Sustainability in Operations and Supply Chain Management Classrooms

“Sustainability is not a one-off course but a new business fundamental.”

- Financial Times, January 8, 2024

Teaching the topic of sustainability should not be relegated to an elective course, tacked on as the last few sessions of existing courses, nor should its inclusion be dependent on student interest.

Business management education should raise the visibility of how sustainable practices are incorporated into operations as well as end-to-end across supply chains.  Operations and Supply Chain courses are well suited for integrating sustainability content into the curriculum.  It is already part of our core course at the University of Minnesota.

Here, we explore teaching forward-thinking Operations and Supply Chain practices for shaping a sustainable future.  This includes an approach of integrating sustainability topics throughout a core course, not just in one or two lectures.  This teaching strategy incorporates content, key terms, strategies, and familiar examples to deepen students’ understanding and proficiency.

We begin with a definition: Sustainability in Operations and Supply Chain means producing and delivering the goods and services that customers want while maintaining environmental, social, and financial viability for future generations.

Sustainability can be integrated throughout a course, just as it is integrated end-to-end in the management of the supply chain.  We lay out here, topic by topic, an array of sustainability topics and examples, and how they fit into an Operations and Supply Chain course.

The Triple Bottom Line

Most students are familiar with challenges around the sustainability of the natural environment.  Organizations are increasingly asked to produce and deliver goods and services while minimizing their environmental impacts.  Students may be less familiar with social and economic sustainability topics which we introduce using the triple bottom line framework, also called the 3P’s of sustainability for planet, people, and profit.  Social sustainability for people means hiring a diverse workforce, ethical business practices, providing opportunities, and safe working conditions.  Economic sustainability includes creating sufficient profit for long-term survival, a strong balance sheet, and avoiding bankruptcy.

Positioning Sustainability As Strategic

Early in the course, we introduce how firms may choose to fit sustainability into their operations and supply chain strategy.  Sustainable operations may be pursued in concert with the objectives of cost, quality, delivery, and flexibility.  Sustainability as a strategic objective means making decisions that support ongoing operations without depleting natural, social, or economic resources for future generations.

Sustainable operations support corporate social responsibility (CSR), which encompasses a firm’s ability to self-regulate and be accountable to its stakeholders.  CSR statements publicly communicate responsibility commitments to stakeholders and may include decisions about which customers will not be served, e.g., buyers in certain countries.  Related, environmental, social, and corporate governance (ESG) is an approach to measuring, evaluating, and reporting progress in working toward sustainability.  Sustainable operations objectives support ESG by setting direction on factors that include the use of natural resources, workforce health and safety, and geopolitical considerations.

Sustainable operations as an operations objective guides decision-making.  This objective and the firm’s strategy must deliver on customer requirements and support the firm’s competitive advantage.  Supply chain partners play an important role in this effort.

Designing For Sustainability

Next, we cover how sustainability plays a role in the processes for new products and new service development.  As much as 80 percent of product and service pollution is determined by their design.  Introducing concepts such as design for the environment brings attention to the impact of the entire product or service lifecycle.  Designers can consider the effects of materials, energy use, and human impact, along with the economic impact of the product or service life cycle.

Key activities for students to understand include purchasing, production, distribution, as well as the role of services.  A simple framework for evaluating materials is the 3Rs – reduce, reuse, recycle.  Practices to reduce are usually the ‘greener’ option – meaning more direct environmental benefits.  Reuse and recycling are less beneficial but better than if no effort is made.  Extended producer responsibility is legislation that can significantly impact product design.  Students may be familiar with “take back” programs for cell phones, thus demonstrating the value of designing for reuse and recycling.  Many efforts to improve sustainability require R&D to completely redesign existing products or to design new products.

Producing Sustainably

Operations decisions regarding materials, energy inputs, production methods, and by-products can significantly impact all dimensions of sustainability – environmental, social, and economic.  Producing sustainably from existing designs is particularly aligned with environmental inputs and outputs from production processes.  Pollution prevention includes technology and changes in operating practices to reduce or eliminate pollutants from production processes.  Pollution control is also accomplished through technology and changes in practices, in this case to manage treatment or disposal of pollutants.

