Sustainable Supply Chain

Triple Bottom Line

The triple bottom line integrates environmental, social and economic issues:

1) Environmental issues address levels of pollution, carbon emissions, contamination of local environment, development of eco-friendly products, low density packaging design, input material purification, waste reduction, and waste elimination efforts like bio-degrading and non-toxic incineration (Walker, Di Sisto and McBain 2008).

2) Social issues relate to Ethical Trading Initiative and UN Global Compact that addresses unsustainable practices like slave labour, under-age employment, below-minimum wage employment, poor OH&S practices, and discrimination (UN Global Compact 2012, Ethical Trading Initiative 2012).

3) Economic issues relate to quality, speed, reliability, cost and flexibility. When choosing supplier, company should use evaluation schemes that integrate environmental and social criteria, set minimum standard (ISO and SA) requirements and use supplier self-evaluation to avoid risks related to environmental and social performance and disruptions of operation processes (Seuring and Müller 2008). For example, every supplier needs to meet minimum requirements (IWAY) to work with IKEA. These include legal working ages of employees, decent working conditions, sourcing wood from known sources, introduced environmental and social policy (Smith 2010).

Drivers of Sustainable Supply Chain

There are several internal and external drivers or triggers of sustainable supply chains:

1) Personal values and commitment of individuals in an organisation, including managers, founders and owners.

2) Government regulations and legislation that should encourage innovation, not court action. For example, the Carbon Tax, that is due to come into force on July 1, 2012 is being challenged in the High Court as unconstitutional (Governement Confident Carbon Tax Constitutional 2012), although it should encourage businesses to explore alternative energy sources.

3) Customer demand. Demand is growing for environmentally friendly and energy efficient products which allows companies enhance reputation and revenue (Green Products 2010). Customers are also increasingly influenced by a company’s sustainability policies and what products firms buy and from whom they buy.

4) Non-governmental organisations and pressure groups. NGOs have the biggest impact on companies’ reputation, which may also affect customer demand once customers are made aware of some environmental or social issues. For example, in 2010 Nestle was boycotted by consumers and was forced to terminate contracts with a palm oil supplier in Indonesia after Greenpeace exposed this supplier as destroyer of tropical rainforests which are the natural habitat of endangered orang-utans (Nestlé Takes a Beating on Social-Media Sites 2010).

5) Competitive advantage. Potential leaders in environmental technology may set new industry standards and drive environmental innovation, and they may gain competitive advantage at the same time.

6) Suppliers provide valuable ideas for potential collaboration to address sustainability issues.

7) Cost reduction relates to reduction in wasted resources and effort, e.g., by reducing packaging and waste (Walker, Di Sisto and McBain 2008).


Barriers to Sustainable Supply Chain

1) High costs. Sustainable supply chains require sometimes radical changes in operational practices and re-engineering of existing supply chains, therefore significant investments are required that would give only long-term returns (Wu and Pagell 2011).

2) Insufficient communication in supply chain, poor supplier commitment and unwillingness for companies to share information that would expose weaknesses or give other companies competitive advantage (Walker, Di Sisto and McBain 2008).

3) Rules and regulations can also prevent sustainable supply chain development as some companies see regulations as constraint (Walker, Di Sisto and McBain 2008).

4) Lack of legitimacy relates to “greenwash” that occurs when company management does not have real commitment to sustainable practices (Walker, Di Sisto and McBain 2008).

Benefits of Sustainable Supply Chain

Implementation of sustainable supply chain provides several long-term benefits: reduced costs, improved performance and enhanced reputation (Walker, Di Sisto, McBain 2008). All these benefits relate to more efficient product and operations design and quality, safer working conditions that result in motivated and more productive employees and implementation of ISO standards, that combined makes company more attractive to customers and suppliers (Carter and Easton 2011).

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