The review of the literature for this study focuses on the various approaches for implementing sustainability practices in supply chain operations and how they relate to the triple bottom line concept. The chapter begins with a definition of supply chain management, corporate sustainability and the triple bottom line approach, followed by a detailed review of what sustainable development and sustainable organization entails.
The chapter also encompasses a detailed review of sustainability reporting and instruments of sustainable reporting, such as the Global Reporting Initiative (GRI), Dow Jones Sustainability Index (DJSI) and, more importantly, the Supply Chain Operations Reference (SCOR) model and GreenSCOR. Additionally, the chapter will in great detail review the concepts of supply chain sustainability and the triple bottom line, along with the challenges organizations face in attempting to implement sustainable supply operations. Lastly, the chapter concludes by reviewing some of the competitive efficiencies organizations gain by engaging in sustainability efforts through the triple bottom line.
Definition of Terms
Supply Chain Management
The Council of Supply Chain Management Professionals (CSCMP) describes supply chain management as the planning and administration of all actions and procedures concerned with sourcing, procurement, and all logistics supervision issues incorporating supply and demand management within and across enterprises (Vitasek, 2010). Markley & Davis (2007) define a corporation’s supply chain “…as the series of companies, including suppliers, customers, and logistics providers, that work together to deliver a value package of goods and services to the end customer” (p. 766).
Extant literature reveals that direct interaction with supply chain partners facilitates contemporary organizations to, among other things, minimize total inventory levels and product obsolescence (Bai, Sarkis & Wei, 2010), lower transaction costs (Faisal, 2010), react more swiftly and knowingly to shifts in the external environment (Giovanni, 2012), and respond more quickly to the needs and expectations of consumers (Pullman & Dillard 2010). The capacity of organizations to influence and control these variables is geometrically correlated to supply chain performance (Carter & Easton, 2011).
Critical to supply chain performance, as noted by Markley & Davis (2007), “…is improving the effectiveness of materials management – the set of business processes that support the complete cycle of material flows from purchasing and internal control of production materials, through the planning and control of work-in process, to the warehousing, shipping, and distribution of finished products” (p. 766).
The intersection between supply chain performance and sustainability is illuminated by Awaysheh and Klassen (2010), who suggest that managers can improve the supply networks by undertaking concerted efforts to integrate sustainability initiatives into critical business processes, in addition to adopting Corporate Social Responsibility (CSR) considerations, such as environmental preservation, diversification, respect and protection of human rights, philanthropy and safety.
Extant studies show that corporate sustainability has been a major area of interest ever since the concept came into the mainstream management literature in the mid-1900s (Christofi, Christofi & Sisaye, 2012; Balkau & Sonnemann, 2010). The studies, which were largely anecdotal in scope and context (Pullman & Dillard, 2010), laid their main focus on how sustainable practices can protect the well being of human population and shelter the environment from unregulated production activities that ultimately resulted in pollution and reserve degradation (Issakson & Garvare, 2003).
In 1953, while laying down the groundwork for corporate sustainability, H. Bowen argued that “…if men are responsible for the known results of their actions, business responsibilities must include the known results of business dealings, whether these have been recognized by law or not” (Christofi et al., 2012). Arising from this focused declaration, many scholars to date regard Bowen as the father of corporate social responsibility.
To contextualize the concept of corporate sustainability into its fullest dimensions, Gao & Zhang (2006) acknowledge that the fundamental premise of corporate sustainability is that organizations “…should fully integrate the social and environmental objectives with their financial aims and account for their actions against the wellbeing of a wider range of stakeholders through the accountability and reporting mechanism” (p. 724).
On their part, Christofi et al (2012) argue that corporate sustainability evolved as a direct consequence of economic expansion, environmental regulation-stewardship, and a sustained drive for social justice and equity. This view is reinforced by Bai et al (2010), who argue that corporate sustainability oblige organizations to attend to the concerns of economic success, social fairness, and environmental quality in such a manner that the entities will move along a continuum, from unsustainable and inefficient processes towards sustainability and efficiency.
A strand of emergent management literature demonstrates that concerns about corporate sustainability have increased in recent years, due in part to a sequence of highly publicized corporate environmental tragedies such as the recent oil spill in the Gulf of Mexico (Christofi et al, 2012), emergence of social and environmental legislation spearheaded by government agencies and other relevant bodies (Gao & Zhang, 2006), as well as enhanced pressures from the public for better corporate performance and responsibilities in the interests of communities and future generations (Awaysheh & Klassen, 2010).
Collectively, these factors have in large part contributed to the development and implementation of corporate sustainability initiatives. In recent years, an increasing number of corporations are voluntarily adopting supply chain practices aimed at expanding the traditional economic objective of shareholder wealth maximization (Faisal, 2010), to include variables that cater for environmental concerns and social issues (Christofi et al, 2012). Correspondingly, the corporate sustainability paradigm has increasingly extended its range into voluntary TBL reporting to lessen unethical behaviors and practices in the supply chain (Awaysheh & Klassen, 2010), and to create early warning systems for intervention and rectification purposes (Flint & Golicic, 2009).
The Triple Bottom Line
The triple bottom line approach is a central concept that is helping to operationalize sustainability, where stakeholders expect an organization to achieve minimum performance in the economic, environmental, and social dimension (Dyllick & Hockberts, 2002). Thus, the triple bottom line is a concept corporations employ to empirically relate the social and environmental impact of the organization’s activities and processes to its economic performance with a view to demonstrate improvement in all three areas through strategic actions in the supply chain (Keyes & Sykes, 2009). This concept will be discussed in depth in other sections in this chapter.
Sustainable Development & Supply Chains
Markley & Davis (2007) define sustainable development (SD) “…as a process of achieving human development in an inclusive, connected, equitable, prudent and secure manner” (p. 764). In their research on flexibility and sustainability of supply chains, Shukla, Deshmukh and Kanda (2010) defines SD as a pattern of growth in which resource use aims to meet present human needs while preserving the environment to enable future generations to meet their needs and requirements in a similar manner.
These authors further observe that in recent years, there has been a noted awareness in academic circles and a mounting concern in practitioners for SD to become an integral component of supply chain practices. Indeed, in the past one decade, SD has received considerable attention from policy makers and researchers, primarily due to mounting prominence of social-economic and social-cultural linkages in evaluating the performance and viability of supply chains (Faisal, 2010), as well as the social concerns that have crept into the vocabulary of policy makers (Pullman & Dillard, 2010).
According to Faisal (2010), “…sustainable development implies a process, which is integrative in essence, and that tries to maintain a state of dynamic balance in the long run” (p. 508). Available literature demonstrates that the SD paradigm considers both development and sustainability when integrating social, environmental, and economic policies into the affairs and activities of the corporation (Sarkis, Meade, & Presley, 2006). This view is reinforced by Fabbe-Costes, Roussat and Colin (2011), by acknowledging that the most prevalent SD paradigm in contemporary business settings support’s the triple bottom line approach, which integrates environmental responsiveness, social responsibility and economic advancement into corporate activities.
As noted by Faisal (2010), the obligation of a successful SD paradigm, therefore, entails the maintenance of a state of dynamic balance among the three variables into the long-term. A number of scholars view this obligation as a guiding philosophy that directs organizations to consider and reduce the social impact of their profit making activities by ensuring proper maintenance and preservation of the environment for the present and future generations (Keating, Quazi, Kriz & Coltman, 2008; Issakson & Garvare, 2003), as well as engaging in socially responsible practices (Christofi et al, 2012; Bai, Sarkis & Wei, 2010).
While the SD orientation may be perceived as a detracting force which hinders organizations from realizing their profit-making motive, which is essentially the core function, previous studies have demonstrated positive correlations between an organization’s SD efforts and performance indicators, such as profitability, social approval and customer satisfaction (Keating et al, 2008). In 2002, the Global e-Sustainability Initiative (GeSI), in conjunction with United Nations Environmental Programme (UNEP), delivered a concept paper on how multinational corporations stand to benefit by incorporating the SD dimension to the production and exchange of products and services, and in their global supply and distribution networks (Balkau & Sonnemann, 2010).
Indeed, the popular view among scholars and practitioners is that adding the SD dimension to supply chain management extends the expectations of stakeholders, end-consumers and communities that these organizations will perform well not only on traditional indicators of profit and loss, but also on an extended conceptualization of performance that takes into account environmental and social indicators (Pagell, Krumwiedi & Sheu, 2007; Sarkis et al., 2006). In this light, many organizations are now, more than ever, embracing what they believe are sound sustainable business practices, incorporating fundamental elements such as corporate social responsibility (CSR), green purchasing strategies, environmental marketing, green marketing and sustainable supply network management into their business practices and supply chains (Faisal, 2010).
