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Ó Springer 2011
Sustainable Supply Chain Management Integration: A Qualitative Analysis of the German Manufacturing Industry
ABSTRACT. Firms are increasingly integrating sustainability into their supply chain management (SCM) practices. The goal is to achieve sustainable flows of products, services, information and capital to provide maximum value to all corporate stakeholders. Prior research on SCM integration has insufficiently addressed sustainability. The objective of this research is to provide for a coherent and testable model of sustainable supply chain management integration (SSCMI). By drawing on four cases from the German manufacturing industry, we seek to identify the most important factors that enable or impede the integration of sustainability into SCM. KEY WORDS: integration, supply chain management, sustainability, conceptual framework, case study research
Research motivation and objectives The practices and structures of a globalized, capitalist world order gave rise to a number of challenges for corporations. Sustainable development is undoubtedly among the most important tasks to overcome in this new business world (Amaeshi et al., 2008; Carroll, 1991; Porter and van der Linde, 1995). Sustainable development has been deﬁned as
Julia Wolf is Assistant Professor for Sustainability in Logistics and Supply Chain Management at the Supply Chain Management & Information Systems Department of the EBS Business School in Germany. Her research interests include internal integration of sustainability strategy from the corporate to the functional and supply chain level, management for the triple bottom line at logistics service providers and theory development in Supply Chain Management. Julia Wolf gained her doctoral degree from the European Business School in 2008 on the theoretical foundation of Supply Chain Management research.
development that meets the needs of the present generation without compromising the ability of future generations to meet the needs of theirs (World Commission on Environment and Development, 1987). According to the United Nations Global Compact, sustainability does not only mean using natural resources in a sustainable way. Rather, sustainable development implies embracing, supporting and enacting within the sphere of ﬁrm inﬂuence, a set of core values in the areas of human rights, labour standards and anti-corruption. By doing so, ﬁrms, as a primary driver of globalization, can help to ensure that markets, commerce, technology and ﬁnance advance in ways that beneﬁt economies and societies everywhere (United Nations Global Compact Ofﬁce, 2008). Supply chain management (SCM) plays a central role in achieving sustainability for two reasons. First, SCM has a strong and deep impact on the natural environment because it deals with the resources needed for the production of a good or service (Mentzer et al., 2001). Thus, SCM impacts the exploitation of renewable and non-renewable resources (Srivastava, 2007). This aspect addresses the importance of incorporating sustainability in internal SCM practices. Second, buying practices can impact suppliers’ ability to improve their sustainability. Firms can use their purchasing power to help instil good environmental and social practices in smalland medium-sized companies across the supply chain (Hart, 1995; World Commission on Environment and Development, 1987). This aspect addresses the importance of integrating sustainability into external SCM practices with supply chain partners. Previous research suggests that sustainable supply chain management (SSCM) has a positive impact on
Julia Wolf according to the same set of objectives in order to deliver the highest value to the customer. Poorly managed supply chains are characterized by one or more value creating processes working at cross purposes to other processes (Pagell, 2004). Flynn deﬁnes supply chain integration as the degree to which a manufacturer strategically collaborates with its supply chain partners and collaboratively manages intra- and inter-organization processes. The goal is to achieve effective and efﬁcient ﬂows of products and services, information, capital and decisions, to provide maximum value to the customer (Flynn et al., 2010). The question is how this deﬁnition needs to be modiﬁed to include sustainability. There is empirical evidence that customers increasingly want to understand the conditions un´ der which products have been produced (Gonzalez´ Benito and Gonzalez-Benito, 2006b; Locke and Romis, 2007; Locke et al., 2007a, b) and desire products that have been produced in an environmentally sustainable way (Collins et al., 2007). In addition, stakeholder theory (Freeman, 1984, 2004, 2005) asserts that ﬁrms should not only seek to satisfy customer needs but also the expectations of other stakeholder groups. Governmental organizations and non-governmental organizations (NGOs) have been found to be the most important drivers for the adoption of sustainability strategies for corporate ´ ´ ﬁrms (Gonzalez-Benito and Gonzalez-Benito, 2005a, b, 2006a, b, 2008, 2010; Sharma and Vredenburg, 1998). Firms need to understand these expectations in order to deﬁne appropriate sustainability goals and strategies at the corporate level. It will be essential for ﬁrms to break down the corporate sustainability strategy into appropriate supply chain sustainability strategies to achieve maximum performance. For example, Hayes and Wheelwright (1984) assert that a business strategy needs to be supported by various functional strategies which are internally consistent. This consistency allows the ﬁrm to be competitive (Hayes and Wheelwright, 1984). Applying this to sustainability suggests that the goal of sustainable supply chain integration is to achieve sustainable ﬂows of products, services, information and capital to provide maximum value to all corporate stakeholders. Integration can be studied at two different levels. Internal integration examines integration between different areas of the same organization, whereas external integration analyzes integration at the interface of
