CHAPTER ONE

THE NEED FOR SUSTAINABLE SUPPLY CHAIN MANANAGEMENT

Learning Objectives:

At the end of this section, students will be able to:

 Define logistics and supply chain management

 Define sustainable supply chain management
 Describe the objectives of sustainable supply chain management
 List out mega trends in sustainability
 Analyze the relationship between sustainable development and corporate social
responsibility
 Learn green supply chain management
 Trace the development of sustainable objective from the triple bottom line
perspective
 Appreciate best practices in sustainable supply chain

1.1. Logistics and Supply Chain Management

We first need to define what is meant by logistics and SCM. The Council of Supply Chain
Management Professionals (CSCMP) in the United States defines logistics management as
(2012): that part of supply chain management that plans, implements, and controls the
efficient, effective forward and reverses flow and storage of goods, services and related
information between the point of origin and the point of consumption in order to meet
customers’ requirements.
Logistics management activities typically include inbound and outbound transportation
management, warehousing, materials handling, order fulfilment, logistics network design,
inventory management, supply/demand planning, and management of third-party logistics
(3PL) service providers. To varying degrees, the logistics function also includes sourcing and
procurement, production planning and scheduling, packaging and assembly, and customer
service.

The term ‘supply chain management’ was introduced by consultants in the 1980s and since
then academics have attempted to give theoretical and intellectual structure to it. CSCMP
(2012) defines SCM as encompassing: the planning and management of all activities involved
in sourcing and procurement, conversion, and all logistics management activities.

Importantly, it also includes coordination and collaboration with channel partners, which
can be suppliers, intermediaries, third-party service providers, and customers. In essence,
supply chain management integrates supply and demand management within and across
companies.

SCM is thus considered an integrating function with a primary responsibility for linking
major business functions and business processes within and across companies into a
cohesive and high performing business model. It includes all of the logistics management
activities noted above, as well as manufacturing operations, and drives the coordination of
processes and activities with and across marketing, sales, product design, finance, and
information technology, and is thus a more holistic view of a firm.

Nevertheless, there are some overlaps, which have prompted some authors to consider
whether SCM is merely a re-labelling of logistics due to a lack of understanding by academics
and practitioners of what supply chains are and what supply chain managers do. Is it an
intersection between logistics and SCM as SCM represents a broad strategy across all
business
processes in the firm and the supply chain, or a union whereby logistics is a sub•set of SCM
due to a wider supply chain and business process perspective of SCM? The CSCMP
definitions above represent a unionist view

The immediate customer and supplier of the firm under consideration, or the focal firm, are
known as ‘first tier’ customers and suppliers. The first-tier customer’s first tier customer and
the first-tier supplier’s first tier supplier are the focal firm’s second tier customer and
supplier respectively, and so on. Between each supply chain node, where a node is the
focal firm, a supplier or a customer, goods are moved by transportation or ‘Go’ activities.
Further, goods are stored and/or processed at each node in storage or ‘Stop’ activities.
Essentially, logistics and SCM are about ‘Go’ or ‘Stop’ activities, although details of each
of them can be quite complex. However, it will be useful to consider this simply ‘Go’ or
‘Stop’ concept when discussing sustainability issues as they really occur during
transportation or storage activities.

Supply chain management is the management of a network of interconnected businesses

involved in the ultimate provision of product and service packages required by end
customers. Thus, supply chain management covers all the necessary movement and
storage of raw materials, work-in-process inventory, and finished goods from the point-of-
origin to the point- of-consumption. While transporting goods to where they are most valued
makes economic sense, there are major social and environmental implications. For example,
trucking product by road may lead to congestion and pollution. However, by packing a
vehicle more densely, we can reduce both congestion and pollution, thus creating a more
sustainable supply chain is very important.
Logistics and supply chain management (SCM) are far-reaching activities that have a major
impact on a society’s standard of living. In different societies professionals have come to
expect excellent logistics services and only tend to notice logistical and supply chain issues
when there is a problem. To understand some of the implications to consumers of logistics
activities, consider:
 The difficulty in shopping for food, clothing, and other items if logistical and supply
chain systems do not conveniently bring all of those items together in one place, such
as a single store or a shopping center
 The challenge in locating the proper size or style of an item if logistical and
supply chain systems do not provide for a wide mix of products, colors, sizes and
styles through the assortment process.
 The frustration of going to a store to purchase an advertised item, only to find the
shipment is late in arriving. These are only a few of the issues that highlight how
we often take for granted how logistics touches many facets of our daily lives.
However, the various activities associated with logistics and SCM also have an
impact on environmental sustainability

