American Journal of Industrial and Business Management, 2013, 3, 42-48

http://dx.doi.org/10.4236/ajibm.2013.31006 Published Online January 2013 (http://www.scirp.org/journal/ajibm)

Sustainable Supply Chain Management Practices and

Operational Performance
Maruf Hasan
School of Mechanical & Manufacturing Engineering, The University of New South Wales, Sydney, Austalia.
Email: [email protected]
Received September 21st, 2012; revised October 23rd, 2012; accepted November 25th, 2012

ABSTRACT
Sustainable supply chain management has emerged as a key approach for enterprises aiming to become environmentally
sustainable. The study will investigate the kinds of environmental management practices that are undertaken by companies in greening the supply chain and how these practices affect the environmental and operational performance of the
companies. The study provides additional insight into the growing field of literature examining the relationships between environmental policies and operational performance.
Keywords: Management; Supply Chain; Environment; Performance

1. Introduction

be used interchangeably.

Environmentally conscious business practices have been

receiving increasing attention from both researchers and
practitioners. The number of organisations contemplating
the integration of environmental practices into their strategic plans and operations is continuously increasing [1].
Numerous initiatives have provided incentives for organizations to become more environmentally friendly. The
concepts pertaining to supply chain environmental management (SCEM) or greening the supply chain are usually understood by industry as screening suppliers for
environmental performance and then doing business with
only those that meet regulatory standards [2]. The driving
forces for introducing and implementing the concept into
the company operations are numerous and comprise a
range of reactive regulatory reasons to proactive strategies and competitive advantage reasons [3]. Approaches
such as cleaner production, environmental management
systems and eco-efficiency have been implemented for
green management practices. The factors driving the competitive advantage through environmental performance
have been identified as market expectations, risk management, regulatory compliance and business efficiency
[4]. Green supply chain management (GSCM) has a key
role in ensuring that all of these factors are addressed [5].
Environmental impact occurs at all stages of a products
life cycle. Therefore GSCM has emerged as an important
new archetype for enterprises to achieve profit and market share objective by lowering the environmental risks
and impacts and while raising their ecological efficiency [6]. In this paper the terms SCEM and GSCM will

2. Literature Review

Copyright 2013 SciRes.

The concept of supply chain management has been observed as a recent and novel tool and the literature in
green supply chain management has been growing in
recent years. Min and Galle [7] conducted an empirical
survey of US purchasing managers with regard to green
purchasing and have found that that the primary driving
force to green purchasing is an urge to meeting regulations rather than environmental monitoring or partnerships. The effectiveness of green purchasing also depends on whether the firm has centralised or decentralised decision-making [8], which determines the extent of
flexibility in the green purchasing process. In a survey,
purchasing managers listed the impact of environmental
regulations on purchasing activities as their second most
important future concern [9].
The relationship between GSCM and organisational
performance has been investigated [10] but the results
have not been conclusive. There exist two contrasting
views about the relationship between environmental practices and organisational performance. The first viewpoint argues that many managers believe that environmental management consists simply of compliance with
regulations, and that a trade-off exists where increased
level of environmental management results in increased
cost [11]. This relationship might exist in part due to increased costs associated with the transference of externalities, such as the cost of polluted air, back to the firm
[12]. Gallop and Roberts [13] studied the effects of enAJIBM

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Sustainable Supply Chain Management Practices and Operational Performance