performance (Christopher and Ryals, 1999; Cochran and Wood, 1984; Epstein and Roy, 2003; Klassen and McLaughlin, 1996; Li et al., 2006; Porter and Kramer, 2006). The literature has dealt with multiple issues: green product development (Chialin, 2001), green purchasing (Chen, 2005), ethical sourcing (Roberts, 2003), sustainable transportation (Murphy and Poist, 2000; Murphy et al., 1996), sustainable operations and production (Kleindorfer et al., 2005), issues related to governance and reporting (Hervani et al., 2005; Keating et al., 2008; Tate et al., 2010) and product carbon management (McKinnon, 2010). Most of this research has been fragmented and considered single activities in isolation (Svensson, 2007). Recently, research on SSCM started to integrate the supplier perspective (Foerstl et al., 2010; Pullman et al., 2009) but such approaches are still scarce (see also the critique put forward by Svensson, 2007). There is far less research that addresses the relationship between a ﬁrm’s sustainability strategy, its internal integration in form of supply chain sustainability strategy and the external integration with customers and suppliers (Keating et al., 2008; Pagell and Wu, 2009; Seuring and Muller, 2008; Svensson, 2007). Such an integrative ¨ perspective appears to have the potential to improve efforts in making supply chains more sustainable. Applying the concept of integration to sustainability may help us to better understand the practices which make supply chains more sustainable and to assess the impact of such activities on sustainability performance. To the best of the authors’ knowledge, there is no earlier research that has tried to do this. The overall objective of the present research is to contribute to closing this gap in literature by providing a coherent and testable model of sustainable supply chain management integration (SSCMI). By drawing on traditional supply chain integration literature and the insights gained from four case studies of the German manufacturing industry, we seek to identify the most important factors that enable or impede the integration of sustainability in SCM.
Literature review The concept of supply chain integration asserts that the objectives of different functional areas and partners in a supply chain need to be arranged
Sustainable Supply Chain Management Integration different organizations (Flynn et al., 2010). Pagell (2004) suggests that aligning performance measurement and reward systems, organizational structures, and information and communication processes is among the most important determinant factor for successful internal integration between the corporate and the supply chain level. External integration may cover both the upstream and downstream supply chain. Stakeholder theory (Freeman, 1984, 2004, 2005) suggests that any stakeholder should be integrated that is affected by the ﬁrm’s operations. The expectations of stakeholders are those of downstream supply chain partners. They should be integrated into SSCM strategy formulation and then be transferred to the upstream supply chain in the stages of supply chain partner selection (Jiang, 2009), relationship management (Reuter et al., 2010) and performance management (de Brito et al., 2008). The underlying assumption is that increased integration leads to better performance (Narasimhan and Wook, 2001). It seems close at hand to simply transfer existing knowledge of supply chain integration to sustainability. However, if this would be the perfect solution, why can we observe so many practical cases where this does not hold true? We believe that the lack of supply chain sustainability integration is partly due to a lack of knowledge as to how internal and external integrations of sustainability can be achieved. Furthermore, we contend that it will be essential for ﬁrms to not only integrate immediate tier-1 suppliers into sustainability strategies, but to extend these to tier-2 to tier-n. This increased degree of complexity has been insufﬁciently addressed in earlier supply chain integration literature. For the purposes of this article, we deﬁne supply chain sustainability integration as the degree to which a manufacturer strategically collaborates with its supply chain partners and collaboratively manages intra- and inter-organization processes for sustainability. The goal is to achieve economic, environmental and social sustainability by integrating ﬂows of products and services, information, capital and decisions, to provide maximum value to multiple stakeholder groups. In the following section, we provide a model of SSCMI which identiﬁes the factors that support or impede integration. This literature review served to identify a general theoretical model (Figure 1) to be assessed in the subsequent discussion.
Sustainable Supply Chain Integration
External Downstream Supply Chain Integration
External Upstream Supply Chain Integration
Figure 1. Model of SSCMI based on prior literature.
