Sustainable Logistics and Supply Chain Management - Example

Sustainable Logistics and Supply Chain Management Name Name of Institution Executive Summary This report examines sustainability issues that affect Amazon’s supply chain. The paper begins with a review of literature on sustainability and supply chain management. These concepts facilitate the definition of Sustainable Supply Chain Management (SSCM) as taking social, economic, and economic objectives into consideration when managing capital, material, and information flows as well as supply chain partners. A further evaluation of SSCM shows that supply chain transparency is a major facilitator of sustainability in the supply chain. Amazon faces the issue of transparency in its supply chain as evidenced by its refusal to publish sustainability reports. This issue has and will continue to have direct implications for the environmental and social sustainability of Amazon’s supply chain. For example, the failure to publish sustainability reports has the impact of encouraging human rights abuses at partner firms that do not have to be accountable. Similarly, the company’s failure to provide carbon emissions data has the rollover effect of encouraging unsustainable environmental practices at both Amazon and the firms in its supply chain. The paper notes that the organisation has taken measures to improve on the levels of transparency, and thus, social and environmental sustainability. These measures include the recruitment of sustainability leaders who have experience in advocating for transparency. The company has also invested in green energy, and it strives to source a bigger share of its electricity from renewable sources. However, these measures are not enough for a firm that operates across the globe. The report concludes by providing recommendations to assist Amazon in its move towards greater supply chain transparency, and thus, social and environmental sustainability. The recommendations include giving the new sustainability recruits a high degree of autonomy to change the prevailing culture at Amazon. Other recommendations include partnering with NGO’s like Greenpeace, and introducing strict sustainability standards for its supply chain partners. Table of Contents Introduction 4 Description of Issue 4 Supply Chain Transparency and Environmental and Social Sustainability 6 Implication on Amazon’s Supply Chain 6 Recommendations 8 References 10 Sustainable Logistics and Supply Chain Management Introduction Amazon is a multinational firm that provides an e-commerce platform to millions of sellers and buyers in the world. According to Mohapatra (2012, p.5), the company, which started as a bookseller, has grown to the point that it has become synonymous with e-commerce. By 2010, the company served over 900 million customers across the world, a number that should continue to grow owing to the penetration of technology across the globe (Mohapatra 2012, p.6). Despite the evident value that the firm provides to customers and sellers, the rapid growth of the firm has had an unquestionable impact on the environment and society. For example, the firm offers delivery services to consumers, a service that requires a large fleet that increases demand for fossil fuels and contributes to environmental degradation. Unlike other firms, Amazon has failed to produce sustainability reports that measure its impacts on the environment, economy, and society (Gunther 2016). This report focuses on this issue and explains how it has impacted Amazon’s supply chain. The report will also address how Amazon has responded to the issue of lack of transparency on sustainability and provide recommendations on how the issue can be resolved. Description of Issue Sustainability is a concept that is gaining increasing importance in the world. According to Seuring and Müller (2008, p. 1700), sustainable development defines development that caters to present needs without obstructing the ability of future generations to meet their needs. The concept has gained increasing importance as a result of factors like the rapid growth in the global population and the depletion of resources to meet the needs of 7 billion people. The concept of sustainability has three dimensions that help to operationalize the concept and make it applicable to business organisations. The dimensions include the environmental, social, and economic dimensions (Seuring & Muller 2008, p. 1700). A sustainable business can, therefore, be described as one that takes the initiative to manage its social, environmental, and economic risks. In the case of Amazon, society can expect the firm to operate in a way that ensures that its extensive logistics operation does not place excessive burdens on the environment. As a sustainable business, the firm will also be expected to provide safe working conditions to those it employs. According to Seuring and Muller (2008, p.1700), the supply chain incorporates all activities that are associated with the extraction of raw materials and their transformation for end consumers in addition to the information that flows. By definition, supply chain management seeks to provide a business with a competitive advantage through the integration of supply chain activities. It is, thus, essential to ensure that a firm’s supply