vironmental regulations on the cost of operations in the

electricity utilities industry and found a similar effectenvironmental regulations were associated with a decline
in industry productivity.
There is also a body of research that suggests a positive relationship between environmental practices and
organisational performance. Klassen and Mclaughlins
[12] proposed model and empirical findings suggests a
positive effect of environmental performance through
both market and cost pathways. Recent literature has
provided insight on the potential pattern of supply chain
practices for improving environmental performance [1416]. The literature for supporting this positive relationship is relatively strong [17]. Frosch [18] argued that an
inter-firm linkage facilitated by proximity could lead to
an improvement in environmental performance. Geffen
and Rothenberg [19] suggested that relations with suppliers aid the adoption and development of innovative
environmental technologies. Furthermore, the interaction
of customer and supplier staff, partnership agreements
and joint R & D leads to improved environmental performance. It is not very clear whether GSCM practices
relate to positive or negative economic performance [20].
Alvarez et al. [21] indicated that environmental management such as GSCM has a positive relationship with
an organisations economic performance. According to
Klassen and Mclaughlin [12], organisations that minimise the negative environmental impacts of their products and processes, recycle post-consumer waste and establish environmental management systems are poised to
expand their markets or displace competitors that fail to
promote strong environmental performance. However,
Bowen et al. [22] suggested economic performance is not
being reaped in short-term profitability or sales performance. Szwilski [23] indicated that an environmental management system is an innovative environmental policy
and information management tool for industry to improve organisational performance. Tooru [24] demonstrated, using a case study, that an environmental management system can improve operational performance of a
firm. Hanna et al. [25] observed a strong relationship between the meeting of goals and staff involvement on environmental management.
Revenues can be positively impacted when customers
prefer the products of environmentally friendly firms
[26], resulting in increased market share vis-a-vis less
environmentally oriented competitors. Costs can be lowered when firms invest in environmental management
systems that result in a decrease in accidental environmental releases and liability. Costs may be reduced
through proactively managing environmental regulations,
which may create barriers and first-mover advantages
that are difficult for competitors to imitate [27,28]. Orlitzky et al. [29] showed, based on a meta-analysis inteCopyright 2013 SciRes.

grating 30 years of research, that there is a positive association between corporate social performance and corporate financial performance across industries.
There is a dearth of empirical research concerning
GSCM practices and organisational performance and it is
important to investigate the effect of green supply chain
management practices on environmental and operational
performance of organizations.
The aims of the study (research questions) are the following:
1) What kind of environmental management practices
are undertaken by organisations in order to improve their
environmental performance?
2) How does the practice of green supply chain management practices affect the environmental and operational performance of organisations?
A research framework is developed to investigate the
relationships between three SSCM practices that companies may implement to improve their performance.
SSCM practice dimensions and items are based on previous literature that addressed various aspects of SSCM
[30-33]. The framework is given in Tables 1 and 2.
A description of the GSCM practices and performance
constructs is given below:
There is agreement within the literature that environmental management practices in the organisation are a
key to improve enterprise performance [34]. It is well
Table 1. Environmental management practices within the
organization.
Environmental management practices within the organization
Commitment of GSCM from senior and middle level managers
Total quality environmental management
Environmental compliance and auditing program
ISO 14000 certification
SSCM practices relating to suppliers and customers
Cooperation with suppliers for environmental objectives
Suppliers ISO14000 certification
Company-wide environmental audits
Environmental management for suppliers internal management
Provide training to build supplier environmental management capacity
Cooperation with customers for eco-design and cleaner production
Cooperation with customers for green packaging
Environmentally conscious product and process design
Environmentally friendly raw material
Design of products for reduced consumption of material and energy
Design of products for reuse, recycle, recovery of material, component
parts
Design of products to avoid or reduce use of hazardous products and/or
their manufacturing process
Optimization of process to reduce solid/liquid waste and emission
Use reverse logistics

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Sustainable Supply Chain Management Practices and Operational Performance

Table 2. Environmental and operational performance constructs.

Environmental performance
Reduction of solid/liquid waste and emissions
Reduction of consumption for hazardous/toxic materials
Reduction of frequency of environmental accidents
Reduction of electricity usage
Operational performance
Cost savings and increased efficiency
Product quality improvement
Increase in market share
New market opportunities
Enhance employee motivation and performance
Increase in sales

known that senior managers support is necessary, and

often a key driver for successful adoption and implementation of most innovations, technology, programs
and activities [35]. Reference [34] concluded that support
from mid-level managers is also key to successful implementation of GSCM practices. Bowen et al. [22] used
middle managers to find positive relationships between
middle managers perceptions of corporate environmental pro-activity and environmental management.
GSCM practices relating to suppliers and customers
are concerned with the inbound and outbound aspects of supply chain management. From the inbound
perspective of the supply chain it is argued that greening
the supply chain has numerous benefits for an organization, ranging from cost reduction, to integrating suppliers
in a participative decision making process that promotes
environmental innovation [2,22]. A large part of the inbound function essentially comprises of green purchasing
strategies adopted by organisations in response to increasing global concerns of environmental sustainability
[7]. Walton et al. [36] examine the integration of suppliers into environmental management processes, and observe two evolving trends. They firstly suggest that environmental issues are becoming an intrinsic part of strategic planning in organisations due to stricter regulations
and the demands of environmental accountability. They
also observe a second trend amongst their case examples,
that organisations are integrating their supply chains to
reduce operating costs and improve their customer service. Green purchasing strategies arguably resolve around
two key components, the evaluation of suppliers environmental performance and mentoring to assist suppliers
to improve their performance. Reference [37] has detailed the range of tools and techniques in place to assess the environmental behaviour of suppliers to aid in
supplier selection. Often organisations urge suppliers to
Copyright 2013 SciRes.

