Chapter 14 Environmental and Ethical Issues In Supply
Management
While goods, materials and services acquired by an organization may be assessed in terms of their
biophysical or social impacts, the difficulty for Purchasing and Supply managers is establishing the
scope of their responsibility for activities in the operations of their direct and indirect suppliers.
There appear to be two good reasons for acting in a responsible way:
1. A genuine concern for the sustainability of the Earth’s ecology.
2. Improved risk management – avoiding the penalties associated with breaking civil or
criminal law.
Environmental and ethical problems are thus intrinsically linked to supply chains. While these
problems are manifested at one point in the chain, their root cause is often located two or three
links earlier in the chain. Thus, a Supply manager’s perspective must include provision for potential
problems – and opportunities – elsewhere in his or her organization’s respective supply network.
The environmental pressures that affect a business may come from sources inside and outside the
firm. Internal pressures are increasingly important. Employee motivation is a key factor in business
productivity.
Developing environmentally sound supply chain policies and strategies to address the related market
needs therefore requires a clear understanding of each of the stakeholders’ perspectives and
priorities. This should be fitted into a framework that may be used to guide the firm’s activities. For
the Purchasing and Supply manager, this framework would serve as the basis for formulating the
firm’s environmental supply strategy.
There has been a transition from a generalized wish not to harm the environment to a focused
concern for specific, carefully dimensioned impacts. For purposes of focus, CSR (corporate social
responsibility) can be seen as the endeavors of the organization to achieve sustainable development.
1
, In describing sustainability as it applies to business organizations, it is common to speak of ‘the triple
bottom line’. The triple bottom line refers to an organization’s responsibilities in the areas of
economic behavior, environmental impact and social policy. Companies do not become green; they
become greener. Over time, therefore, as part of development within defined social policy,
environmental soundness – ‘greening’ rather than ‘greenness’ – could be said to deliver
sustainability.
For Purchasing and Supply managers, environmental soundness may be seen as the degree to which
their activities comply with the framework of requirements their parent organization has identified
as its policy and strategy on the subject. Using the corporate framework, Purchasing and Supply
strategists can formulate their own economic and environmental plans and stances to ensure they
conform to the firm’s intentions and preferences.
A checklist of the Purchasing manager’s basic environmental concerns would include:
- An understanding of the types of pollution associated with goods and services being
purchased;
- A policy on environmental soundness in purchasing and supply;
- A strategy to minimize the impacts of sourcing decisions;
- A plan for working with the risks associated with environmental performance.
Pollution can be broadly defined as matter that is in the wrong place. Matter can neither be created
nor destroyed – it is simply converted from one medium into another. This is supply chain thinking –
everything has a source and a destination. In economic terms, it is clear that pollution often
represents a form of economic waste.
It is not too harsh to conclude that pollution is indicative of some business inefficiency, showing that
resources have been used incompletely, inefficiently or ineffectively. It also requires additional cost.
Like defects, pollution often reveals flaws in the product design or production processes. As
regulation changes, the external costs cease to be negligible and must be added to the direct costs
of the product. In effect, the supply chain implications of the product must be managed at the
primary costing level.
2
Management
While goods, materials and services acquired by an organization may be assessed in terms of their
biophysical or social impacts, the difficulty for Purchasing and Supply managers is establishing the
scope of their responsibility for activities in the operations of their direct and indirect suppliers.
There appear to be two good reasons for acting in a responsible way:
1. A genuine concern for the sustainability of the Earth’s ecology.
2. Improved risk management – avoiding the penalties associated with breaking civil or
criminal law.
Environmental and ethical problems are thus intrinsically linked to supply chains. While these
problems are manifested at one point in the chain, their root cause is often located two or three
links earlier in the chain. Thus, a Supply manager’s perspective must include provision for potential
problems – and opportunities – elsewhere in his or her organization’s respective supply network.
The environmental pressures that affect a business may come from sources inside and outside the
firm. Internal pressures are increasingly important. Employee motivation is a key factor in business
productivity.
Developing environmentally sound supply chain policies and strategies to address the related market
needs therefore requires a clear understanding of each of the stakeholders’ perspectives and
priorities. This should be fitted into a framework that may be used to guide the firm’s activities. For
the Purchasing and Supply manager, this framework would serve as the basis for formulating the
firm’s environmental supply strategy.
There has been a transition from a generalized wish not to harm the environment to a focused
concern for specific, carefully dimensioned impacts. For purposes of focus, CSR (corporate social
responsibility) can be seen as the endeavors of the organization to achieve sustainable development.
1
, In describing sustainability as it applies to business organizations, it is common to speak of ‘the triple
bottom line’. The triple bottom line refers to an organization’s responsibilities in the areas of
economic behavior, environmental impact and social policy. Companies do not become green; they
become greener. Over time, therefore, as part of development within defined social policy,
environmental soundness – ‘greening’ rather than ‘greenness’ – could be said to deliver
sustainability.
For Purchasing and Supply managers, environmental soundness may be seen as the degree to which
their activities comply with the framework of requirements their parent organization has identified
as its policy and strategy on the subject. Using the corporate framework, Purchasing and Supply
strategists can formulate their own economic and environmental plans and stances to ensure they
conform to the firm’s intentions and preferences.
A checklist of the Purchasing manager’s basic environmental concerns would include:
- An understanding of the types of pollution associated with goods and services being
purchased;
- A policy on environmental soundness in purchasing and supply;
- A strategy to minimize the impacts of sourcing decisions;
- A plan for working with the risks associated with environmental performance.
Pollution can be broadly defined as matter that is in the wrong place. Matter can neither be created
nor destroyed – it is simply converted from one medium into another. This is supply chain thinking –
everything has a source and a destination. In economic terms, it is clear that pollution often
represents a form of economic waste.
It is not too harsh to conclude that pollution is indicative of some business inefficiency, showing that
resources have been used incompletely, inefficiently or ineffectively. It also requires additional cost.
Like defects, pollution often reveals flaws in the product design or production processes. As
regulation changes, the external costs cease to be negligible and must be added to the direct costs
of the product. In effect, the supply chain implications of the product must be managed at the
primary costing level.
2
