(1987) definition of sustainability and Elkington's (1998) Triple Bottom Line (TBL). These concepts are extended by two ideas, namely âworkâ and âethicsâ, which ...
International Conference on Green Supply Chain
GSC’ 2014 June 25 - 27, 2014 ARRAS - FRANCE
Towards the Definition of Sustainable Supply Chains Anne WINTERa, Ioana DENIAUDb, Wassila AGGOUNE-MTALAAc, Emmanuel CAILLAUDa a
ICUBE, UMR 7357, 15 rue Maréchal Lefébvre, 67100 Strasbourg (France) BETA, CNRS UMR 7522, 61 av. de la Forêt Noire, 67085 Strasbourg Cedex (France) c Public Research Centre Henri Tudor, 29 av. J. F. Kennedy, 1855 Luxembourg (Luxembourg) b
Abstract The “Sustainability” and “Sustainable Supply Chains” topics are still in an early stage. General interest in those topics has, however, risen enormously in recent years. This is evidenced by the number of articles published in the last three decades. The purpose of this article is to provide an overview of the current state of the art. This article is based on Brundtland’s (1987) definition of sustainability and Elkington’s (1998) Triple Bottom Line (TBL). These concepts are extended by two ideas, namely “work” and “ethics”, which have been neglected until now. In other words, the TBL has been extended into a New Triple Bottom Line (NTBL). Key words: Sustainability, Sustainable Supply Chain Management, Triple Bottom Line (TBL); New Triple Bottom Line (NTBL);
1.
Introduction
Green Supply Chain Management (GSCM) is becoming more important than ever before, since not only companies try to improve their Supply Chains (SC) but also its’ resulting management (SCM). Deniaud et al. (2012) defined green supply chains being open systems with specific needs. The European Union (EU) also considers sustainability being an enormously important subject. Indeed, several standards, concerning sustainability are implemented and existing ones are improved. Thus, companies will implement ecologically responsible practices in order to meet legislative requirements. (Azevedo et al., 2011) The purpose of this paper is to analyse the existing definitions of Sustainable Supply Chains and Sustainability and to propose a new one which includes concepts which are revised in the existing definitions. This analyse is based on Elkington’s (1998) Triple Bottom Line (TBL), which is explained in section 2. The extension of this concept is presented in section 3. The extension of the TBL aims being a reference point for future research in the sustainable supply chain management domain
2.
The Triple Bottom Line (TBL)
In 1987, Gro Harlem Brundtland defined sustainable development as being “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Milne and Gray (2012) criticise the Brundtland Report, seeking to avoid suggestions of a commitment to limits on human enterprise and leaving open the question of what can and what has to be sustained. However, the concept of sustainability has been extended by Elkington (1998) via his definition of the TBL, which is shown in figure 1, including the (1) economic, (2) ecologic and (3) societal pillars.
Fig. 1 The Triple Bottom Line 2.1. The Economic Pillar Nowadays, Benjamin Franklin’s (1748) quote “Remember that time is money.” is more relevant than ever: in order to reduce wasted time to a minimum, many (producing) companies use the concept of “Single Minute Exchange of Die” (SMED). The “Single Minute” means, that all changeovers should take less than 10 Minutes (“single-digit Minute”) in order to reduce production lot sizes while flows are improved. It is important to know that the utility of SMED is not limited on manufacturing only. In other words, SMED is one methodology beyond many, which can be used in order to implement the lean production methods, such as Lean 6-Sigma. The Lean 6-Sigma methodology declares that every waste has to be reduced to its minimum. In this logic, waste (named “Muda”, Japanese meaning dissipation or waste) is seen as being each an every action not adding value to the end product or service. In this manner, dissipation of time, resources or even prodigality of working forces are defined being waste. Guirong et al. (2010) elucidated that, in the logistics area, resources are seriously squandered. Nevertheless, from a company’s perspective, the economic aspect is the most important one. If there is no return on investment (ROI), the enterprise will not implement the concerned project. This holds also true for “Green” projects. In fact, a company always tries to get the best possible profit out of a project while its costs have to be reduced to a minimum. In addition to this, managers must decide if they want the company to produce by itself or if certain activities should be outsourced, in order to offer the best quality/price ratio to its customers. This is also true from a sustainability point of view. If the implementation of sustainability is supposed giving no ROI, no manager will approve the implementation procedure. It has to be mentioned, that the ROI can have several forms. Hence, the return on investment is not necessarily given in financial terms but can be identified as a gain of reputation. According to Cruz (2008), “Fabian (2000) asserts that poor environmental performance at any stage of the supply chain process, may damage a company’s most important asset – its reputation.” Indeed, a company’s reputation and the resulting customers’ trust is seen