chain is sustainable because it can contribute towards the attainment of a competitive advantage. Seuring and Muller (2008, p. 1700) define sustainable supply chain management (SSCM) as taking environmental, economic, and social goals into account in the management of capital, information, and material flows as well as the cooperation between firms in the supply chain. The implication for a firm like Amazon is that it will have to ensure that all its partner firms take adequate measures to cater to economic, social, and environmental sustainability. Carter and Easton (2011, p. 49) argue that SSCM has four supporting facets. The first is that the supply chain should apply a strategy that aligns with the organisation’s overall sustainability strategy. Secondly, SSCM should prioritise risk management where contingency plans are developed for the entire supply chain (Carter & Easton 2011, p. 49). The third facet of SSCM involves the development of an organisational culture that is characterised by respect for the environment and society as well as high ethical standards (Carter & Easton 2011, p. 49). The final facilitator of sustainable supply chain management is transparency, which involves communicating with stakeholders and acquiring the ability to trace the activities of upstream and downstream supply chain operations (Carter & Easton 2011, p. 49). Supply chain transparency is the issue that applies to Amazon. According to Gunther (2016), Amazon has developed the reputation of having extremely low levels of transparency when it comes to the sustainability of its supply chain. For example, the company has never published a sustainability report, unlike its rivals that publish these reports and are active participants in catering to environmental sustainability (Gunther 2016). This is a significant issue that has consequences for Amazon’s ability to meet its social and environmental obligations. Supply Chain Transparency and Environmental and Social Sustainability According to Gupta (2008, p. 1), transparency is a concept that is linked to issues like corporate governance, global security, and human rights. Transparency is often ignored when it comes to management of the environment but is encouraging to note that firms are taking part in the trends towards greater transparency. One such trend is the governance by transparency trend which encourages private and public to work towards voluntary corporate sustainability objectives (Gupta 2010, p. 2). According to Bastien and Zentes (2013, p.553), the initial advances in supply chain transparency can be attributed to safety and quality issues. However, the trend shifted in recent years owing to a desire for supply chains to be socially and ecologically sound. In this case, supply chain transparency is an indicator of the accuracy, quality availability, and accessibility of supply chain data. Some of the advantages of supply chain transparency include the fulfilment of legal obligations, improvements in responsiveness, process optimisation, and better communication (Bastien & Zentes 2013, p. 558). In addition to these, Bastien and Zentes’ study of 131 supply chains shows that transparency has a direct link to social and ecological performance. It is, therefore, evident that the lack of supply chain transparency at Amazon has an impact on the firm’s social and ecological performance. Implication on Amazon’s Supply Chain The lack of transparency at Amazon as manifested by the failure to publish sustainability reports has had implications for the sustainability of its supply chain. According to Gunther (2012), the firm has been ranked 127th out of 145 firms in terms of environmental sustainability. The lack of transparency has meant that firms within Amazon’s supply chain can also use strategies that do not consider environmental sustainability. For example, Amazon has failed to assess and disclose its total carbon emissions to the Carbon Disclosure Project (Gunther 2016). The result is that the company’s partners will take a similar stance owing to the lack of pressure from Amazon for supply chain partners to be sustainable. Over the long term, the environmental unaccountability will contribute towards climate change, ozone depletion, pollution, and adverse weather conditions. These conditions will have a drastic effect on Amazon’s supply chain in a way that will prevent the firm from meeting its objective to bring buyers and sellers together. It is evident that the lack of transparency is an issue that will have direct impacts on different aspects of Amazon’s supply chain. In addition to the environmental issues, the lack of transparency at Amazon will have impacts on the social dimension of sustainability. The need to assess operations and provide detailed information to stakeholders can be considered as an incentive for a firm to adopt policies that are socially sustainable. The lack of sustainability reports means that managers across Amazon’s supply chain do not have the pressure to consider sustainability in the day to day operations. For example, managers can focus on meeting delivery targets at the expense of workplace health and safety. According to Kantor and Streitfeld (2015), Amazon engages in workplace practices that can be construed to be unethical. For example, the desire for high