Balancing priorities: Decision‐making in sustainable supply chain management

• Date: 01 September 2011
• Author: Zhaohui Wu,Mark Pagell
• Published date: 01 September 2011
• DOI: http://doi.org/10.1016/j.jom.2010.10.001

Journal of Operations Management 29 (2011) 577–590

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

Balancing priorities: Decision-making in sustainable supply chain management

Zhaohui Wua,∗, Mark Pagell b,1

aOregon State University, College of Business, 200 Bexell Hall, Corvallis, OR 97331-2603, United States

bSchulich School of Business, York University, 4700 Keele Street, Toronto, Ontario M3J 1P3, Canada

article info

Article history:

Received 28 June 2008

Received in revised form

27 September 2010

Accepted 25 October 2010

Available online 3 November 2010

Keywords:

Green supply chain management

Decision-making

Sustainability

abstract

The need for environmental protection and increasing demands for natural resources are forcing com-

panies to reconsider their business models and restructure their supply chain operations. Scholars and

proactive companies have begun to create more sustainable supply chains. What has not been fully

addressed is how organizations deal with short-term pressures to remain economically viable while

implementing these newly modeled supply chains. In this study, we use theory-building through case

studies to answer the question: how do organizations balance short-term profitability and long-term

environmental sustainability when making supply chain decisions under conditions of uncertainty? We

present five sets of propositions that explain how exemplars in green supply chain management make

decisions and balance short and long term objectives. We also identify four environmental postures

that help explain the decisions organizations make when dealing with strategic trade-offs among the

economic, environmental and social elements of the triple-bottom-line.

© 2010 Elsevier B.V. All rights reserved.

1. Introduction

Organizations have begun to examine their supply chains in

response to numerous interrelated economic and environmental

challenges such as fluctuations in commodity prices and climate

change. Critics confront “business as usual” and demand sustain-

able practices. Many organizations initially resist change, but some

companies have recently begun to transform their supply chains in

efforts to become more sustainable.

How difficult this transformation will be is debatable. There is

a body of research which suggests that many organizations can

simultaneously achieve business goals and reduce their environ-

mental impacts (e.g. Russo and Fouts, 1997; Christmann, 2000;

Melnyk et al., 2003). However, while waste and pollution reduction

are aligned with the traditional goals of operations management,

not all environmental practices will bring cost savings and some

will increase costs, especially in the short term. For instance, proac-

tive investment in green technology may not pay off for decades.

And there is evidence that some companies take bold environmen-

tal action at the expense of their financial health (Margolis et al.,

2007). The challenge is how to run a viable business today while

not compromising the natural environment in the future.

∗Corresponding author. Tel.: +1 541 737 3514; fax: +1 541 737 4890.

E-mailaddresses: wuz@bus.oregonstate.edu (Z. Wu), mpagell@schulich.yorku.ca

(M. Pagell).

1Tel.: +1 416 736 2100x77939.

Managing this trade-off is going to test every organization – and

not just because environmental issues will be new to many. Recent

studies suggest that organizations making choices regarding the

natural environment operate in a complex and dynamic setting

(Matos and Hall, 2007; Devinney, 2009). When making decisions

about the environmental impact of their supply chains, organiza-

tions face information uncertainty, evolving decision parameters

and changing decision boundaries (Chechile, 1991; Matos and Hall,

2007). In such a setting organizations are going to be forced to

navigate a dynamic environment without a clear road map. Deci-

sions about the trade-off between short-term profitability and

long-term environmental sustainability involve uncertainty and

risk (Kahneman et al., 1982; March and Simon, 1993).

Further, since environmental and social issues are intertwined,

stakeholders such as NGOs who were not traditionally considered

in supply chain decisions, suddenly are involved (Gladwin et al.,

1995; Pagell and Wu, 2009). Freeman (1984) defines a stakeholder

in an organization as “any group or individual who can affect, or

is affected by, the achievement of the organization’s objectives.”

Organizations have stakeholders with different priorities due to

their values and issue saliency (Donaldson and Preston, 1995), and

therefore are often forced to make trade-offs (Hertwich et al., 2000).

For instance, owners and managers will focus on profitability, while

members of the community are likely concerned with the over-

all livability of the community and environmental impacts from

production.

The challenge is how to balance environmental issues and sound

business practices in this dynamic, complex and uncertain set-

ting. Existing research has not addressed the business models and

0272-6963/$ – see front matter © 2010 Elsevier B.V. All rights reserved.

doi:10.1016/j.jom.2010.10.001