The Role of Supply Chain Management
in Developing Sustainable Operations

Supply chain executives have traditionally managed trade-offs related to service and cost. Expanding
the firm objective to include sustainability has substantially increased the trade-off dimensions.

David J. Closs
Brian D. Pease

Increasingly firms are adding sustainability as one of their key objectives. While this may suggest environmental and “green” initiatives to some, leading firms understand that sustainability includes many other dimensions. Some firms label it as the “triple bottom line.” Others, such as McDonalds, specifically designate sustainability as including ethical, environmental, and economic dimensions. Supply Chain sustainability includes considerations such as risk management, resource availability, supply chain security, food safety, sustainability of human resources, alternative energy platforms, bio-economics and green supply chains. This broad definition requires wide-ranging expertise from disciplines including human resource management, criminal justice and security, engineering, natural science, natural resources, and agriculture. Even political science has become interested as they receive requests from constituents to implement policies and legislation that will “save the planet.” The common requirement by policy makers and firms to create sustainable supply chains has developed cross-disciplinary interest to define, understand and disseminate information regarding the need for policies, strategies and practices to achieve sustainability.

Over the past year, through interactions with colleagues on campus and executives in business, a number of common themes have emerged regarding sustainability. We would like to briefly review these themes because they offer both insight and opportunity to supply chain executives.

First, many firms are struggling to develop a definition of sustainability to both guide and scope their efforts. While some firms equate sustainability with environmental and “green” initiatives, some are beginning to realize that it is much broader. It certainly needs to include dimensions involving resource availability and access (markets, material, capital, and labor). However, it can’t go so far that it requires firms to be stewards over organizations and environments that they have little control over. In addition, firms are looking for a definition that has credibility that might be achieved by benchmarking or synthesizing with other firms. Supply chain executives need to take an active role in scoping the definition without being so broad that it can’t be managed.
Second, firms are looking for joint expertise that can identify trends and synthesize the observations to determine the implications for their overall firm and supply chain strategy. For example, demand for palm oil has skyrocketed due to the recent public health pressure for restaurants to discontinue use of hydrogenated cooking oils. The unintended consequence has been severe global supply shortages and soaring prices for a commodity that represents a critical source of calories for much of the developing world and particularly Asia. Firms are seeking professionals with the know-how to anticipate issues, align resources and execute an effective strategy to mitigate the unintended side-effects of change.

Third, firms are looking for expertise that can evaluate the trade-offs related to sustainability. If sustainability meant always making the most ethical, environmental, or economic choice, it would be easy to achieve. However, all supply chain executives know that there are trade-offs that must be effectively managed to achieve firm competitiveness. Supply chain executives have traditionally managed trade-offs related to service and multiple dimensions of cost. Expanding the firm’s objective to include sustainability substantially increases the trade-off dimensions that must be managed. As supply chain executives, we can take the position that our primary responsibility is to effectively manage the resources and trade-offs to fall within the increasingly complex, but basically traditional roles of purchasing, manufacturing, and logistics. After all, most firms report that there are still many “internal integration” problems that need to be solved. We might ask, “Why get involved in all these soft trade-offs when we have so many internal trade-offs to evaluate and resolve within our control?” similarly, it would have been easy for the Department of Supply Chain management at Michigan State to respond to our cross-campus colleagues that we can’t help them with their cross-discipline trade-offs because we are trying to integrate internally. Just as a trans-disciplinary perspective with appropriate ethical, environmental and economic trade-off management offers an interesting opportunity for MSU, supply chain executives in firms have the same opportunity to enhance the role of supply chain management and extend the dimensions of firm competitiveness. This is an opportunity for supply chain executives to demonstrate to the Board and a range of senior executives what they do best (trade-off management) on a much broader scale.
Sustainability is often touted as a key initiative in many organizations today. However, successfully fostering sustainable operations is a far more wide-ranging and complex mission than is often initially understood. Supply chain professionals have a unique opportunity for broader involvement to educate and lead their organizations in achieving these noble objectives while driving value to their firms, and benefiting not only the communities in which they live but ultimately the greater global environment.