Sustaining Change

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Produce spoils. Chemicals contaminate. Emissions pollute the air. Consumers now understand the potential damage of production and consumption. Today, companies are challenged to be socially and environmentally responsible—while still making a profit. This means managing to the “triple bottom line,” a business philosophy that underscores the simultaneous pursuit of economic viability, environmental stewardship and social equity.

“How do companies leverage their supply chain to do that?” asked Dr. Beth Davis-Sramek, the Gayle Parks Forehand Professor in the Department of Supply Chain Management.

Davis-Sramek’s co-authored paper, “Integrating Behavioral Decision Theory and Sustainable Supply Chain Management: Prioritizing Economic, Environmental, and Social Dimensions in Carrier Selection,” examines the triple bottom line framework in a transportation context.

“Industry leading companies are challenged to be good citizens and to minimize their environmental footprint—to be more sustainable in their operations and more transparent about their activities,” Davis-Sramek said. “The leaders are now pressuring other companies in their supply chain to do the same.”

Transportation providers are a significant link in the supply chain. Davis-Sramek explained, “Trucking in particular creates a sizable carbon footprint. The industry also grapples with driver shortages, turnover and a tainted reputation for unsafe driving and accidents.”

Companies outsourcing their transportation activities are called “shippers,” and third-party transportation companies are the “carriers.” In a perfect world, when the price of transportation is equal, shippers should choose more sustainable carriers, but do they? Decisions around sustainability are not well understood, because managing the triple bottom line means making priorities and accepting tradeoffs.

Understanding how decisions are actually made in carrier selection was the goal of the research. Findings point to environmental and social aspects as significant considerations, but the economic viability of the carrier is the biggest determinant of choice. In short, a carrier demonstrating environmental stewardship and social equity will lose the business if its financial health is questionable. Likewise, when a carrier demonstrates strong financials and environmental and social responsibility, it will be significantly more likely to get the shipper’s business.

The lesson is this: Companies that invest in sustainability can differentiate themselves in the market—as long as those investments do not stymie their financial viability. “There is a clear message to policymakers as well,” Davis-Sramek said. “Overreaching policies intended ‘for the good of society’ that harm the financial viability of companies will backfire. Market mechanisms are driving investments in sustainability. Companies investing in sustainability will prosper and those ignoring market forces will dwindle.”