Supply Chain Management and the Triple Bottom Line

Executive Summary

The triple bottom line is an accounting framework that incorporates three dimensions of performance: social, environmental and financial. When comparing this to different management systems and practices of a supply chain we can see how closely the two are linked. The supply chain encompasses multiple areas of an organisation, all linked together in order to transform materials into the the right item in the right quantity, delivering it at the right time at the right place for the right price in the right condition to the right customer.

Examining eight different supply chain management systems in conjunction with six supply chain practices that can help accomplish different areas within the TBL theory. It was found that multiple organisations are currently already implementing activities within these systems and practices and that there are tools that can be used to measure their effectiveness once they are in place.

From the different management systems and practices that were discovered, and the benefits that they can bring to companies, the importance of incorporating the TBL into supply chains is for all organisations if they wish to operate in the future. It also showed however the length of time and effort these strategies take to put in place in order to gain competitive advantage, if the supply chain isn’t already reasonably agile.

Introduction

With the recent global media attention focused on the Rana Plaza factory collapse along with constant debate over climate change and sustainable living, the need for organisations to factor in both social welfare and environmental factors alongside economical factors is apparent. The triple bottom line is an accountability system based solely around these three factors. The ability of the supply chain to encompass the TBL within different aspects of it is apparent. Aiming to relate the TBL to the supply chain this report explores different supply chain management systems and practices that encompass the theory within it.

The relationship between the triple bottom line and the supply chain.

In 1994, John Elkington coined the term “triple bottom line” (TBL) (Savitz and Weber, 2013). Elkington believed that there needed to be language and framework that better described the “inevitable expansion of the environmental agenda” (Savitz and Weber, 2013) in order to better express to corporations the importance of the encompassing issues that were impending. The TBL is an accounting framework that incorporates three dimensions of performance: social, environmental and financial (Hall and Slaper, 2011).

The supply chain encompasses multiple areas of an organisation, all linked together, in order to transform materials into the the right item in the right quantity, delivering it at the right time at the right place for the right price in the right condition to the right customer. After recognizing this, it is clear that “applying sustainable supply chain management to projects can complement economic, social, and environmental dimensions of sustainability” (Gold, Hahn and Seuing, 2013).

Supply chain management has the ability to control multiple aspects that relate directly back to aspects within the TBL theory: Community welfare (by addressing the social needs of suppliers and offering jobs and economic growth opportunities in local communities they operate in) (Carter & Rogers, 2008); Risk management (through the ability to manage social and environmental risks, accidents and product recalls) (Tate, Ellram and Kirchoff, 2010); Energy consumption (through the production of cleaner fossil fuels, an increased production of renewable energy sources, the use of clean energy products and technologies, factoring in the conservation of inputs such as energy and water during product design and improving process efficiency to reduce energy consumption) (Tate, Ellram and Kirchoff, 2010); Healthcare and social well being (by developing criteria for supplier selection and procurement strategies, enforcing supplier compliance regarding employee health and measuring suppliers and service providers based on written health programs) (Tate, Ellram and Kirchoff, 2010) and the environment (through engaging suppliers to incorporate low carbon-dioxide emissions, packaging reduction and development of environmentally friendly packaging, hiring construction companies specialising in low impact construction and partnering with global suppliers to acquire emerging innovation and technology) (Tate, Ellram and Kirchoff, 2010). The TBL theory

The TBLT depends on seven related revolutions seen below in figure 1, this also shows what older supply chains’ concepts are based around in comparison to current and future concepts (Savitz and Weber, 2013).

Figure 1 (Savitz and Weber, 2013, pg 3)

The difficulty for organisations operating with older supply chain habits is the rigid nature they have been established with. In order to break out of these you almost have to start from scratch.

Supply chain management systems incorporating TBL

These systems assist organisations in overcoming the barriers for embedding the TBL within their supply chain. Though only a few systems address all three issues identified by the TBL theory, when used in conjunction with one another they are important tools to better an organisation’s social welfare, environmental impact and profits.

Product life cycle management – When the company takes an overall look at the product supply chain with a view comprised of three areas: management vision – taking into account environmental issues when a company is making decisions; engineering vision – focusing on the life cycle of the product and the environmental impact it has, and leadership vision – the generation of a new organisational culture (Ching and Moreira, 2014). In order to utilise this management system Ford of Europe uses a product sustainability index (PSI) that covers product development. This tool is applied when they are developing a new vehicle, which covers environmental, economic and societal aspects that the product will encompass (UNEP and SETAC, 2014). Not only does this benefit their company image as they are producing a more environmentally friendly product, but it also decreases costs within the supply chain due to