Executive Briefings

Balancing the Triple Bottom Line of People, Planet and Profits

Analyst Insight: Sustainability is a global business megatrend with cross-functional implications that for-profit corporations cannot afford to ignore any more than IT or quality management. Sustainability means balancing environmental impacts, social welfare and profit-making activities to promote value along the so-called "triple bottom line." Given increasingly conscientious consumers and growing limits to resource availability, success in the era of climate change will be reserved for companies that have sustainable supply chains and operations. - Nada Sanders, Professor and Iacocca Chair, Lehigh University; Director of EcoNautics Sustainability Institute

EcoNautics Sustainability Institute (ESI) finds that companies that promote sustainability at the executive level see a number of economic benefits.  By eliminating waste, reducing resource use, avoiding regulatory issues, enhancing customer loyalty, and achieving competitive differentiation, sustainable companies see long-term economic benefits by reducing costs, increasing resilience, and promoting their brand.

Sustainable supply chain management will be easier for some than others. Companies that are vertically integrated will find sustainability improvements easier to come by, because it is easier to monitor and control the various business entities that are responsible for bringing a product or service to market.  Companies that are not vertically integrated must establish collaborative relationships with suppliers in order to ensure a sustainable supply chain.  This will pose a challenge because of the difficulty of establishing monitoring and oversight of globally dispersed suppliers, including the environmental or labor practices of the suppliers of suppliers.

"¢ Each company has a unique sustainability potential, depending upon current adverse impacts and the feasibility of operational improvements.  Companies that are involved in manufacturing and production, intensive resource use, depend upon global supply chains, or operate across national boundaries, are more likely to be involved in environmental or social controversies, and thus have more to gain by proactively addressing sustainability challenges, and more to lose by neglecting this critical perspective.  Further, these companies have greater opportunities to reduce adverse impacts in a cost-effective way than, for instance, a local service organization that has few impacts and which would be hard-pressed to reduce those few to nothing.

"¢ Sustainability can promote a variety of value streams for businesses that make the investment.  Reducing waste promotes the financial performance of a firm by eliminating disposal costs and reducing the cost of materials procurement.  Improving environmental performance can be used in marketing to distinguish a company's products and can even command a price premium, promoting revenue.  Managerial approaches that promote a better work-life balance for employees will reduce sick days, improve productivity and loyalty, and increase the quality of labor.

"¢ Sustainability is cross-functional.  Improving the status quo of business activities by striking a more appropriate balance between environmental, social and economic factors can take place across business functions.  Sustainability improvements can take place in marketing, operations, supply chain management, leadership, strategy, innovation, finance and other business functions.  Sustainability should be integrated into the mission of a firm at the highest level, and each business function should be re-envisioned to promote the triple bottom line.

The Outlook

Customers and consumers will increasingly be well informed about the adverse social and environmental impacts of business activities, and they will be demanding change, including lobbying for regulatory reform.  Extended Producer Responsibility, which would require electronics manufacturers to ensure sound disposal of e-waste generated by their products, has found its way onto the legislative agendas of local and national governments.  Certification and labeling standards will become more common, clamping down on false advertising of green products.  Supply chain disruptions and constraints on resources such as freshwater supplies caused by climate change will increasingly reward sustainable companies.


Keywords: supply chain, supply chain management, sustainability, green supply chains, green logistics, EcoNautics Sustainability Institute

 

EcoNautics Sustainability Institute (ESI) finds that companies that promote sustainability at the executive level see a number of economic benefits.  By eliminating waste, reducing resource use, avoiding regulatory issues, enhancing customer loyalty, and achieving competitive differentiation, sustainable companies see long-term economic benefits by reducing costs, increasing resilience, and promoting their brand.

Sustainable supply chain management will be easier for some than others. Companies that are vertically integrated will find sustainability improvements easier to come by, because it is easier to monitor and control the various business entities that are responsible for bringing a product or service to market.  Companies that are not vertically integrated must establish collaborative relationships with suppliers in order to ensure a sustainable supply chain.  This will pose a challenge because of the difficulty of establishing monitoring and oversight of globally dispersed suppliers, including the environmental or labor practices of the suppliers of suppliers.

"¢ Each company has a unique sustainability potential, depending upon current adverse impacts and the feasibility of operational improvements.  Companies that are involved in manufacturing and production, intensive resource use, depend upon global supply chains, or operate across national boundaries, are more likely to be involved in environmental or social controversies, and thus have more to gain by proactively addressing sustainability challenges, and more to lose by neglecting this critical perspective.  Further, these companies have greater opportunities to reduce adverse impacts in a cost-effective way than, for instance, a local service organization that has few impacts and which would be hard-pressed to reduce those few to nothing.

"¢ Sustainability can promote a variety of value streams for businesses that make the investment.  Reducing waste promotes the financial performance of a firm by eliminating disposal costs and reducing the cost of materials procurement.  Improving environmental performance can be used in marketing to distinguish a company's products and can even command a price premium, promoting revenue.  Managerial approaches that promote a better work-life balance for employees will reduce sick days, improve productivity and loyalty, and increase the quality of labor.

"¢ Sustainability is cross-functional.  Improving the status quo of business activities by striking a more appropriate balance between environmental, social and economic factors can take place across business functions.  Sustainability improvements can take place in marketing, operations, supply chain management, leadership, strategy, innovation, finance and other business functions.  Sustainability should be integrated into the mission of a firm at the highest level, and each business function should be re-envisioned to promote the triple bottom line.

The Outlook

Customers and consumers will increasingly be well informed about the adverse social and environmental impacts of business activities, and they will be demanding change, including lobbying for regulatory reform.  Extended Producer Responsibility, which would require electronics manufacturers to ensure sound disposal of e-waste generated by their products, has found its way onto the legislative agendas of local and national governments.  Certification and labeling standards will become more common, clamping down on false advertising of green products.  Supply chain disruptions and constraints on resources such as freshwater supplies caused by climate change will increasingly reward sustainable companies.


Keywords: supply chain, supply chain management, sustainability, green supply chains, green logistics, EcoNautics Sustainability Institute