Measuring the Sustainability of Global Supply Chains
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t Measuringthe Sustainabilityof Global Supply Chains: Current Practicesand Future Directions Dr. Thomas !V. Sloan, University of iVlassachusettsLowell, USA ABSTRACT Researcherstrntl pructitioners ulike hcne become increasinglv interestedin the env'ironmental pe('ormance oJ-globolsttpply chains. Does improving the environmentalperJbrmance o.f a single link of ct suppl.r-chain improve the entire chttin's sustuinabitiry - that is, econr.tmic,social, ctnd environmentttl outcomes/ Answering thisqttestion is impossiblewithout a way to measureperformance, and this paper of seeksto answer the question: what are the goals, requirements,an(J challenges of an overall measure supply chain sustainabitity'/ In the process of answering this question, three things are accomplished' used to First, more than 70 articles antJ books ure reviewecJto give an overview of current methods chain improve businesssustainabitity anrt measure performance. Second,a new framework of supply global sttpply chain sustainabiliry is introducerl. ThirtJ, three research propositions related to who can use the sustaintrbilitymeasurement are presenterl. This research has implicationsfor scholars empirical analyses. The research also has framework and propositions to tlirect new theoretical and - stakeholderswith an interest implicationsfor practitioners managers,policy makers, and community in making global supply chains more sustainable. INTRODUCTION 'green' In recent years, many firms have begun efforts to their businesses. The impetus for these preferences' efforts comes from external forces, such as increasedregulation and changesin consumer of and from internal forces, such as the values of the firms' leadership. For example, manufacturers large appliancesmust take new regulationsregarding product recovery into considerationas they design the next generation of washers and dryers. Drivers in the United States (U.S.), once lovers of large vehicles. SUVs, now pay top-dollar for smaller and more environmentally-friendly hybrid find Manufacturers have re-examined waste from their processesto reduce emissions' save energy, and alternativeuses for byproducts. Many firms, governments,and citizens now recognlze the need to go beyond green and have begun thinking in terms of sttstrtinabitity. In general terms, sustainability is defined as economic practices 'meet which the needsof the presentwithout compromising the ability of future generationsto meet their own needs' (WCED, 1987). Building on the definition of sustainableoperations managementby Kleindorfer et al. (2005), we define a sustainuble supply chain as one that is operated in a way that 'competitive generates returnson its capital assetswithout sacrificingthe legitimateneeds of internaland external stakeholdersancl with due regard for the impact of its operationson people and the environment' (p.a8e). previousresearch related to supply chain sustainabilitycan be divided into two broad areas. The 'local' first area has to do with efforts to improve sustainability. This topic covers the tools and techniquesthat firms use to improve environmentalperformance as well the efforts they make to report 'F * 92 The Journalof GlobalBusiness Nlanagement Volume 6 Number 1 February2010 l'esults to outside stakeholders. This researchraises an important question: Does improving one dimensionof sttstainabilityfor one link in a supplychain actuallyincrease the overall sustainabilityof the 'global' entire chain? The secondbroad areaof researchhas to do with performancemeasurement; that is, how one assessesthe performanceof industries,economies, and countries. This area covers the developmentof variouscomposite indicators: multi-dimensional measures designed to evaluatecomplex concepts such as human well-being, industrial competitiveness,and the performance of health care systems. While many important lessonscan be gleaned from this work, it does not yield practical performance measuresthat managerscan use to improve supply chain sustainability. The goal of this paper is lay a theoreticalfoundation for the developmentof an objective measureof global supply chain sustainability. In the coursepursuing this goal, the paper makes three conrriburions. First, it provides a review of the tools and methods currently used by businessesto incorporate sustainability into their businesspractices. Second, it introduces a new framework for thinlang about and exploring supply chain sustainability. And third, it presents three research propositions related to global supply chain sustainability measurement, which can serve as a springboard for future theoretical and empirical investigations. REVIEWOF SUSTAINABILITYTOOLS As mentioned above, firms are becoming more interested in