METHODSIntegrating sustainable chain management with triple bottom line accounting
Introduction
Considerable tension is building between the goals and aspirations of business as promoted in texts such as the Chrysalis Economy (Elkington, 2001) and Cannibals With Forks (Elkington, 1997) and the management and change methods such as sustainable chain management (SCM) that are available to address these goals. Windsor (2002) highlights the societal tightrope that must be walked balancing the goals of economic development (e.g., reducing poverty worldwide) with the societal and environmental consequences of the same economic development.
Many consumers assert that companies or producers bear the responsibility of implementing sustainable production chains. In reality, the consumer and the producer are bound together in a complex web of interdependence. Central to this is the quandary for the producer if the consumer continues to demand a product or a service at a price that produces poor environmental outcomes and inequitable social effects. Improved analytical techniques and better information flows can improve consumer-purchasing decisions, but as Elkington (2002) points out, even the greenest of firms start to change as success builds and they are forced to face the realities of the market.
Embedded in all measurement frameworks is the implied assumption that ‘if you can't measure, you can't manage’. Developing sustainable chains asserts the added dimension of “escaping the myopia of the served market” (Prahalad and Hamal, 1990) and “creating an extreme misfit between what is required and what is available” (White and Hanmer-Lloyd, 1999). Initiatives underway help corporate managers “manage the environmental risks posed by their supply chain” (Gascoigne, 2002) but there is always an assumption that the right fit can be found between corporate aspirations and the multiple recipes of inputs that make up the production system.
Measurement systems give indicators that are condensed information for decision-makers. The nature of information contained in indicators varies with (1) the type of decision to be made, (2) the context and time horizon of the decision, (3) the stakeholders involved and their sensitivity to environmental issues, (4) the type and size of firm, (5) the sector, and (6) the regulatory environment (Olsthoorn et al., 2001). A literature review of environmental performance indicators for firms can be found in Tyteca (1996) and Olsthoorn et al. (2001). Based on this review, they conclude the need for (1) more standardisation amongst the various approaches, (2) the measurement of sustainability, (3) life cycle thinking, and (4) a narrower but deeper analysis of core areas instead of a multitude of indicators. The latter point arises out of the recognition of redundancy in indicators sets. Principle components analysis can be used to reduce the dimensions of many indicators to focus on core impact areas (Yu et al., 1998).
Changing the notion of supply chain management to that of sustainable chain management brings many challenges to the original concept which was built on efficiency, information sharing, and joint planning. The concept of “save the earth and make money too” (Tierney, 2002) may involve some difficult decisions where more holistic accounting concepts are used and where the system boundaries for analysis are extended beyond the perimeter fence of the factory or the agricultural crop. This is particularly so when the more biophysical concepts of sustainability are extended to include the social and economic issues central to the philosophy of the triple bottom line. Thus, the triple bottom line distils a communication focus for complex decision making processes that in reality have to deal with many bottom lines which according to some, currently have too great an emphasis on financial outcomes.
This paper presents an approach to highlighting sustainable chain management (hereafter SCM) issues within the framework of triple bottom line accounting implemented at an economy-wide scale in Australia. Central to the approach is the use of input–output analysis to account for the full effects from an infinite chain of supply paths. Within this framework, a technique of structural path analysis is described that can extract the most important components of the production chain and that can determine whether improved production methods should be focused on direct effects in the production process, or indirect effects within the supply chain.
Section snippets
Underlying methodology
The methodology for ‘triple bottom line’ analysis, grounded on economic input–output analysis, has many antecedents over the last four decades. The concept of input–output analysis, reviewed by Rose and Miernyk (1989), was developed by a Russian émigré to the U.S., Wassily Leontief (1936), and subsequently applied to management of the U.S. economy during World War 2 and to employment problems in the immediate postwar period. Since then, it has been applied to a wide range of economic analysis
Australian cotton growing sector
The Australian cotton growing sector provides the first example of a sector-scale assessment within the proposed approach (Fig. 3). In overall triple bottom line terms, cotton production produces a good financial surplus and employment generation per dollar of GDP, both of which are above the economy wide average, with the effects split almost equally between the direct or immediate effect of activities within the sector, and the chain of suppliers that facilitate the production process.
Discussion
This paper has presented a broad schema for the integration of sustainable chain management with the many sustainability initiatives underway by both producing and governing entities. The approach has its precursors in the input–output analytical procedures of economic disciplines, and the triple bottom line initiatives currently being promoted by worldwide activities such as the Global Reporting Initiative (Global Reporting Initiative (GRI), 2002). There are three important advantages of the
Conclusions
We propose a rigorous framework that has the potential to integrate sustainable chain management (of goods and services) with the wide range of corporate reporting activities and sustainability goal seeking that is currently underway in institutions at a national and international level. The framework can accommodate a wide range of producing activities from the individual product, through the firm and corporation to the industrial sector and the whole national economy. It also accommodates the
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