A number of studies interested in examining why contemporary corporations are gravitating towards sustainable development initiatives, especially on the social and environmental fronts, found that consumer discontent, community pressures, and stricter government and stakeholder regulations in operational activities of these firms, were reversing the gains made on the economic front (Faisal, 2010; Keating et al., 2008). To remedy the situation, these firms increasingly made commitments to, among other things, enhance transparency, improve corporate governance, implement sustainable supply networks, and undertake greater stakeholder engagement. In most developed countries and now in many developed countries, multinational corporations are adopting voluntary codes of conduct and practices for sustainable development, particularly in relation to their supply chains (Faisal, 2010).
According to this author, the codes of conduct and practices regulate supplier performance in critical areas, including pollution prevention, health and safety, child labor, employment and human rights, and anti-corruption initiatives. Subsequently, the relationship between sustainable development and supply chain management is illuminated in so far as many corporations are today, more than ever, seeking to verify supplier performance through a multiplicity of audits such as documentation, adoption of green supplier guidelines, and on-site inspections of supplier facilities (Vitasek, 2010.
Practitioners are also realizing that they need to integrate the natural environment and social concerns into their organizational strategy if they expect to remain competitive in the ever shifting and increasingly regulated business environment, thus the need to adopt sustainable practices (Pullman & Dillard, 2010). Indeed, many corporations have developed and implemented environmental mission statements to inform strategic decision-making (Faisal, 2010), while in others, financial reporting has matured to include yearly environmental and social responsibility reports (Balkau & Sonnemann, 2010). These initiatives, in their individual and integrated contexts, point to a shift in business processes and practices towards a more sustainability-oriented approach.
A stream of studies has however unveiled a multiplicity of barriers that detract organizations from engaging and integrating the concept of sustainable development into their critical business processes. For example, Gao & Zhang (2006) identify financial limitations, time constraints, lack of personal or corporate motivation, lack of performance measures, inadequate understanding /knowledge of the dynamics involved, and supply chain constraints, as some of the issues that continue to hinder corporations from achieving sustainability in their operations. Bai et al (2010) reinforce the lack of understanding aspect by acknowledging that many organizations not only perceive ‘sustainable development’ as a difficult concept to understand, but the linking of social, environmental and economic aspects to form the triple bottom line is perceived as being far too complicated.
According to Markley & Davis (2007), “…a sustainable organization is one that contributes to sustainable development by simultaneously delivering economic, social and environmental benefits – or what has been termed the triple bottom line or 3BL” (p. 764). In recent years, as noted by these authors, enlightened companies have been experiencing a paradigm shift, from the traditional single-pronged perspective of pursuing profit to a multi-faceted agenda of protecting the environment and upholding the rights of their employees and other stakeholders as well.
Carter & Easton (2011) reinforce this view by acknowledging that being environmentally correct is not only a social responsibility imperative for these organizations, but serves as a unique business strategy that stands to yield substantial profits for all stakeholders. Consequently, a sustainable organization should have the capacity not only to support the preservation of the planet but also to assist people and communities improve quality of life (Markley & Davis, 2007), and yield substantial profits to maintain competitiveness (Flint & Golicic, 2009).
It is well premised that an organization “…is a social institution whose responsibilities extend far beyond the wellbeing of its shareholders to giving security and a sustainable good life to its employees, customers, suppliers, local communities and the society beyond the current generation” (Gao & Zhang, 2006, p. 724). In consequence, according to these authors, the social and environmental inputs and outputs need to be entirely integrated not as mere add-ons to the organization’s economic domain but as fundamental re-definitions of its strategic imperatives, operational processes, mission and value orientation, as well as performance.
Shukla et al. (2010) acknowledge that sustainability reporting includes a wide variety of organizational initiatives dealing with issues in environmental impact appraising, pollution avoidance, community development programs, and fair trade practices. According to Christen, Shepherd, Meyer, Jawardane, and Fairweather (2006), sustainability reporting is a tool used to facilitate communication on transformation progress, and it also becomes a part of the improvement process of integrating sustainability into the organization. Sustainability reporting, which encompasses terms such as corporate social responsibility (CSR), environmental reporting, and triple bottom line (Badiru, 2010), demonstrates the ever-mounting demand by stakeholders for more transparency and traceability (Shukla et al., 2010).
As confirmation of this inclination, Shepherd’s (2008) study reported an impressive growth in professionally managed assets that have a social responsibility orientation, with socially responsible investments in the United States growing from six hundred thirty-nine billion dollars in 1995 to more than two trillion dollars in 2005. There are no policies obliging organizations in the United States to present sustainability reports, nevertheless evidence demonstrates the trend to present these disclosures is increasing (Borkowski, Welsh & Wentzel, 2010).
Christofi et al (2012) note that “…sustainability reporting evolved in the mid-1990s as a means for business organizations to manage and balance their productive efforts with those of the environment and their surrounding communities” (p. 158).
These authors further note that the collective and multidisciplinary research efforts involved in the development of sustainability reporting frameworks resulted in the realization and execution of formal accounting methods that not only record but also report the triple bottom line outcomes. As will be seen in this literature review, however, TBL measurement and reporting is still at its infancy phase of development as it is yet to receive full standardization and enforcement by relevant bodies, including the Dow Jones Sustainability Index (DJSI) and the Global Reporting Initiative (GRI) (Shukla et al, 2010; Christofi et al, 2012).
Extant research demonstrates that sustainability reporting is an integral component of an effective and efficient corporate sustainability strategy (Sloan, 2010). However, as noted by Gao & Zhang (2006), “…it is technically difficult to distinguish between sustainability reporting from other integrated social and environmental reporting as the latter has moved towards the assessment and reporting on the triple-bottom line performance of an organization” (p. 734).
In essence, today, most leading-edge corporations are publishing their environmental and/or social reports, typically combining their financial, social and environmental determinants (triple-bottom-line) into one document referred as a sustainability report. White (2005) cited in Christofi et al (2012) documented the number of United States-based businesses that included corporate sustainability practices and reporting as part of their companies’ strategic mission. In her documentation, the author acknowledged that “…the number of US companies practicing sustainability reporting grew from just a few in the early 1990s to few thousand companies by the mid-2000s, to over two-third of the Fortune 500 companies” (Christofi et al., 2012, p. 163).
Tate, Ellram and Kirchoff (2010) initiated a study to investigate how organizations present CSR reports and what these reports indicate about the organizations publishing them. They surmised that organizations fit somewhere along a continuum, with respect to their social and environmental approaches, ranging from resistant to self-protective to searching for value and competitive advantage. According to Tate et al. (2010), the continuum perception envisages that organizations will realize potential gain from espousing more positive social and environmental strategies and these organizations will ultimately advance toward the value and competitive advantage stage.
Of concern to scholars and practitioners is how the declarations in CSR reports contrast with the concrete corporate commitment in the equivalent spheres of reported activity. The study further insinuated that absence of CSR reporting guidelines led to significant variety and uncertainty in the substance of the reports compared for analysis. Research, for instance, revealed one reason for the differences in report substance is that few incentives exist to divulge negative information and, consequently, organizations are inclined to remove or reduce this type of information since the major inspiration for publishing CSR reports is to benefit from an improved corporate image (Tate et al., 2010).
To address this disparity, Isaksson and Steimle (2009) conducted a study on the GRI-G3 guidelines for sustainability reporting from the data of five different companies within the same industry. The study also considered and critically reviewed the triple bottom line concept and the topic of eco-efficiency launched by the World Business Council for Sustainable Development (WBCSD) in an effort to find common recommendations of how to measure sustainable development and sustainability in order to determine elements stakeholders would expect to find in a sustainability report (Isaksson & Steimle, 2009). The research concluded with a focus on the GRI-G3 guidelines to find out to what extent this method really addresses the sustainability performance of participating organizations.
In contrast to the research conducted by Tate et al. (2010), the study by Isaksson and Steimle (2009) did not find that organizations eventually grow into a commitment toward sustainability merely through procedural reporting of these initiatives. Instead, the results concluded through market-relevance that social reporting has a very low relevance in developing regions due to lack of customer focus.
