the organisation and its supply chain. Part of the Business Strategy and Sustainability module.

1. Unit 6:
Design for Embedding Systemic Sustainability
the Organisation and its Supply Chain
Dr. Miles Weaver,
Edinburgh Napier University Business School
m.weaver@napier.ac.uk
@DrMilesWeaver
#BSSD17

2. #BSSD17
Learning outcomes
Learning Outcome Key
Concept
LO 6.1
Critically appraise how a sustainable business can create
sustainable value by taking a systems perspective: upstream, in
its business processes and downstream.
Systems
Thinking;
Functional
Strategy
LO 6.2
Explain the emergence and importance of managing the supply
chain to underpin the efficient and effective running of a business
and opportunities for improving sustainability
Sustainable
Supply Chain
Management
(incorporating
TBL)
LO 6.3
Evaluate the various different supply chain decisions that benefit
the natural (planet) and social (people) environment as well as
involve the business in less cost in the long term as the result of a
better use of resources (e.g. to impact on profit/surplus)
After this lecture and independent study you should be able to:-

3. #BSSD17
Systems thinking in connecting & aligning
responsible business practice
• Systems thinking may represent the
next phase in the evolution of
sustainability (The Guardian,
15/10/2012. Accessed: 21/2/15)
Allows us to:
• See the whole
– To embed sustainability inc. from source and
re-use/recycle [as part of a circular economy)
• Think differently
– Identify new business opportunities
– Develop ‘shared values’ & ‘common space’
(Weaver et al., 2016)

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Systems thinking is the ‘field of knowledge for understanding change and
complexity through the study of dynamic cause and effect over time’’
(Maani and Cavana, 2006)

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‘Bolt-on’ or ‘embed sustainability’ (I)
(Laszlo and Zhexembayeva, 2011)
Bolt-on sustainability Embedded sustainability
Goal Pursue shareholder value Pursue sustainable value
Scope Add symbolic wins at the
margins
Transform core business activities
Customer Offer “green” and “socially
responsible” products at
premium prices or with
diminished quality
Offer “smarter” solutions with no
trade-off in quality and no social
or green premium
Value
capture
Focus on risk mitigation and
improved efficiencies
Reach across all seven levels of
sustainable value creation
Value
chain
Manage company’s own
activities
Manage across the product or
service life cycle value chain

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‘Bolt-on’ or ‘embed sustainability’ (II)
(Laszlo and Zhexembayeva, 2011)
Bolt-on sustainability Embedded sustainability
Relationships Leverage transactional
relationship. Stakeholders
such as customers,
employees, and suppliers are
resources to be managed
and sources of input
Build transformative relationships.
Co-develop solutions with all key
stakeholders including NGOs and
regulators to build system-level
change
Competitor Operate only in win-lose
mode in which any gain is
competitor’s loss
Add cooperation with competitors
as potential sources of gain
Organisation Create a “scapegoat”
department of sustainability
Make sustainability everyone’s
job

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‘Bolt-on’ or ‘embed sustainability’ (III)
(Laszlo and Zhexembayeva, 2011)
Bolt-on sustainability Embedded sustainability
Competencies Focus on data analysis,
planning, and project
management skills
Add new competencies in
design, inquiry, appreciation,
and wholeness
Visibility Make green and social
responsibility highly
visible and try to
manage the resulting
scepticism and
confusion
Make sustainability
performance largely invisible
but capable of aligning and
motivating everyone

8. Advice to those blind men:
We need to be following those elephants …
We discussed:
• Some organisations ‘bolt-on’
sustainability to create
business opportunities and
mitigate risk. Feeling the
parts.
• Call towards ‘embedding
sustainability’ with the goal
of ‘Sustainable Value’ and
implementing sustainability-
driven initiatives throughout
the organisation. Seeing the
whole.
• But the real elephant in the room is about following that tail and trunk. Both
upstream and downstream.

