Sustainability and Sustainable Operations

Operations Management: Sustainability and Sustainable Operations

Sustainability Big Ideas

Definitions of Sustainability

  • Sustainability: The concept is defined by various frameworks. A pivotal definition comes from the Brundtland Report (1987): “Sustainability is to meet the needs of the present without compromising the ability of future generations to meet their own needs.”

  • Three Overlapping Dimensions of Sustainability:

    1. Environmental Sustainability: Aims to reduce human impact on the environment.

    2. Social Sustainability: Focuses on removing structural barriers toward social well-being, although it remains the least well-defined dimension of sustainability.

    3. Economic Sustainability: Intends to alleviate poverty and improve economic conditions.

The Sustainability “Landscape”

  • The consensus on sustainability emphasizes:

    • A basic definition of natural cycles that govern sustainability.

    • A set of human behaviors impacting environmental balance.

    • Importance of measurable impacts and actions to improve sustainability.

Sustainable Development Goals (SDGs)

Overview

  • Developed in 2015 as part of the UN 2030 Agenda for Sustainable Development.

  • Consists of 17 ambitious goals useful for nations and businesses to align sustainability strategies.

  • More information can be found at UN SDGs.

Wedding Cake Model

  • Establishes a hierarchical and interconnected relationship among the different goals.

  • Base Goals: Environmental goals are foundational for achieving all other SDGs. Key environmental goals include:

    • Goal 6: Clean Water and Sanitation

    • Goal 13: Climate Action

    • Goal 14: Life Below Water

    • Goal 15: Life on Land

  • Goal 17: Partnerships for the Goals emphasizes the necessity of international cooperation.

SDG Index Dashboard

  • Ranks countries by their performance on SDGs:

    • United States: 1st, Score: 87.02

    • Finland: 2nd, Score: 85.74

    • Sweden: 3rd, Score: 85.26

    • Denmark: 4th, Score: 85.26

    • Germany: 5th, Score: 83.67

    • France: 6th, Score: 83.14

    • Others include: Austria, Norway, Croatia, and more.

  • Rank and performance data may reflect recent updates; discrepancies in years may occur due to missing data.

Climate Risks and Their Implications

Overview

  • The document discusses the importance of climate action to mitigate severe climate risks:

    • Differentiates between the impacts of global warming at 1.5°C versus 2°C.

    • Reports worldwide statistics such as:

    • Flood risks will increase by 100% at 2°C.

    • Water availability issues will affect 350 million urban residents at 1.5°C, which doubles at 2°C.

    • Extreme weather and biodiversity loss due to climate changes are highlighted as serious concerns.

Nationally Determined Contributions (NDCs)

  • Emphasizes the obligations of countries under the Paris Climate Agreement to meet their carbon reduction commitments.

Business Case for Sustainable Development

Overview

  • Research studies related to corporate sustainability:

    • Eccles et al. (2014) found strong sustainability measures correlate with higher long-term market capitalization and accounting performance compared to firms lacking such measures.

    • Horváthová (2010) identifies a link between financial performance and environmental measures.

    • Berchicci and King (2020) suggest the relationship between financial and sustainability performance heavily depends on various assumptions and models employed.

    • Overall, moving towards sustainability generally enhances performance and contributes positively to revenue and stock prices.

Sustainable Operations and Supply Chains

Overview

  • Sustainable Operations: Refers to the accomplishment of firm value goals, alongside sustainable development goals to maintain viability over time.

  • Key Principles of Sustainable Operations:

    1. Sustainable development can improve a company's economic performance, but may not always do so.

    2. Measuring environmental and social impact can often yield enough groundwork for improvement.

    3. The operations within supply chains are critical to sustainability efforts.

    4. Views sustainability as a continuous journey rather than an endpoint.

    5. Requires active engagement with a diverse range of stakeholders.

Key Terms in Sustainability and Business

Triple Bottom Line (TBL)

  • TBL illustrates the need to consider:

    • People: Social responsibility towards labor and communities.

    • Profit: Economic outcomes ensuring fair returns for shareholders.

    • Planet: Environmental stewardship and minimizing ecological impacts.

ESG (Environmental, Social, Governance)

  • Represents a firm's commitment to sustainable and ethical practices, guiding investment assessments based on these factors.