Methodology The goal of this research is to develop a conceptual theoretical model of SSCMI that enables future empirical testing. According to Eisenhardt, the case study logic is an appropriate methodology for any research targeted at theory development (Eisenhardt, 1989). For this reason, an exploratory research design, using qualitative information from four case studies, was adopted. Siggelkow (2007) suggests that research, which is based on inductive theory building, can be based on a limited number of cases, provided that the conceptual argumentation is plausible and the cases are used as additional justiﬁcation for argumentation (Siggelkow, 2007). Since we were interested in understanding how traditional supply chain integration differs from sustainability integration, the two key dimensions to be considered for case selection were ﬁrm experience in supply chain integration and in sustainability. We chose four cases from four different industrial sectors of the German manufacturing industry based on these selection criteria. PharmaChem and ApparelComp have received numerous rewards and have been recognized in sustainability rankings for their sustainability efforts. In addition, we identiﬁed two ﬁrms from newspaper and business press articles, which are renowned for their supply chain integration activities: ApparelComp and FoodFirm. This theoretically guided approach to case study selection contributes to the external validity and generalizability of ﬁndings (Gibbert et al., 2008; Numagami,
Julia Wolf external stakeholders. These factors were compiled and presented in a table, which displays the constructs and their direction of inﬂuence on sustainable supply chain integration at each sample ﬁrm. This table helps to condense the cases to their key elements. Table I provides one example of the initial table that was constructed for FoodFirm. In addition, we created maps of each case to achieve a preliminary understanding of how these constructs relate to each other and to sustainable supply chain integration. The map for PharmaChem is displayed in Figure 3. Cross-case analysis was conducted in order to move from the four speciﬁc cases to the identiﬁcation of a general model of sustainable supply chain integration across all four cases. The second step enabled the investigation of whether and to what extent elements of interest in one setting are replicable in other settings (Miles and Huberman, 1994; Yin, 2002). The objective of this process was to identify patterns across case examples. Tables, such as Table I for FoodFirm, were generated for each case ﬁrm. The factors that enable and inhibit sustainable supply chain integration for each sample ﬁrm were then extracted from the individual case setting and grouped around constructs. Cross-case analysis rearranges information from a case-by-case format to a construct-by-construct format (Miles and Huberman, 1994). For example, all items identiﬁed at the single case level on internal organizational structures were combined in one construct for organization. This second step of the research required several iterations. Our emphasis was on being both parsimonious and complete. In the course of the research, we were able to identify ﬁve factors central factors that enable or inhibit SSCMI.
1998; Yin, 2002). Figure 2 summarizes the sampling strategy and sampled ﬁrms. Multiple data sources, combining primary interview data and secondary archival data, were used for the development of a case study database (Eisenhardt, 1989; Yin, 2002). The interview partners were senior managers and responsible for translating corporate sustainability strategies into supply chain strategies. Interviews lasted between 30 min and 2 h. Each interview was conducted by two researchers: the main researcher, who participated in all interviews, and a second researcher, who differed for each case company. We used a structured interview protocol at each visit which is included in the Appendix. Interviews were tape-recorded and transcribed in their entirety. We employed ﬁeld notes taken during and directly after the interview as a primary information source. Further information was collected from secondary data sources, such as company reports, information on sustainability and corporate social responsibility strategies from corporate websites, supplier codes of conduct where available, and other material that interview partners were willing to share. This triangulation of primary interview data and secondary data sources increases reliability and internal validity of research ﬁndings (Yin, 2002). Qualitative data were analyzed using a grounded theory approach (Glaser and Strauss, 1967; Miles and Huberman, 1994). Within-case analysis supported us in understanding sustainable supply chain integration in a speciﬁc context. The objective of within-case analysis was to identify key factors that enable and inhibit the level of interaction and coordination across different functional areas and with key
Renonwned for SC integration
Results Strategic internal integration
Figure 2. Sample ﬁrms.