Most manufacturing and service industries generate greenhouse gas (GHG) emissions during production processes, in heating and cooling facilities, and during transportation.  Firms can begin measuring GHG internally and then extend to measuring the carbon footprint across their entire supply chain.  This includes GHG emissions from sourcing of materials, production, the entire life cycle of use, and finally during product or waste disposal.  Operations and supply chain are major sources of GHG and will need to be part of the solution to air pollution, ocean acidification, and rising global temperatures.  Here, we give a brief demonstration of calculating carbon footprint.

Calculating Carbon Footprint

Activity (consumption)  X  Emissions factor (corresponding to activity)

Designing the Supply Chain

Sustainability of the supply chain includes managing the planning and coordination of activities that cross organizational boundaries, while still focusing on the triple bottom line of environmental, social, and financial performance.  A sustainable supply chain includes sourcing, transforming, and delivering goods and services that meet customer needs while also ensuring that the needs of future generations are not sacrificed.

Technology can often play an important role in improving sustainability.  For example, Blockchain technology can support supply chain traceability by enabling firms to track raw materials from source to consumption.  Tracing can reveal sources of environmental issues such as food contamination, social issues including identification of poor labor treatment, or economic concerns around the cost of materials.

Firms working toward reduced or zero emissions use Scope 1, 2, and 3 to measure and understand their entire supply chain’s GHG emissions. Scope 1 is direct emissions from owned sources, Scope 2 is indirect emissions from purchased energy sources (such as electricity), and Scope 3 includes all other indirect emissions from the supply chain.  This insight can serve as a basis for helping firms move from intentions to action.  Actions to improve sustainability then include setting goals, developing plans, and implementing plans throughout the firm (usually first) and then the supply chain.

Newer supply chain designs, linking product design to sustainability goals, might include a closed-loop supply chain that uses its own output and waste as input into production processes.  Another design is a circular supply chain that produces products for multiple generations of reuse, such as car batteries being reused in power storage grids.

Sourcing Sustainably

Sourcing materials and services from outside the firm constitutes most of the production costs in many firms.  And Scope 3 indirect emissions from the supply chain can represent 65-95% of a firm's total emissions.  Modern sourcing considers cost and sustainability, along with access to technology and the risks of quality and delivery problems.

Some offshore sourcing is being rearranged to near-shore and on-shore locations to minimize these risks and improve sustainability.  Supplier social responsibility includes hiring a diverse workforce, human rights considerations, avoidance of child labor, and community involvement.  Firms seeking improved sustainability evaluate suppliers on their GHG emissions and ESG scores.

Walmart, with 2.2 million employees and $611 billion in sales, uses suppliers for the $463 billion in goods and services it purchases each year.  Walmart requires all suppliers to meet its social sustainability goals for improvement including not tolerating discrimination or harassment, promoting health and safety, prohibiting child labor, and supporting local communities around the world.  Environmental goals require all suppliers to reduce GHG emissions, protect water and land resources, and reduce landfill waste.  The Walmart Sustainability Hub can be used by suppliers to access helpful resources.

Planning Sustainable Logistics

A substantial part of a firm’s environmental impact is in the logistics choices made in locating distribution centers and the forms of transportation used.  These choices impact cost and delivery as well as sustainability.  GHG emissions from transportation – including passenger vehicles and movement of freight – account for 29% of total U.S. GHG emissions.  Electric trucks are an option for reducing road freight GHG emissions. Freight movements by ocean, air, and rail also have technical solutions, but little progress has been made in the implementation of all types of sustainable freight transportation to date.

As firms continue to direct their attention to sustainability concerns, courses in Operations and Supply Chain can play a leading role in covering these topics.  Bringing a comprehensive approach to teaching sustainability content helps students understand how sustainability is increasingly integrated into everyday business practices.