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Context: The “Yes, but ….”
• We must be concerned with the efficient and effective use of resources
– don’t just appear in a business … resources are inputs, part of a supply
chain
– Not just an impact from a business … outputs that may be the inputs to
another organisations supply chain
• We agreed that the natural environment underpins all competitive advantages.
These eco-systems are at the source of these supply chains.
• There are a limited number of organisations that hold sustainability leadership
positions although the standards/norms are evolving (the ‘level playing field’).
The competitive battle is won or lost in an organisations supply chain?
“Supply chains compete, not companies" (Christopher, 1992)

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Inputs from upstream sources to a
business
Inputs Environmental concerns
Raw materials Deletion of forests;
Harm caused by toxic materials like pesticides, solvents
Fuels Depletion of oil, coal, natural gas;
Pollution created by fossil fuels, hazards of using nuclear energy
Cannon (2012, pg. 145)
Organisation
(sits within a supply chain)
Inputs Outputs
All issues involved in
resource consumption
All issues involved with
pollutant emissions

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Outputs downstream towards the
customer
Outputs Environmental concerns
Products Product safety;
Health consequences of products such as tobacco, liquor, fats, beef, etc.,
Packaging Refuse created by packaging
Servicing Reliability, hazards of failure
Cannon (2012, pg. 145)
Organisation
(sits within a supply chain)
Inputs Outputs
All issues involved in
resource consumption
All issues involved with
pollutant emissions

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Creating sustainable value:
Evaluating organisational system “impacts”
Laszlo (2008)

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Levels of strategic response: functional
strategy level
• We discussed previously the four
levels of strategic response
suggested by Banerjee (2001)
• We are concerned this week at the
functional level. This level
underpins an organisations
competitive strategy.
– Functional strategy - planning
operations for different functions (e.g.
marketing, human resources,
manufacturing/service operations)
– Banerjee (2001) argued most actions focused around manufacturing (especially where cost
advantage possible)

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Organisational considerations
(Adapted Banerjee, 2002 to incorporate also social impacts)
Corporate focus
• Research & Development, product
stewardship, regular audits, commitment
stated in mission statement, sustainability
goals, cross-functional with responsibility for
sustainability teams
Note those in italics are concerned with
corporate strategy.
Employee focus
• In-house paper/bottles/cans recycling
programme, special training programmes,
newsletter communicating on sustainability
initiatives/activities/actions, car-pooling
scheme, rewards for new sustainability
ideas
Marketing focus
• Product and packaging redesign around
sustainability impact, offering products
/services that cater for sustainability
conscious consumers, co-operative
alliances with environmental/social
organisations, stakeholder integration,
specific programmes to educate consumers
on sustainability issues, firm advertises
sustainability efforts
Manufacturing focus
• Waste reduction, utilising sustainable
energy sources, recycling waste produced
during manufacturing, use recycled
materials wherever possible, using recycled
content of raw materials, specific
environmental standards/sustainability code
for evaluating suppliers

15. Employee focus
• Many pressures come from
within!
– New recruits “questioning” norms
– Existing workers “raising
questions” about practices
Key:
• Information
• Recruitment
• Training (i.e. induction)
• Development programmes
• Winning active co-operation
Change requires:
(Cannon, 2012)
1. Buy-in
2. High levels of communication
and participation
3. Endorsement for adaption or
innovation
4. Progress and success
recognised and disseminated
5. Leadership acts together and
transmits consistent messages
6. Holistic view adopted
7. Change backed by training and
development of at risk staff

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Marketing focus
• New product development
increasingly influenced by
efforts to reduce the
negative effects of
innovations while
strengthening their positive
features (Cannon, 2012)
• Green imagery
– Packaging
– Labelling
• Green washing?

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What’s in a label? Do you care?
On Youtube

18. Manufacturing focus: Savings reported at M&S
on early adoption of Plan ‘A’
“Savings on initiatives such as
being more energy efficient in
stores and distribution centres
(£13.5m saving last year), using
less fuel (£2m), hanger recycling
and reuse (£1m), and packaging
reductions (£11m) more than
outweighed any investments
M&S made in Plan A projects.”
M&S (June, 2011)

19. A WIN-WIN?
Society and recycling
Banerjee (2001) survey on
managerial attitudes showed
recycling was most commonly
performed activity
Story of aluminium recycling:
• If society recognises the value of a
material and puts systems to
recover it, significant resource
savings can be made
• Recycling rates as high as 90 –
95% (Cannon, 2012)

