Session 5:
Integrating Sustainability into the
Supply Chain
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Approach to Sustainable Supply Chain
Management (SSCM): Overarching Framework
Framing the Issues
Session 1: From
Sustainable Development
to Sustainable Supply
Chains
Preparing for
Implementation
Session 4: Sustainable
Supply Chains as a Lever
of Competitive Advantage
Session 5: Integrating
Sustainability into the
Supply Chain
Session 2: Governance of
Supply Chains: From
Compliance to Voluntary
Standards
Session 3: Governance of
Supply Chains: Introducing
International Labour
Standards
Assessing Impact
Session 8: Measuring
and Communicating on
Sustainable Supply Chain
Performance
Session 6: Managing
Stakeholder Relations
Session 7: Building
Supply Chain
Partnerships
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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?v=US5lO1HfmEo
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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.

Organisation’s policies and procedures should
exploitation of the above three. (Barney, 2007)
support
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The VRIO Framework (Barney, 2007, pp. 150)
Is a resource or capability resulting from SSCM…
Valuable?
Rare?
Costly to Exploited by
Imitate? Organization?
No
No
Competitive
Implications
Competitive
Disadvantage
Competitive Parity
Yes
No
Yes
Yes
No
Yes
Yes
Yes
Temporary
Competitive
Advantage
Yes
Sustained
Competitive
Advantage
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Group Discussion and Presentation
Identify the resources and capabilities that
resulted from McDonald’s adoption of a
SSCM strategy. Using Barney’s (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.
2.
3.
4.
5.
6.
7.
Innovation capability.
Positive management orientation.
Reconceptualise SC members.
Collaborate with non-traditional SC members.
Supplier continuity is an important outcome.
SC performs well on traditional metrics.
Institute measurement and reward system.
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Model for Integrating Sustainability into
the SC (Pagell and Wu, 2009)
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McDonald’s case study and Group
Discussion/ Class Presentation.
Using Pagell and Wu’s (2009) framework
for integrating sustainability into the SC,
what issues should McDonald’s 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 McDonald’s 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.
Patagonia’s 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.
McDonald’s, Wal-Mart.

Greater organisational and employee commitment when
properly communicated – e.g. Patagonia, McDonald’s.
(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
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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
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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/declaration/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/MDG%20Report%202010%20En%20r15%20low%20res%2020100615%20-.pdf
Walley, N. and Whitehead, B. (1994), “It’s Not Easy Being Green”, Harvard Business Review, MayJune, 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.
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