The Business Case for Sustainable Sourcing : A Corporate Social Opportunity

University essay from Mälardalens högskola/Akademin för ekonomi, samhälle och teknik; Mälardalens högskola/Akademin för ekonomi, samhälle och teknik

Abstract: Sustainability has become a prevalent societal value and is ubiquitous in public discourse. Securing sustainable economic growth on increasingly globalized markets is perceived by many as one of the greatest challenges of our time. Supply chains have become globally dispersed and are increasingly complex to manage. Companies are experiencing higher expectations from their stakeholders in terms of their sustainability performance. They can no longer renounce responsibility for the actions of their suppliers and need to manage their sourcing activities so as to ensure sustainable supply chains. This poses a challenge but can at the same time present a business opportunity. There have been attempts to identify a business justification and rational for pursuing sustainability in sourcing. However, previous research has been primarily theoretical and has lacked practical applicability. The current study seeks to investigate the key features of the business case for sustainability. It also seeks to identify how the business case can be realized in sourcing activities. The current study has an exploratory design and revolves around a single case company. It utilizes both primary- and secondary data as well as a rigorous literature review. The primary data consist of a pre-study as well as interviews whereas the secondary data consist of a review of the current sustainability- and sourcing processes of the case company. The study culminates in a thematic analysis of the empirical data as well as a subsequent discussion. The empirical data indicates that the market is exhibiting an increasing demand for products with a strong sustainability profile. Additionally, it indicates that sustainable sourcing will become increasingly important for complying with regulations, attracting employees and reducing risk throughout the supply chain. Currently, suppliers’ sustainability performance is predominantly managed through the screening process and there is no functional metric available for practitioners to quantitively evaluate it. Rather than relying solely on sustainability requirements, the empirical data indicates that it is through cooperation and joint initiatives the greatest results can be achieved. We conclude that there is business case for pursuing sustainability as it: reduces risk and costs; increases companies’ ability to retain and recruit employees; cost efficiently comply with regulations; retain and attract customers and increase overall competitiveness. In order to realize the business case, it is imperative for companies to formulate clearly defined goals and subsidiary objectives to follow up on established trajectories. Since there is no metric suitable for measuring sustainability performance it is advisable to adopt a reductionist approach. The screening process should be devoted to binary variables while the evaluations process should be concerned with those who can be quantifiably evaluated. Companies should work closely with suppliers by identifying opportunities for synergistic value creation and engage in joint initiatives. Finally, companies need to communicate their efforts and achievements to all concerned stakeholders.

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