The Journal of Developing Areas

Special Issue on Dubai Conference Held in June 2016

Volume
No.
2016

SUSTAINABLE SUPPLY CHAIN

MANAGEMENT: A BREIF LITERATURE
REVIEW
Mohsen Varsei
Australian Institute of Business, Australia

ABSTRACT
This paper aims to provide a brief review of the sustainable supply chain management
literature. Supply chain management involves the extraction, production, transportation, and
recycling of materials and products, which all have major impacts on the multiple dimensions
of sustainable developmenteconomic, environmental and social. Sustainable supply chain
management has evolved in the literature to incorporate a combination of these dimensions.
The paper starts by presenting an overview of supply chain management and sustainability.
Then different dimensions of the area are discussed along with some research gaps which can
offer new avenues for future research. While sustainable development requires the
consideration of social, environmental and economic dimensions concurrently, the extant
literature has predominantly dealt with one or two dimensions, namely the economic and
environmental. Furthermore, sustainability has been misinterpreted as green or
environmental practices by many scholars with the general oversight of the social dimension.
This would result in an appeal for future research to address the social sustainability and
investigate the interconnections among all three dimensions and the potential trade-offs or
win-win-win scenarios. This research agenda could assist in reaching true sustainability as
an inevitable necessity. Despite all valuable efforts, we still may not know much about the
dynamics in various industries at the organizational, regional and global levels. The priorities
in most cases are still unclear for practitioners and policy makers. Hence several opportunities
exist for research in order to help create a more sustainable future.

JEL Classifications: M11

Keywords: Supply chain management, Sustainability, Sustainable supply chain
management, Literature review
Corresponding Authors Email Address: mohsen.varsei@aib.edu.au

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INTRODUCTION
Sustainable supply chain management is an extension of the traditional supply chain
management that incorporates the environmental and social objectives. The growing
environmental concerns such as global warming, and social issues such as human rights
and safety, have forced many companies to go beyond just economic-related goals and
include a wider range of objectives in their supply chain decisions.
However, satisfying multiple objectives could often be conflicting due to potential
trade-offs between the three dimensions of sustainability (Winter and Knemeyer, 2013;
Varsei et al., 2015). While some social or environmental initiatives may provide financial
benefits (e.g. managing energy usage efficiently), others could undermine the financial
performance directly or indirectly (Ross et al., 2012). Nevertheless, several executives
have stated that sustainability issues would be critical for their businesses future success,
as mentioned in the report published by the United Nations Global Compact and Business
for Social Responsibility (UNGC, 2010). The area of sustainable supply chain management
has been researched and published, particularly in the recent years, to provide insights for
practitioners to enhance sustainability at the supply chain level. The three dimensions of
this area are briefly discussed in the following sections.
The Economic Dimension
This dimension has attracted several researchers to address the long-term economic
stability of a supply chain and various financial performance indicators such as supply
chain cost or service level (Pullman et al., 2009). The economic sustainability also mean
achieving financial objectives whilst protecting the environment and safeguarding society
(Yusuf et al., 2013). A number of researchers have investigated the linkage between the
three dimensions and maintained that implementation of environmental and/or social
initiatives could provide economic advantages such as:

cost minimisation due to recycling, redesigning to re-use, remanufacturing and

reducing packaging waste (Carter and Rogers, 2008);
economic performance improvement due to environmental purchasing and sustainable
packaging;
health and safety cost reduction as a result of safer warehousing, transportation and
manufacturing;
lower recruitment and labour turnover costs associated with better working conditions
;
improving product quality and lead times resulting from the implementation of
environmental management standards, such as ISO 14000 (Hanson et al., 2004);
difficult to replicate competitive advantageif companies proactively implement
sustainability initiatives, they are not compelled by future regulations to change their
supply chain structure, leading to competitive advantages for focal companies and
their suppliers;
enhancing reputation through proactively engaging in sustainability initiatives
(Klassen and McLaughlin, 1996);

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improving focal firms marketing performance due to greater customer satisfaction,