1.2. Sustainable Supply Chain Management Overview

Collins English Dictionary (1998) provides two definitions for sustainability: 1) capable of
being sustained, i.e of economic development, energy sources, etc, and 2) capable of being
maintained at a steady level without exhausting natural resources or causing severe
ecological damage, ie sustainable development. These two separate meanings highlight an
important point that ‘green is green’, i.e a firm’s sustainability initiatives for the natural
environment, or being green, need to be considered in conjunction with the economic
case for long-term corporate sustainability, i.e green being the color of money.
Further, the second definition for sustainability relating to development raises the issue of
consumption not only today but also for tomorrow. The philosopher John Rawls termed this
issue ‘intergenerational equity’ whereby societies must justly determine how much of the
Earth’s resources they will sacrifice or not use today so that future generations will be able to
access and enjoy such resources. This view helped shape a more widely used definition
of sustainable development by Brundtland (1987) as development that meets the needs of
the present without compromising the ability of future generations to meet their own needs.

Sustainability is linked to corporate social responsibility (CSR) as a socially responsible firm

should ensure its impact on the natural environment is minimized. But CSR goes beyond the
natural environment to include aspects of fair trade, good employment practices, and
appropriate
relationships with customers, suppliers and other stakeholders. The linkage with
sustainability is manifested in ‘triple bottom line’ or TBL concept encompassing profits, the
planet and people.

The TBL posits that firms should focus on maximizing shareholder wealth or economic value
they create while ensuring that they also add environmental and social value to achieve long-
term natural environment security and proper working and living standards for all human
beings. The TBL concept has found wide acceptance in firms, governments and
non•governmental organizations (NGOs).

The natural environment has been receiving attention since the first UN Conference on the
Human Environment at Stockholm in 1972. Since then there have been a number of events
and meetings to raise the profile of the environment and climate change around the world
including, among others, the Brundtland (1987) Commission, the initial UN Earth Summit
at Rio de Janiero in 1992 that declared that polluters should pay the cost of pollution,
the 1997 Kyoto Protocol which determined greenhouse gas emissions reduction targets for
the world, and follow-on events such as the 2000 New York Millennium summit, the
2002 Johannesburg summit, the 2009 Copenhagen
climate change conference and the 2012 Rio+20 conference. Brundtland (1987) defined five
key areas related to sustainability: species and ecosystems, energy, industry, food, and
population and urban growth. These areas plus the topic of fresh water form a holistic view
of sustainability and will now be discussed in turn, including their respective relationship to
logistics and SCM.

1.3. Objectives of Sustainable Supply Chain Management

The European Commission recognize the importance to the economy of efficient and
effective supply chains, and also recognize the potential negative impacts on society and the
environment. Freight transport can be considered to be the key element in modern supply
chains. The demand for freight transport continues to increase. This increase is due not only
to the increasing demand for physical products, but also to many supply chain management
decisions. As supply chains have become more sophisticated, they have sought to
become more responsive, more reliable and more efficient, often leading to increased
transport requirements. This was highlighted in the SULOGTRA report to the European
Commission in 2002, as discussed below.

The application of modern management principles throughout the supply chain, such as Just-
In-Time, lean production and Efficient Consumer Response, have led to more responsive,
more flexible supply chains that enable firms to compete in a global market. The wider
geographical sourcing of supplies and wider distribution of finished products is extending
supply chains, both upstream and downstream. Global sourcing strategies are driven by the
potential savings in purchasing, manufacturing and/or labor costs. This trend is supported by
the ease with which information can now flow between different firms throughout the world
in real-time. This trend towards global rather than local supply chains is also a result of
companies focusing on their core competencies. The vertical disintegration of production
allows companies to increase quality of product and service while reducing risk. The spatial
concentration of production has resulted in a reduction of the total number of factories. The
focus in many sectors has been to move away from nationally-based production towards
single locations producing a particular product for the whole of a continent, or even the world
market. This has increased the demand for freight transport. By rationalizing their supply
base, companies also lower their overall transaction cost at the expense of increasing the
logistics and transport services needed to deliver the material flow. This concentration of
suppliers is particularly utilized in large scale industries, where the producer has a large
degree of power within the supply chain, for example in the automotive industry.