20. A WIN-WIN?
“It’s waste reduction stupid!”
• Banerjee (2001) survey on
managerial attitudes showed most
actions focused around
manufacturing (especially where
cost advantage possible)
• As usually cost reductions follow
• Lean production techniques
– Toyota production system
• Rely heavily on and gain many of
their returns from waste
reduction (Cannon, 2012)

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Lean thinking = ‘mindset’ + ‘toolbox’
• The key principle of Lean is
relatively straightforward to
understand: it means moving
towards the elimination of all
waste in order to develop an
operation that is faster and more
dependable, produces higher
quality products and services and,
above all, operates at low cost.
• Eliminate waste by involvement
of people + continuous
improvement
21
+

22. Eliminating waste (Muda)
= using less of everything
• Waste is anything that
does not add value
from the customer point
of view
• Storage, inspection,
delay, waiting in queues,
and defective products
do not add value and
are 100% waste
• Ohno (1988) seven
wastes (shown right)

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Origins of Lean/JIT:
Toyota Production System (TPS)
‘leanness’ is doing more with less
– E.g. hrs/car
LOW COST HIGH CUSTOMER
SATISFACTION
TO DELIVER
TWICE THE NUMBER
OF MODELS
ONE THIRD THE NUMBER
OF DEFECTS
WITHIN TWO WEEKS
OF ORDERING
HUMAN EFFORT
FACTORY SPACE
PRODUCT DEVELOPMENT
TIME
50% LESS
50% LESS
30% LESS
90% LESSIN-PLANT INVENTORY
LEAN vs MASS PRODUCTION
Source: Womack, J.P. Jones, D.T. & Roos, D. (1990), The Machine That Changed the World, Simon & Schuster, London

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A thought …
Does

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Impact of ISO Standards

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Continuous improvement and standards:
Environmental Management Systems (EMS)
• ISO 14001 - Internationally accepted standard
to put in place an environmental management
system (EMS) (superseded BS 7750)
• Eco-management and Audit scheme (EMAS)
– voluntary EU initiative designed to improve
corporate environmental performance
• 29% of firms do not have an EMS in place
although acknowledging rising cost of energy
(70%), waste management (45%) and carbon
emissions (30%) (BSI, 2006)

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Time series of companies in EU27 which are certified by
ISO 14001 (European Environment Agency, published 05 Apr 2013)
http://www.eea.europa.eu/data-and-maps/figures/number-of-organisations-with-registered-1

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In your own time …
ISO 14001 - the world's EMS standard

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Benefits of an environmental management
system (BSI, 2006)
Benefits include:
• 94% recognise it can improve
performance
• 54% believe it can enhance
corporate reputation
• 1 in 10 believes it enhances
competitive advantage and
achieves cost savings
• 76% believe customers will be
more interested in companies
with an EMS in the next 10
years
…. becoming/now a norm?

30. SUSTAINABLE SCM
LO6.2 Explain the emergence and importance of managing the supply chain to underpin
the efficient and effective running of a business and opportunities for improving
sustainability
LO6.3 Evaluate the various different supply chain decisions that benefit the natural (planet)
and social (people) environment as well as involve the business in less cost in the
long term as the result of a better use of resources (e.g. to impact on profit/surplus)

31. #BSSD17
Unlocking the potential in a supply chain:
the Opportunity
• Supply chain professionals are in an outstanding position to impact
sustainability practices (Carter and Rodgers, 2008)
• We will now expand the concept of sustainability from an organisation
to supply chain perspective
Cost Improve
Corporate
Reputation

32. The concept of sustainable value must take a
supply chain perspective
"supply chains compete, not companies"
“Supply chain is the new value chain”
(Christopher, 2002; 2011)
• Supply strategies significantly impact upon a firms performance
(Christopher and Ryals, 1999, Keah-Choon et al., 1999)
• Companies have far too often attempted to optimise their own
value chains, without considering the effect of these decisions on
their suppliers or customers (Chopra and Meindl, 2004)
• Generally, the adoption of Green SCM practices by manufacturing
organisations leads to improved environmental performance and
economic performance which, in turn, positively impact operational
performance (Green et al., 2012)