and increasing suppliers capabilities to innovate and gain trust in suppliers as a result
of engaging in sustainability initiatives (Rao and Holt, 2005); and,
improvement in key performance measures such as quality of service and products,
market share, customer loyalty and profit (Yusuf et al., 2013).
Despite the above studies, Pullman, Maloni, and Carter (2009) found that the
financial benefits of social and environmental sustainability initiatives may be difficult to
recognise, calling for future research to help practitioners understand and clarify trade-offs
between the three dimensions. Linton, Klassen and Jayaraman (2007) argued that
sustainability initiatives would add an additional level of complexity to existing supply
chains at both strategic (e.g. supply chain design) and operational levels which may need
short-term investment.
It could be drawn from some recent studies that the implementation of
environmental or social initiatives might increase costs, especially in the short term (Wu
& Pagell 2011, p.577), which in turn highlights the importance of analysing trade-offs in
decision-making when environmental and social dimensions are to be considered along
with the traditional economic dimension (Ross et al., 2012). In doing so, decision-makers
can gain a clear understanding of the cost-benefit analysis of environmental and social
initiatives in both short- and long-term decisions.
The Environmental Dimension
Research on the environmental dimension of supply chain management (often called green
supply chain management) aims to embed environmental issues into the supply chain
processes and functions such as product design, supplier selection, operations,
transportation as well as the end-of-life management of used products (Srivastava, 2007).
Some of the important environmental concerns investigated in the supply chain
management literature include greenhouse gas (GHG) emissions (Paksoy et al., 2011),
resource depletion (Yusuf et al., 2013), waste generation (Tsai and Hung, 2009), hazardous
substances in products (Hsu and Hu, 2009), energy consumption (Cholette and Venkat,
2009) and water consumption (Brent, 2005). Of these concerns, the issue of GHG
emissions, CO2 in particular, has been highlighted in the literature as the most prominent
because of the hazardous consequences on ecosystems and human health.
To incorporate environmental concerns into supply chain management, two main
streams can be distinguished in the literature namely green operations and green design,
according to a comprehensive study by Srivastava (2007). Green operations seek to address
issues such as remanufacturing, designing the supply chain to include reverse logistics, and
waste management. It can be argued that these challenges are closely linked since effective
remanufacturing may require well-designed reverse logistics and waste management
systems. Jayaraman, Guide and Srivastava (1999) define remanufacturing as the
transformation of used products into products which satisfy exactly the same standards as
new products and argue that it is profitable and environmentally conscious. However, they
affirm that a focal firm must simultaneously consider the traditional forward and also the
reverse flow of goods (i.e. a closed-loop system) for a remanufacturing process to function
effectively.

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The product design directly affects how a product can be recovered, re-used,
repaired, disassembled, remanufactured, recycled or disposed of (Linton et al., 2007).
Green design is concerned with the integration of environmental considerations and the
products design process which traditionally considers some objectives including cost,
functionality and manufacturability (Ilgin and Gupta, 2010). It aims to increase
understanding of how the product design may impact the environment, which could
improve a products environmental compatibility during its life cycle throughout its supply
chain (Srivastava, 2007).
The abovementioned studies have addressed the environmental and economic
dimensions. However, a truly sustainable supply chain needs to consider all three
dimensions. Matos and Hall (2007) asserted that practitioners usually consider economic
and environmental criteria in decision-making and do not recognise the importance of
social factors or do not know how to deal with social factors (Matos and Hall, 2007,
p.1090).
This highlights two major gaps in the literature: (i) how practitioners can deal with
social criteria, and, (ii) how they can consider multiple aspects and follow a broad
integrated approach to design and manage sustainable supply chains despite its inevitable
limitations. Bearing this in mind, it should be acknowledged that there have been relatively
few studies that address the social dimension as discussed below.
The Social Dimension
Being socially sustainable requires that companies consider a set of social criteria for
supply chain management. The social responsibility-related standards, codes of conduct,
and reporting frameworks consider to some extent similar social criteria (SAI, 2008; GRI,
2013), and they can be incorporated into supply chain management. The social dimension
in the Global Reporting Initiative include four aspects: labour practices and decent work
conditions, human rights, society, and product responsibility (GRI, 2013). These categories
are also congruent with the guidelines of Social Accountability 8000 standard (SAI, 2008),
International Labour Organisation (ILO, 2012) and social life cycle assessment tools
(Dreyer et al., 2006).
Empirical evidence has shown that many focal companies have struggled to
implement social sustainability practices in their supply chains (Andersen and SkjoettLarsen, 2009). It could be argued that the social dimension is still not directly incorporated
into supply chain performance measures of many organisations (Cetinkaya, 2011). One
reason lies in the fact that implementing social initiatives across global supply chains is a
complicated undertaking because there is a large number of supply chain members for
many multinational companies (Mamic, 2005). The empirical study by Mamic (2005)
highlighted this problem across sports footwear, apparel and retail sectors in which there
are often thousands of suppliers. The study suggested that focal companies should prioritise
their suppliers according to their importance and the nature of the relationship with them.
In addition, the research found that the influence of a focal company is the major
determinant of adopting the social initiatives at the supplier level (Mamic, 2005). Ansett
(2007) stated that only a few organisations have acknowledged the strategic advantage of
being socially sustainable at the supply chain level even though by doing so they might be