Similarly, the spatial concentration of inventory has resulted in a reduced number of

stockholding points. These can yield a large financial benefit, outweighing the cost to the
firm of any additional transport required, but what are the implications for the environment
and society?

Reverse logistics has been helping to alleviate some of the environmental and societal
concerns, for example through more efficient backhauling and greater recycling capability.
However, reverse logistics may increase transport demand and potentially reduce utilization
rates. Similarly, while technology has reduced the need for regular mail through the
development of electronic mail services, the demand for small units, such as parcels, has
increased due to online retailing activity and customer-to-customer transaction websites,
such as EBay – thus increasing freight transport requirements.

In general, the objective of supply chain sustainability is to create, protect and grow long-
term environmental, social and economic value for all stakeholders involved in bringing
products and services to market. And it serves to

 Reducing greenhouse gas emissions.

 Improving energy efficiency and resource usage, in particular water, minerals, land
etc.
 Minimizing air, water, and soil pollution.
 Removing toxic substances from the manufacturing process.

1.4. Mega Trends and Sustainability

The world is becoming increasingly interconnected through flows of information, resources,

goods and services, people and ideas, and this implies that changes occurring in one part of
the world are likely to have a ripple effect on others. This means that production and
consumption systems in Africa/Europe or others are not isolated from one another or the
rest of the world. Instead, they are influenced by multiple 'drivers of change'. Changes in
the business environment occur usually as trends. Trends in a business environment are
changes which take place over time and affect companies in their competitive
environment; for example, the current “corporate social responsibility” trend or the “green
SCM” trend. Some such trends – so-called “mega trends” – have a more global and
extended impact on the economic, business, and social environment. Climate change is an
example of such a mega trend: It affects customers, regulations, society, the competition,
investors, and the markets of a company.

Many 'drivers of change' that impact the environment and sustainability in Europe are
actually not of an environmental nature and of European origin, but they are crucially
important in determining Europe's long term environmental and sustainability outlook. As a
result, there has been growing interest for systems thinking and anticipatory knowledge
within EU institutions in view of designing better informed and ultimately more effective
policies. There has been growing interest for systems thinking and anticipatory knowledge
within EU institutions in view of designing better informed and ultimately more effective
policies.

The future of Europe's environment and sustainability is likely to be highly influenced by

developments of societal, technological, economic, environmental and geopolitical natures,
as well as changes in values and lifestyles. These 'drivers of change' differ from each other in
relation to their origin, nature, likelihood, significance, geographical scale and timescale.
Although some of them are well established and well known, some have just emerged,
and their effects have not yet unfolded or are still unknown.

Background information: There are different categories of ‘drivers of change’

a) Global megatrends are global, long-term trends that are slow to form but have a major
impact once in place. They are the great forces that are likely to affect the future in all
areas throughout the world. Furthermore, they are often strongly interconnected

b) European trends are mid to long term trends specific to Europe and, contrary to global
megatrends, not all of them are likely to have major implications at global scale. They are
directly or indirectly interconnected between them and with global megatrends. Their
direction of change can be aligned or contrasting to global megatrends (e.g. a stagnating
European population in contrast to a growing global population

c) Emerging trends represent emerging developments that are occurring at a fast pace but
are not yet fully established over mid to long term timescales, and for this reason
their potential implications are not yet well understood. Depending on their evolution,
they might lead to the establishment of new European trends or global megatrends

Clusters of drivers of change

In order to explore even further the characteristics, interactions and the potential
implications of the ‘drivers of change’, the EEA has developed and identified six thematic
clusters using the STEEPV framework (i.e. society, technology, economy, environment,
politics and values):

 Cluster 1 — Growing, urbanizing and migrating global population.