being a very important factor in a company’s initial strategy, no matter if this strategy is perceived in a short, middle or long term. 2.2. The Ecologic Pillar The ecologic pillar, concentrating on reduction of waste in its proper sense, is the second one described in Elkington’s TBL. According to Sarkis et al. (2010), the problem of waste and industrial pollutions has already been treated since the beginning of the 20th Century, needless to mention that those analyses were done in an economic point of view. It has to be mentioned that “green” is often seen being a synonymous of “ecologic”. For this reason, those first approaches of environmental issues can be considered as the roots of today’s “Green” research fields. Nevertheless, companies still keep an eye on their energy consumption, not only in order to reduce their financial costs but also in order to green their operating principles. In addition to this and for the same reasons, many companies use renewable energy such as photo-voltaic systems. As stated by Winter et al.
(2013), a proactive management of the sustainable supply chain will decrease pollution, improve environmental performance and thus lead to cost reductions and ameliorate companies’ profit. Another point to allude is that nowadays, the optimisation of produced CO 2 emissions is more and more required by customers and consumers. As there is no optimisation without calculation, the EU implemented the pr EN16258 standard, in order to provide the companies a possible calculation methodology. In fact, this norm gives instructions and guidelines, how to calculate the CO 2 emissions produced via facilities and transportation. The positive side-effect is that the companies using those methodologies can re-use its calculation and optimisations experiments in their communication and marketing activities. Moreover, “one of the most important European regulations regarding the environment is the directive Emissions Trading Scheme (ETS) based on the so-called Kyoto Protocol which is the world’s first multinational emissions trading scheme covering greenhouse gases.” as highlighted by Mtalaa and Aggoune (2009). Thus, the requirements for carbon emission reporting come not only from the customers but also from the European Union. Liimatainen et al. (2013) state that transport is the only sector in Europe having increased its CO2 emissions in recend years. Thus road freight transport has, above all, an important role in decreasing global greenhouse gas (GHG) emissions. According to Coronado Mondragon et al. (2011), multimodal transportation has been encouraged by government directives, making operations more efficient and environmentally friendly. In addition, the European Union implemented the EC 1692/2006 regulation, also known as “Marco Polo II Programme” in 2006, which is designed to shift freight via subventions from the road to other, more environmentally friendly transportation modes (European Parliament, 2006). D’Autume et al. (2012) detected that “the simplest mechanism for reducing emissions at a global level would be a global tax on carbon.” In contrast, McKinnon et al. (2010) analysed the environmental consequences of logistics and explained how a logistics company should deal with those issues in an effective way. In order to fullfill the ecologic requirements, some companies already have resorted to the “Reduce, Reuse, Recycle” approach, which is also known as “3R-concept”. The main concern of this concept is to reduce waste to a maximum, to reuse the available resources 1 as far as possible and to recycle arising trash. In order to achieve this aim, many companies implemented reverse logistics operations. The incentives can be proactive (concerning cost savings, gaining competitive advantage, environmental improvement, etc) and / or reactive (referring to the fulfillment of legislations and European directives, etc) (Nikolau et al. 2011). Unfortunately, when a company wants to optimise its resources, it always takes the risk to confuse “green acting” with “green washing”: the positive side-effect of acting in a resource optimisation is that money can be saved. If this is the only reason for implementing resource optimisation, no other action will be taken in order to preserve the environment. Thus, a customer will, in this case, perceive the optimised utilisation of resources being “green washing”. Above all, one has to keep in mind that some companies do not implement more ecological friendly procedures for the only reason to prevent the environment. In fact, pressures from consumers, NGOs, local communities, legislations and regulations have affected the behaviour of certain manufacturers and enterprises (Cruz, 2011, Azevedo, 2011). Some authors believe that the implementation of a Code of Conduct would have significant influences on environmentally sustainable supplier selection. Goebel et al. (2012) also set up this assumption, but they found no evidence proving this statement. 2.3. The Societal Pillar Many authors did not take into account the societal aspect of sustainable logistics. Nevertheless, Elkington considered this point of view being as important as the economic and the ecologic perspective. Nikolau et al. (2011) defined 5 categories of logistics social responsibility practices, namely (1) purchasing social responsibility, (2) sustainable transportation, (3) sustainable packaging, (4) sustainable warehousing and (5) reverse logistics. In addition to this, they define corporate social responsibility (CSR) practices being the most responsible factor for socio-economic and environmental problems solutions. It has to be noted that corporate responsibility “consists of a matrix of strategies, policies and behaviours [… and …] is a way of managing relationships with stakeholders” (Gallear et al., 2012). Carroll (Beamon, 2005; Gallear et al. 2012) identified four groups of responsibility, videlicet (1) economic, (2) legal, (3) ethical and (4) philanthropic responsibility. Most companies are not even aware of the fact, that they take the societal aspects into account. De facto, they normaly have a “Quality, Safety, Health and Environment (QSHE)” department, managing not only the 1
