A Term Paper on

Sustainability Trends in Operations Management

For partial fulfilment of the requirements of the course GNS 301

Instructor: Mr Adediran

Submitted by

name

matric

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Sustainability Trends in Operations Management

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PAPER CONTENTS:
ABSTRACT
INTRODUCTION
DETAILED CONTENTS
CONCLUSION
Reference

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 CHAPTER ONE
INTRODUCTION
Operations management researchers and practitioners face new challenges in
integrating issues of sustainability with their traditional areas of interest. During
the past 20 years, there has been growing pressure on businesses to pay more
attention to the environmental and resource consequences of the products and
services they offer and the processes they deploy. One symptom of this pressure
is the movement towards triple bottom line reporting (3BL) concerning the
relationship of profit, people, and the planet. The resulting challenges include
integrating environmental, health, and safety concerns with green-product
design, lean and green operations, and closed-loop supply chains.
We use the term sustainability to include environmental management, closed-
loop supply chains, and a broad perspective on triple-bottom-line thinking,
integrating profit, people, and the planet into the culture, strategy, and
operations of companies.

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 CHAPTER TWO
LITERATURE REVIEW

Supply Chains as the Business Model

Many successful and innovative companies now formulate their strategies and
business models in simple operational terms (for example, Amazon.com, Dell,
Liand Fung, Southwest Airlines, Toyota, and Zara).Asked about Zara’s business
model, a senior executive said, “At Zara, the supply chain is the business
model.”OM has moved from a narrow focus on costs to an appreciation of the
customer (service, willingness to pay)and to a closer scrutiny of assets.
OMprovides the methods for analyzing and improving value drivers at the
process level and for measuring and balancing costs, revenues, and assets.
These methods include integrated financial and operations-driven metric
systems, such as economic value added.

Sustainability: A Key Element in Supply Chains

As the new economic order unfolded, people recognized that profits and
profitability were only one element in the long-term success of companies and
the economies. Also important are the future of people (internal and external to
companies) and the future of planet Earth. These new legitimacy concerns are
captured in measures such as the triple bottom line (3BL), the three Ps of
people, profit and the planet, and the goal of maintaining viable social
franchises (the trust of employees, customers, and the communities) as well as
viable economic franchises (the ability to pay from the cash flows it generates
for capital and other inputs it uses to produce its outputs). OM is increasingly
connected to sustainability, and it now concerns both the operational drivers of

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profitability and their relationship to people and the planet. The emerging
synthesis gives researchers in OMexciting opportunities to make a difference.

Roots and Branches of Sustainability Theory

Convergence of Social Needs and Competitive Advantage

The World Commission on Environment and Development(1987) defined

sustainable development as “development that meets the needs of the present
without compromising the ability of future generations to meet their own
needs.”Criticized by some for its all-encompassing scope, the sustainability
movement has nonetheless gained traction because of the evident inefficiency of
our current products and production processes in their use of the planet’s
resources. This is as true for the industrialized countries as it is for the less
industrialized ones and provides huge opportunities for creating new value. For
example, about one percent of all material that originates at the top of the

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supply chain serving the United States remains in usesix months after sale of the
products containing it

We must enlarge our perspective in OM to include people and the planet

because companies will be expected to do so. We can expect the opportunities
to invest in sustainable technologies, operations, and supply chains to increase
rapidly because of the following factors:

1. The costs of materials and energy will continue to grow as the world
economy expands and as rapidly industrializing countries, such as China
and India, make strong demands on these resources.
2. Public pressure for environmental, health, and safety performance is
likely to remain strong, leading to strengthened property rights, additional

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 regulations, international agreements on controlling negative externalities
and preserving resources, and reductions in subsidies.
3. Increasing awareness of 3BL issues could increase consumer demand for
products made by companies subscribing to 3BL practices.
4. People’s growing antipathy to globalization is leading to strong non-
government organization activity regarding businesses’ sustainability
performance.
The evolution towards sustainable OM is clear in three areas that integrate the
three Ps of sustainable OM.

1. Green product and process development

2. Lean and green OM
3. Remanufacturing and closed-loop supply chains

Green Product and Process Development

Uncertainty, Lead Times, and Investment

As a company moves to long-range strategies and moves beyond its own
internal opportunities, the technologies it invests in will involve more money
longer lead times, and greater uncertainties about benefits and outcomes of
development efforts. Whether a firm invests in sustainable technologies or not,
its competitors may do so.