Isaksson and Steimle’s (2009) research found that for the low-income customer the most important concern regarding corporate performance is price. Concerning the environmental indicators in CSR reports, results of their research indicated that most companies report both level of commitment and progress toward achieving sustainability initiatives, however they do not compare level or progress to industry benchmarks such as those available from CSRHub. According to Gunasekaran and Kobu (2007), benchmarks provide sustainability and corporate social responsibility (CSR) ratings on some of the world’s largest publicly traded companies. In the absence of this data, it becomes very difficult for the reader to know how a particular company compares with another.
The need to Adopt Sustainability Reporting in Supply Chain Operations
Debate is ongoing about the need for organizations to undertake sustainability reporting, particularly with regard to their supply chains. It is widely believed that “…for sustainability practices to be successful, indicators are required to show which aspects of performance must be improved and to indicate the direction of change” (Faisal, 2010, p. 513). This assertion demonstrates the impetus for sustainability reporting. Gao & Zhang (2006) are of the opinion that an effective and efficient sustainable development management system obliges the development of patent sustainability goals and communicating them through the organization to partners in the supply chain, along with explicit objectives and targets that render support to these goals.
This view is shared by Pullman & Dillard (2010), who argue that “…positive market place impact requires that the integrity of the people and processes be assured and communicated to the marketplace” (p. 745). Equally influential is the fact that although supply chain practitioners have been slow in the adoption of sustainability paradigms and sustainability reporting mechanisms, it is indeed true that social responsibility concepts and environmental concerns in the supply network are increasing in importance (Markley & Davis, 2007).
Additionally, contemporary consumers and stakeholders have taken increasing interest in social responsibility issues as well as environmental issues associated with the supply chain. According to extant research, consumers are not necessarily concerned with what these issues contribute to the corporate well-being; rather, they are concerned about what ignoring them may detract (Balkau & Sonnemann, 2010). A recently concluded survey undertaken by GlobeScan for the ‘University of Maryland’s Program on International Policy Attitudes’ demonstrated that environmental preservation ranked high among public/consumer’s attitudes and value systems in 20 countries, with over 75 percent of the interviewees in support of tougher laws and regulations aimed at protecting the environment (Bai et al, 2010).
The interest/scrutiny view receives wide support from Chistofi et al (2012), who acknowledge that organizations are progressively adopting sustainability practices and reporting due “…to awareness and increased scrutiny of corporate behavior from consumers, employees, investors, local communities, and governments that would like to minimize and possibly restrain corporate waste and unregulated environmental practices” (p. 163).
Consequently, ignoring supply chain corporate social responsibility issues and environmental concerns may in reality present organizations with a far greater risk of experiencing consumer and stakeholder protests, animosity and boycotts (Meehan, Meehan & Richards, 2006), indicating that it is not only an organization’s ethical responsibility to undertake sustainability reporting to its consumers, but also in their best interest to proactively prepare an all-inclusive strategy for dealing with social responsibility issues and environmental concerns in the supply chain (Markley & Davis, 2007).
Another reason why modern corporations are increasingly adopting sustainability reporting paradigms in their supply operations derives from the rationale that organizations that outline sustainability as their primary objective “…will achieve competitive advantage through innovations in models, products, technologies, and processes” (Christofi et al., 2012, p. 164). To this effect, Markey & Davis (2007) contend that the way corporations report their social and environmental responsibility has a direct bearing on their financial performance and, by extension, their competitive advantage.
Additionally, Christofi et al (2012) argue that social, ethical and environmental disclosure/reporting has the prospect not only to develop mutual understanding and trust between corporations and their respective supply partners, but also promote dialogue, competitiveness and problem-solving educating practices that are fundamentally indispensable for socially and environmentally responsible supply chain operations. Their claim is premised upon the idea that social and ecological reports are substantially important in ascertaining whether or not corporations are socially and environmentally sustainable; that is, if they able to reduce costs associated with waste, reputation liability, unfair practices and cleanup, among others.
Instruments/Indicators for Sustainability Reporting
In general terms, “…an indicator is something that provides useful information about a system” (Isaksson & Gavvare, 2003, p. 651). It therefore follows that indicators for sustainable reporting of the triple bottom line approach in supply chain operations must have the capacity not only to describe the state of the supply chain, but also to detect shifts in the network and demonstrate cause-and-effect relationships among the variables or dimensions under investigation (Awaysheh & Klassen, 2010).
Such indicators, according to Carter & Easton (2011), should be relevant, comprehensible to users and stakeholders, limited in number, and adaptable to current trends as well as future developments. This review samples three popular indicators of sustainability reporting, namely: The Global Reporting Initiative (GRI), the Dow Jones Sustainability Index (DJSI), and the Supply Chain Operations Reference (SCOR) model.
Global Reporting Initiative (GRI)
In 2000, concerted efforts by the United Nations Environmental Programme (UNEP), in conjunction with Coalition for Environmentally Responsible Economies (CERES) and the Tellus Institute, aimed at providing global institutions with a reporting framework to guide their sustainability efforts and initiatives materialized in the creation of the Global Reporting Initiative (GRI) (Christofi et al, 2012). It is reported in the literature that GRI thereafter evolved to not only become an independent center in sustainability initiatives (Markis & Davis, 2007), but also “…the world’s leader and largest producer of standards/guidelines to report ecological footprints in sustainability reports” (Christofi et al, 2012, p. 163).
These guidelines, according to Christofi and colleges, are premised upon the perception that transparency and accountability about economic/financial, environmental, and social impacts are of immense concern to a varied group of stakeholders. This effort has increasingly gained popularity in contemporary corporations, particularly after the realization that although the primary objective of these corporations is to seek top returns and enhance growth, they are also bound to pursue environmental and societal goals and especially so in areas that intrinsically relate to sustainable development.
Such areas, as noted by Faisal (2010), include environmental protection, prevention of child labor, fair remuneration practices, social justice and equity, and economic development. Accordingly, Awaysheh & Klassen (2010) argue that the GRI “…provide a means for companies to identify, structure, and communicate their TBL performance to stakeholders both inside and outside the firm” (p. 1248).
The GRI guidelines provide consistent language and metrics for companies of any size or scope to undertake sustainable reporting on three forms of application disclosure information, categorized into:
- organizational profile,
- management approach, and
- performance-related indicators (Christofi et al., 2012; Meehan et al., 2006).
While it is demonstrated in the literature that the GRI report covers disclosure of the organization’s profile, governance structure, and performance indicators (Faisal, 2012), this review is only limited to the latter element – performance indicators. To this effect, Christofi et al (2012) argue that GRI-G3 performance indicators include all the three elements of the TBL, organized into:
- Economic/financial disclosure (revenue streams, operational costs, worker compensation, contributions, growth projections, and community investments);
- Environmental disclosure (impact on existing/non-living ecological systems, waste disposal, emissions prevention, effluents, employment of green technologies, concern for biodiversity, and holistic environmental compliance); and
- Social disclosure (impact on human rights, fair labor and trade practices, employee benefits, education and training of employees and partners, health promotion, safety, diversity, equal opportunity and treatment, supply and procurement practices with regard to anti-corruption and anti-trust practices).
Dow Jones Sustainability Index
Launched in 1999, the main aim of the Dow Jones Sustainability Index (DJSI) is to track and report on the financial performance of leading sustainability-oriented corporations through the creation of a multiplicity of performance indicators from investable/traded concepts (Bai et al., 2010). The main driving force of DJSI is the concept that leading corporations in corporate sustainability are able to realize long-term shareholder value by directing “…their strategies and management to harness the market’s potential for sustainability products and services while, at the same time, successfully reducing and avoiding sustainability costs and risks” (Christofi et al., 2012, p. 165).
Consequently, according to these authors, such a concept is reflected upon as economically productive and can be targeted for investment decisions. It is imperative to note that the selection of index constituents for the Dow Jones sustainability reporting instrument follows a rule-based process which is essentially based on methodical evaluation of general and industry-specific sustainability standards.
The Dow Jones Index has three elements, covering economic, ecological and social facets of the assessed corporations (Sloan, 2010), and distributed in equal weights of one-third each (Sealy, Wehrmeyer & France, 2010). The DJSI member companies are reviewed on an yearly basis, not only to keep pace with leading-edge organizations in sustainability initiatives and sustainability reporting (Pflieger, Fischer, Kupfer & Eyerer, 2005), but also to take stock of extraordinary events, including delisting from stock exchange markets, bankruptcy, merger, acquisition, and other noteworthy shifts in the corporate sustainability performance (Meehan, Meehan & Richards, 2006).