 Cluster 2 — Climate change and environmental degradation worldwide.
 Cluster 3 — Increasing scarcity of and global competition for resources.
 Cluster 4 — Accelerating technological change and convergence.
 Cluster 5 — Power shifts in the global economy and geopolitical landscape.
 Cluster 6 — Diversifying values, lifestyles and governance approaches.
1.5. Sustainable Development and Corporate Social Responsibility

Business activity and the economic strength of a nation are inextricably linked (OECD
Economic. A potential for a business to be in a position to generate economic activity, provide
income for a workforce, and support a community presents many challenges, as well as many
opportunities. With these corporate challenges come significant responsibilities. It is generally
accepted that the primary duties of any business are to treat all its employees with dignity and
respect, to provide fair wages, and carry out operations efficiently and effectively without
degrading natural or environmental resources while at the same time generating profit.
Demands for accountability and transparency in the public domain are steadily increasing.
Enhanced communications and global connectivity have put the spotlight on Sustainable
Business Development (SBD) and its interrelated term Corporate Social Responsibility (CSR).
CSR is seen as a vehicle for achieving sustainable development, and the two terms are
used interchangeably.

From a European research perspective, Horizon 2020 reflects the policy priorities of the
Europe 2020 strategy and addresses significant challenges faced elsewhere. Funding focuses
on the following societal challenges:

 Health, demographic change and well-being,

 Food security, sustainable agriculture and forestry, marine and maritime and inland
water research, and the bioeconomy,
 Secure, clean and efficient energy,
 Smart, green and integrated transport,
 Climate action, environment, resource efficiency and raw materials,
 Europe in a changing world—inclusive, innovative and reflective societies, and
 Secure societies—protecting freedom and security of Europe and its citizens. The
secure, clean and efficient energy challenge is concerned with reducing energy
consumption and carbon emissions by, among other things, employing alternative
energy sources.

The Horizon 2020 framework states that this challenge is underpinned by ‘robust decision-
making and public engagement’. The climate action, environment, resource efficiency,
and raw materials challenge is focused on activities that help to keep the average global
warming below 2 °C. This current research study focuses on progress made in two
specific challenges, namely secure, clean and efficient energy, and climate action,
environment, resource efficiency and raw materials.

The raising of awareness that corporations have concerning social responsibility has, in
part, been driven by changing customer expectations, more regulation, and stakeholder
 pressure. The broad-ranging stakeholder theory appears to have replaced the narrow-
focused classical shareholder theory. Shareholder theory holds that the purpose of a
business is to provide a return of investment for shareholders and increase the wealth of
investors who risk capital in the business.

While there are many definitions for CSR, the term can be broadly defined as a
moral/ethical decision-making ethos adopted by companies which allow their business to
contribute to the welfare of society beyond their self-interests.

Corporate Social Responsibility is the continuing commitment by businesses to behave

ethically and contribute to economic development while improving the quality of life of
the workforce and their families as well as of the local community and society at large’.

It laid the foundation for practitioners and academics to consider CSR becoming an
integral part of strategic planning and decision-making by business managers. A
threefold focus called the ‘Triple-Bottom-Line’ (TBL) on people, planet, and profit was
proposed.

CSR scholars have investigated the CSR themes from five main business management
perspectives, as follows:

 Marketing (limiting the scope of social obligations to one stakeholder only,

namely, consumers, as businesses seek to build a brand image),
 Leadership (the ability of business leaders to build relationships with many
stakeholders to advance an adequate shared business vision),
 Strategy (businesses align their behaviors with their primary stakeholders,
embedding CSR into their corporate strategy),
 Stakeholder theory (wide-ranging scope of companies to include all stakeholders
in the decision-making process),
 Social obligation (businesses encompass all their activities with the objectives and
values of our society in mind). Each of the management perspectives is now
individually reviewed.

1.6. International Organization for Standardization

ISO 14001 is the international standard for EMS and among the most widely used EMS
in the world. The Eco•management and Audit Scheme (EMAS) is the second most
popular EMS standard globally. These two standards have very similar structures but there
are some fundamental differences. EMAS firms must be compliant with relevant
environmental rules and regulations to guarantee their certification. However, ISO 14001
emphasizes only the commitment to compliance but such compliance is not essential to
keep certification. In
addition, the evaluation of the EMAS standard is guaranteed by obligatory audits every three
years where all requirements are checked and a statement is made public.