Prior research on strategy deﬁned it as a set of decisions and activities directed towards the achievement of a speciﬁc goal (Mintzberg and Waters, 1985; Porter, 1998). Following this school of thought, ﬁrms ought to deﬁne precise strategic goals and direct all strategic decisions and organizational structures towards the most efﬁcient and effective
Sustainable Supply Chain Management Integration
TABLE I Factors that enable and inhibit sustainable supply chain integration at FoodFirm Construct Internal integration Goal setting Impact Note
Organizational structure Positive leaves initiative to function Limited communication Negative between functions Limited availability of Negative data and information on sustainability Lack of additional Negative human resources Leadership Positive commitment External downstream supply chain integration Interaction with Neutral consumers Interaction with NGOs Positive
Formulation of sustainability goals at corporate level vague; no goals formulated for different functional areas Motivates and inspires; employees are empowered with responsibility
SCM perceives a need to integrate other functions, such as Marketing, to achieve better results Perceived lack of substantiated basis for decision making; lack of information both internally (within ﬁrm) and externally (customers and suppliers) SCM employees burdened with sustainability issues in addition to their daily work Employees perceive strong moral support from superiors despite the lack of guidance in terms of key ﬁgures SCM is unsure whether sustainability should be a strategic goal of the ﬁrm per se or whether sustainability is something valuable in the eyes of consumers Pressure exerted by NGOs is perceived as very strong; leads to numerous supply chain risk management activities Serves to better understand needs and expectations
Interaction with other Positive stakeholders External upstream supply chain integration Source situation Negative Supplier selection Positive Supplier relationship management Supplier performance measurement Limited integration of tier-2 to tier-n supply chain partners Positive/neutral Neutral Negative
Single source situation leaves limited room for manoeuvring Sustainability objectives can easily be integrated into existing supplier selection mechanisms (e.g. audits, certiﬁcation) Pilot projects with selected suppliers; perceived dependence on suppliers’ willingness to share information No tracking of environmental and social performance measures; contribution of SCM unclear No transparency of who these supply chain partners are and how they work; SCM might be held accountable for things that may happens out of its control
achievement of these goals. This implies that corporate strategic goals need to be integrated into functional strategic goals (Mintzberg, 1979). However, we could not ﬁnd a clear supply chain sustainability strategy that was integrated into a broader corporate sustainability strategy at any of the sample ﬁrms. All case companies issued some form of a sustainability report, which was more or less an overview of activities in the areas of environmental protection and social responsibility. Three of the four companies included a collection of sustainability
performance metrics and information about how these ﬁgures had improved in the past. The interview partners of all case companies reported a lack of integration of corporate sustainability strategies with functional and, in particular, supply chain sustainability strategies. The impact of this lack of integration differed among ﬁrms. At CarComp, interviewees felt that this lack of integration inhibited sustainable supply chain integration. Here, employees felt that they could not engage in any form of activities or invest in the development of
Corporate Sustainability Strategy •Focus on emissions and security
Supply Chain Sustainability Strategy •Focus on product availability and security Sustainability Performance •Risk mitigation
External Stakeholder Integration Activities •Stakeholder dialogues Enablers (+) •Market position Inhibitors (-) •Willingness to pay for sustainability •Expectations do not match buying behavior •Risk from adverse action of NGOs
Internal Integration Activities •Sustainability risk management Enablers (+) •Sustainability training •Goal alignment •Additional human resources Inhibitors (-) •Disconnect on incentives •Knowledge
External Supplier Integration Activities •Audits Enablers (+) •Market position •Information sharing •Third party certification Inhibitors (-) •Disconnect on costs •Disconnect on time requirements
Figure 3. Map of SSCMI of PharmaChem.
sustainability structures without having a clear sign from top management that these were in line with corporate strategy. In contrast, interviewees at FoodFirm perceived the lack of a clear supply chain sustainability strategy as an opportunity to realize own ideas and to assume an active role in setting standards. The informants felt that these ideas, once deﬁned, would be approved by top management because the leadership team encourages efforts in sustainability without setting limitations on activities. This strongly motivates employees within the supply chain function. A similar motivation was expressed by interviewees of PharmaChem and ApparelComp. ApparelComp’s focus is on continuously decreasing the corporate environmental footprint. In order to achieve this goal, ApparelComp sets similar targets to its suppliers. CarComp strives to become the producer of a car with the least amount of emissions. PharmaChem aspires in becoming the leader in environmental sustainability in its industrial sector. Therefore, all ﬁrms have clear and ambitious sustainability goals, but they adopt different strategies for internal implementation. The sustainability strategies of the case companies rather resembled the school of Hamel and Prahalad (1993), who perceived strategy as stretch. The principle of stretch requests the active creation of a misﬁt between an
organization’s resources and its aspirations. High aspirations unleash potential within an organization that might not have been discovered otherwise (Hamel and Prahalad, 1993). Findings from the case companies suggest that supply chain sustainability integration is stronger when corporate sustainability strategies leave supply chain decision makers room to manoeuvre.