Moreover, the selected member companies of the DJSI fraternity “…are monitored daily for critical issues and crisis situations against their stated principles and policies, for possible exclusion from the index, regardless of how well they performed in the yearly assessment” (Christofi et al., 2012, p. 165).
Comparing the GRI with the DJSI criteria, Christofi et al (2012) argue that the two instruments/indexes address similar sustainability concerns albeit using diverse disclosure techniques. This implies that there exist similarities in the content of both GRI and DJSI, but variations are noted in the disclosure configurations of the two instruments, as well as in their sustainability indicators. For example, GRI under the social responsibility indicators of supply chain sustainability necessitates information and data that is primarily related to “…impact on human rights, labor practices, benefits, training, education, health, safety, diversity, equal opportunity, and procurement practices with regard to anti-corruption and anti-trust practices” (Christofi et al., 2012, p. 165).
On the other hand, as posited by these authors, the DJSI’s social responsibility indicators that could be used by leading-edge corporations to assess their supply chains for sustainable practices include “…corporate citizenship/philanthropy, labor practice indicators, human capital development, social reporting, and talent attraction and retention” (p. 165). Consequently, stakeholders must initiate reporting standardization and enforcement to synchronize the diverse disclosure formats assumed by the two sustainable reporting instruments.
Supply Chain Operations Reference (SCOR) model and GreenSCOR
The Supply Chain Council (SCC), upon realization that environmental management is attracting phenomenal interest from industry and stakeholders, introduced the “green supply chain” into the SCOR model to illuminate concerns in supply chain processes, best practices and metrics (Supply Chain Council, 2008). This addition gave rise to the GreenSCOR model, “…an integrated green supply chain management tool that allow users to seamlessly manage their supply chain and environmental impacts, resulting in more efficient operations and lower costs” (Logistics Management Institute, 2003, p. iv). It should be noted that the SCOR model was initially developed by the SCC, with the underlying objective of coming up with a standard instrument for assessing, measuring and enhancing supply chain performance.
GreenSCOR modifies the existing SCOR model – a tested supply chain management model and ideal as green supply chain tool – to structure and communicate environmental supply chain management programs with the view to achieve faster, repeatable, collaborative outcomes (Logistics Management Institute, 2003), as well as manage the environmental impacts of the supply chain (Vachon, 2007). In GreenSCOR, therefore, processes define the scope and context of supply chain operations and supply chain roles, while metrics assess and benchmark the total environmental footprint of supply chain operations (Teuteberg & Wittstruck, 2010), and best practices are employed to minimize the environmental footprint of the supply chain (Faisal, 2010).
As such, the best practices to green the supply chain under the GreenSCOR initiative may include such elements as collaborating with partners on environmental issues, minimizing fuel/energy consumption, as well as minimizing and reuse of packaging materials. In equal measure, the metrics to measure such elements under GreenSCOR may include carbon and environmental footprint, energy costs and units per shipment (Supply Chain Council, 2008). While energy cost savings can be achieved by scheduling peak production for of-peak energy demand times, stakeholders are yet to agree on an effective framework that could be used to measure and assess the environmental footprint of the supply chain (Logistics Management Institute, 2003).
The product life cycle, entailing raw material extraction, manufacture, transport, retail/consumer use and disposal, acts as the basis of the green supply chain management, and hence is the cornerstone of GreenSCOR (Supply Chain Council, 2008). Available literature credits GreenSCOR for supporting supply chain innovation, enhancing relations among supply partners, raising productivity, and facilitating organizational growth through engaging organizations to reduce carbon and air pollutant emissions in the supply chains, as well as minimize the liquid and solid waste generated by the multiplicity of processes in the supply chain (Logistics Management Institute, 2003).
The overall finding of the research conducted by Tate et al. (2010) was that the role of supply chain management spans across all aspects of sustainable practices among companies that develop progressive corporate social and environmental strategies. It was clear from the research findings that organizations rely heavily on supply chain management to achieve their sustainability goals. Tate et al. (2010) believed researchers could generalize future study results, based on the data they reviewed from the corporate CSR reports, to discover new insights into the role of supply chain management in sustainability at large corporations.
In contrast, Zhu, Sarkis and Lai (2008) found that the adoption of these practices tends to vary due to extant issues facing major industrial sectors thereby reducing the generalizability of the results. The study cited differing drivers and pressures in each industrial sector as a leading cause of the variances in the adoption levels of sustainable supply chain management practices. Zhu et al. (2008) acknowledged that the same premise is true for the incorporation of potential improvements that companies can make to mitigate the causes that inhibit program adoption.
To reduce variances and address program adoption issues, organizations can utilize the GreenSCOR model which incorporates environmental elements in the latest version (9.0) of the original SCOR model, developed by the Supply Chain Council. The GreenSCOR model allows companies to more successfully incorporate environmental management with supply chain management by underlining best practices for each process and availing a clear set of measures (Vachon, 2007).
Research conducted by Teuteberg and Wittstruck (2010) revealed that while no reference model for sustainable supply chain management is in existence to-date, the GreenSCOR model is particularly useful as a closely-related concept of sustainable supply chain management to base new specific reference models on in the future. The GreenSCOR model also contains best practices for software features and technology development as well as organizational structuring to support supply chain sustainability practices. The implementation of reference models is helpful because they accelerate the realization of organizational concepts and software implementation, and these models also contribute to the minimization of risks (Teuteberg & Wittstruck, 2010).
Overall, the GreenSCOR model has been largely effective as an instrument of sustainability reporting of supply chain operations such that, in 2008, its main elements were incorporated into SCOR 9.0 as integral component of the model (Supply Chain Council, 2008). Among its most highlighted benefits, the GreenSCOR has not only been able to improve environmental and supply management performance, but has provided foresight into the effective management of green supply chain initiatives (Logistics Management Institute, 2003).
Challenges of Sustainability Reporting
Indeed, according to Gao & Zhang (2006), “…while social and environmental measurement and reporting are becoming a relatively well-established practice among a few leading-edge corporations, for many businesses integrating the environment and social attainments into the economic destination is at a very early stage or even has not started yet” (p. 723). As such, companies in need of sustainability reporting encounter a myriad of challenges, particularly in the use of non-standardized data, inadequate technological integration, variations in organizational strategies and policies, as well as lack of agreed upon metrics that could be employed to measure and report on sustainable practices as they interact in the triple bottom line (Hervani et al., 2005).
As rightly noted by these authors, sustainability indicators in supply chains encounter additional challenges, especially when corporations attempt to assess the numerous tiers within a supply chain. For instance, one of the key challenges for many organizations during the implementation of the GreenSCOR model is the lack of data that is deemed essential to initiate the assessment of the organizations’ environmental progress against the metrics identified (Logistics, 2003).
Christofi et al (2012) assert that “…the social responsibility part of sustainability is far more difficult to assess even though it cost society just as much, if not more, as the environmental pollution and resource degradation” (p. 158). This view is reinforced by Bai et al (2010), who note that there exist some practical difficulties in developing performance measurement systems (PMS) with the capacity to integrate tangible and intangible performance measures arising from both environmental concerns and social issues within supply networks.
Additionally, organizations are increasingly facing the challenge of balancing the three elements of TBL to achieve sustainable outcomes in their supply chains (Carter & Easton, 2011), with a section of them being accused of whitewashing the social and environmental dimensions in favor of the economic dimension (Faisal & Akhtar, 2011) One study demonstrated that even in the TBL economy, unreservedly, “…the economic dogma will not be compromised but rather complemented by the other two objectives, for as long as it leads to shareholder wealth maximization” (Christofi et al, 2012, p 159). In the event of supply chain turmoil, research demonstrates that even the most ethical, environmentally friendly, and socially responsible organizations will act in the best interests of their shareholders; that is, they will first safeguard their economic interests (Gao & Zhang, 2006).
As an example, British Petroleum (BP), a leading player in the petroleum industry, was seen to act in the best interests of its shareholders even after it publicly admitted it made a mistake that triggered the Gulf of Mexico oil spill (BBC News, 2010). Regardless of whether BP acted responsibly to balance the TBL components, the ultimate result demonstrated sustained environmental and maritime degradation with substantial social ramifications elsewhere on the other two dimensions of TBL – social and environmental.
