Session 5: Integrating Sustainability into the Supply Chain

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Session 5 Integrating Sustainability into the
Supply Chain
2
Approach to Sustainable Supply Chain Management
(SSCM) Overarching Framework
Framing the Issues
Preparing for Implementation
Assessing Impact
Session 4 Sustainable Supply Chains as a Lever
of Competitive Advantage
Session 1 From Sustainable Development to
Sustainable Supply Chains
Session 5 Integrating Sustainability into the
Supply Chain
Session 8 Measuring and Communicating on
Sustainable Supply Chain Performance
Session 2 Governance of Supply Chains From
Compliance to Voluntary Standards
Session 6 Managing Stakeholder Relations
Session 7 Building Supply Chain Partnerships
Session 3 Governance of Supply Chains
Introducing International Labour Standards
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Session Objectives

• Analyse the relationship between SSCM and
  competitive strategy
• Discuss steps for integrating sustainability
  into the SC and
• Highlight key benefits and challenges.

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Session Outline

• Unit 5.1 Introduction.
• Unit 5.2 Analysing SSCM and Competitive
  Advantage.
• Unit 5.3 Integrating Sustainability into the SC.
  
• Unit 5.4 Benefits and Challenges for Integrating
  Sustainability into the SC.
• Unit 5.5 Conclusion

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Unit 5.1 Introduction

• Question
• What are the key social and environmental
  challenges that corporations are called upon to
  integrate when seeking to achieve their economic
  supply chain goals?

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Sustainability concerns in Global SCs

• Economic goals in SCs Cost, quality, speed of
  delivery, flexibility, resource utilization,
  visibility and innovativeness (Chan, 2003 and
  Gunasekaran et al, 2001).
• Social issues respect of human and workers
  rights child labour, bonded labour, health and
  safety, working conditions (Maignan et al, 2002)
  gender equality, poverty alleviation, etc.
• Environmental problems pollution, climate
  change decline in ecosystems biodiversity
  deforestation soil degradation resource
  depletion and fresh water crisis (McAllister et
  al, 2005).

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Question

• How many people think it is difficult to
  simultaneously integrate economic, social and
  environmental sustainability issues into the
  supply chain?

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Video What do Business Leaders Think About
Supply Chain Sustainability?

• Future Supply Chain 2016
• CEOs of consumer and retail products highlight
  Sustainable Supply Chain concerns challenges,
  breakthroughs, innovations, collaboration and
  momentum.
• http//www.youtube.com/watch?vUS5lO1HfmEo

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Unit 5.2 Analysing SSCM Competitive Advantage

• To achieve competitive advantage, resources and/
  or capabilities generated through SSCM must be
• Valuable respond to threats and opportunities.
• Rare Controlled by a few competing firms.
• Imitate Costly for rivals to reproduce.
• Organisations policies and procedures should
  support exploitation of the above three. (Barney,
  2007)

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The VRIO Framework (Barney, 2007, pp. 150)Is a
resource or capability resulting from SSCM
Exploited by Organization?
Competitive Implications
Costly to Imitate?
Rare?
Valuable?
No
No
Competitive Disadvantage
Competitive Parity
Yes
No
Temporary Competitive Advantage
Yes
Yes
No
Sustained Competitive Advantage
Yes
Yes
Yes
Yes
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Group Discussion and Presentation

• Identify the resources and capabilities that
  resulted from McDonalds adoption of a SSCM
  strategy. Using Barneys (2007) VRIO framework
  explain the competitive implications of each
  resource and capability identified.

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Unit 5.3 Integrating Sustainability into the SC

• All levels in the SC
• Raw material sourcing.
• Manufacturing.
• Packaging.
• Warehousing.
• Logistics (Transportation distribution).
• Retail.
• Consumption.

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Integrate Sustainability into SC processes

• Product design.
• Manufacturing by-products.
• By-products produced during product use.
• Product life extension.
• Product end-of-life.
• Recovery processes at end-of-life. (Linton et
  al, 2007)

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Businesses employ various strategies to integrate
sustainability into the SC.

• Reactive Defensive Accommodative
  Proactive
• (Maignan et al, 2002)

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Proactive Strategies

• Define sustainability goals.
• Educate suppliers.
• Sanction suppliers.
• Designate organisational member in charge.
• Monitor Suppliers.
• Communicate achievements to stakeholders.
• Receive stakeholder feedback
• (Maignan et al, 2002)

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Framework for Integrating Sustainability into
the SC (Pagell and Wu, 2009)

1. Innovation capability.
2. Positive management orientation.
3. Reconceptualise SC members.
4. Collaborate with non-traditional SC members.
5. Supplier continuity is an important outcome.
6. SC performs well on traditional metrics.
7. Institute measurement and reward system.

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Model for Integrating Sustainability into the SC
(Pagell and Wu, 2009)
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McDonalds case study and Group Discussion/ Class
Presentation.

• Using Pagell and Wus (2009) framework for
  integrating sustainability into the SC, what
  issues should McDonalds consider if it were to
  redesign and enhance its SSCM?

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What does these mean for SCs?

• Way forward is proactive SSCM strategy.
• Firms and suppliers should adopt and implement
  voluntary codes of conduct (Doh, 2005)
• Establish long-term relationships, certification
  and building capabilities of SMEs.
• Voluntary initiatives filling regulatory vacuum
  in developing countries (Frenkel, 2001)
• Enhance buyers ability to influence sustainable
  supply chain practices (Bowen et al, 2001)

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Brainstorming and Class Discussion

• SC sustainability projects are generally cut to
  suit business and supplier priorities and
  circumstances.
• Given McDonalds core business, suggest MDG
  priorities to the Board of Directors and justify
  your preferences.