develop their own in-house environmental management

system, and many request that a supplier accredits to an
environmental management standard such as ISO 14001
[38].
On the outbound side of green supply chain, green
marketing, green packaging and environmental friendly
distribution are all initiatives that might improve the environmental performance of the supply chain [2,3]. Packaging performs a number of functions including containment, protection, preservation, apportionment, unitisation and presentation [32]. In order to address the environmental impact of packaging, many countries now
have programs that aim to minimise the amount of packaging that enters the waste stream. The reuse of packageing can be found in reusable, collapsible shipping containers [39]. Green marketing has an important part to
play in the link between environmental innovation and
competitive advantage [40]. Encouraging suppliers to take
back packaging is a form of reverse logistics that can be
an important consideration in greening the out-bound
function. Reference [41] argued that standardised reusable containers, good merchandising layouts, and easy
information access reduce storage and retrieval delays
which leads to cost saving whilst being environmentally
friendly.
Environmentally conscious product and process design
may purposely incorporate a number of concepts such as
environmentally friendly raw material, design for reduced consumption of material and energy, use of cleaner technology processes to reduce solid and liquid waste
and use of reverse logistics. Investment recovery is an
emerging environmental practice and many enterprises
have considered investment recovery as a critical aspect
for GSCM [30].

3. Case Studies
Case study research is used to validate the framework.
Convenience sampling was used to select the companies
for case studies. Convenience sampling is a non-probability sampling technique where subjects are selected
based on their easy accessibility. The necessary information required from the five companies selected were accessible and readily available. All the companies selected
have exercised substantial effort in managing supply
chain that is sustainable. Case studies were conducted in
order to investigate various sustainable supply chain
management practices and the environmental and operations results derived out of this. The studies are mostly
based on published documents such as reports and publications. A description of the cases is given below:

3.1. Eastman Chemical Company

Eastman Chemical Company is focused on continual imAJIBM

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provement and value creation in all aspects of the supply

chain such as, measuring supplier performance, developing alternative methods of supply, develop supplier solution, improve packaging, use renewable material, design
and optimize supply chain network, develop customer
solutions and manage investment recovery [42]. Eastman
tracks a variety of environmental measures and expanded
the environmental performance matrics and included greenhouse gas intensity reduction goal in addition to energy
efficiency goal and TRI (Toxic Release Inventory) releases and reportable releases.
Eastmans energy policy has balanced the need for affordable energy supplies with the need to reduce the
amount of energy needed to make their products. Eastmans integrated manufacturing process results in very
efficient operations, allowing heat from one chemical
process to be used for heat within a different chemical
process. The water management practices of Eastman are
very good in efficient use and pollution prevention.
Eastman takes great care to manage on-site waste reduction and recycling. Eastman focuses on renewable materials and packaging to limit the end-of-use waste of the
products.

3.2. Westpac Bank, Australia

Westpac Bank aims to ensure that suppliers must share
their commitment to best practices, continuous improvement and collaborative approaches, deal ethically and
responsibly with suppliers and build corporate and long
term relationships [43]. Westpac also set a clear and
unambiguous minimum standard of supplier behaviour
for key business practices, via a sustainable supply chain
management (SSCM) code of conduct. SSCM enables
Westpac to create other benefits such as reduced costs,
improved risk management, enhanced quality and product or service innovation. Westpac also undertakes detailed assessment of high spend and higher risk suppliers
to ensure a more in-depth understanding of the social,
ethical and environmental business practices of these
supplier.
Sustainability is a core component of Westpac Banks
culture and corporate strategy. Part of this is managing
their environmental impact and dealing with the critical
issue of climate change. Westpac supports emission trading and other market mechanism in order to effect positive environmental outcomes. Westpac is committed to
efficient eater management and water conservation. Westpacs supplier selection process included questions regarding the management of environmental issues.