A related challenge is elucidated by Bai et al (2010), who admit that although managing key performance indicators (KPI) is increasingly assuming prominence among supply chain managers, formal modeling based on analytical instruments for supply chain KPI determination is so far lacking, particularly in developing countries. Consequently, it becomes difficult not only to integrate environmental performance measures into these assessments but determine and manage these performance measures (Chistofi et al., 2012), and also determine which performance measures are effectively monitoring the expected social and ecological outcomes of sustainable supply chain management (Bai et al., 2010).
Another challenge derives from noted weaknesses in the current sustainability reporting tools and methods. As pointed out by Balkau & Sonnemann (2010), many of the current instruments used to report sustainability initiatives, particularly on social issues and environmental concerns, need to evolve further if they are to play an effective part in sustainable supply chain management. Indeed, according to these authors, “…the expanded range of objectives in a full sustainable development agenda, and the need to consider the entire value-chain stretches many of the [instruments] to the limit” (p. 48).
This particular challenge is aggravated by the lack of standardization of most sustainability reporting instruments, leading to a multiplicity of often-inconsistent approaches that progress variant results on social and environmental initiatives deemed to be identical (Christofi et al., 2012). In consequence, these variations render impossible attempts by corporations to realize real sustainability improvements in their supply chain operations. Also, as noted by Bai et al (2010), cumbersome and inconsistent sustainability reporting instruments diminishes the management effectiveness and efficiency of the supply chain.
Supply Chain Sustainability
As the convergence of information and communication technology improves the transfer and dissemination of information to the global audience, a wider range of customers and stakeholders are increasingly becoming privy to loads of information on what actually happens within supply chains. As a consequence, issues like environmental degradation, poor social responsibility practices, and poor worker conditions in suppliers’ facilities are increasingly becoming news for public consumption, necessitating consumers, governments, and non-governmental organizations (NGOs) to demand that organizations be held more accountable for what happens in their supply networks (Faisal & Akhtar, 2011).
In response, a mounting number of organizations are investigating how to recognize, evaluate, and supervise supplier-related social issues and practices (Awaysheh & Klassen, 2010), as well as supplier-related environmental concerns (Fabbe-Costes et al, 2011). These organizations are said to be engaged in developing mechanisms for sustainable supply chains by aligning their supply networks to respond better to particular sustainability-related issues, such as the provision of safe working conditions for employees, payment of fair wages, and the internalization of environmentally friendly practices (Christofi et al., 2012).
Although sustainability is yet to be holistically operationalized in the Operations Management literature (Faisal, 2010; Pullman & Dillard, 2010), Linton et al (2007) cited in Neto, Walther, Bloemhof, Van Nunen and Spengler (2010) defines sustainable supply chain as “…a supply chain integrating issues and flows that extend beyond the core of supply chain management such as product design, manufacturing by-products, product management during use, product life extension and recovery processes at end-of-life” (p. 4465).
Faisal (2010) views sustainable supply chain strategies, such as waste minimization, social equality and fairness, as well as green product design, as key components of integrative efforts undertaken by organizations not only to seek competitive advantage but also secure shareholder approval in the future. This author further posit that sustainable practices, including environmental friendly packaging, recycling and eco-friendly handling of end-of-life products, are increasingly gaining prominence in supply networks as corporations attempt to meet the challenges of sustainability.
Consequently, according to Faisal (2010), “…sustainability today demands that supply chains must be explicitly extended to include by-products of the supply chain, to consider the entire life-cycle of the product, and to optimize the product not only from a current cost standpoint but also a total cost standpoint” (p. 511). The total cost must take into consideration the environmental effects of resource degradation as well as the social implications of the employees and communities affected by the supply chain.
Emerging research demonstrates a strong correlation between sustainable supply chain and improved corporate image and reputation (Awaysheh & Klassen, 2010; Faisal & Akhtar, 2011). In their research on environmental sustainability, Sarkis et al (2006) found that corporations that fail to address social and environmental concerns in their business practices risk substantial strategic, reputational, and operational implications that have the capacity to undermine any potential economic gains made by domestic and international organizations. For example, the accusation leveled against sports utilities manufacturer Nike about engaging suppliers who used child labor in the manufacture of soccer balls led to negative publicity and, ultimately, the previously respected corporation not only failed to meet its economic objectives but also found it challenging to reengineer its eroded brand image (Faisal & Akhtar, 2011).
Roberts (2003) cited in Keating et al (2008) explored the nexus between organizational image and reputation, management of sustainability issues, and social impacts of supply chains in the framework of branded textiles, wood-based merchandise and branded confectionary. The study unearthed a strong correlation between organizational reputation and the expectation of important supply chain stakeholders, and also drew a strong relationship between the internalization of social and environmental practices and organizations typified by strong consumer activism and high profile brands.
An interesting finding, however, was that there existed a strong relationship between corporate image and reputation on the one hand, and the presence of an “ethical sourcing code of conduct” among key supply chain stakeholders, on the other (Keating et al., 2005). Elsewhere, McDonald’s resolution to increase the price of tomatoes not only had a positive impact on the pay collected by farmers but also conveyed good publicity and enhanced reputation to the corporation, hence reinforcing the brand image (Faisal & Akhtar, 2011).
Supply chain sustainability in the dynamic complexity of the modern-day economy implies that organizations need to, through developing and maintaining networks of relationships with stakeholders and partners, institute a corporate supply or distribution network that will be consistent with the focused notion of sustainable development (Sloan, 2010). To achieve this, Welford (1995) cited in Gao & Zhang (2006) identifies a number of “shifts” that organizations need to undertake, including:
- Shift from objects to relationships,
- shift from parts to the whole,
- shift from domination to partnership,
- shift from structures to processes,
- shift from individualism to integration, and
- shift from growth to sustainability.
There exists a multiplicity of methodologies through which organizations can be persuaded to shift towards supply chain sustainability. Faisal (2010) mentions government and stakeholder legislation, as well as market mechanisms, as some of the ways that could be used to persuade organizations to make major paradigm shifts towards supply chain sustainability. But in their study on sustainable supply chains, Carter and Easton (2011) retrieve this assertion, instead arguing that both legislation and market mechanisms suffer from well-established limitations as they not only ignore the ‘internal’ impulsion and idiosyncrasies of the unique supply networks but provide an opportunity which may facilitate particular stakeholder groups or partners within the supply chain to have more authority than others, resulting in hierarchical control and bureaucratic obstructions between stakeholder/partner groups.
Gao & Zhang (2006) argues that engaging supply chain stakeholders and partners through constructive dialogue is yet another way to facilitate the shift towards supply chain sustainability because “…dialogue draws together the values, issues and indicators relevant to stakeholders in a language that is meaningful, consistent and useful for decision making” (p. 729). To reinforce this view, Pullman & Dillard (2010) conclude that a genuine two-way dialogue between corporations and their partners in the supply network represents the best possible solution for the management of intricate issues bedeviling contemporary society, such as environmental concerns and social inequities.
Indeed, it has been noted in management literature that dialogue is important in any attempt to move an organization to sustainability in supply operations as it entails a search for a win-win situation among all partners and communities involved (Faisal, 2010), brings into perspective an exploration of shared and different interests, expectations, values, needs and fears among the stakeholders (Christofi et al, 2012), and illuminates a focused co-creation of shared realities and values, particularly in issues of concern not only to the present generation but also to future generations (Awaysheh & Klassen, 2010).
Apart from the methodologies used to persuade organizations to shift toward supply chain sustainability, available management literature has come up with themes or enablers that lead organizations to invest in sustainable development within the supply chain. Faisal (2010) mentions ten such enablers, namely:
- information sharing,
- strategic planning to implement sustainable practices in supply chain,
- consumer concern towards sustainable practices,
- collaborative relationships,
- metrics to quantify sustainability benefits in a supply chain,
- regulatory framework,
- support to partners in the supply chain,
- top management commitment,
- awareness about sustainable practices in supply chain, and
- availability of funds.
In discussing the same themes, Tate et al (2010) reveal the intersection and integration of environmental, social, and economic performance. All the themes associated with one of the triad spheres of sustainability (economic, environmental, or social) in SCM and the organization’s CSR report consequently mirror the amount of relative influence that each theme has on the enterprise (Tate et al., 2010).
The framework developed by Carter and Rogers (2008) for applying the triple-bottom line in defining sustainable supply chain practices present overbearing evidence that enterprises should integrate long-term sustainability approaches with vision right through the supply chain to generate competitive advantage. Furthermore, the development of long-term strategy for the performance of the enterprise supports the acceptance that short-range economic benefits are not sufficient if the enterprise wants to remain viable and realize sustainable growth (Dyllick & Hockberts, 2002).
