The Case for Doing the Right Thing: More and more companies now recognize that creating a sustainable supply chain is more than just the right thing to do—it’s a requisite to business success. Sustainability today resembles the quality movement of three decades ago. As with quality, there was initial resistance to “going green.” But it soon became apparent that the benefits were far too great to ignore. And done right, sustainability can be free.
 In 1979, Philip B. Crosby published the book Quality Is Free. It contained the revolutionary idea that quality did not add cost to a product. Instead, building quality into a product or process was, at the very least, a break-even proposition. Crosby wrote that making quality a sure thing was really an exercise of “getting people to do better all the worthwhile things they should be doing anyway.”
Today, this applies to sustainability just as well. Building sustainability into products and processes is “free.” While quality now is widely understood to be a critical competitive variable and the “ante” to play the game, sustainability does not yet enjoy that same status. But we believe that over the next several years, sustainability, like quality, will become an integral part of the organization. Further, sustainability will be a critical part of every firm and every supply chain.
Creating a sustainable supply chain is a lot more difficult than just being a sustainable company. A sustainable supply chain requires several companies working in concert to deliver products and services to the ultimate consumer in a socially responsible, environmentally sound and financially favorable manner. Sustainable initiatives need to benefit the companies that populate the supply chain as well as the key stakeholders.

Four Elements of Sustainability
The key elements in the sustainable supply chain are shown in Exhibit 1. Included in this model is the “triple bottom line”—a theoretical device that depicts three areas that need to be measured both internally and across the supply chain. The triple bottom line consists of the natural environment, society and economic performance. Nike calls the three areas “planet,” “people,” and “profits” and understands the need to consider its performance in all three areas, not just one.
Economic performance clearly is the main focus of most companies. Clearly, a company cannot stay in business very long without profitability. However, short-term profitability should not be the only yardstick applied to a firm or its supply chain partners. They also must be measured on how well they “do the right thing” over the long term. Thinking environmentally and using fewer resources can also lower costs in both the short run and long run. The same holds true for social responsibility. A firm’s intentional focus to encompass social and environmental responsibility will ultimately serve to build and solidify its profitability. Doing the right thing for employees, customers and the community in which the firm operates makes it more likely that companies will maintain profitability in the long run. Ford Motor Company calls this relationship with employees, customers and the community its “license to operate.”
The sweet spot from which to operate is in the nexus of Exhibit 1—the intersection of environmental or green performance, society or social responsibility, and great economic performance. It is at this nexus that the firm and its supply chain are best positioned to thrive in the long term. Four enablers–strategy, organizational culture, transparency and risk management–can help move companies toward this nexus and the goal of a sustainable supply chain. Collectively they will move an organization toward a place where sustainability—like quality before it—is free.
Strategy: A Top-Down Approach
Sustainability must be part of an integrated strategy. In fact, sustainability should be at the top level of strategy development. From that point, it can be infused throughout the corporation’s supply chain.
In the United States, Walmart has adopted such an integrated strategy. The large retailer is attempting to integrate environmental and social responsibility. Specifically, it intends to infuse a regard for the environment and social responsibility into every part of the operations of both Walmart and its suppliers. The plan is to achieve “zero waste” from all operations before 2025. While it remains to be seen if Walmart can achieve this lofty goal, it is a central part of their corporate strategy.
A firm may be tempted to ask itself, “How do we choose between sustainability and profitability?” That is the wrong question. The two are not separate and distinct; today, companies have no choice but to embrace both. A better strategic question to ask is, “How do we build in affordable sustainability that will best enhance the lasting profitability of this firm and its critical supply chains?” A sustainable supply chain strategy entails more than just taking a long-term view of the firm and its supply chain; it should also focus on increasing productivity within the supply chain. This productivity should not come at the expense of the environment or of key stakeholders such as employees and suppliers. Productivity is doing more with less. It can be accomplished by reducing costs or resources needed to operate.

