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Good OM Reading: What Makes a Supply Chain Sustainable?

November 20, 2016

A growing number of companies are looking to build sustainability into their supply chains. This is due, in part, to mounting pressures to disclose supply chain information. The growing emphasis on supply chain sustainability is commendable, but there is a problem: Most sustainable supply chain initiatives do not actually address sustainability at all. This new article in MIT/Sloan Management Review (Nov. 15, 2016) proposes 4 broad and hierarchical strategies for supply chain management: legal, ethical, responsible, and sustainable.

A responsible supply chain, for example, must also be legal and ethical. However, a responsible supply chain is not necessarily sustainable. First, there are supply chains that operate within legal limits and comply with agreed-upon contractual requirements. All partners in these supply chains must follow, for example, established legal, building, and environmental standards.

Third, there are supply chains that operate responsibly. Partners in these supply chains are committed to continual improvement, considering stakeholder interests, and making positive contributions in their communities. Responsible supply chains focus on making things better.
Last are sustainable supply chains. These require that all partners behave legally, ethically, and responsibly. However, they must also consider how their actions are situated in the broader sustainability context. A supply chain is sustainable only if its activities can be supported by nature and society over the long term. This is what the other strategies miss.
What makes a supply chain sustainable? Sustainable SCM requires setting science-based targets, developing metrics that take sustainability context into account, and building relationships with players across the chain.
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