45

opment is involved in improving the businesss own operations, ensuring that the goods and services provided
by suppliers to increase efficiency and competitiveness
and working effectively with customers and sales and
distribution to design sustainable products and services
[44].
A great benefit lies in working with supplier and customers to improve the design of products and processes
that connect business with customers. Some success has
been achieved in redesigning packaging and in increasing
the recyclable content in a variety of products. Process
collaboration with suppliers and customers has been
shown to deliver improvement in manufacturing and logistics efficiency whilst reducing emissions, road congestion and improving employment stability. One way in
which companies can differentiate themselves, reduce
cost and improve service is to consider the environmental,
social as well as economic factors related to the supply
chain.
Dow Jones has valued more than 300 companies in
relation to their sustainable development in the Dow
Jones Sustainability Group Index (DJSI), the index provides evidence that sustainable development pays, with
companies in the index underperforming the Dow Jones
Group Index. One of the parameters that can have a
negative influence on corporate reputation and share
price is whether the companys supply chain is socially
responsible and accountable. In relation to risk management, any actions which may be seen as inconsistent with
Shell Group Business Principles can potentially lead to
damage to the groups reputation and its business. Sanfords business in New Zealand is based on the growth
and harvesting of wild fish and shell fish with the sustainable fish quota management system and is entirely
dependent upon long-term fish supply. Sanfords prices
for sustainable Hoki have increased following accreditations. Consumers are prepared to pay a premium for
certified fish.
Companies embracing sustainable development can benefit from being a first mover in a market. All else being
equal, 82% of UK consumers prefer to purchase goods
from socially and environmentally responsibly companies, according to a 2003 study, and 23% would do so
even if this option is more expensive.
Driving out inefficiency from processes is good business practice and reduces costs. In the service sector,
introducing video conferencing reduces energy consumption and emissions associated with travel increased productivity and reduces costs.

3.4. Coca Cola Enterprises

3.3. New Zealand Business Council for
Sustainable Development
New Zealand Business Council for Sustainable DevelCopyright 2013 SciRes.

In 2007 Coca Cola Enterprises set five strategic Corporate Responsibility and Sustainability (CRS) focus areas.
These areas are energy conservation/climate change,
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Sustainable Supply Chain Management Practices and Operational Performance

sustainable packaging/recycling, product portfolio/wellbeing, and diverse and inclusive culture [45]. In 2008,
Coca Cola made an investment of US $34.8 million on
capital projects in their three environmental focus areas.
They are now establishing a cost-benefit analysis process
to prioritize CRS investments. Coca Cola Company has
set the following goals in the area of energy conservation,
water stewardship, sustainable packaging/recycling, product portfolio/well-being and diverse and inclusive culture:
Reduce the overall carbon footprint by 15 percent by
2020, as compared to 2007 baseline. Establish a watersustainable operation in which water use will be minimized and have a water-neutral impact on the local
communities in which they operate, by safely returning
the amount of water equivalent to what they use in their
beverages and their production. Reduce the impact of
packaging: maximizing the use of renewable, reusable,
and recyclable resources; recover the equivalent of 100
percent of packaging, which creates a culture where diversity is valued, every employee is a respected member
of a team, and workforce is a reflection of the communities in which they operate.
In order to reduce overall carbon footprint, Coca Cola
measured their carbon footprint, calculated the first certified product carbon footprint of sparkling beverages, and
increase hybrid fleet by 120 trucks. To establish a watersustainable operation, the company reduced water use
ratio to 1.73 litres, saved 301 million litres of water
through efficiency initiatives and launched pilot study of
embedded water footprint. To reduce the impact of packaging, Coca Cola avoided use of approximately 31,000
metric tons of packaging materials, or 2.7 percent of total
used, recovered and recycled approximately 125,000
metric tons of packaging and reached 90 percent waste
recycling at an additional 14 facilities. In the area of
product portfolio well-being, the company introduced
first zero-calorie sports drink, POWERADE Zero, reduced average calorie content of the portfolio by three
percent since 2006 and introduced first naturally sweetened low-calorie beverage.