ISO 14001 audits check for environmental system performance against internal benchmarks;
somehow there are no penalties for the lack of improvement and the frequency is left to the
discretion of the individual firm.

In the literature some novel concepts such as Factor 4, Factor 10 and zero emission have
been established. These concepts can be used to guide companies when they set cost and
environmental improvement targets. It also means the same functions of a product can be
achieved by using only a quarter of the resources. To achieve Factor 4, a seven-step approach
to resource productivity has been proposed based on the idea of using material input per
service (MIPS). This method is very similar to the concept.

The textile industry is one of the major contributors to many developing economies in terms
of jobs and economic growth. The textile industry is also known as one of the dirtiest as it
requires many chemicals and a lot of water during wet processing. Thousands of different
chemicals including heavy metals (mercury, cadmium, lead, chromium), bleaches, detergents,
and brighteners are used, some when making yarn from natural fbres such as cotton but a lot
are used to dye and wash fabric. Textile workers, especially those involved in wet processing,
are exposed to hazardous chemicals that may cause acute toxicity, respiratory problems,
asthma and even cancer.

Factor 10 means 10 times more product with the same input, which is a more ambitious
target. The main motif is to drive environmental ambition. These concepts have been
applied by governments as well as commercial fi rms. Similarly, zero emission is not
practically possible but it is a goal that could drive serious efforts. Zero emission is
becoming a benchmark and some companies are competing to become the first to
achieve zero emission.

1.7. Green Supply Chain Management

Green supply chain management is defined as integrating environmental thinking into

supply chain management, including product design, material sourcing and selection,
manufacturing processes and the delivery of the final product to the consumers as well as
an end-of-life management of the product after its useful life.
Many organizations today are lauded for being carbon-neutral, zero-waste, and energy
efficient. Greening initiatives and innovations have predominantly focused on the
reduction of emissions, wastes and energy consumption; not only because it is better for
the planet, but to “future-proof” the organizations.

The two primary challenges in this context are (1) identifying economic and
environmental metrics based upon which the performance of the supply chain can be
assessed, and (2) exploring the tradeoff solutions that can balance the economic and
environmental sustainability of the supply chain. We here review some of the related
modeling efforts in these areas.

Supply chain cost and carbon emissions have been the most popular economic and
environmental metrics amongst both researchers and practitioners. There are a few studies
that do not fall in this category.

Environmental impact assessment methods use a set of criteria such as energy sources,
water usage, carbon emissions, hazardous/chemical material usage, land use, and
environmental technology and innovation investments to assess the environmental
performance of the supply chain at every stage in the product life cycle. The information
is translated into a set of socio-environmental impact categories and a score is assigned
to each impact category. The scores are then aggregated to produce a single score
that represents the sustainability performance of the supply chain.
Accelerating climate change and global warming increase the likelihood that disruptive
events from natural disasters will continue to occur. History also records a continuous
stream of anthropogenic catastrophes that can affect supply chain operations at various
 levels. To remedy these extensive problems, organizations need to build resilience into
their supply chains. Resilience is defined as the capacity for a supply chain to survive and
continue operating in the face of unanticipated disruptions. Looking for best practices to
manage supply chain imbalance in disruptions can become a formidable challenge.

In this environment, achieving sustainability will necessitate the development of resilient

supply chains whose sustainability performance remains unaffected or lightly affected in
disruption situations. A focus on supply chain greening without considering the dynamic
nature of the operating environment means trying to operate in an environmentally
sustainable fashion in one specific state of the system with no effort to manage
supply chain sustainability imbalance when changes occur in the state of the system (e.g.
when the supply chain is affected by a disruptive event). In other words, in an
increasingly volatile world, a steady-state sustainability analysis is simplistic. In this
environment, a realistic supply chain greening analysis in this environment requires
moving beyond a static supply chain analysis towards a dynamic evaluation where supply
chain greening can be examined in multiple states of the system.