For example : Reuse rainwater for toilet flush
company’s environmental engagement, but also the other pillars which Elkington has defined being a part of the sustainability concept. Thus, the QSHE deparment concentrates on employees’ health, on the hygiene in a working environment, on avoidance of accidents, and many other topics. Furthermore, it implements the Code of Conduct, which is frequently required by external parties. In other words, there are some external pressures, leading companies to insert anticorruption and behaviour instructions. Ruighaver et al. (2010) state that acceptable use policies should lead employees to think about the consequences of their actions. Hence, the Code of Conduct should improve a company’s whole organisation and thus it’s external reputation.
3.
Additional Values
Trust as well as friendly relationships will also increase a company’s reputation. For this reason, the (1) economic, (2) ecologic and (3) societal pillars compiled by Elkington defining sustainability are deemed being insufficient. In this logic, two pillars will be added to Elkington’s Triple Bottom Line, namely, the pillars (1) Work and (2) Ethics, resulting thus the New Triple Bottom Line (NTBL). In fact, Porter and Kramer (2011) stated that “companies can create economic value by creating societal value”. On these grounds the pillars “Work” and “Ethics" were categorised important enough to be considered individually.
Fig. 2 Sustainability – the New Triple Bottom Line (NTBL)
3.1. Work Force It is generally recognised that, particularly in recent years, working conditions have changed in a considerable manner. Kirchner (1993) distinguished between (1) technical, (2) organisational, (3) psycho-social and (4) material-financial working conditions. It has to be mentioned that his definition of psycho-social working conditions are close to Maslows’s hierarchy of needs, shown in figure 3. In his theory, Maslow (Hagerty, 1999) explains that a human being has five different levels of needs and that a new need will emerge once the desideratum of a former level has been satisfied.
Fig. 3 - Maslow's Hierarchy of Needs In Western Europe, labor unions have arisen during the middle of the 19 th century. Two important dates in this point of view are 1863 and 1895, when the German “Allgemeine Deutscher Arbeiterverein” and the French “Confédération Générale du Travail” (CGT) had been founded. (Deutscher Gewerkschaftsbund, 2009; Leruisseau, 2005). It is well known that the different labor unions of all over the world have been conductive to today’s working conditions and they continue growing in weighting, as they are gaining constantly in greater involvement of national Parliaments. The working criteria like working hours per day and per week, paid leave, etc. have been defined by several laws and directives. The latter have been introduced in order to protect employees’ physical and mental health. For the purpose of saving money, some companies opt for outsourcing some of their activities. This leads to stressfull situations for employees, who are thus (increasingly) afraid for their jobs. Thus, if a company announces its intention to outsource some of its activities, this will jeopardise the workers’ mental health, no matter if their jobs are affected or not. In other words, they fear being hit by unemployment a few months later, as they do not know if their activities will be performed abroad in the long run. Another important issue is the level of equity which has to be ensured in each and every company. For this reason, many collective agreements mention this point explicitely. Thus, for example, some collective contracts mention that salary accounting and increase have not to be linked on employees’ gender. Furthermore, in some of these contracts it is noted that one same type of activity has to be paid in the same way. There has thus no difference to be made on employees’ religion, appearance, gender or others. It should be noted that those issues are stated in labour laws too. A company always has the permission to allow some advantages, such as higher salary, more paid days of holidays, etc. It is thus evident that collective contracts are based on labour legislation. Beside the fixed conditions defined by the law, the abovementioned advantages are reported in those contracts. The positive side-effect of those contracts, in a company’s point of view, is that they can help to communicate the firm’s internal culture and to increase its reputation. This, in turn, will increase customers’ confidence and thus, non financial gains.