Challenges of Implementing Sustainable Supply Chains
A strand of existing literature (e.g., Isaksson & Steimle, 2009; Sloan, 2010; Vachon, 2007) demonstrates that corporations face a myriad of challenges in their attempt to standardize their supply chain operations to be in sync with sustainable practices as suggested by the dominant triple bottom line approach. Awaysheh & Klassen (2010) acknowledge that the successful implementation of a sustainable supply network is not as easy as just dictating that a specific set of standards be utilized by every supplier to the plant, distribution system or firm; rather it requires a lot of research, planning and sufficient forethought to implement sustainable development in supply chain operations.
Among the noted challenges, some corporations may not have the needed influence to drive paradigm shift among its suppliers, from traditional supply chains to more environmentally sustainable and socially responsive supply chain operations (Awaysheh & Klassen, 2010).
Several studies have examined the root cause of this problem, with results demonstrating a positive correlation between the lack of needed influence to direct sustainability policies and a weak management’s personal value system (Neto et al., 2010; Pullman & Dillard, 2010; Slaper & Hall, 2011). Pullman & Dillard (2010) define values as “…desirable trans-situational goals, varying in importance, that serve as guiding principles in the life of a person or other social entity” (p. 746). One particular study investigating the influence of environmental product and service corporations on their supply chain partners found that senior managers exercised values that were more ecocentric, open to change, and self-transcendent, and hence were able to influence sustainability decisions of these partners in supply and distribution operations (Faisal, 2010).
In yet another study that aimed to evaluate the influence furniture companies exercised over their supply chain partners, particularly in environmental and social sustainability issues, Klassen and Whybank (1999) cited in Pullman & Dillard (2010) found that management’s proactive value system towards the environment and community issues led to elevated efforts by supply chain partners to be more environmentally and socially sustainable via investing in fair remuneration packages for workers, social responsibility initiatives, and pollution prevention and control systems.
Another challenge derives from the fact that “…cultural norms and expectations for improving human potential vary by industry, customer segment, and marketplace” (Awaysheh & Klassen, 2010, p. 1247). This view is reinforced by Faisal (2010), who suggests that foreign multinationals are always in a dilemma when implementing sustainable supply chains under the triple bottom line approach as local communities may project variant cultural norms and values, while concerns for environmental protection may shift from the standards set by the multinationals due to marketplace variations and dominant culture.
On his part, Faisal (2010) notes it is a challenging task for corporations to implement sustainable practices in their supply chain operations at a global level not only due regional differences on the view of corporate social responsibility and sustainability, but also due to varying cultural and value-based orientations between suppliers. It therefore becomes difficult for these corporations to develop standardized indicators of measuring sustainability-related issues, in particular those relating to social and environmental attainments (Slaper & Hall, 2011; Shukla et al 2010; Norman & MacDonald, 2004).
Another challenge is illuminated by Awaysheh & Klassen (2010), who point out that “…as more manufacturing and supplier sourcing has shifted overseas, the geographic distance and length of supply chains (i.e. tiers) between supply chain partners also has increased” (p. 1247). Consequently, it remains unclear about how the structure of the supply network may influence the management of social and environmental concerns between a focal corporation and its many suppliers, who may actually be located thousands of miles away (Slaper & Hall, 2011).
In contrast, however, Markley & Davies (2007) suggest that the emergence of information and technology applications, such as email, internet and sustainability software, provide the needed ground and mechanisms for corporations to influence and control their supply chain partners toward the realization of the triple bottom line approach to supply chain operations. As an example, the supermarket giant Wal-Mart has adopted a sustainability software that seeks to reduce their exposure to potential social and environmental risks by stipulating a set of standards that supply partners must meet and probably surpass in order to win their business (Faisal, 2010).
Additionally, there exists a gap in knowledge and research on the impact of integrating social and environmental issues into supply chain operations and management, primarily arising from measurement challenges (Fabbe-Costes et al., 2011). For instance, it is challenging for organizations to understand the impact that environmental protection programs have on myriad internal and external stakeholders within the supply network due to lack of standardized measurement instruments.
In providing a solution to this challenge, Keating et al (2008) suggest that “…firms desiring to improve the sustainability of their supply chains need to become more proactive in monitoring their suppliers across a range of business functions” (p. 176). In contrast, however, Hervani, Helmes and Sarkis (2005) argue it is difficult for firms to successfully adopt sustainability practices across the supply chain in the absence of standardized metrics and poor technological integration, which will ensure a detailed consideration and exposition of the economic, ecological and social facets of business practice.
Another concern regarding the implementation of supply chain sustainability relates to absence of reporting mechanisms. As much as the triple bottom line approach demands organizations to collect, validate and report on non-financial and non-operational information affecting the organization (Cokins, 2009), to date, it remains a mirage for many organizations to develop and implement effective reporting mechanisms to report on important sustainability parameters, particularly social issues affecting supply chain operations along with germane environmental concerns (Markley & Davis, 2007).
For instance, a recently concluded study examining sustainability practices in the UK construction sector illuminated that in spite of recognizing the relative importance of social and environmental issues to the supply chain, sustainability reporting did not accentuate these issues. A major conclusion arising from this particular study was that “…while there were incidences of environmental screening of suppliers and contractors, these impacts were not captured as part of a formal governance process and were generally not reflected in their social reporting activities” (Keating et al., 2008).
A number of scholars take up this issue by recommending a multiplicity of frameworks for measuring and reporting sustainable supply chain management practices. Cokins et al (2009) suggest that the chief financial officer (CFO) should assist to build a knowledge base that can calculate and report on the firm’s performance from unstructured environmental, climate, and social parameters. Such a knowledge-based framework, it is argued, will in the long-term support the organization to make innovative decisions based on progressive information.
On their part, Hervani et al (2005) suggest a greater strategic elevation of social and environmental reporting faculties, alongside the implementation of a more formal system to monitor and report on social issues and environmental concerns in the supply chain, not only to facilitate coordination across purchasing, production, distribution and marketing functions of the firm and its supply chain partners, but also enhance superior performance advantages and superior commitment from internal and external stakeholders. Consequently, developing practices for measuring sustainability will force organizations to take a broader view of sustainable development initiatives and consider the supply chain in its entirety rather than as separate entities (Sloan, 2010).
Lastly, and perhaps most important, the costs associated with developing and adopting sustainable supply chain practices with the capacity to deal with social and environmental concerns might be prohibitive (Awaysheh & Klassen, 2010). Organizations typically lack the capacity to quantify social and ecological aspects of their business when making decisions regarding supply chain operations (Walker, DiSisto & McBain, 2008).
Other firms are unable to justify to stakeholders the actual or perceived benefits of incurring costs associated with implementing the triple bottom approach into sustainable supply chain operations (Fabbe-Costes et al., 2011), particularly in the event that these stakeholders perceive sustainability as a fixed trade-off between social and environmental issues on the one hand, and economic attainments on the other (Hervani et al., 2005; Faisal, 2010). Still, other organizations are unable to deal with the cost issues due to sheer numbers of suppliers involved (Balkau & Sonnemann, 2010).
Consecutive research studies, as well as extant literature on sustainable supply chain management strategies, provide a compelling case of why many corporations are unable to justify to their shareholders the costs associated with development and implementation of sustainable supply chain operations. However, as indicated in a number of studies, there exists a multiplicity of benefits arising form the implementation of sustainable initiatives across the supply chain (Pullman & Dillard, 2010; Tate et al., 2010; Vachon, 2007), and that can be used to justify the budgetary allocations required to resource and grow these initiatives (Faisal & Akhtar, 2011; Norman & MacDonald, 2004).
While evaluating Westpac Bank commitment to sustainable supply chain, Keating et al (2008) demonstrated that the flow-on benefits from a sustainable supply network that could be used to justify costs related to implementation of such a strategy include “…supply chain benefits, reduced costs and risks, and improved outcomes for both the organization and society” (p. 176).
The Triple Bottom Line
As corporations begin to confront widespread global competition for scarce resources, stricter governmental, stakeholder and environmental regulations, as well as economy globalization (Chan & Qi, 2003), they must find a way between focusing on satisfying shareholders by enhancing their profit margins on the one hand and also concentrating on other matters like social concerns and environmental issues (Faisal & Akhtar, 2011).
