Measuring and managing sustainability performance of supply chains

Measuring and managing sustainability performance of supply chains

Article Type: Editorial From: Supply Chain Management: An International Journal, Volume 19, Issue 3

With the ongoing growth of international trade between developed and developing countries, the environmental, social and economic performance of supply chains is constantly under the spotlight, with reviews by academics (see a sample for the controversial textile and apparel industry in #B10) and emphasis on practice (#B15) to the fore. Focal companies are challenged to manage risks of media coverage, often focusing on discovering social and environmental problems in the supply chains. The safest way to manage these risks is to prevent undesired sustainability problems. However, for modern brand leaders and focal companies, managing sustainability performance has exceeded the stage of mere risk management. With growing awareness among business leaders, the preference for contributing to sustainable development is increasing, and with the growing awareness in many consumer markets, the business opportunities are emerging to design “sustainable products”. For both, risk-and opportunity-oriented supply chain management, new strategies and methods are needed. Resilient supply chains are critical to developing economies with the employment prospects of millions of workers hanging in the balance, hence their measurement and management are of great socioeconomic importance. However, for companies, the setting for wringing excellent performance out of supply chains is much more complex.

In practice, moving towards sustainability in supply chains involves a complex set of performance issues relating to social, environmental, technological, political and economic aspects and their integration as the recent clothing factory fires in Bangladesh illustrate. Measurement of sustainable performance of supply chains is undertaken using various techniques ranging from the highly quantitative (#B5) to the use of qualitative methods, such as performance management of the host companies, and of upstream and downstream parties in the supply chain itself. In conventional terms, the focus tended to be on economic performance (#B8) or on simplification of sustainability to one of its aspects, such as the environment (#B9). For a long time, less attention has been given to management of social performance of supply chains, in spite of child work and working condition scandals being reported by international media.

In the years ahead, there may be better engagement as sustainable supply chain management improves. Perhaps the new Global Reporting Initiative G4 guidelines on supply chain disclosure will assist companies to think beyond their own legal entities for the scope of reporting, but the jury is out, as it has been for decades when the notion of reporting on externalities has been mooted. Getting into the mindset of strategic decision-making might be more productive and is examined in the articles in this special issue.

In this special issue of Supply Chain Management: an International Journal, these matters are raised, as we move towards addressing the complexity of measuring and managing sustainability performance of supply chains. The following set of papers represents latest thinking.

This special issue is introduced with an analysis of what a fully sustainable supply chain might look like and what consequences can be drawn from this view for sustainability performance measurement and management. Based on a review of efficiency, consistency and sufficiency as fundamental approaches to sustainability-oriented innovations and a discussion of possible strategies to eliminate, redesign or improve supply chains, #B12 develop an analytical framework for the assessment of approaches for the measurement and management of sustainability performance of supply chains.

With a review of the literature on four organizational theories (resource-based, institutional, stakeholder and social network) #B14 identify key drivers and enablers of sustainability initiatives in the supply chain. The authors propose a multidimensional framework to assist focal companies in the development of sustainable supply chains which can serve as a tool for research scholars and supply chain practitioners in identifying and assessing various economic, environmental and social performance indicators.

Based on empirical data from 336 assembly manufacturing companies from 21 countries of the International Manufacturing Strategy Survey, #B7 explore the impact of sustainable supply chain management (SSCM) on a company’s environmental and social performance, the impacts of conventional supply management on sustainability performance and the relationships of conventional supply chain management to SSCM and sustainability performance of the company.

Their main findings are that SSCM improves environmental and social performance of the company implementing it and that conventional supply chain management fosters the adoption of SSCM and makes SSCM more effective for both local companies sourcing mainly within their continent and global companies with relevant international supply relationships.