3.2. Ethics In an ethical point of view, the before mentioned Code of Conduct could help to set up psychological contracts, which are perceptual and thus unwritten. Gullett et al (2010) explain that each party has an own interpretation of a certain situation and that this interpretation can differ from one party to another. One concern of those psychological contracts is trust, which is a subjective perception and varies in its intensity as well as in its consequences (Gullett et al., 2010). It has to be noted that, human factors, such as trust commitments can provide important barriers to collaboration between different parties (Visser, 2010). On the other hand, Hoejmose et al (2012) state that “from a transaction cost perspective, trust between buyers and suppliers can limit opportunistic behaviour, resulting in greater adaptability and reduced governance costs“. In addition to this, it is well known that confidence is an important factor, regarding the question of friendship. It is evident that employees are more productive if they feel comfortable. Thus, inside a company a friendly relationship between employees (on an inter- as well as on an intradepartemental level) will help improving the companies’ working conditions. The related positive side-effects are increased productivity and thus a better reputation of the concerned company. Also, in order to improve a company’s performance, the European Commission has voted a femal quota of 40% objective in non-execuvive board-member positions in publicly listed companies. In fact, one of the main economic arguments is that greater gender diversity would have the potential to improve a company’s performance. It can thus be stated that the European Commission advocates emancipation, as even today, in the 21st century, “women are barely visible among top business leaders – more than 96 out of 100 company presidents are men” (European Commission, 2013). Nevertheless, women and men are not treated equally, as proved by Bellizzi and Hasty (2001). They highlighted that femal workers are disciplined less severely than their male colleagues. Furthermore, regardless of gender, authority significantly affects ethical decision making and problem solving, which has been proved by Milgram in 1974 (Kunsch P. L. et al., 2009; Goebel P. et al. 2012). Another issue worth to be alluded is that the connection between sustainable and financial topics is often not seen on the first sight. Guirong Z. et al. (2010) state “green logistics objective reflects the idea of sustainable development.”, but unfortunately, those objectives are often defined being not mutually reachable. In most cases, companies have to invest in order to get more sustainability. Those financial costs are often perceived having no return on investment, as company leaders do not always see the relation between financial and non financial benefits, described by Porter and Kramer (2011). Company leaders have to act profit oriented, thus they will not adhere to sustainable topics if there is no direct financial profit perceivable. In addition to this, even if this connection between financial and non financial topics is well recognised, a company’s leader only can act on what is under his control. In other words, an enterprise is not able to change external factors in order to get sustainable. 4.
Conclusion
The general interest in sustainability is growing continuously. Not only customers require their products and services being sustainable, but also the European Union has implemented several standards and norms considering sustainability. Thus, in order to fulfill the legislative as well as its’ customers’ requirements, companies invest in green and sustainable working methodologies. In 1987 Brundtland emphasised that todays’ generations should leave the world in such conditions that future generations would have at least the same opportunities. A decade later, Elkington has defined sustainability being based on three pillars, namely, the economic, the ecologic and the societal one. This concept is not future oriented, while exactly this mindset constitutes Brundtland’s concept. For this reason, the TBL was extended by the pillars work and ethics. Many companies are not aware that they already implemented those points. Labor Unions have struggled for better working conditions and gained influence in political and legal decisions defining today’s working conditions. Thus, many companies have already implemented a Code of Conduct and have signed collective agreements, ensuring equity and equal treatment of all employees. Consequently, they do consider the two pillars, extending the TBL into a New Triple Bottom Line (NTBL), even if they do it unknowingly.
5.
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