1.8. The Development of Sustainable Objective from The Triple Bottom Line
Perspective

Sustainability has been an often-mentioned goal of businesses, nonprofits and governments

in the past decade, yet measuring the degree to which an organization is being sustainable or
pursuing sustainable growth can be difficult.

This accounting framework, called the triple bottom line (TBL), went beyond the traditional
measures of profits, return on investment, and shareholder value to include environmental
and social dimensions. By focusing on comprehensive investment results—that is, with
respect to performance along the interrelated dimensions of profits, people and the planet—
triple bottom line reporting can be an important tool to support sustainability goals.

Interest in triple bottom line accounting has been growing across for-profit, nonprofit and
government sectors. Many businesses and nonprofit organizations have adopted the TBL
sustainability framework to evaluate their performance, and a similar approach has gained
currency with governments at the federal, state and local levels.

This article reviews the TBL concept, explains how it can be useful for businesses, policy-
makers and economic development practitioners and highlights some current examples of
putting the TBL into practice.
The Tiple Bottom Line Defined
The TBL is an accounting framework that incorporates three dimensions of performance:
social, environmental and financial. This differs from traditional reporting frameworks as it
includes ecological (or environmental) and social measures that can be difficult to assign
appropriate means of measurement. The TBL dimensions are also commonly called the three
Ps: people, planet and profits.

Well before Elkington introduced the sustainability concept as "triple bottom line,"
environmentalists wrestled with measures of, and frameworks for, sustainability. Academic
disciplines organized around sustainability have multiplied over the last 30 years. People
inside and outside academia who have studied and practiced sustainability would agree with
the general definition of Andrew Savitz for TBL. The TBL "captures the essence of
sustainability by measuring the impact of an organization's activities on the world ...
including both its profitability and shareholder values and its social, human and
environmental capital.2

The trick isn't defining TBL. The trick is measuring it.

Calculating the TBL

The 3Ps do not have a common unit of measure. Profits are measured in dollars. What is
social capital measured in? What about environmental or ecological health? Finding a
common unit of measurement is one challenge.

Some advocate monetizing all the dimensions of the TBL, including social welfare or
environmental damage. While that would have the benefit of having a common unit—
dollars—many objects to putting a dollar value on wetlands or endangered species on strictly
philosophical grounds. Others question the method of finding the right price for lost
wetlands or endangered species.

Another solution would be to calculate the TBL in terms of an index. In this way, one
eliminates the incompatible units issue and, as long as there is a universally accepted
accounting method, allows for comparisons between entities, e.g., comparing performance
between companies, cities, development projects or some other benchmark.

An example of an index that compares a county versus the nation's performance for a variety
of components is the Indiana Business Research Center's Innovation Index. There remains
some subjectivity even when using an index however. For example, how are the index
components weighted? Would each "P" get equal weighting? What about the sub-
components within each "P"? Do they each get equal weighting? Is the people category
more important than the planet? Who decides?

Another option would do away with measuring sustainability using dollars or using an index.
If the users of the TBL had the stomach for it, each sustainability measure would stand alone.
"Acres of wetlands" would be a measure, for example, and progress would be gauged based
on wetland creation, destruction or status quo over time. The downside to this approach is
the proliferation of metrics that may be pertinent to measuring sustainability. The TBL user
may get metric fatigue.

Having discussed the difficulties with calculating the TBL, we turn our attention to potential
metrics for inclusion in a TBL calculation. Following that, we will discuss how
businesses and other entities have applied the TBL framework.

What Measures Go into the Index?

There is no universal standard method for calculating the TBL. Neither is there a universally
accepted standard for the measures that comprise each of the three TBL categories. This can
be viewed as a strength because it allows a user to adapt the general framework to the needs
of different entities (businesses or nonprofits), different projects or policies (infrastructure
investment or educational programs), or different geographic boundaries (a city, region or
country).

Both a business and local government agency may gauge environmental sustainability in the
same terms, say reducing the amount of solid waste that goes into landfills, but a local mass
transit might measure success in terms of passenger miles, while a for-profit bus company
would measure success in terms of earnings per share. The TBL can accommodate these
differences.