This sustainable approach, according to Faisal (2010), leads to an integrative corporate strategy that, in addition to economic facets, also considers social and ecological concerns as mandatory maxims to the growth and wellbeing of the company. Indeed, it has been demonstrated in the literature that the Global Reporting Initiative (GRI) infers global sustainability reporting in terms of the most broadly recognized “…approach of defining sustainability as economic, environmental and social performance – known as the triple bottom line” (Pflieger et al., 2005, p. 167-168).
The notion behind the triple bottom line (3BL), which dates back to the mid-1990s when a management think-tank on accountability coined and commenced using the expression in its work (Giovanni, 2012), derives from the fact that a company’s eventual success or health in its engagements can and should be evaluated not just by the traditional economic bottom line of increasing profit margins, but also by its social and environmental undertakings and performance (Markley & Davis, 2007). To this effect, the 3BL approach recommends that companies be held accountable for their actions and performance on the three domains of sustainability – economic, social and environmental (Bai et al., 2010).
Operations and supply chain management researchers and practitioners face new challenges in operationalizing and integrating the 3BL approach into their traditional areas of interest (Awaysheh & Klassen, 2010; Kleindorfer, Singhal & Van Wassenhove, 2005). Despite these challenges, it is evident that environmental management and performance, which forms one of principle elements of the 3BL, is receiving a mounting degree of attention of interest in the operations literature, particularly in such areas as green product design (Hervani et al., 2005), lean and green operations (Pflieger et al., 2005), green supplier development, and closed loop supply chains (Kleindorfer et al., 2005).
Awaysheh & Klassen (2010) acknowledge that operations and supply chain managers are also increasingly redirecting substantial interest into the assessment of social issues and performance under the 3BL paradigm, particularly in the hope of capturing individual-level human safety and welfare in the supply networks, as well as societal-level community development. Consequently, by extension, these authors posit that social issues and performance in operations and supply network include “…all management practices that affect how a firm contributes to the development of human potential or protects people from harm, thereby capturing both positive and negative aspects, respectively” (p. 1249). In effect, examples of such social practices would include workforce policies for safety and diversity, regulations against engaging in child labor, fair wage practices, and product and work environment safety, among others.
A strand of existing literature has identified a multiplicity of concerns that drives business enterprises to adopt the 3BL approach and to report their sustainability initiatives. These concerns include: preservation of corporate image, regulatory compliance, prevention of liability (Kleindorfer et al., 2005), adherence to community relations, upholding of employee health and safety (Markley & Davis, 2007), customer relations, cost reduction, and quality improvement (Awaysheh & Klassen, 2010).
Because of these mounting concerns, contemporary business organizations are under increasing pressure to assess their impacts on the social and environmental scenes, and to engage in 3BL reporting not only to account for environmental resources they use in their supply chain operations and the resulting footprint they leave behind (Kleindorfer et al., 2005), but also demonstrate how well they handle social issues for the benefit of people and communities (Faisal, 2010). Under the 3BL approach, for example, companies are not only obliged to ensure that employees operate in a prudent and responsible manner in a safe and healthy work environment, but also need to improve their environmental performance (Bai et al., 2010), and align their sustainability objectives with employees and economic incentives (Pullman & Dillard, 2010).
Operations and supply chain management researchers and practitioners are in agreement that the 3BL approach has the potential to make a substantial positive impact on supply chain practice. In green and lean operations, for example, it has been demonstrated that “…resources lost in later stages of the supply chain imply dependent losses also upstream, and thus downstream savings lead naturally to higher savings upstream in the supply chain” (Kleindorfer et al, 2005, p. 486).
Because these cost savings upstream and downstream is facilitated by the presence of the 3BL reporting mechanisms, there exists compelling need for corporations and their supply partners to redefine their supply chain operations (Faisal, 2010). In particular, corporations need to focus on the 3BL enablers for environmental, social and economic dimensions, as summarized below.
Studies have found that corporations that engaged in environmentally sustainable supply chain operations reaped beneficial results in terms of costs reduction, improvement of organizational performance, as well as enhancement of the firm’s reputation and brand image (Markley & Davis, 2007). It is demonstrated in the literature that “…environmental consciousness gives rise to green supply chain management which includes practices like reducing packaging and waste, assessing vendors on their environmental performance, developing eco-friendlier products and reducing carbon emissions associated with transport of goods” (Faisal & Akhatar, 2011).
Indeed, companies are greening the supply networks by increasingly managing their suppliers’ environmental performance with the view to reap the numerous benefits that are associated with the adoption and implementation of the environmental dimension of the 3BL, ranging from cost reduction and positive brand image and reputation (Faisal & Akhatal, 2011), to integrating supply partners in a participative decision-making process that enhances environmental protection (Hervani et al., 2003).
As acknowledged by Faisal & Akhatar (2011), the environmental dimension of the 3BL provides organizations with the leverage to motivate their supply partners, sometimes several tiers upstream, to comply with requirements that may be of fundamental significance not only to the focal company but also to other relevant stakeholders such as consumer groups, nongovernmental organizations and governments, among others.
Kleindorfer et al (2005) note that these stakeholders have the capacity to pressure companies into improving their environmental performance, resulting in strong regulations that govern supply chain operations. However, companies themselves lobby for strong regulations from government and private agencies if they have developed an environmentally friendly technology to improve sustainability in supply chain operations and they ingeniously believe that regulations requiring the standardization and use of their technology would certainly offer them a competitive advantage.
The social dimension of the 3BL framework obliges a company which seeks to operate in accordance with the principles of sustainability to “…consider its entire supply chain, not just those links which belong to its own sphere of legal responsibility” (Faisal & Akhatar, 2011). This implies that the company must conduct its supply chain operations in a manner that is in harmony with the morals and values set by society, but not necessary in accordance with the legal statutes set and governed by law. In this respect, organizations asserting to be guided by socially responsible practices must diversify their supply base and workforce (Pflieger et al., 2005; Bai et al., 2010), put in place mechanisms that support community initiatives and respect of human rights (Carter & Easton, 2011), and guarantee the health and safety of their workers in the supply chain (Fabbe-Costes et al., 2011).
A study by Ciliberti et al (2008) cited in Faisal & Akhatar (2011) avails some learning indicators for integrating socially responsible practices into sustainable supply chains like instituting written requirements, training plans, enduring close relationships with partners in the supply chain, a continuous process improvement philosophy, and imploring the assistance of nongovernmental organizations and other community networks in supporting them to find solutions to a multiplicity of challenges that arise as they attempt to monitor downstream suppliers and retrieve information on employee working conditions and local laws in developing countries.
In a sustainable supply chain setting, available literature demonstrates that the economic dimension of the 3BL approach grants prime significance to quality, delivery and net price (Faisal & Akhtar, 2011), alongside other attributes such as on-time delivery, delivery lead-time and flexibility (Bai et al, 2010; Carter & Easton, 2011). Verma and Pullman (1998) cited in Fabbe-Costes et al (2011) studied what attributes supply chain managers look out for when choosing a supplier.
Among the many attributes under study, the researchers found that managers perceive quality of the supply chain to be the most essential attribute, followed closely by on-time delivery and cost. Extending this work, Faisal & Akhtar (2011) list other attributes to include “…cost savings due to reduced packaging waste, ability to design for reuse and disassembly, and product life extension” (Faisal & Akhtar, 2011, p. 33).
To reinforce these facts, Christofi et al (2012) acknowledge that the economic dimension of the 3BL combines with the other two dimensions – social and environmental – to provide supply chain operations with competitive efficiencies, which include: lower health and safety costs; minimal turnover and recruitment costs due to improved working environments and higher levels of motivation and productivity; shorter lead-times and improved product quality due to innovations in warehousing, transport and product design, and; enhanced organizational reputation due to sustained ecological initiatives such as waste disposal and product disassembly and reutilization. These efficiencies make an organization more attractive and competitive not only to its customers and supply partners but also to other relevant stakeholders, thus lessening liability.
Overall, studies have demonstrated that the 3BL concept provides industry with not only a method of measuring performance, but also administers a frame of reference for understanding sustainable development (Christen et al., 2006). While citing the Global Reporting Initiative (2002), Christen et al. (2006) suggest that it is generally acceptable to view the triple bottom line through the lens of the economic, social, and environmental aspects of business performance. Elkington (1998) refers to the three aspects as the delivery of environmental quality, social equity, and economic success by organizations, implying that most triple bottom line literature depicts sustainability as the intersection rather than the integration of social, economic, and environmental interests and initiatives (Gibson, 2006).
