Sustainability in the Supply Chain

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Outline

• Sustainability
• Corporate Social Responsibility
• Design and Production for Sustainability
• Regulations and Industry Standards

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Sustainability
• Meeting the needs of the
present without
compromising the ability of
future generations to meet
their needs

• Includes employees,
customers, community, and
company reputation

• More than “going green”

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Sustainability

Green Logic vs Sustainable Logic

While going green looks at only the environmental aspect
of it, being sustainable is equivalent to taking into
account the social, economical and environmental impact
of that particular product or organization.

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Triple Bottom Line (1 of 4)
• Consider the systems
necessary to support the three
Ps: people, planet, and profit

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Triple Bottom Line (2 of 4)
People
• Decisions affect people
• Globalization and outsourcing complicate the task
• Supplier selection and performance criteria are important
• Materials must be safe and environmentally responsible

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Walmart’s Objectives
1. Improving livelihoods through the creation of productive,
healthy, and safe workplaces
2. Building strong communities through access to
affordable, high-quality services
3. Preventing exposure to substances that are considered
harmful or toxic
4. Promoting health and wellness

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Triple Bottom Line (3 of 4)
Planet
• The planet’s environment
• Look for ways to reduce the environmental impact of
operations
• Overarching objective is to conserve scarce resources
• Carbon footprint and greenhouse gas (G H G) emissions

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Carbon Footprint
Figure S5.2

34.5-gram Bag of Frito-Lay Chips

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Triple Bottom Line (4 of 4)

Profit
• Social and environmental sustainability do not exist without
economic sustainability
• Staying in business requires making a profit
• Alternate measures of success include risk profile,
intellectual property, employee morale, and company
valuation

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 Corporate Social Responsibility

• How products and

services affect people
and the environment
• Stakeholders have strong
opinions about
environmental, social,
and ethical issues
• Doing what’s right can be
beneficial to all
stakeholders

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Corporate Social Responsibility
• Corporate Social Responsibility is operating a company in a manner
that meets or exceeds the ethical, legal, commercial and public
expectations that society has of business” (NEPALI 2008).

• CSRs are often broken into four categories:

– environmental impacts
– ethical responsibility
– philanthropic endeavors
– financial responsibilities

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Corporate Social Responsibility
• Shared value suggests finding policies and practices that enhance the
organization’s competitiveness while simultaneously advancing the
economic and social conditions in the communities in which it
operates.
• What types of businesses can focus on creating shared value?

Manufacturing and Consumer Goods: Businesses in this category can

improve their supply chains for efficiency and sustainability, develop
products that address societal needs, and adopt environmentally friendly
production processes. Nestlé’s training programs for farmers and
Unilever’s Sustainable Living Plan. Automakers Tesla, Toyota, and
Nissan find shared value in low-emission vehicles

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Corporate Social Responsibility
Technology and Software: Tech companies can create shared value by
developing products that improve access to information, boost education, or
help small businesses thrive. Google’s free suite of tools, including Google
Search, Google Maps, and Google Classroom.
Financial Services: Banks and financial institutions can create shared
value by offering financial products and services tailored to underserved
communities or small businesses. For example, providing microfinance
loans to entrepreneurs in developing countries or developing financial
literacy programs.
Healthcare: Healthcare companies can create shared value by improving
access to medical treatments, promoting preventive care, or working to
address public health crises. Novo Nordisk’s efforts to improve diabetes
care exemplify CSV in the healthcare sector.
Agriculture and Food Production: Companies can help small farmers
improve their yields, develop more sustainable farming methods, and
improve access to nutritious food. An example is Nestlé’s work with coffee
farmers.
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Sustainable Product Design
• Design decisions affect
materials, quality, cost,
processes, related
packaging and logistics, and
how the product will be
processed when discarded
• Incorporate systems view to
lower environmental impact
• Alternative materials

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Sustainable Production Process
• Reduce the amount of resources in the production process
– Energy
– Water
– Environmental contamination
• Reduce cost and environmental concerns

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Sustainable Logistics
• Reduce costs by achieving efficient route and delivery
networks

1. Getting shipments to customers promptly

2. Keeping trucks busy
3. Buying inexpensive fuel

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 Design and Production for
Sustainability

• Life cycle assessment

evaluates the
environmental impact of a
product, from raw material
and energy inputs all the
way to the disposal of the
product at its end of life

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Design and Production for
Sustainability

• The life cycle of a T-shirt

https://www.youtube.com/watch?v=BiSYoeqb_VY

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End-of-Life Phase
• What happens at the end-of-life stage?
• Closed-loop supply chains or circular economy
• Initial design incorporates disassembly, recycling, and
reuse

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Circular Economy
• Circular economy – The circular
economy is a model of production and
consumption, which involves sharing,
leasing, reusing, repairing, refurbishing
and recycling existing materials and
products as long as possible.

• In this way, the life cycle of products is

extended.

• In practice, it implies reducing waste to

a minimum.

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Life Cycle Ownership Costs (1 of 5)

Total life Life cycle

cycle = Cost of + Life cycle + operating
cost vehicle cost of fuel cost

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Life Cycle Ownership Costs (2 of 5)
Ford TriVan

 miles 
Total life   22,000 year 
cycle  $28,000 +   ($4.25 / gallon )(8 years )
cost  24 miles 
 gallon 
 miles 
+  22,00 0  ($.20 / mile)(8 years )
 gallon 
= $ 28,000 + $31,167 + $35,200 = $94,367

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Life Cycle Ownership Costs (3 of 5)
Honda CityVan

 miles 
Total life   22,000
year 
cycle  $32,000 +   ($4.25 / gallon )(8 years )
cost  37 miles 
 gallon 
 miles 
+  22,00 0  ($.22 / mile)(8 years )
 gallon 
= $ 32,000 + $20,216 + $38,720 = $90,936

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Life Cycle Ownership Costs (4 of 5)
Crossover point in miles

Total cost for Ford TriVan  Total cost for Honda CityVan
 $   $ 
 4.25 4.25
gallon $   gallon $ 
$28,000 +   .20  ( M miles )  $32,000    .22  ( M miles )
 24 miles mile   37 miles mile 
 gallon   gallon 

 $   $ 
$28,000 +  .3770  (M )  $32,000 +  .3349  (M )
 mile   mile 

 $ 
 .0421 (M )  $4,000
 mile 
$4,000
M=  95,012 miles
$
0.421
mile
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Life Cycle Ownership Costs (5 of 5)
Crossover point in years

Crossover point  (95,012 miles  22,000 (miles  year ))

 4.32 years

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International Environmental Policies
and Standards
• Organizations and governments guiding businesses
– U.N. Framework Convention on Climate Change (UNFCC C)
– International Organization for Standardization (IS O)
– Elimination of greenhouse gas (GH G) emissions

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European Union Emissions Trading
System (EUET S)
• To combat climate change
• Reduce industrial G H G emissions
• “Cap-and-trade” principle

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IS O 14001 and 50001
• Environmental management standards

1. Environmental management
2. Auditing
3. Performance evaluation
4. Labeling
5. Life cycle assessment

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IS O 14001 and 50001
• Advantages
– Positive public image, reduced liability
– Good systematic approach to pollution prevention
– Compliance with regulatory requirements, opportunities
for competitive advantage

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IS O 14001 and 50001
• Implemented by more than 200,000 organizations in 155
countries
• Environmental and economic benefits
– Reduced materials/resource usage
– Reduced energy consumption
– Lower distribution costs
– Improved image
– Improved process efficiency
– Reduced waste and disposal costs
– Better utilization of recoverable resources

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