The paper by #B3 on determining and applying sustainable supplier key performance indicators provides a theoretically advised simulated vision of sustainability supply chain performance indicators. Neighbourhood rough set theory and data envelopment analysis are combined and used to select key performance indicators of supplier performance, and then these are benchmarked to assess relative performance. The aim is to facilitate comparison of the performance of suppliers through integration of diverse measures across sustainability supply chain settings where multiple performance aspects exist. The key for managers is whether they really need single or multiple indicators of performance. The former provides simpler rules of thumb for decision making about a more general notion of sustainability and is assumed in this paper, but the latter may be more practical where separate sustainability management functions exist and strong sustainability without trade-offs is pursued.

Based on a dataset of 12 case studies across different industries #B6 study the alignment of management, measurement and sustainability performance in supply chains. The authors investigate the continuum of reactive to proactive sustainable supply chain practices and identify clusters of companies along these dimensions. #B6 find varying degrees of alignment between management practices and measurement systems of sustainable supply chains. They recommend that a better alignment of sustainable supply chain management and measurement practices could result in improved sustainability performance in the supply chain.

Benchmarking carbon emissions' performance in supply chains written by #B1 reminds us that sustainability is complex and that reductionist approaches can serve a purpose where a pressing sustainability issue, such as the need for carbon emission reduction in the face of the predicted problems emanating from global warming, is to the fore as crisis looms. When driving towards a cliff edge, the focus on steering the car away from the edge is understandable, rather than examining better fuel efficiency at that point. Hence, #B1 paper is timely and welcome, as it promotes carbon mapping of hotspots which can be eliminated through appropriate management. The mapping uses multiregional based input–output modelling (MIRO) to benchmark steel industry carbon emissions across product supply chains and is strictly a meso-oriented application of life cycle assessment, but with implications at the micro-level being drawn.

In their conceptual article, #B4 have the aim of putting sustainability into supply chain management. The emphasis is unashamedly on the practical approaches to integrating performance of business across all the dimensions of sustainability in the context of supply chain management. They seek the key to Pandora’s box and think they have found it in five categories, orientation, continuity, collaboration, risk management and pro-activity in supply chain activities, and when the box is opened the practices for moving towards sustainability performance can be implemented. The main consideration behind this theory building is that all performances are critical in sustainability, whereas emphasis on only a single dimension, say environmental performance, distracting from the aim so clearly canvassed by, for example, the Bruntland Commission in Our Common Future over 25 years ago. The paper is both a necessity, as organizations grapple with the opportunities and risks presented by sustainability and a rebuke which reminds the reader that progress has been very slow with most still locked into conventional supply chain management. The paper is a beacon on the hill for practice while the (un)sustainable storm clouds continue to gather.

The link between sustainable supply chains and companies’ financial performance is analysed by #B11 with a large sample of 3,900 companies over eight years (2004-2011). The analysis of multivariate measures displays a wide diversity of relationship patterns and general bidirectional causality between sustainable supply chain performance and corporate financial performance. The link between profitability and sustainable supply chain performance is, however, unidirectional. This study thus confirms that the general question, whether it pays to be green, does not make sense and should be replaced by the question, what should companies do to create a positive relationship between sustainability management and economic performance.

#B2 analyse the importance of public procurement in the European Union for driving sustainable supply chain management in the public sector in the context of procurement tenders and offers. Structural equation modelling is used to analyse a stratified sample of 281 procurement files over 2007-2009, across eight product categories in four European Union states. Because of its sheer size, public procurement could be used as a pro-active policy tool to encourage sustainability practices. The results indicate effective application of policy to influence the environmental goals of suppliers through tender processes, but that suppliers are less ready for consideration of socially responsible goals than environmental goals in procurement contracting. If sustainability is the target, then appropriate inducements need to be introduced to change the behaviour of suppliers towards social responsibility.

The authors extend many thanks to Dr Beverly A Wagner, Editor, Supply Chain Management: an International Journal, who provided excellent guidance, and to the many scholars who supported this special issue by acting as reviewers and by submitting papers.

Stefan Schaltegger and Roger Burritt
Guest Editors

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