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Unit 5.4 Benefits and Challenges for Integrating
Sustainability into the SC

• Benefits
• Stimulates innovation and builds new capabilities
  e.g. Patagonias quest for recycled inputs led
  to new product development.
• Market positioning and firm-customer bonding
  e.g. the Dutch coffee brand Max Havelaar and
  Ford and General Motors encouraging minority
  suppliers.
• (Maignan et al, 2002 Markley and Davis, 2007)

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Benefits

• Increase sales, revenues and profits E.g.
  Coca-Cola
• Positive publicity and good corporate reputation
  e.g. McDonalds, Wal-Mart.
• Greater organisational and employee commitment
  when properly communicated e.g. Patagonia,
  McDonalds.
• (Maignan et al, 2002 Markley and Davis, 2007)

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Challenges

• Insufficient dedication to sustainable
  development (MDGs Report, 2010).
• Lack of top management commitment and resources
  (Maignan et al, 2002 Min and Galle, 2001).
• Inadequate expertise.
• Strong emphasis on efficiency and governance of
  supply relationships rather than environmental
  and social sustainability (Maignan et al, 2002).
• Reactive and fire fighting culture (Preuss, 2001)

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Challenges

• Effectively implement rather than end at senior
  management goals (Preuss, 2001)
• High costs complexity of and insufficient
  communication in supply chains (Seuring and
  Muller, 2008).
• Green washing and poor supplier commitment (Greer
  and Bruno, 1996 and Wycherley, 1999)
• Small firms have limited resources and low
  response rate to supply chain pressures (Kempe
  and Soete, 1992 Walley and Whitehead, 2004
  Hill, 1997).

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Unit 5.5 Conclusion

• What do you think?
• Given the guidance and tools provided in this
  session, do you think it can be less difficult to
  integrate economic, social and environmental
  challenges into the supply chain?

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Conclusion

• A SSC is a veritable source of business growth
  and sustainable development.
• Think beyond short-term financial benefits and
  build long-term value across the entire SC.
• Corporations that have the relevant knowledge and
  skills are capable of realising sustained
  competitive advantages.

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Additional References

• Bowen, F. E., Cousins, P. D., Lamming, R. C. and
  Faruk, A. C. (2001), The Role of Supply
  Management Capabilities in Green Supply,
  Production and Operations Management, Vol. 10,
  Iss. 2, pp. 174-189.
• Chan, F.T.S. (2003), Performance Management in a
  Supply Chain, International Journal of Advanced
  Manufacturing Technology, Vol. 21, pp. 534-48.
• Doh, J. P. (2005), Offshore Outsourcing
  Implications for International Business and
  Strategic Management Theory and Practice,
  Journal of Management Studies, Vol. 42, Iss. 3,
  pp. 695-704.
• Frenkel, S. J. (2001), Globalisation, Athletic
  Footwear Chains and Employment Relations in
  China, Organization Studies, Vol. 22, Iss. 4,
  pp. 531-562.
• Gunasekaran, A., Patel, C. and Tirtiroglu, E.
  (2001), Performance Measures and Metrics in a
  Supply Chain Environment, International Journal
  of Operations and Production Management, Vol. 21,
  Nos 1-2, pp. 71-87.
• Greer, J, and Bruno, K. (1996), Greenwash The
  Reality Behind Corporate Environmentalism,
  Penang, Third World Network.
• Hill, K. (1997), Supply Chain Dynamics,
  Environmental Issues and Manufacturing Firms,
  Environment and Planning, Vol. 29, Iss. 7, pp.
  1257-1274.
• Kempe, R. and Soete, L. (1992), The Greening of
  Technological Progress An Evolutionary
  Perspective, Futures, Vol. 26, pp. 1047-1059.

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Additional References

• Linton, J. D., Klassen, R. and Jayaraman, V.
  (2007), Sustainable Supply Chains An
  Introduction, Journal of Operations Management,
  Vol. 25, Iss. 6, pp. 1075-1082.
• McAllister, D. T., Ferrell, O. C. and Ferrell, L.
  (2005), Environmental Issues in McAllister, D.
  T., Ferrell, O. C. and Ferrell, L. (2005)
  Business and Society A Strategic Approach to
  Social responsibility, Boston/ New York, pp.
  257-288.
• Min, H. and Galle, W. P. (2001), Green
  Purchasing Practices of US Firms, International
  Journal of Operations and Production Management,
  Vol. 21, Iss, 9, pp. 1222-1238.
• Preuss, L. (2001), In Dirty Chains? Purchasing
  and Greener Manufacturing, Journal of Business
  Ethics, Vol. 34, Iss. 3-4, pp. 345-359.
• United Nations Organisation (2000), United
  Nations Millennium Declaration, New York, 6-8
  Sept. Available at http//www.un.org/millennium/d
  eclaration/ares552e.pdf
• United Nations Department of Economic and Social
  Affairs (2010), The Millennium Development Goals
  Report New York, June. Available at
  http//www.un.org/millenniumgoals/pdf/MDG20Report
  20201020En20r1520-low20res202010061520-.pdf
  
• Walley, N. and Whitehead, B. (1994), Its Not
  Easy Being Green, Harvard Business Review,
  May-June, pp. 46-53.
• Wycherley, I. (1999), Greening the Supply Chain
  The Case of the Body Shop International,
  Business Strategy and the Environment, Vol. 6,
  No. 2, pp. 169-184.