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        Sustainability, shipping and profit: Finding a balance

        April 5, 2019 By Joe McAdory

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        truck

        Produce spoils. Chemicals contaminate. Emissions pollute the air. Consumers now understand the 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 Beth Davis-Sramek, Gayle Forehand Professor in Supply Chain Management at the Harbert College of Business.

        davisDavis-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 to 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 policy-makers 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.”     

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