Additionally, the TBL is able to be case (or project) specific or allow a broad scope—
measuring impacts across large geographic boundaries—or a narrow geographic scope like a
small town. A case (or project) specific TBL would measure the effects of a particular project
in a specific location, such as a community building a park. The TBL can also apply to
infrastructure projects at the state level or energy policy at the national level.

The level of the entity, type of project and the geographic scope will drive many of the
decisions about what measures to include. That said, the set of measures will ultimately be
determined by stakeholders and subject matter experts and the ability to collect the
necessary data. While there is significant literature on the appropriate measures to use for
sustainability at the state or national levels, in the end, data availability will drive the
TBL calculations. Many of the traditional sustainability measures, measures vetted through
academic discourse, are presented below.

Economic Measures
Economic variables ought to be variables that deal with the bottom line and the flow of
money. It could look at income or expenditures, taxes, business climate factors,
employment, and business diversity factors. Specific examples include:

 Personal income
 Cost of underemployment
 Establishment churn
 Establishment sizes
 Job growth
 Employment distribution by sector
 Percentage of firms in each sector
 Revenue by sector contributing to gross state product

Environmental Measures
Environmental variables should represent measurements of natural resources and reflect
potential influences to its viability. It could incorporate air and water quality, energy
consumption, natural resources, solid and toxic waste, and land use/land cover. Ideally,
having long-range trends available for each of the environmental variables would help
organizations identify the impacts a project or policy would have on the area. Specific
examples include:

 Sulfur dioxide concentration

 Concentration of nitrogen oxides
 Selected priority pollutants
 Excessive nutrients
 Electricity consumption
 Fossil fuel consumption
 Solid waste management
 Hazardous waste management
 Change in land use/land cover

Social Measures
Social variables refer to social dimensions of a community or region and could include
measurements of education, equity and access to social resources, health and well-being,
quality of life, and social capital. The examples listed below are a small snippet of potential
variables:
  Unemployment rate
 Female labor force participation rate
 Median household income
 Relative poverty
 Percentage of population with a post-secondary degree or certificate
 Average commute time
 Violent crimes per capita
 Health-adjusted life expectancy

There are several similar approaches to secure stakeholder participation and input in
designing the TBL framework: developing a decision matrix to incorporate public
preferences into project planning and decision-making,3 using a "narrative format" to solicit
shareholder participation and comprehensive project evaluation,4 and having stakeholders
rank and weigh components of a sustainability framework according to community
priorities.5 For example, a community may consider an important measure of success for an
entrepreneurial development program to be the number of woman-owned companies
formed over a five-year time period. Ultimately, it will be the organization's responsibility
to produce a final set of measures applicable to the task at hand.

Researchers in environmental policy argue that the three categories—economic, social and
environmental—need to be integrated in order to see the complete picture of the
consequences that a regulation, policy or economic development project may have and to
assess policy options and tradeoffs.

Who uses the Triple bottom Line?

Businesses, nonprofits and government entities alike can all use the TBL.

Businesses
The TBL and its core value of sustainability have become compelling in the business
world due to accumulating anecdotal evidence of greater long-term profitability. For
example, reducing waste from packaging can also reduce costs. Among the firms that
have been exemplars of these approaches are General Electric, Unilever, Proctor and
Gamble, 3M and Cascade Engineering.10 Although these companies do not have an index-
based TBL, one can see how they measure sustainability using the TBL concept. Cascade
Engineering, for example, a private firm that does not need to file the detailed financial
paperwork of public companies, has identified the following variables for their TBL
scorecard:
  Economic
o Amount of taxes paid
 Social
o Average hours of training/employee
o From welfare to career retention
o Charitable contributions
 Environmental/Safety
o Safety incident rate
o Lost/restricted workday rate
o Sales dollars per kilowatt hours
o Greenhouse gas emissions
o Use of post-consumer and industrial recycled material
o Water consumption
o Amount of waste to landfill

Nonprofits
Many nonprofit organizations have adopted the TBL and some have partnered with private
firms to address broad sustainability issues that affect mutual stakeholders. Companies
recognize that aligning with nonprofit organizations makes good business sense, particularly
those nonprofits with goals of economic prosperity, social well-being and environmental
protection.