Carbon Offsets, Carbon Neutrality, and Net Zero

  • Carbon Offsets/Credits: Mechanisms to compensate for GHG emissions through investments in emission reduction projects elsewhere.

  • Carbon Neutral: Achieved when total CO2 emissions equal purchased carbon offsets.

  • Net Zero: Focuses on balancing GHG emissions primarily through reductions (95% operational changes, 5% offsets), highlighting the importance of additionality in emissions reductions.

Greenwashing

  • The practice of misleading the public regarding a company's environmental efforts, which can delay genuine climate action through perceived false solutions.

Corporate Climate Leadership

Microsoft Moonshot

  • Goals include:

    • Becoming carbon negative by 2030.

    • Removal of historical carbon emissions by 2050 (starting from 1975).

    • Establishment of a $1 Billion climate innovation fund.

Amazon Pledge

  • Targets include:

    • Achieving 100% renewable energy usage by 2030.

    • Attaining net-zero carbon emissions by 2040.

    • Transitioning to 100,000 electric delivery vehicles by 2030.

Circular Economy

Overview

  • Linear Supply Chain: Traditional model defined by the sequence: Source-Make-Use-Dispose.

    • This model generates significant solid waste, with an average individual producing about 2 kg (4.4 lbs) daily in the U.S., only 18% of which is recovered post-consumer use.

Problems with Linear Supply Chains

  • Limited recovery of materials leads to excessive waste and low recycling rates:

    • Only 9.1% of raw materials in the world are repurposed back into the economy.

    • Issues with plastics not being compostable or recycled properly.

Circular Economy Principles

  • Focus on reducing waste through:

    1. Closed-loop supply chains: Products are cycled back for reuse, recycling, or remanufacturing.

    2. Product Design: Designing products for easier reuse and recycling.

    3. Sustainable Business Models: Promoting service-oriented models rather than merely selling products.

End-of-Life Options

  • Discusses various methods available for waste disposal:

    1. Landfilling: Banned for hazardous materials in many jurisdictions.

    2. Waste-to-Energy (WTE): Incineration that recovers energy, substantially reducing landfill waste.

    3. Recycling and Composting: Key for material recovery and biological waste.

    4. Parts Harvesting: Recovering parts from electronics for service contracts.

    5. Remanufacturing: Restoring used products to their original standards.

Cradle-to-Cradle® Design (C2C)

  • Founded by W. McDonough and M. Braungart; emphasizes:

    • Designing products based on nature's cycles where waste acts as food for future resources.

    • Focus on eco-effectiveness, ensuring materials can be recycled or composted without toxins.

Measuring Environmental Impact

Methodologies

  • To evaluate the environmental impact, two methodologies are highlighted:

    1. Life Cycle Assessment (LCA): Quantifies the total environmental impact of a product/service throughout its life cycle.

    2. Carbon Footprinting: Measures CO2 emissions linked to a firm, categorized into three scopes.

Social Sustainability

Overview of SDGs Related to Social Sustainability

  • Key goals include reducing poverty, hunger, ensuring good health, quality education, promoting gender equality, and building sustainable communities.

Corporate Social Responsibility (CSR)

  • Outlined as a business model for social accountability.

    • Involves ethical practices that benefit society overall and includes areas of:

    1. Governance

    2. Human Rights

    3. Labor Practices

    4. Environmental Responsibility

    5. Fair Operating Practices

    6. Consumer Issues

    7. Community Involvement

Social Life Cycle Assessment (S-LCA)

  • A framework to gauge the social impacts of business processes/products, though currently less established compared to LCA.

B Corporations (B Corp)

  • These are firms certified by B Lab for their social and environmental performance, rated significantly in areas like governance and community impact.

Purpose-Driven Supply Chain: Tony’s Chocolonely

  • Founded in 2005, aims for a 100% slavery-free chocolate supply chain, ensuring decent wages for cocoa farmers and avoiding deforestation.

  • Strategies involve:

    • Partnering with suppliers.

    • Ensuring transparency and ethical practices.

    • Successful in selling over $130 million worth of chocolate annually.

General Reminders

  • No SmartBook readings this week; focus on videos and the Canvas reading assignment.

  • Plan for the discussion forum and prepare for the Week 9 quiz.

  • Submit all assignments by midnight Sunday, noting the policy against late submissions.