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Lower labor costs – Better working conditions can increase motivation and productivity, and reduce the absenteeism of supply chain personnel (Holmes et al., 1996; McElroy et al., 1993). Proactively shaping future regulation – companies that proactively address environmental and social concerns can influence government regulation when this regulation is modeled after a company’s existing production and supply chain processes, leading to a difficult-to-replicate competitive advantage for companies and their suppliers (Carter and Dresner, 2001). Reduced costs, shorter lead times, and better product quality associated with the implementation of ISO 14000 standards, which provide a framework for environmental management systems (Hanson et al., 2004; Montabon et al., 2000; Tibor and Feldman, 1996). Enhanced reputation – engaging in sustainable behavior can make an organization more attractive to suppliers and customers (Ellen et al., 2006), to potential employees (Capaldi, 2005), and to shareholders (Klassen and McLaughlin, 1996).
Our contention is that the proportion of environmental and social initiatives which result in enhanced economic performance is relatively large, as illustrated by the extent of overlap between environmental, social, and economic performance shown in Figure 2. While most of the above outcomes are “good” examples of ways in which a firm can improve its sustainability, true sustainability occurs at the intersection of all three areas – environmental, social, and economic – and includes multiple activities (e.g. activities in the aggregate) where an organization explicitly and comprehensively incorporates social, environmental, and economic goals in developing strategic vision and long-term strategic objectives. Further, as indicated in our review of the supply chain management literature, the environmental and social aspects of sustainability can extend beyond an organization’s boundary to include supply chain activities. When coupled with economic objectives to develop a clear, long-term strategy, the inclusion of supply chain management activities in a firm’s sustainability can actually create a longer-lasting, and less imitable set of processes, as will be discussed further in the next section of the paper. The preceding discussion of the benefits of such an explicit and long-term viewpoint and integration of all three of the dimensions which make up SSCM leads to the following proposition: P1.
Firms that strategically undertake SSCM will achieve higher economic performance than firms that pursue only one or two of the three components of the triple bottom line.
Although P1 might appear tautological, it advocates that the highest level of economic performance will occur at the intersection of environmental, social, and economic performance as shown in Figure 2. Thus, firms which attempt to simultaneously maximize performance of all three dimensions of the triple bottom line will outperform organizations that attempt to only maximize economic performance, or companies that attempt to achieve high levels of social and environmental performance without explicit consideration of economic performance.
A framework of SSCM
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