Organizational internal integration According to Mintzberg, an organization is deﬁned as the set of mechanisms by which a ﬁrm organizes its activities and the parameters it uses to design its structures (Mintzberg, 1979). The organizational structures used to integrate sustainability internally varied strongly across the sample ﬁrms. CarComp installed one entity at the central level which was in charge of sustainability. Although this unit was perceived as highly efﬁcient, interview partners expressed some concerns. They were afraid that all sustainability matters would be delegated to this entity, while they asserted that sustainability should be the responsibility of everyone. PharmaChem emphasized sustainability risk mitigation. This was associated with additional work and interviewees felt
Sustainable Supply Chain Management Integration that this burden could not be allocated to employees in addition to their regular work. For this reason, PharmaChem set up an additional central unit which is in charge of sustainable supply chain risk management. This organizational structure allows for building up and storing expert know-how at the central level, which the decentralized level could only extend with difﬁculty. Information technology structures were adapted correspondingly, i.e. employees at the central unit receive automatic information about potential sustainability risks in the supply chain without additional workload for supply chain employees. Although supply chain employees perceived this organization as highly efﬁcient, they also recognized that this risked decreasing the opportunities for others to contribute to sustainability. ApparelComp integrated sustainability objectives into classical performance measurement and reward systems. Individual supply chain employees and their supervisors determined a certain share of their variable pay component which was allocated to the realization of a sustainability project. The interviewees perceived this very positively but, at the same time, expressed some concerns because sustainability projects are normally team projects but incentives were not aligned across teams. At the time of data collection, FoodFirm was still about to deﬁne its supply chain sustainability strategy. Similar to PharmaChem, FoodFirm felt it needed additional human resources to be able to handle the workload associated with sustainability. The ﬁrm had just created a new job position for which it had searched for someone with experience in sustainability, in contrast to experience in SCM. The task of this person will be to help deﬁne the supply chain sustainability strategy and then support the ﬁrm in redesigning its internal supply chain structures to optimally realize the strategy. Findings from the cases suggest that sustainable supply chain integration at the central level reduces costs but decreases its impact. The ApparelComp case reveals that higher levels of sustainable supply chain integration can be achieved if responsibility is shared across functions. The cases provide some weak support of the assertion that well-designed performance measurement and incentive systems lead to higher levels of sustainability integration. In contrast, incentive systems that foster competition between functions seem to inhibit sustainability integration. While information
technology seems to be an important carrier of information on sustainability, the interview partners perceived that it was not a central factor for enablement or inhibition of sustainability.
External stakeholder integration of downstream supply chain partners A stakeholder of a ﬁrm is any person or entity who can affect or may be affected by the operations of the ﬁrm (Clifton and Amran, 2011; Freeman, 1984, 2004, 2005). Stakeholders may include NGOs, regulators, customers or local communities. Earlier empirical research has demonstrated that the perceived pressure of such stakeholder groups is one factor that inﬂuences the adoption of supply chain sustainability strategies by ﬁrms (Carter, 2000; Carter and Jennings, 2002a, b, 2004). Data from the case companies suggest that the mere perceived pressure is only one of the factors that lead to sustainable supply chain integration. Respondents from all case ﬁrms felt this pressure but were unsure about what it actually meant. Three of the four ﬁrms reported that they perceive that their customers expected sustainability but were uncertain about their willingness to pay higher prices for sustainable products. The appropriate strategic direction was also not ﬁnal at these ﬁrms. PharmaChem perceived a strong risk of being publicly accused by NGOs for non-sustainable business practices along their upstream value chain. As a consequence, the ﬁrm adopted a supply chain sustainability strategy focused on risk prevention and mitigation, and has invested substantial human and ﬁnancial resources into this strategy. CarComp reported an increased share of customers, who requested that the ﬁrm contractually conﬁrm that all products were produced under environmentally and socially responsible conditions. This led CarComp to integrate similar requirements into its own supplier contracts. FoodFirm collected information about stakeholder’s sustainability expectations. It found that consumers expect sustainable products but were not willing to accept a price premium for these. ApparelComp engages in diverse forms of stakeholder dialogues to explore the expectations of multiple stakeholder groups in terms of sustainability. Although external stakeholder pressure is a driver for the adoption of SSCM strategies, the insights from
Julia Wolf integration is lower than that which could be found in earlier research for classical supply chain integration (Flynn et al., 2010). The strong emphasis of PharmaChem on risk mitigation results in a concentration on commodity suppliers. This ﬁrm ﬁnds that the highest sustainability risks are with those suppliers that are not very well known. For such suppliers, PharmaChem performed additional processes in order to track relevant information on potential sustainability risks that might arise. In addition, it adjusted information systems. For example, PharmaChem deﬁned certain risk classiﬁcation indices. Once a supplier falls under certain criteria, there is an automatic alert. Findings from this case suggest that sustainability integration, in terms of risk management, goes beyond traditional supply chain integration to include all suppliers and only the most strategic ones. ApparelComp seeks to asses the environmental impact of its products throughout their lifecycle and explicitly includes all suppliers, from tier-1 to tiern. The suppliers are asked to provide information on key sustainability areas, such as the amount of carbon emissions for production. ApparelComp receives information from tier-n suppliers through its contacts with tier-1 suppliers. If a tier-n supplier cannot provide the requested information, either the tier-1 supplier provides support to the tier-n supplier, or tier-1 suppliers provide ApparelComp with complete contact information, and ApparelComp solves the problem directly. Thus, ApparelComp has adjusted operational processes and information ﬂows to support sustainability. In addition, ApparelComp seeks to ensure the long-term survival of its upstream supply chain partners. In order to do so, it requests economic performance information across multiple supply chain tiers. The objective is to understand the wealth distribution across the entire chain in order to ensure the long-term economic proﬁtability of all its supply chain partners. Classical supply chain integration seeks to achieve effective and efﬁcient ﬂows of products and services, information and capital, to provide maximum value to the customer at low cost and high speed (Bowersox et al., 1999; Flynn et al., 2010; Frohlich and Westbrook, 2001). Findings from ApparelComp suggest that sustainability integration also encompasses equal distribution of capital to provide longterm business continuity of all supply chain partners involved. This is an extension of classical supply chain integration.