415
rewarded with enhanced credibility and reputation, license to operate, risk mitigation and
strategic innovation advantages.
The implementation of social sustainability (or corporate social responsibility)
practices at the supply chain level would face two interlinked challenges: firstly, how focal
companies and their executives can make a long-term commitment to social sustainability
(Andersen and Skjoett-Larsen, 2009); and secondly, how committed focal companies are
able to develop decision-making processes and business models underlying social issues
so as to design and manage sustainable supply chains (Wu and Pagell, 2011).
Notwithstanding these challenges, focal companies in todays business environment are
increasingly under pressure to minimise the number of incidents with regard to the social
dimension at the supply chain level which could harm their reputation (Green, 2013;
Greenhouse, 2013; Manik and Yardley, 2013). It is believed that reputation is a valuable
corporate asset, hard to build, yet easy to diminish (Roberts, 2003, p.168).
Some scholars have examined the linkage between social sustainability initiatives
and financial performance outcomes which could encourage focal firms to make a longterm commitment to social initiatives (Pullman et al., 2009). While these efforts have
addressed the first challenge (as noted earlier) and may encourage organisations to create
a business case for sustainability (Schaltegger et al., 2011), few studies in recent years
have taken one step further and examined how social concepts can be applied to supply
chains in order to provide insights for practitioners (Varsei et al., 2014).
The study by Carter (2000) is among the first to practically analyse social issues
in the global (i.e. international) supplier management. He advocated that setting up a
mechanism for formally communicating codes of conduct and reporting violations of codes
would dissuade supply chain members from engaging in unethical behaviours. His findings
show that engaging in socially sustainable practices could create a win-win situation in
supply chains, providing a secure business opportunity for all partners involved. Carter and
Jennings (2002) elaborated the concept of logistics social responsibility and proposed a
framework in which social issues such as safety, human rights, quality of life, ethics,
diversity, community and philanthropy are considered.
The literature also suggests setting social standards and principles, codes of
conduct and auditing processes to help focal firms ensure socially acceptable practices
amongst supply chain members, especially those with extended supply chains into
developing countries (Awaysheh and Klassen, 2010). These standards set basic social
responsibility requirements for supply chain members. For instance, the Social
Accountability 8000 explicitly examines nine areas including child labour, forced labour,
health and safety, freedom of association and collective bargaining, discrimination,
disciplinary practices, working hours, remuneration, and related management systems
(SAI, 2008). By means of these standards, a focal company may administer social audits
on its supply chain members in order to assess their social performance (Awaysheh and
Klassen, 2010). Based on the audit outcomes, a focal company can identify and prioritise
those areas or links in the chain which need improvement so as to enhance the overall
chain performance (Klassen and Vachon, 2003).
Although codes of conduct have been widely used in contracts between focal
firms and their suppliers (Welford and Frost, 2006), Andersen and Skjoett-Larsen (2009)
observed that they have not been truly implemented in several supply chains. It could be
argued that this issue exists because the social sustainability has not been successfully

416
embedded into business models or decision-making processes. There are only very few
studies in the literature which attempt to address this problem such as the study by Hutchins
and Sutherland (2008). They proposed a framework to examine how some social
sustainability indicators (i.e. labour equity, health, safety and philanthropy) can be
quantified and incorporated in a supply chain decision-making process. Another study has
been done by Varsei and Polyakovskiy (2016).
The social, environmental and economic dimensions should be analysed through
integrated approaches, otherwise it tends to be difficult for decision-makers to examine the
linkages between the three sustainability dimensions and balance strategic priorities. This
identifies a major gap in the literature (Brandenburg et al., 2014; Walker et al., 2014). In
particular, Wu and Pagell (2011, p.577) highlight that existing research has not addressed
the business models and decision-making processes underlying sustainable supply chain
management. It can be seen that this gap has been frequently highlighted by several studies
(Seuring and Mller, 2008; Winter and Knemeyer, 2013; Brandenburg et al., 2014).
CONCLUSIONS
The brief literature review presented in this paper may help to uncover some gaps in the
nexus between sustainability and supply chain management. While sustainable
development requires the consideration of social, environmental and economic dimensions
concurrently, the extant literature has predominantly dealt with one or two dimensions (i.e.
economic and environmental). Furthermore, sustainability has been misinterpreted as green
or environmental practices by many scholars with the general oversight of the social
dimension. This would result in an appeal for future research to address the social
sustainability and investigate the interconnections among all three dimensions and the
potential trade-offs or win-win-win settings. This research agenda may assist in reaching
true sustainability as an inevitable necessity. Despite all valuable efforts, we still may not
know much about the dynamics in various industries at the organizational, regional and
global levels. The priorities in most cases are still unclear for practitioners and policy
makers. Hence several opportunities exist for research in order to help create a more
sustainable future.
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