First Mover Advantage.

The first-mover advantage for sustainable innovations includes royalties for
licensing technology; development of manufacturing capabilities that a
competitor would be unable to copy or unable to copy quickly; a head start on
the next generation of technologies, including the creation of proprietary
information that would provide competitive advantage.

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Sustainable Product Design
Essential to developing sustainable products is sustainable design. The early
history of product design is replete with examples of inefficiency over its total
life-cycle. As the ratio of labor costs to material costs went up, it became
uneconomical to replace or repair most products’ individual parts, and their
designs reflected that. The solution to most malfunctions or breakdowns was
simply to replace the entire assembly or subassembly. Manufacturers are now
moderating this practice, developing designs that avoid environmentally
hazardous components and make it economically possible to save components
that have high reuse value. Modular designs increasingly facilitate
remanufacturing; automated diagnosis of problems; and repair or part
replacements by users, original manufacturers, and third parties.

The Impact of Sustainable Design on Supply Chains

Resources lost in later stages of the supply chain imply dependent losses also
upstream, and thus downstream savings lead naturally to higher savings up
stream in the supply chain

Lean and Green Operations

OM is attempting to use the tools and concepts of lean operations to add green
metrics to the measures of excellence companies use in evaluating business
processes. Several POM authors have written about whether the lean and green
approach is evident in practice, how best to achieve it, and what its net benefits
are.

Corporate Image and Profitability

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Mitigating environmental, health, and safety impacts of a company is socially
responsible and good business. Promoting environmental care can enhance a
company’s and an industry’s image (Chinander 2001) as shown by chemical
industries’ adoption of codes of responsible care and the rapid spread of ISO
14000. Kassinis and Soteriou (2003) show that environmental practices inthe
hospitality industry enhance profitability by improving customer satisfacti on
and loyalty.

Synergies between Lean and Green

Improved environmental, health, and safety performance can aid plant-level
productivity efforts (Klassen 2001) and increase revenues and market share
(Delmas 2001, 2004).To gain these positive results, the firm must establish
management systems and tools that integrate environmental ,health, and safety
metrics with other process metrics within the company and across the supply
chain

Regulatory Compliance
To comply with regulations, companies must track their use of hazardous
substances and emissions of pollutants.

Liability and Negligence. Another factor driving companies to improve their

environmental performance is the risk of being held liable or found negligent
for accidents or environmental damage, a risk they face even when they act
prudently and use state of-the-art technology.

Employee Health and Safety. Similar to community concerns, employee

health and safety is a key focus of risk reduction and risk communication
initiatives

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Improved Tools and Management Systems for Better Product and Process
Design. To achieve sustainable OM, companies must integrate employee health
and safety metrics with key business processes, measure results, and obtain the
commitment of top management.

Remanufacturing and Closed-Loop SupplyChains

As profit margins shrink, product life cycles shorten, and environmental
concerns increase, businesses consider product take back. The increasing costs
of handling product returns may offset small profit margins, and short life
cycles may increase the costs of obsolescence. Companies are increasingly
expected, or legally required, to take responsibility for the entire lives of their
products, including proper recycling and disposal

Dynamic capabilities of OM:

• Modelling and measuring action-outcome links
• Designing and managing processes to achieve agility, adaptability, and
alignment
• Executing strategies
• Integrating, conceptually and operationally, the many dispersed activities
needed to achieve the goals mentioned above
• Building bridges with other functions and disciplines, including strong
historical links to engineering and, more recently, to economics

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 CHAPTER THREE
INTERNET REVIEW
In years past, companies would provide recycling receptacles and install
compact fluorescent light bulbs (CFLs) and consider themselves “green.” But
with pressing forces of climate change, strained resources and transparency,
corporate sustainability has evolved and become embedded deeper in business
decisions. It now defines company culture and corporate reputation.
A number of significant sustainability developments occurred in 2012,
contributing to our need for increased collective action around climate change.
The Dodd-Frank Act mandated companies to disclose information related to
their supply chain. The US drought grew and became more extreme, impacting
agriculture and commodity prices. Conversations after Hurricane Sandy showed
the need for increased adaptation and resiliency necessary for the future.
The following five trends emerged in the world of corporate sustainability in
2013:

1. The intersection of technology and sustainability

Across industries, technology is being utilized to find operation management

efficiencies or drive sustainability into purchasing practices. These
advancements allow companies to look at real-time data on a host of issues,
such as carbon and water use, and make immediate recommendations that will
conserve resources. At Darden, we are exploring how to leverage technology to
view the performance of each of our restaurants in real time. Our goal is to
identify and gather key insights from the top performing restaurants to employ
across our operations.

