What is a Sustainable Supply Chain?
Sustainability refers to the utilization of resources and the production of goods/services in a manner which takes into consideration not only the impact of a company on the environment but also its ability to ensure that the resources it utilizes are sourced in a manner that ensures that they can be renewable (Pullman, Maloni, & Carter, 2009). By doing so, this creates a system where costs are reduced, efficiency is increased and the company presents a far better public image due to the general consensus that implementing sustainable practices creates a beneficial effect for the general public (Pullman, Maloni, & Carter, 2009). As such, sustainable supply chains implement the aforementioned principles into a cohesive whole in every aspect of the supply chain, whether it is the sourcing of raw materials, the manufacturing of goods/services or the distribution of such outputs to consumers. From the perspective of Pagell and Wu (2009) an organization with a truly successful sustainable supply chain could theoretically remain in business forever (depending on continued consumer demand for its products of course) which lends credence to the beneficial effects a sustainable supply chain could have for a company (Pagell and Wu, 2009).
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One example of a sustainable supply chain is when a company’s management orientation is evidenced by a business model where economic goals are compatible with environmental and social goals. In this particular version of a successful supply chain a company does not focus entirely on a competitor oriented approach (though this is also important) rather what is being accomplished is that it focuses on developing a business model that utilizes Corporate Social Responsibility (CSR) as the basis behind its actions (Pagell and Wu, 2009). Since CSR is a form of internal self regulation, a company that implements this focuses on reducing adverse environmental practices while at the same time develops positive social effects. A second example of a sustainable supply chain is when sustainability becomes integrated in the organization where the organization has both a managerial orientation toward sustainability and an innovation capability (Pagell and Wu, 2009).
This means that internal developments within the organization focus on developing methods wherein processes become more efficient, waste is reduced, resources are obtained from renewable sources and the focus of the company is towards the development of practices that result in positive environmental effects. One last example of a sustainable supply chain comes in the form of the use of the concept of collaboration between companies in order to maximize the use of resources and minimize wastefulness. All too often companies fear cooperation due to the potential of a loss of commercial control however this often results in the creation of wasteful practices (i.e. loading a shipment in a truck, vessel or plain that is not full which wastes fuel). By implementing practices in relation to cooperation and collaboration a supply chain becomes more sustainable due to the reduction of expenditure related to the transportation of goods and services.
Sustainable and Traditional Supply Chains
Traditional supply chains have always operated under the concept of getting a particular product or service from one location to another in order to satisfy consumer demand. It has been an integral aspect of economic activity and one that has stood the test of time as a necessary method of commerce. Yet, what must be understood is that it has only been within the past three decades that aspects related to growing consumer concern regarding the environment, the necessity of Corporate Social Responsibility and the development of the “green movement” that sustainable practices have been integrated into supply chain management. Supply chains which ascribe to the “traditional” method of product creation and distribution have often focused so intently on raw material extraction that the end result has been the complete depletion of resources at the raw material supplier level which often causes the entire chain to collapse (Abbasi & Nilsson, 2012).
This was seen in the case of South America, Eastern Europe, Asia and various parts of Australia where the extraction of lumber outstripped the ability of forests to replenish the necessary trees to meet demand resulting in the collapse of several industries as a direct result of this distinctly unsustainable method of resource extraction. Thus, from a certain perspective, it can be stated that “waste” in the name of production was an enduring facet that can be attributed to traditional supply chains. Sustainable supply chains on the other hand ascribe to a different tactic which focuses on ensuring the continuous flow of resources from one aspect of the chain to another by employing methods which ensure that the raw materials which go into the finished product are extracted and refined through sustainable means (Paulraj, 2011). The advantage this particular method of supply chain management has over traditional methods comes in the form of a far more stable method of supply and production where the creation of products and services are not interrupted due to the depletion of resources at one end of the chain (Pagell, Wu, & Wasserma, 2010).
In terms of creating a competitive advantage it must be noted that organizations that utilize sustainable supply chains have a better cost performance due to their emphasis on reducing waste, have a greater degree of positive public responses due to their emphasis on sustainable practices which is a part of Corporate Social Responsibility and lastly, such organizations are less likely to encounter problems in terms of sudden stoppages in their supply line as a direct result of resource exhaustion (Reuter et al., 2010). When combining such factors it becomes evident that this creates a considerable degree of competitive advantage and is something many corporations have taken into consideration given the positive effects this could have on cost reduction, positive public perception and the uninterrupted production and distribution of goods and resources (Reuter et al., 2010).