levels of performance has meant that those diagnosed with diseases and those who face other social challenges are terminated instead of earning the time to recover and get back to previous levels of production (Kantor & Streitfeld 2015). This is a breach of the company’s social responsibility towards catering to the well-being of its employees. The problem is further worsened by the fact that Amazon does not disclose its global suppliers or publish the results of audits conducted on these suppliers. (Gunther 2016). This implies that supply chain partners can engage in human rights abuses without being subjected to the scrutiny that comes with transparency. As in the case of the environment, the lack of concern for society will have injurious impacts on Amazon’s supply chain. These impacts can include frequent labour disputes that disrupt operations and increase lead times, thereby eliminating Amazon’s core competitive advantage. Despite the insufficient concern for environmental and social sustainability at Amazon, the firm has taken measures in recent years to improve its practices. According to Gunther (2016), the company has created the position of a sustainability leader to address some of the sustainability challenges that it faces. The company has also started recruiting top talent in the fields of sustainable supply chain management. In particular, the recruitment of Dara O’Rourke might be a significant sign given that he has focused his career on the issue of transparency and taken part in exposing poor working conditions in Asian firms that supplied Nike (Gunther 2016). When it comes to the environment, Amazon has acknowledged its responsibility and taken measures to address its footprint. These measures include investing in wind and solar plans as well as sourcing 40% of its electricity from renewable sources by the end of 2016 (Gunther 2016). While these initiatives point towards an improved focus on sustainability at the company, they are not enough owing to the Global nature of Amazon’s operations. The company needs to fast-track these changes in the same way that Apple overhauled its sustainability practices (Gunther 2016). Recommendations Amazon’s decision to recruit top talent in the field of sustainable supply chain management is a laudable effort. However, the new employees are unlikely to be successful without the support of senior Amazon executives in all its regional branches. It is recommended that the leadership at the company give vocal support to the newly recruited sustainability leaders. This backing will go a long way in giving the experienced SSCM practitioners the power to introduce changes to Amazon’s corporate culture. In turn, this will increase the levels of supply chain transparency at the organisation. The increased transparency will assist in the firm’s movement towards being one of the leading companies in social and environmental sustainability. The second recommendation involves partnering with external firms. As stated, one of Amazon’s failures is that it has failed to provide carbon emission data to the Climate Disclosure Project (Gunther 2012). Greenpeace has also evaluated Amazon and given it an F-score when compared to similar firms. Partnering with this firms will be important to Amazon as it will receive guidance on how to improve the sustainability of its supply chain. In addition to these partnerships, Amazon should look at the policies employed by its competitors that have managed to get better ratings in environmental and social sustainability. The final recommendation concerns Amazon’s supply chain partners. In the recent past, there have been revelations of multinational firms partnering with companies that engage in gross environmental and social practices. A key point in ensuring the sustainability of Amazon’s supply chain will be to ensure that organisations that use its platform are transparent. These firms should be given strict expectations on the social and standards that they should maintain. References Bastian, J., and Zentes, J., 2013. Supply chain transparency as a key prerequisite for sustainable agri-food supply chain management. The International Review of Retail, Distribution and Consumer Research, 23(5), pp.553-570. Carter, C.R. and Liane Easton, P., 2011. Sustainable supply chain management: evolution and future directions. International journal of physical distribution & logistics management, 41(1), pp.46-62. Gunther, M., 2012. Amazon’s no show on sustainability. The Guardian. Viewed Gunther, M., 2016. Can Amazon’s new ‘dream team’ fix the company’s sustainability reputation? The Guardian. Viewed Gupta, A., 2008. Transparency under scrutiny: Information disclosure in global environmental governance. Global Environmental Politics, 8(2), pp.1-7. Gupta, A., 2010. Transparency in global environmental governance: a coming of age?. Global Environmental Politics, 10(3), pp.1-9. Kantor, J. and Streitfeld, D., 2015. Inside Amazon: Wrestling big ideas in a bruising workplace. The New York Times. Viewed Mohapatra, S., 2012. E-commerce strategy: text and cases. Springer Science & Business Media. Seuring, S. and Müller, M., 2008. From a literature review to a conceptual framework for sustainable supply chain management. Journal of cleaner production, 16(15), pp.1699-1710. Read More