the case studies suggests that a ﬁrm’s competence in integrating diverse stakeholder groups into strategy formulation provides for appropriate focus and direction. This competence involves the ability to establish trust-based, collaborative relationships with a variety of stakeholders, in particular those with noneconomic goals (Sharma and Vredenburg, 1998). According to our data, perceived pressure is not enough for successful sustainability implementation. Rather, ﬁrms need to understand more precisely the nature and range of stakeholder expectations to design appropriate strategies. The key implication here is that the information gained from stakeholders needs to be integrated into strategy formulation and included in communication channels throughout the supply chain. Therefore, ﬁrms need to develop capabilities in stakeholder integration.
External integration of upstream supply chain partners External integration of upstream supply chain partners recognizes the importance of establishing close, interactive relationships with suppliers (Flynn et al., 2010). Earlier research suggests that supplier integration involves core competencies related to coordination with critical suppliers (Bowersox et al., 1999). We have found similar approaches among the case ﬁrms and the objective to structure inter-organizational sustainability strategies, practices and processes. FoodFirm and CarComp work with strategic suppliers in the area of sustainability. For both ﬁrms, the objective is to generate product and process innovations in sustainability. For example, CarComp seeks to develop automotive vehicles that cause a minimum of carbon emissions throughout their lifecycle. The ﬁrm integrates key suppliers into product development teams. In addition, both ﬁrms ask their critical suppliers to share information on sustainability. For example, FoodFirm asks strategic suppliers about their energy usage and water consumption levels in production. However, in both cases, information systems and processes have not been aligned in order to automatically track such information. In addition, interview partners mentioned that the degree of information provided depends on the supplier’s willingness to share this information. Findings from these two cases suggest that the level of sustainability
Sustainable Supply Chain Management Integration Sustainability performance It has been argued that internal integration contributes to operational performance because it breaks down functional barriers and engenders cooperation to meet customer requirements (Flynn et al., 2010). In addition, there is evidence that internal integration positively relates to business performance, for example, through improved product innovation (Koufteros et al., 2005). External integration with customers offers opportunity to better understand customer expectations and their needs (Song and Di Benedetto, 2008). The exchange of information with suppliers has been claimed to improve performance because of more accurate production and delivery plans (Flynn et al., 2010; Koufteros et al., 2005). Sustainability performance is more complex than traditional economic performance for three reasons. First, it adds two additional dimensions to classical economic performance: social and environmental performance (Epstein and Roy, 2003). Second, performance is not only measured in terms of customer expectations but in terms of multiple stakeholder group expectations (Freeman, 1984, 2004, 2005). Third, it requests information transparency across multiple upstream supply chain tiers that are normally out of the control of the manufacturer (Amaeshi et al., 2008). All sample ﬁrms had problems in understanding and assessing the contribution that sustainable supply chain integration has on sustainability performance. PharmaChem and ApparelComp altered internal performance evaluation and incentive schemes that integrated sustainability goals. However, both only concentrated on one aspect of sustainability, environmental or social, not both. In terms of external stakeholder integration, FoodFirm relied on publicly available data, such as the Dow Jones Sustainability Index, and benchmark reports to assess its performance in relation to competitors. ApparelComp collected some information on environmental sustainability from its upstream supply chain partners, but this information was collected for a speciﬁc project purpose and was not a regular activity. All ﬁrms collect some information on the sustainability performance of their supply chain partners at the initial phase of supplier selection but, normally, this information is not regularly updated. Most interview partners pointed to a perceived gap between the
costs incurred for sustainable supply chain integration and customer’s unwillingness to accept higher prices. They felt that this had a negative effect on their sustainability initiatives. This issue points to a potential negative relationship between economic performance on the one hand and social and environmental performance on the other. The sample ﬁrms were just about to explore appropriate performance measures and quantifying the impact of different activities on sustainability performance at the corporate and supply chain level. At this stage, it seems too early to draw any valid conclusions on the performance contribution of sustainable supply chain integration.