Although the triple bottom line is largely viewed as a metric by which organizations can measure their contribution to sustainable development, christen et al. (2006) caution that the three components should neither be viewed in isolation nor should their broad nature be diluted or, even worse, lost in a constricted indicator definition process that loses sight of the integrated and all-encompassing scope of sustainability.
It has been noted through research that many organizations approach sustainability assessments by addressing the social, economic, and environmental considerations separately and later struggle with how to integrate the separate findings, resulting in the absence of integrative data and authority (Christen et al.; Gibson, 2006). As postulated by Christen et al. (2006), organizations tend to neglect the interdependence of these factors. For this reason, research conducted by Gibson (2006) found that organizations should design their triple bottom line framework to ensure that all members of the organization are aware of the interrelation of the separate elements which will, in turn, ensure mutual gains in all areas. Results of this research demonstrated that this concept is crucial for progress toward a more viable future for the organization (Gibson, 2006).
In contributing to the 3BL research, Vanclay (2004) acknowledges that an integrative approach to triple bottom line implies that the concept functions more as an accounting method rather than a way of thinking about corporate social responsibility since the accounting requirements necessary to determine mutual gains indicate there is a preoccupation with identifying measurement indicators, which often have not proved adequate.
As a result, according to Vanclay (2004), organizations that use the three pillar approach, also referred as the triple bottom line, inadvertently end up implementing this as a framework for accounting and reporting rather than a method for identifying the social impacts of the organization on the environment. Similarly, Gibson (2006) believes that the three pillars approach is a poor fit when considering the interrelated concerns of sustainability. The consequences of this “separate but equal” mindset highlight the complex affinity of the social, economic, and ecological factors, which could lead organizations to view them as conflicting rather than complementary. This attitude toward sustainable practices encourages an emphasis on making trade-offs in sustainability assessments (Gibson, 2006; Walker, et al., 2008; Sloan, 2010).
To remedy these perceived limitations of the triple bottom line, Walker, et al. (2008) advises that awareness is the key. Holistically, the triple bottom line concept measures the result of current actions to indicate progress toward sustainability-oriented goals (Gibson, 2006). However, one study found that while corporate managers recognize the relevance of sustainability and social responsibility, many of them do not know how to systematically include environmental and social issues into decision-making. The challenge is to design a transparent process for measuring supply chain sustainability that is devoted to mutually supporting gains in all three pillars (Gibson, 2006; Walker, et al., 2008; Sloan, 2010)
To summarize, industry can improve the effectiveness of the triple bottom line concept by broadening its definition and applying integrative assessment methods because it is necessary to integrate the entire array of sustainability considerations throughout the process of deliberation, decision, and implementation (Vanclay, 2004; Gibson, 2006). Researchers acknowledge that the incorporation of measurement elements from the triple bottom line with elements of monitoring and analysis from social impact assessment methods can improve the effectiveness of the three pillar approach. The synthesis of processes for measuring, analyzing, monitoring, and managing the intended and unintended social consequences of organizational policies, programs, plans, and projects can bring about a more sustainable and equitable human environment (Vanclay, 2004).
Competitive Advantage through Supply Chain Sustainability
As postulated by Flint & Golicic (2009), “…a competitive advantage exists when a firm has one or more competencies that allow it to create superior value, relative to competitors, for some market segment” (p. 842). As business becomes increasingly competitive and managers more knowledgeable, corporations are realizing that relying on the product alone to provide competitive advantage in the marketplace only provides momentary benefits (Issakson & Garuare, 2003). Thus, according to Pullman & Dillard (2010), contemporary organizations are increasingly relying on competencies acquired through their supply chain to outperform their competitors.
Scholars and practitioners have been quick to identify the unique competencies that enable firms to achieve competitive advantage, with Bai et al (2010) proposing environmental sustainability, while Markley & Davis (2007) suggest corporate social responsibility initiatives. As reported in the literature, early studies reported strong positive correlations between social and environmental management initiatives on the one hand, and the organization’s financial endowment and competitiveness on the other (Pullman & Dillard, 2010). Consequently, researchers have acknowledged that proactive social and environmental strategies generate entry barriers and are sources of competitive advantage in global markets (Flint & Golicic, 2009).
Faisal & Akhtar (2011) acknowledge that nowadays, more than ever, “…sustainability is an integral part of business strategy where the focus is now to leverage it for improving competitive advantage, not just as part of cost reduction for the bottom line” (p. 32-33). Organizations are now achieving competitive advantage through the implementation and adoption of various sustainability paradigms, such as the green supply chain management and green purchasing, which act to assist firms to achieve their economic and financial objectives by curtailing their environmental impact, enhancing their ecological efficiency, and promoting social equity through the 3BL approach (Giovanni, 2012).
Consequently, customers are more willing to consume products from companies that take responsibility for environmental concerns and social issues (Markley & Davis, 2007), while competitors encounter even more complicated challenges, particularly in trying to modify their strategies to accomplish non-economic targets (Bai et al., 2010). Such an orientation considerably puts companies employing sustainability practices under the 3BL approach at a distinct competitive edge over other players.
Current management literature demonstrates that in order for an organization to achieve and maintain competitiveness, “…it must be difficult for competitors to duplicate the benefits of the firm’s competencies due to the fact that they are rare, valuable, imperfectly imitable and have few strategically equivalent substitutes” (Flint & Golicic, 2009, p. 842). It therefore follows that a sustainability competency avails a differential benefit only if it is comparatively unique and inimitable in the organization’s market. In their study on sustainable supply chains, Carter and Easton (2011) appreciably demonstrate that supply chain management, and especially distribution-oriented competencies, is distinguished as presenting such a competitive advantage for many organizations.
Supply and distribution networks ought to serve as avenues for competitive advantage (Flint & Golicic, 2009), by simultaneously harnessing and delivering economic, social and environmental benefits through the adoption of the increasingly popular paradigm of “the triple bottom line” to achieve sustainability (Faisal & Akhtar, 2011, Markley & Davis, 2007). In their recently concluded study on best practices to sustainable supply networks, Pagell and Wu (2007) cited in Pullman and Dillard (2010) found that organizations with exemplary performance had achieved adequate alignment between all three aspects of sustainability – economic, social, and environmental – and had gone even further to integrate this sustainability focus into their routine conversations and value systems.
Earlier on, Gao & Zhang (2006) had found that leading-edge organizations, such as British Petroleum, General Electric, Proctor & Gable and Shell, among others, have not only attempted to integrate their business strategy, processes and people across the triple bottom line, but are constantly reporting on their performance of interacting with economic, environmental and social variables.
In their seminal paper on available avenues for organizations to explore future competitive advantage, Markley & Davis (2007) acknowledge that contemporary organizations can no longer depend on traditional marketing approaches such as price and product differentiation to absorb the competitive pressures of today’s business environment; rather, the opportunity to remain competitive lies in the development and implementation of a sustainable organization, and more significantly, a sustainable supply chain.
In their research on stakeholder engagement and corporate sustainability, Gao & Zhang (2006) are of the opinion that progressive organizations should integrate sustainability into corporate strategic policies and business processes, not only to stimulate the triple-bottom line and long-term competitiveness of the organizations but also to enhance and solidify their strategic assets. Indeed, the premise that sustainability is a fundamental strategic asset of an organization continues to draw increased interest from scholars and practitioners (Markley & Davis, 2007), and has been documented as a theoretical foundation for the development of a variety of modern management models and business process initiatives (Gao & Zhang 2006).
Research literature demonstrates an increase in the occurrence of the intersection between supply chain management and sustainable development (sustainability) over the years; however, the number of related publications is still limited. It is important to define the boundaries which delimitated the search for related papers for this literature review. In this context, three separate categories of literature exist to support the basic elements of this qualitative study. It was necessary to gather information on sustainability reporting to support the research on specific indicators each organization uses to provide evidence of their sustainability efforts.
This information will facilitate a portion of the cross-case analysis to determine if there are common indicators among the selected organizations. It was necessary to conduct an investigation on supply chain sustainability strategies to support research on which model organizations selected and the various themes that govern how organizations approach sustainability implementations to achieve sustainable growth. This data will identify which factors influence model selection and whether the use of a specific model governs the outcome of sustainability implementations. The final topic area of investigation into the triple bottom line and related methods was necessary to prove the existence of a gap in current practical application of the concepts, thereby validating the problem statement.
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