Organizational Culture: The Power of Example
Mitch Jackson, vice president, environmental affairs & sustainability at FedEx, characterizes sustainability as a “team sport.” Put another way, sustainability needs to be built into the organization’s culture. FedEx looks for sustainability solutions both across departments within the company and with its customers. Jackson believes the solutions that result from the FedEx approach are both powerful and effective.
As the FedEx experience suggests, the culture of sustainability within the organization and across the supply chain should be deeply ingrained. One historic example of sustainable supply chain management (SCM) embedded into a culture was brilliantly on display nine decades ago at the Ford Motor Company. When Henry Ford first developed his amazing manufacturing facilities in River Rouge, Michigan, he built in many sustainable mechanisms. In 1919, he not only constructed a state-of-the-art assembly line for Model Ts, but also designed an industrial park for Ford suppliers with a “zero waste” philosophy in mind.
For example, the boxes Ford specified for receipt of parts were designed so that the wood used in making the boxes could be reused for the floorboards in the car. And then, any leftover wood and sawdust was used to start up a new business called Kingsford Charcoal or to heat the furnaces. As much as possible, he worked to reduce waste.
Transparency: Being Visible and Accessible
The third enabler of a sustainable supply chain is transparency. Consumers worldwide are demanding that the companies they purchase from embrace sustainability. At the same time, purchasing managers are building sustainability requirements into their Requests for Proposal. As the pressure from consumers, governmental bodies and other stakeholders intensifies, companies have had to open up their operations to greater public scrutiny.
Transparency can help managers up and down the supply chain avoid wrongdoing that can sometimes thrive in dark corners. If supplier actions are visible to their customers it is more likely the suppliers will act appropriately. With transparency, it becomes more difficult to keep corporate wrongdoings secret.
Transparency involves not only reporting to stakeholders, but also actively engaging them. Firms can effectively use stakeholder feedback to modify operations and make them more sustainable. By illuminating blind spots, transparency in the supply chain can reduce risk and smooth out bottlenecks. The bottom line: Transparency typically reduces costs.
Risk Management: Removing the “Blind Spots”
Managing the costs and profitability elements of a complex supply chain is difficult enough. It gets even tougher when the sustainability elements are thrown into the complex mix of suppliers.
 Many suppliers are in countries where environmental and social regulations are less stringent (or sometimes completely ignored). Therefore, the firm whose name is on the product and its retailers need to vigilantly ensure that all of the suppliers are acting in a socially responsible manner. Part of a good risk management strategy is to reduce “blind spots” in the supply chain and work to avoid supply disruptions. In September 2011, Apple was accused of using suppliers with poor environmental records and taking “advantage of the loopholes in developing countries’ environmental management systems.”
The accusers were five different Chinabased nongovernmental organizations (NGOs). They claimed that Apple suppliers— not Apple itself—were guilty of environmental negligence. Whether they are eventually proven to be true or not, accusations like these can damage a firm’s reputation.
In the United States, for example, several states are developing “e-waste” laws that govern end-of-life disposition for consumer electronic products. These laws, which carry large penalties for inappropriate disposal of items such as computers and monitors, are currently being written and refined. In parallel with this development, companies are trying to adjust their reverse logistics operations to ameliorate the increased risk of improper disposal.
Reducing “headline risk” is another part of a risk management strategy. If a firm or one of its suppliers operates unsafely and employees are hurt or killed, that reflects negatively on all of the entities up and down the supply chain. Similarly, unethical behavior in one node of the supply chain tarnishes the reputation of that chain’s other members.
Supply Chain- Wide Adoption of Sustainability
Once a firm has defined a structure to enable sustainability inside their organization, managers need to think carefully about how to expand that structure across critical links in their critical supply chains. Perseverance is needed here; in multi-tiered supply chains, complex networks are the rule.
The automotive industry provides a good example, requiring their supply base to adopt new methods of measuring process conformance to specification and product quality. In the beginning, many suppliers complained that new methodologies like TQC and TQM—Total Quality Control and Total Quality Management—were only going to add costs at a time when they were being expected to not raise prices. Within a short time, however, the suppliers that adopted these methodologies generally saw positive results. In some cases, the improvement in process and product quality and the reduction in costs were revolutionary.
Companies need to move in the direction of creating shared value between supply chain partners. It is likely that private industry will take the lead in bringing businesses and other societal elements together. The real leaders around the world are not necessarily political. They are business people. As in the early days of the quality movement, suppliers are often skeptical of the value of sustainability. Many suppliers, in fact, were effectively forced to adopt sustainability initiatives they initially resisted. That resistance overall has diminished in the past few years as suppliers have seen positive results such as lower operating costs.
CONCLUSION: Sustainability is here to stay
There is much more work to be done around sustainability and the sustainable supply chain. Like quality before it, sustainability is here to stay. As companies around the world increasingly understand what the sustainability concept really means, they embrace it for themselves and for their supply chain partners.
The reality is that sustainability cannot be ignored for very long if a company wants to be successful. Increasingly, companies are going to be asked to be sustainable and to incorporate sustainable ideas up and down their supply chain.
Sustainability shouldn’t be thought of as a set of trade-offs between financial gain and environmental and social responsibility. Rather, sustainability should be viewed as a methodology that lets firms create shared value while improving economic conditions internally and across their various supply chains.
It is clear that where sustainability issues are concerned, nongovernmental organizations are going to be a continuing part of management’s peripheral vision for a long time to come. Supply chain leaders need to develop principles of shared value that produce financial gain while also creating value for society. As Michael Porter and Mark Kramer said in a Harvard Business Review article, creating shared value is “not on the margin of what companies do, but at the center.” Creating shared value around sustainability may well be the impetus for the next major transformation of business thinking.

Reprinted with permission of Dr. Rogers and Supply Chain Management Review · November 2011.

Dr. Dale S. Rogers is professor, logistics & supply chain management and co-director of the Center for Supply Chain Management at Rutgers University College of Business. He can be reached at Dale.