2. Growing interest in supply chain and product sourcing from consumers

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 When and where a consumer buys a product – be it a purse or a meal at Red
Lobster – they want more information.  Where was this product sourced? Who
made the product and what were their working conditions? Were there any
environmental impacts in the production cycle? Issues related to supply chain
and product sourcing will be a topic for the private sector to address, and
ideally, will help to increase proactive transparency and engagement. 

3. Leveraging employees to implement sustainability

Corporate sustainability is less about the size of the staff and more about how
people across the company are embedding sustainability throughout their work.
A trend has begun to make sustainability a part of performance evaluations in
an attempt to drive sustainability throughout an organization. Companies
likeIntel and Shell link sustainability as a part of their review process.  How a
company integrates performance management and sustainability will help drive
large-scale change. By working with key groups, such as human resources,
sustainability becomes integrated into a company’s culture.

4. Increased focus on our natural resources

 As our growing global population consumes more food and energy, businesses
are competing for fresh water. Seventy percent of water is used for agriculture
and 47 percent of the world’s population could be living under severe water
stress by 2050. This means that from an ecosystems perspective, we are all
interconnected. Water is critical to the broader economy because products,
services and jobs all depend on this natural resource.

5. A broader definition of “sustainability”

 Creating a sustainable business not only benefits the planet, but it also impacts
people – from employees and consumers to partners and local communities
where we do business. Through innovative partnerships and involvement from a

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multitude of stakeholders, an opportunity emerges to collaborate and spark real
change. By evolving the way we view sustainability and breaking away from a
narrowed focus on just the environment, we will move closer to a broader
definition around the core of corporate responsibility.

Gone are the days when running a business meant only calculating the profit
margin.  In a world with growing concern for environmental degradation and
unsustainable growth, businesses can no longer be restricted to balancing their
books of accounts. Responsible citizens are increasing in number and one of
their demands is that businesses should take corporate social responsibility more
seriously than ever.

To make matters better, running a business sustainably no longer is interpreted

as running for loss or a slimmer profit margin. It is now agreed-upon that
sustainable businesses are forward looking, and innovative processes in
sourcing, production and services; eco-efficiency and resource conservation are
widely accepted topics on the management agendas of many large
organizations. These items improve the company’s brand equity by reflecting a
pro-environment image and enable the company to keep up with market trends
and in many cases stay ahead of the competition.

According to management experts, companies on the World’s Most Ethical

(WME) 2011 list generated 30 % greater returns than S & P 500 companies,
thus  demonstrating “a correlation between responsible actions and business
success.”

Some of the notable corporate sustainability actions last year included those by

large companies such as Wal-Mart, Unilever and Puma:

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  Wal-Mart now mandates its buyers and merchants to have a sustainability
goal in their performance target or review
 Unilever posted a list of challenges and wants and invited consumers to
come up with ideas for resolving them. This online discussion forum
reportedly received more than 1000 ideas. Out of these, Unilever is set to
pursue 6 to 7 percent
 Puma announced a new “InCycle” collection with biodegradable sneakers
and shirt, and recyclable jackets and backpacks.

Investors are now looking at the green sector as a bona fide area to invest in.
Areas of focus include energy efficiency, cleantech, local, organic and fair trade
food, green mobile technology, supply chain management and infrastructure,
and technologies supporting small-scale agriculture. This sustainability business
trend, which grew stronger in 2012, will likely gain further momentum and
continue to flourish in the next decade. According to industry experts, notable
sustainable business trends in 2012 included:

 B2B collaboration.
 Continuation of private/ public NGO forces uniting for greater good
 Continued focus on biodiversity from a business perspective
 Water – access to water, water management, water in the supply chain
 Transparency and reporting – especially integrated reporting of financial
and sustainability reports. A growth in the number of organizations
reporting as noted by the Carbon Disclosure Project.
 Green supply chain – elevating sustainable supply chain management as a
strategic business function
 Local and organic food
 Emerging markets and their impact
 Wider adaptation of social media for stakeholder engagement

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  Oversight and inclusion of business sustainability mandates at the board
room level

The same set of experts predicts that in 2013, sustainable business trends will
see a strong emergence of green supply chain management in various industries.
The past year’s trend of sustainability reporting will gain further momentum
through integration of financial and sustainability reports. The importance of
sustainability ranking, metrics, and surveys will increase as company executives
will start to rely more and more on these as performance markers of the
company and employees. Employees will emerge as strong stakeholders in
corporate sustainable development drive, second only to the customers.