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33

34. Bean to cup example

35. Defining Sustainable SCM
Carter and Rodgers (2008)
• “strategic, transparent
integration and achievement
of an organisation’s social,
environmental, and
economic goals in the
systemic coordination of key
interorganisational business
processes for improving the
long-term economic
performance of the
individual company and its
supply chains”.
Sustainability: the triple bottom line

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Sustainable SCM
Carter and Rodgers (2008)

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SSCM: Win-Win situations
• Carter and Rodgers (2008) offer a variety of environmental and social
issues that a firm can undertake which can improve as well as harm
the economic bottom line
Can Harm?
Little help?
Some social/environmental
initiatives can fail? (as do
others). Need to understand
why (i.e. link between quality
and sustainability, price
premium)
Sustainable SCM Practices
Carter and Rodgers (2008) suggest
this area is large!
True sustainability intersects at all
three areas

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WIN-WIN: Potential economic advantages
(intersections of economic with social and/or environmental performance)
• Cost savings due to reduced packaging waste (Mollenkopf et al.,
2005; Rosenau et al., 1996), and the ability to design for reuse and
disassembly (Christmann, 2000; Hart, 1995; Shrivastava, 1995)
• Reduced health and safety costs, and lower recruitment and
labour turnover costs resulting from safer warehousing and
transportation and better working conditions (Brown, 1996; Carter
et al., 2007).
• Lower labour 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).

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WIN-WIN: Potential economic advantages
(intersections of economic with social and/or environmental performance)
• 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 environnemental management system (Hanson et al., 2004; Montabon et al.,
2000; Tibor and Feldman, 1996).
• Enhanced reputation – engaging in sustainable behaviour can make an
organisation more attractive to suppliers and customers (Ellen et al., 2006), to
potential employees (Capaldi, 2005), and to shareholders (Klassen and
McLaughlin, 1996).

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For reference:
Supply chain decisions impact the resource
footprint (Adapted Christopher (2011), pg. 248)
Design Source Make Deliver Return
• Focus on
opportunities
for reuse and
recycling
• The choice of
materials for
both the
product and
the packaging
• The physical
characteristics
of the product
• Location of
suppliers can
impact
differentially
on a resource
footprint
• Environmental
implications of
supply source
e.g. food
miles
• Society and
ethical issues
• Improve
energy
efficiency
• Reducing
waste, rework
and
scrappage
(inventory)
• Reduce/
eliminate
pollutions and
emissions
• Minimise
transport
intensity
• Optimise
network
configuration
• Reconsider
transport
modes
• Develop
‘reverse
logistics’
capability
• Manage
product end-
of-life
• Create closed
looped supply
chains
Environmental decisions - Social decisions - Hybrid (both)

41. Progress to date?
• A study by Haung et al., (2012)
identified some pressures for
SMEs to adopt Green SCM
practices (study of Chinese
managers):
– Most SME managers lack
experience and theoretical
knowledge to implement
– the pressures from
environmental laws and
regulations having the most
significant influence for
Chinese manufacturing SMEs to
adopt Green SCM practices

42. Summary and a thought to leave you with …
Summary:
• Sustainable Value is won or lost in an organisation
operation and supply chain.
• We need to think in terms of ‘systems’ to achieve
lower costs and better use of resources.
– Systems thinking
– Natural resource based green supply chain management (see
Shi et al., 2012)
• There are many WIN-WINs activities and actions
such as adopting lean thinking
But some questions for the “systems thinker”:
• Who ‘owns/controls/governs’ a sustainable supply chain? Is there a need?
• Where do you draw the line (set the ‘boundary’) to create sustainable value?
• But where do you start ….. At source (our ecological environment)?

43. #BSSD17
“I am of the opinion that my life belongs to the community,
and as long as I live it is my privilege to do for it whatever I
can. I want to be thoroughly used up when I die, for the
harder I work the more I live. Life is no ‘brief candle’ for me.
It is a sort of splendid torch which I have got hold of for a
short moment, and I want to make it burn as brightly as
possible before handing it on to future generations.”
— George Bernard Shaw
I CAME TO your shore as a stranger, I lived in
your house as a guest, I leave your door as a
friend, my earth
- Rabindranath Tagore