Discussion The data were collected and analyzed with the objective of furthering our understanding of the factors that enable and inhibit sustainable supply chain integration. The ﬁndings suggest that integration for sustainability complements traditional SCM integration in several ways. The ability to develop a more sustainable supply chain has been linked to a more ﬁne-grained understanding of expectations of multiple external stakeholder groups, as opposed to a mere understanding of customer expectations. Earlier research perceived stakeholder ´ expectations in the form of pressure (Gonzalez´ Benito and Gonzalez-Benito, 2006b, 2010; Preuss, 2009; Sarkis et al., 2010). Our ﬁndings reveal a more positive picture of external stakeholders. We urge organizations to closely collaborate with multiple stakeholder groups in order to fully recognize the diversity of their expectations and to translate them into appropriate strategies.
Proposition 1: Stakeholder integration capability is required for sustainable supply chain management integration.
In terms of internal integration for sustainability, two factors emerge from the data: strategy and organization. The importance of leadership support for successful sustainability strategies has been stressed in earlier research (Carter and Rogers, 2008; Pagell, 2004; Pagell and Wu, 2009). However, whereas prior research asserts that leadership
Julia Wolf Internal procedural integration supports sustainable supply chain management integration. Proposition 4a: Internal procedural integration is evidenced by sharing responsibility for sustainability across functions. Proposition 4b: Internal procedural integration is evidenced by an alignment of incentive and reward systems.
support is one important element of a whole bundle of effective sustainability strategies, our ﬁndings suggest that leadership support can even compensate for a lack of clear sustainability goals and direction. Furthermore, insights from the case studies suggest that sustainability strategies are most efﬁcient when they create a strong stretch between what a ﬁrm can actually do in terms of existing resources and its aspirations. High aspirations appear to support and motivate employees to fully tap their potential. Finally, organizations need to deﬁne appropriate sustainability performance measures to monitor progress.
Proposition 2: A sustainability strategy and appropri-
ate performance measures are required for sustainable supply chain management integration. Proposition 2a: Leadership support is required for sustainable supply chain management integration. Proposition 2b: Strategic stretch between resources and aspirations supports sustainable supply chain management integration. In all sample ﬁrms, we found evidence that a perceived gap of experience and knowledge of sustainability impeded its implementation. Elements, such as creating new job positions, investing in training, and relying on external expert advice, seem to be linked to SSCMI.
Proposition 3: Investment in additional human resources and the development of expert know-how are required for sustainable supply chain management integration.
The patterns for internal organizational integration of sustainability into SCM are similar to those of traditional SCM integration. The cases provide support for the hypothesis that process thinking is necessary to overcome functional silos. Responsibility for sustainability should be shared across functions in order to achieve best results. In addition, it seems to be appropriate to integrate sustainability objectives into performance assessment schemes. In contrast, information technology integration across functions and across businesses does not seem to play such a strong role for sustainability as it does for other forms of internal integration (Flynn et al., 2010).
Traditional SCM integration has been conceptualized as strategic cooperation with key suppliers (Flynn et al., 2010; Kraljic, 1984). The ﬁndings from the case ﬁrms differ from this conception in several ways. First, the practices of integrating suppliers go beyond the tier-1 level to include tier-n suppliers. Second, SSCMI does not only concentrate on strategic suppliers, but seems to include all suppliers – even commodity suppliers. All case ﬁrms integrated sustainability into all central elements of supply management processes. At the supplier selection stage, ﬁrms asked for information about past experience in sustainability, either evidenced by dedicated certiﬁcations or through site visits. Most sample ﬁrms integrated suppliers into development processes to create new, more sustainable products and processes. All sample ﬁrms tried to measure the sustainability performance of their suppliers and subsuppliers but lacked an understanding of how to best deﬁne such measures and collect the information in an efﬁcient and effective way. Classical SCM integration normally does not include risk management because presumably supply risks are more likely to occur within non-strategic suppliers, which are not in the focus of traditional SCM integration. The integration of all suppliers in sustainability efforts seem to lead to a stronger emphasis of risk management. Findings from the cases suggest that risk management is an integral part of SSCMI. Close supplier relationships with all suppliers at all levels support sustainable supply chain management integration. Proposition 5a: Close supplier relationship practices are evidenced by joint creation of sustainable product and process innovations. Proposition 5b: Close supplier relationship practices are evidenced by the integration of sustainability into
Sustainable Supply Chain Management Integration
Internal SSCMI Strategy Integration •Foster leadership support •Create stretch between resources and aspirations •Create transparency on sustainability performance metrics within the firm •Invest in human resources •Build up sustainability expertise
Upstream SSCM Integration Capability Supplier Management •Selection •Long-term relationships •Product innovation •Process innovation •Performance metrics
Downstream SSCM Integration Capability •Understand expectations of multiple stakeholder groups •Integrate expectations into SSCM decision making
Organizational Integration •Share responsibility for sustainability among functions and employees •Align incentive and reward systems •Integrate internal processes across functions
Sustainability Performance •Balance discrepancies between economic, environmental and social performance
Upstream SSCM Integration Capability Risk Management •Selection •Transparency beyond tier-1
Figure 4. A theoretical model of sustainable supply chain management integration.
