Fundamentals of sustainable supply chains

Sustainability focus on the three pillars stated by Elkington (1998) namely, financial, environmental and societal. Thus, the concept of sustainable development extends the economic goal of a regular supply chain to ecological and social issues.

A supply chain is defined by Chopra and Meindl (2015) as all functions involved in receiving and filling customer demand. It encompasses manufacturers, suppliers, transporters, warehouses, retailers and customers. Supply chain goal must be to maximize supply chain overall profitability (Chopra and Meindl, 2015), yet conventional supply chains focus primarily on economic and financial business performance (Brandenburg et al., 2014). On the other hand, a sustainable supply chain integrates and coordinates all the aspects of traditional supply chains and also includes the two additional dimensions of sustainable development; namely environmental and societal goals (Seuring and Müller, 2008; Ahi et al., 2013; Brandenburg et al., 2014). Therefore, in this broader perspective of supply chains, environment, and social objectives must be considered as a requirement to fulfill customer needs .

Green supply chain, reverse logistics, and closed-loop supply chain (CLSC) are other frequent topics in the field of sustainable supply chains (Govindan et al., 2015). When only the environmental aspects are integrated into supply chain thinking, it is known as green supply chain management (Srivastava, 2007). Reverse logistics involves the collection, inspection, disassembly, reprocessing, redistribution and reuse of end of life products, and the disposal of associated wastes (Agrawal et al., 2015; Bazan et al., 2016). On the other hand, a closed-loop supply chain integrates and coordinates the forward and reverse supply chain activities (Guide et al., 2003). For an extensive literature on the field, we suggest the works of Fleischmann and Bloemhof-Ruwaard (1997) and Srivastava (2007).

Triggers for sustainable supply chains

The adoption of sustainable initiatives is mainly triggered by 1) customers and stakeholders, and 2) legislation (Seuring and Müller, 2008; Walker et al., 2008; Testa and Iraldo, 2010; Hoen et al., 2012).

Customers and stakeholders
The objective of supply chains is to fill customer’s demand (Chopra and Meindl, 2015). Then, customers are a great motivator for building sustainable supply chains.

Numerous studies reveal the growing pressure exerted by customers for greener products and less polluting processes. For instance, in a study carried out by Letmathe and Balakrishnan (2005), in the United States, more than 60% of customers desist or consider avoiding goods for environmental causes. In a more recent study in China, Zhao et al. (2014) revealed that 71.6% out of 500 interviewed consumers are disposed to pay for high-priced green products. Ultimately, Kassinis and Soteriou (2003) acknowledges the impact of environmental enhancements on profits by growing customer satisfaction on hospitals.

Stakeholders can also influence firms to embrace important goals such as the ones of sustainable development (Schaltegger and Burritt, 2014). The growing number of ecologically conscious customers encouraged stakeholders to pressure organizations to adopt sustainable initiatives. For instance, the study performed by González-Benito and González-Benito (2006) over 186 manufacturing firms reveals that only stakeholder’s pressure can justify the implementation of environmental habits in logistics.

Environmental policies
Amid growing concerns over climate change, depletion of natural resources and client awareness; a significant number of enactments has emerged all over the world. Laws go from voluntary agreements to complex trading systems, though, they all share the same goal: to encourage companies to curb their emissions or their resource consumption. We might divide the policies into two categories discussed below: regulatory approaches and market-based approaches. Other mechanisms derive from combinations or special cases of the previous strategies.

Regulatory approaches: Command and control
Regulatory approaches also known as command and control, rely on setting a standard environmental performance, defining a particular technology or emission limits without using economic incentives beyond established limits (U.S. Environmental Protection Agency, 2001). The enforcement of this regulation is made through sanctions. Since the policy tends to restrict compliance options, this strategy is not as flexible as other approaches, but it is effective to carbon mitigation. China was one of the countries to use a command-and-control to climate challenges.