3.5. Ernst and Young Survey

A survey of executives from $1bn-plus corporation conducted by Ernst & Young indicates a high level of awareness of sustainability, with an appreciation of the opportunities it offers within supply chain [46].
Reputation, cost reduction and revenue growth were
the top three widespread opportunities cited by more than
half of respondents. An increase cost base was also highlighted as the greatest risk, suggesting that anticipated
operational and energy savings would be offset by increased capital cost and increase price from suppliers.
Regulatory compliance was reported as both an opportuCopyright 2013 SciRes.

nity and threat, indicating that there will be individual

winners and losers, depending on firms preparedness to
stay ahead of new legislation.
There is a strong possibility that carbon will become a
parallel currency to money in the future. More business
will need to operate within carbon cap, or else pay for the
excess carbon produced. Therefore it is important for the
international companies to take steps to measure their
supply chain emissions in order to predict future cost and
liabilities. To combat increasing energy prices and reduce in-house emissions, 40% of the firms have invested
in on-site renewable energy generation. This offers great
control over energy cost, enhances corporate reputation
and may result in profits from the sale of surplus renewable electricity.
An increasing number of businesses are competing to
launch sustainable products and services to increase their
market share. 63% of respondents see sustainability as an
opportunity for revenue growth. 71% view reputation and
brand as the area where sustainability, green and carbon
issues will provide opportunity. The survey also found
that 44% of the respondents said they are confident they
can deal with sustainability issues. Many large global
companies have yet to realize the full potential of the
savings and benefits due to sustainable supply chain management.

4. Discussion
From the case study analysis it is found that the companies studied are involved with suppliers to increase efficiency and working effectively with customers to design
sustainable products and services. Most of the companies
are involved in measuring supplier performance, developing alternative methods of supply, develop supplier
solution and build long term relationship with suppliers.
Most of these companies are involved in developing improved packaging, and increasing the recyclable content
of the products. Some of these companies have certification to environmental management standards such as
ISO14000. Most of the practices cited are in agreement
with the framework of SSCM practices dimensions.
In relation to the environmental and operational performance a wide range of opportunities were cited by the
companies. Among the key environmental performance
measures, greenhouse gas emission reduction, improvement in energy efficiency and conservation of resources
logistics efficiency were evident in most of the companies. Other benefits achieved by companies are increased
efficiency, reduced cost, improved risk management, improved service, increased sales and market share, revenue
growth and reputation. It is important that the companys
supply chain is socially responsible and ethical. One of
the dimensions in operational performance that needs to
be incorporated to the framework is improved risk manAJIBM

Sustainable Supply Chain Management Practices and Operational Performance

agement and reputation.

From the study of these organisations it can be concluded that SSCM practices have considerable effect on
the environmental and operation performance of organisations. More in-depth case studies will be conducted in
order to further validate/modify the framework. One of
the limitations of the study is that the convenience sampling used may not be representative of the population.

leaf Publishing, Sheffield, 2003, pp. 164-178.

[6]

R. I. van Hock and Erasmus, From Reversed Logistics to

Green Supply Chains, Logistics Solutions, No. 2, 2000,
pp. 28-33.

[7]

H. Min and W. P. Galle, Green Purchasing Strategies:

Trends and Implications, International Journal of Purchasing and Material Management, Vol. 33, No. 3, 1997,
pp. 10-17.

[8]

M. J. Birell, Encouraging Green Procurement Practices

in Business: A Canadian Case Study in Programme Development, In: T. Russel, Ed., Greener Purchasing:
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[9]

R. M. Monszka and R. J. Trent, Purchasing and Sourcing Strategy: Trends and Implications, Center for Advance Purchasing Studies, Tempe, 1995.

5. Conclusion
The research is conducted to examine the relationship
between SSCM practices and operational and environmental performance in organisations. A general framework is developed and an attempt is made to validate the
framework using case studies. In particular, the study
examined whether adoption of environmental practices in
supply chain management results in a positive impact on
environmental and operational performance of companies. The research is expected to provide guidance in
regard to the implementation of environmental supply
chain management practices and to increase their international competitiveness that will result in economic
benefits. Significant concern is prevailing at present
about reduction of greenhouse gas emissions and preservation of the natural environment for future generation.
The study, whose whole purpose is the investigation of
the environmental aspects of supply chain management
will go a long way in addressing this concern.

6. Acknowledgements
The author wishes to acknowledge that an earlier version
of the paper was published in the Proceedings of 1st International Conference on Logistics and Transport, Thailand in 2009.

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