One of the main problems in developing sustainable supply chains is the competitive environment that companies find themselves in at the present which can actually dissuade them from developing sustainable supply chains. What you have to understand is that the current global trade environment is drastically different than it was 30 years ago. While it may be true that consumers have developed a greater degree of consciousness toward the concept of environmental deterioration as a result of industrial processes which translates into preference for sustainable practices in the methods of production for the products they patronize, the fact remains that despite this inherent preference various studies have shown that when it comes down to preference versus affordability, a vast number of consumers still choose a more affordable product rather than one that was created through sustainable means. This has resulted in practices which are distinctly unsustainable finding their way into a variety of supply chains at the present due to its emphasis on getting consumers what they need at an affordable cost despite the inherent environmental costs this may incurr.
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Contributing to this problem is the current practice of business process outsourcing which has have encouraged the development of the “traditional” supply chain due to the cost saving measures this entails for companies. It is interesting to note that the development of sustainable supply chains is actually a practice encouraged by governments due to the increasing amount of concern regarding the state of the environment. Unfortunately, as seen in the case of many western countries such as the U.S., this encouragement towards the development of more sustainable and environmentally beneficial practices for various corporations has resulted in higher costs of doing business coupled with stricter requirements that need to be followed. Environmental restrictions, regulations, laws, local conservation policies and a variety of other practices meant to encourage the development of sustainable supply chains have made it far more costly for companies to do business in countries such as the U.S. which has resulted in a far greater predilection towards the use of outsourcing in order to shift their methods of production elsewhere. This has in effect discouraged the creation of sustainable local supply chains in favor of the creation of traditional supply chains in other countries where local regulations regarding production are far less strict.
There are four characteristics that are in demand within a technology oriented enterprise, namely: high market responsiveness, fast developments, low cost, and finally high levels of creativity, innovation and efficiency. Technology intensive enterprises in particular are constantly pushed towards performance initiatives that place an emphasis on doing things faster, better and with fewer resources. In fact, this push towards better competitive performance through effective and more efficient resource utilization and allocation is one of the current driving forces of many high-tech organizations. It must be noted though that the production processes of certain forms of technological output (i.e. consumer electronics, computer components etc.) do have an impact on the local environment which should be taken into consideration by an organization that utilizes corporate social responsibility as one of the foundations of their managerial practices.
What must be understood is that the drive for faster, better and less resource intensive production processes that are currently being pushed by various companies actually results in many of them choosing to utilize methods of production that have an adverse impact on the local environment. For example, various stores sell vegetables that they deem as being “sustainable” due to the fact that they were grown utilizing only natural fertilizers yet in order to grow them an entire forest was clear cut in order to make way for farming land. It is due to circumstances such as this that term of “green washing” comes to mind wherein due to the inherently similar definitions companies sometimes state their products as being sustainable when in fact there is little about them that is “sustainable” in the first place. Taking this into consideration, the management implications for building sustainable supply chains comes in the form of implementing procedures that not only reduce the negative environmental impact of production processes, reduce waste and ensure that innovative methods of production and resource extraction are utilized but they must also be ethical in terms of actually being sustainable practices instead of merely labeling them as sustainable when in fact they are not.
Abbasi, M., & Nilsson, F. (2012). Supply Chain Management: An International Journal Emerald Article: Themes and challenges in making supply chains environmentally sustainable. Emerald, 17(5), 1-29.
Pagell, M., & Wu, Z. (2009). Building a More Complete Theory of Sustainable Supply Chain Management Using Case Studies of 10 Exemplars. Journal Of Supply Chain Management, 45(2), 37-56.
Pagell, M., Wu, Z., & Wasserma, M. E. (2010). Thinking Differently about Purchasing Portfolios: An Assessment of Sustainable Sourcing. Journal Of Supply Chain Management, 46(1), 57-73.
Paulraj, A. (2011). Understanding the Relationships Between Internal Resources and Capabilities, Sustainable Supply Management and Organizational Sustainability. Journal Of Supply Chain Management, 47(1), 19-37.
Pullman, M., Maloni, M. J., & Carter, C. R. (2009). Food for Thought: Social Versus Environmental Sustainability Practices and Performance Outcomes. Journal Of Supply Chain Management, 45(4), 38-54.
Reuter, C., Foerstl, K., Hartmann, E., & Blome, C. (2010). Sustainable Global Supplier Management: The Role of Dynamic Capabilities in Achieving Competitive Advantage. Journal Of Supply Chain Management, 46(2), 45-63.