Another example is RSF Social Finance,13 a nonprofit organization that uniquely focuses
on how their investments improve all three categories of the TBL. While RSF takes an
original approach to the TBL concept, one can see how the TBL can be tailored to nearly
any organization. Their approach includes the following:

 Food and Agriculture (economic): Explore new economic models that

support sustainable food and agriculture while raising public awareness of the
value of organic and biodynamic farming.
 Ecological Stewardship (environmental): Provide funding to organizations and
projects devoted to sustaining, regenerating and preserving the earth's
ecosystems, especially integrated, systems-based and culturally relevant
approaches.
 Education and the Arts (social): Fund education and arts projects that are
holistic and therapeutic.

Government
State, regional and local governments are increasingly adopting the TBL and analogous
sustainability assessment frameworks as decision-making and performance-monitoring
tools.

Policy-makers use these sustainability assessment frameworks to decide which actions they
should or should not take to make society more sustainable. Policy-makers want to know
the cause-and-effect relationship between actions—projects or policies—and whether the
results move society toward or away from sustainability.
Below are brief explanations of the variables used to measure their TBL.

 Environmental Quality
o Waste: trends in recycling, refuse and yard waste
o Energy: energy consumption, natural gas consumption and alternative fuel
usage
o Water: water consumption
o Air Quality: toxic release inventory and number of air pollution ozone action
days
o Built Environment: number of LEED registered and certified projects
o Land Use and Natural Habitat: inventory of land use and forest canopy
o Transportation: public transportation ridership
 Economic Prosperity
o Personal Income: personal income per capita
o Unemployment: unemployment rate
o Redevelopment, Reinvestment and Jobs: results from brownfield
redevelopment investment and job creation
o Knowledge Competitiveness: third-party report ranking U.S. regions
 Social Capital and Equity
o Safety and Security: crime statistics
o Educational Attainment: degree attainment levels
o Health and Wellness: infant mortality rate and blood lead levels trends
o Quality of Life: home ownership, poverty, and reduced price and free lunches
trends
o Community Capital: 211 calls for assistance, voter participation and
population and ethnicity
1.9. Best Practices in Sustainable Supply Chain Management

As businesses have put more focus on supply chain sustainability, many have studied trends
in this area across industries, countries and areas of impact. Here are several notable
statistics:

a) Demand: Nearly half of U.S. consumers say they would change purchasing habits to
reduce their impact on the environment, according to Nielsen.
b) Environmental impact: The supply chain accounts for more than 90% of most
consumer goods companies’ environmental impact, according to McKinsey &
Company.
c) Societal risk: The U.S. Department of Labor listed 148 types of goods from 76
countries produced by child labor or forced labor in 2018, when it released the
Comply Chain app to help American businesses eliminate child labor from their
supply chains.
d) Data systems: A 2019 survey by the Carbon Disclosure Project (CDP) found that 65%
of its corporate members used environmental metrics to inform supplier management
and hold their business partners accountable to supply chain sustainability goals.
e) Progress: CDP has reported promising progress in cutting greenhouse gases: In its
2019 survey, 29% of 7,000 suppliers to some of the world’s largest corporations
reported a decrease in emissions.

For many companies, sustainability is no longer just something to monitor, but integral to
the foundation of their supply chain. CDP reports its members integrate environmental data
into procurement tools and processes, using environmental metrics alongside cost and
quality stats as they evaluate suppliers.

Other CDP members include specific environmental performance language in contracts and
tender documents. Some businesses provide sustainability training to their own
procurement managers and suppliers to help the cause.

Four Steps to a More Sustainable Supply Chain

Forrester research has developed a framework for integrating sustainability into your supply
chain, with a focus on four areas:

a) Procurement: Most companies start sustainability programs by looking at energy and

water procurement, and by procuring sustainable materials to use in their products.
b) Operations: Look for operational processes or steps across the supply chain that could be
more efficient and reduce resource usage.
c) Retirement: Avoid excess waste and obsolete items by designing products for
upcycling and reuse.
d) Data and communication: Measure the effectiveness of initiatives in the first three
areas, and strengthen any related efforts, by communicating them to customers, supply
chain partners and other stakeholders.