sustainability for many reasons,some 'local' internal and some external. The first line of attack is to address issues;that is, to work on thines that are within their immediate control. Four ways that firms do this are discussedbelow. Decision-Making Tools Once a hrm has decided to take action with regard to sustainability, where does it begin? Many tools and methods have been developed in the last 20 to 30 years to help incorporate sustainability conceptsinto businessdecision making. One of the most prevalent, Lik Cycle Assessment(LCA), is a tool used to evaluate the environmental impact of a product by identifying and measuring all of the materials and energy required to design, produce, deliver, and consume a product. Although LCA is an important and powerful tool, it may difficult to obtain the relevant data and that it ultimately involves subjectiveevaluations by thoseperforming the analysis(U.S. E.P.A., 2006). In addition, its sole focus is environmental factors. Robdrt et al. (2002) discussmany sustainability tools and frameworks, including ISO14000, LCA, Ecological Footprinting, Factor 4, Factor 10, SustainableTechnology Development, Natural Capitalism, and The Natural Step Framework. The authorsdiscuss how the different tools can be used and how they complement each other. Waage et al. (2005) build on the previous discussionby exploring the types of questionsthat practitionersface when incorporating sustainabilityfactors into businessdecision making. For example, which tool(s) should be used in a particular context? Rather than focus on the environmental impacts themselves,other researchfocuses on instruments to evaluate costs and benefits of green practices. Seuring (2001) proposes a framework for evaluating the costs for the entire supply chain, using the fashion industry as a backdrop. De Groene and de Haan (2001) discussthe developmentand application of a method to measureenvironmental costs and benefits for small- and medium-sizedfirms. Barbiroli (1996) observesthat traditional productivity measuresfail to capture the complex economic and technical efficiency of production processesand proposesa new measure,which is the sum of 12 economic,environmental, quality, and productivity performanceindices. The Journal of Global BusinessManagement Volume 6 * Number I * February 2010 93 econonuc (2003) developa methodologyto evaluatethe Extendingthese ideas, Barbiroli and Raggi processand developa numericindex called the impact of envrronmentalinnovations for a pe'ticular two-srepmethodorogy ro evaluateenvironmentally global efiiciencyratio. sarkrs(lggg) developsa factorsare sortedusing the Analytic Network consciousmanufacturing (ECM) programs. Relevant usingData EnvelopmentAnalysis process(ANp), andthen the ECM programalternatives are evaluated (DEA). (2001)'and Figge et al. (2002)discuss how a Epsteinand Roy (2001,2003), Epstein and wisner severalkey environmental,social, and economic barancedscorecartJ approach can be used to track to look beyonda singlemeasure of performance' measuresof performance,which enablesmanagers with whichfirms canintegrate sustainability factors presleyet al. (2007)develop an analyticalframework abovecan play an importantrole in strategicdecisions. All of the tools discussed into long-term, these performanceof firms. Nevertheless,measuring improving the environmentaland sustainability improvementscan be elusive' Environmental and Sustainability Reporting signalconcern with issuesbeyond the way that frms attemptto improve sustainabilityand Another often their sustainabilityperformance' Thesereports financial bottom line is by creatingreports about separatefrom the usual annualreports' with environmentalperformance and are often deal exclusively refersto Triple Bottom Line (TBL) accounting,which one importantform of sustainabilityreporting is performanceto include environmentaland social the expansionof traditional accountingof financial 'stakeholders" that businessesmust also answerto performance. TBL accountingis driven by the idea while TBL accountingis becomingmore widely i.e., all of thoseinfluenced by the actionsof the firm. are not always to fums of engagingin this type of reporting E used,few standardsexist, and the benefits ,$ clear. tr by tl environmentalreporting, which was pioneered $ Fatkin (2001)provides an overview of corporate I The Global performanceand betterstandards are needed' E polaroid, and concludesbroader measures of effort to develop standardsof sustainability Reporting Initiative (GRI) is a non-prof,rt,collaborative I firms can communicate guidelines,issued in october 2006,detail how l reporting. The latestreporting I (GRI, 2006)' Husseyet al' (2001) t to the public their environmental,docial, and economicperformance I and veleva et al' (2003)report on the typesof discusshow the GRI guidelinescan be operationalized,