Other sustainability trends in 2012 in operations management observed by

Business leaders:

 The emergence of water as a business risk. As the cost of water increases,

and it becomes a sometimes contentious commodity in many regions like
the drought-stricken Southwest, managing thirsty commercial buildings is
going to become an increasingly important challenge for building owners.
This is the driving force behind why we are working with the
Environmental Defense Fund (EDF) to develop operational
improvements and best practices that can cut water, chemical and energy
use in facility cooling systems and improve overall building efficiency.
 Material chemistry making a move to the mainstream. Increased
expectations in the supply chain. The scale of investment in sustainability
by large corporations/brands is increasing significantly.
 The significant uptick in the role of supply chain management in
sustainability and recognition to its importance and impact.
 The growing awareness of the potential of the ICT (information and
communications technology) and the telecommunications sector to

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 reduce greenhouse gas emissions through communications and
enablement solutions.
 The growing importance of metrics with meaning and context.
 Finally, there’s more general attention being paid to environmental and
social issues. Shareholder resolutions related to these topics dominated
the 2012 proxy season, making up 40 percent of all submitted.
Additionally, this year the SEC issued a final rule to implement the
conflict minerals disclosure requirements in Dodd-Frank.

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 CHAPTER FOUR
CONCLUSION

The worldwide concept of “sustainable development” represents the concern

with meeting current demands, but, at the same time, with responsibility for the
future. The verification of the association between “operations management”
and “sustainability”, of a community dedicated to the studies and their evolution
in relation to that will represent the establishment of this topic in the OM field,
and the researchers’ efforts in inserting new premises in the operational context,
in order to assure the feasibility of organizations in the long run.

The keyword “sustainability” has been quoted more frequently together with
“supply chain management (SCM)”, whereas the SCM is strongly related to the
topic “corporate social responsibility” (CSR). The CSR concept is guided by
the dimensions of (environmental, social and economic) sustainability, and the
connection of these words with the SCM represents a significant trend of
applying sustainability concepts, in an integrated way, throughout the chain.

We are just beginning to understand and map the territory for sustainable OM.
As the world changes, managers must make some tough bets in deciding how to
position their companies for the long-haul on the sustainable OM spectrum,
from internal neglect to external advantage, from being reactive to proactive as
a company. Whatever their stance, companies need time to prepare for the
uncharted road, especially if they want to be pioneers or early adopters.
Sustainable operations management must help companies to become agile,
adaptive, and aligned in balancing the people and the planet with profits. The
people part is notably absent from OM research to date; the recent renewed

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emphasis on behavioural OM may bring this element back into focus. The
integration of management systems for safety and environmental objectives
with ISO 9000, ISO 14000, and other process management systems indicates
the growing recognition of all three Ps in promoting sustainable operations.

Once companies accept and embrace sustainability, they can rely on OM to

apply it and integrate it into the lifeblood of the enterprise and its employees.
Finally, the modelers (the OR-based OM population) must revisit the classical
models to cope with the people and the planet related issues. For example, one
will have to reformulate the objective function and the set of constraints in
global production-distribution models in the new context.

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REFERENCES

http://energy.aol.com/2013/02/27/pwc-notes-new-trends-in-sustainable-
investing-and-operations/

http://www.greenbiz.com/news/2012/12/28/biggest-sustainability-trends-2012

http://www.sustainablebrands.com/digital_learning/white-paper/global-trends-
sustainability-performance-management

Sustainable Operations Management Paul R. Kleindorfer • Kalyan Singhal •

Luk N. Van Wassenhove

Sustainability operations management: an overview of research trends-

Proceedings of the 2012 Industrial and Systems Engineering Research
Conference

Accenture- A new era of sustainability CEO study

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