all key interaction processes from strategy formulation to performance measurement. Proposition 5c: Sustainability risk management is a central element of sustainable supply chain management integration. The ﬁndings from the cases enable only limited conclusion about the performance impact of SSCMI. The data suggest that ﬁrms believe in a positive impact but have difﬁculties in its quantiﬁcation. All ﬁrms felt that the engagement in sustainability is cost intensive and requires a large sum of investment in human resources, time and technology. Therefore, if the impact of SSCMI is supposed to be positive, the result of these activities should at least compensate for their costs. Our ﬁndings are summarized in Figure 4. Our results have implications for both research and practice. Based on our ﬁndings, decision makers in SCM will need to integrate external upstream and
downstream supply chain partners and internal processes to create more sustainable supply chains. Thus, this research supports practitioners with a better understanding of how to deﬁne and implement SSCM strategies. Furthermore, this research contributes to the SSCM body of knowledge by adding a conceptual model of SSCMI. The research also has some limitations. Our sample covered ﬁrms from the German manufacturing industry. Future research should collect information from ﬁrms from other countries and industrial sectors to explore whether and to what extent geographic location and industrial sector inﬂuence the ﬁndings. Moreover, we collected information from interview partners at the sample ﬁrms only. The analysis would proﬁt from more diverse viewpoints, such as the perspective of suppliers, NGOs and other groups. Finally, future researchers may use the proposed theoretical framework for empirical testing. The collection of
Julia Wolf – To which extent is there an alignment between economic, environmental and social objectives? – Which metrics are tracked? Internal integration Measurement and rewards – Have internal mechanisms for performance evaluation been changed to adapt to sustainability? Please give examples. – How about rewards? – In how far are sustainability objectives included in individual annual performance agreements? – Are there differences between hierarchical levels? To classical systems? – What do they focus on? – Differences between individual level and functional level performance? – How does your function contribute to corporate level sustainability goals? Organizational structure – Who is responsible for sustainability within the supply management function? – How is responsibility shared between different individuals/roles/units? – Are individuals trained in sustainability? • If yes, what is the impact? • If no, problems? – How do you perceive leadership support? – Do you think that sustainability performance of supply management would increase if there were • More persons with speciﬁed training? • More persons with particular responsibility? Communication and information – In how far is sustainability a topic that is addressed in general day-to-day discussions and decisions? – Have IT systems been adapted to include information on sustainability?
quantitative information on its construct and their linkages would help to further reﬁne the model.
The author would like to thank Dachser GmbH & Co. KG for the ﬁnancial support of the research.
Appendix Introduction – Introduce the study, its aims and the researcher – Assure conﬁdentiality, anonymity, inform about recording Corporate sustainability strategy – Could you please describe your ﬁrm’s sustainability strategy? – Where are the priorities at the corporate level? – How does this strategy respond to expectations from different stakeholder groups? – Were they involved in strategy formulation? – Are there clear objectives associated with the corporate sustainability strategy? – How do you measure and control progress? – Ability to predict/direct changes in the competitive environment? Supply management sustainability strategy – Is there a sustainability strategy within supply management? – How does it link to the corporate strategy? – Considering key elements of corporate sustainability strategy: How are they prioritized for supply management? If there are differences from the overall corporate prioritization, please explain. – Are there clear objectives associated with the functional sustainability strategy?
Sustainable Supply Chain Management Integration External supplier integration Supplier performance – What are the key motivating factors to include supplier management into sustainability? – Who is included? – How do you evaluate progress? – What happens to suppliers who fail to meet sustainability expectations? – How do your suppliers perform in terms of meeting supply management and corporate level sustainability goals?
Supplier selection – How is sustainability included in supplier selection practices? Supplier relationship management – How are sustainability expectations communicated? – Which information is shared? How are IT systems integrated? – To which extent is sustainability included in day-to-day communications and decisions with suppliers? – What is the role of sustainability in supplier development? How is it included? Gaps? Problems? – What are mechanisms for incentives and rewards?
Performance – How does supply management perform in terms of meeting goals of corporation? – What is the contribution of the suppliers?
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Supply Chain Management & Information Systems Department, EBS Business School, Soehnleinstrasse 8 F, 65201 Wiesbaden, Germany E-mail: firstname.lastname@example.org
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