics Company: a Case Study. Journal of Technology Management & Innovation, 7(2).

Corbett, C. J. & Klassen, R. D., 2006. Extending the horizons: Environmental excellence as key to improving operations. Manufacturing & Service Operations Management, 8(11), p. 5–22.

Hoffman, A. & Bazerman, M., 2005. Changing environmental practice: understanding and overcoming the organizational and psychological barriers. Harvard Business School Working Paper, Issue 05-043.

O’Marah, K., 2007. Opinion: lessons from 25 supply chain leaders. Financial Times, 10 December.

Parmigiani, A., Klassen, R. D. & Russo, M. V., 2011. Efficiency meets accountability: Performance implications of supply chain configuration, control, and capabilities. Journal of Operations Management, 29(3), p. 212–223.

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