Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

3.3.1 TBL — The Changing Concept of Sustainability with Reference to the Triple Bottom Line

Intended learning outcomes: Produce an overview on the concept of the triple bottom line. Present the paradigm change that correlates to the evolution of sustainability aspects and their interaction.

Triple bottom line refers to measuring success of today’s business activities not only in economic terms but also according to environmental and societal criteria, with the aim of “full cost accounting” (see, for example, [GRI02], [WiLe09]).

The annual performance of an organization in the economic, environ­mental, and social areas may be reported to the public and its impact on its surroundings evaluated. Figure illustrates the concept with the three areas, which are also called the “three pillars of sustainability.”

Fig.        The concept of the triple bottom line is based on the three pillars of sustainability — namely, economy, society, and environment, which interact with companies (see [ScVo10]).

From the point of view of industry, the three pillars may be defined as follows:

  • Environmental aspects (ENV) refer to nature as a closed system, with its limited resources and regenerative capacities (e.g., for greenhouse gases) as a base for any business activity.
  • Social aspects (SOC) refer to society represented by governmental organizations (GOs), nongovernmental organizations (NGOs), individuals, employees, and customers.
  • Economic aspects (ECO) refer to events and developments relevant to manufacturing industries’ competitiveness and their strategic and operational business practices.

The three aspects influence the development of each interdependently. Industry was affected in different ways, depending on the specific importance of each aspect as it changed over time. Every business activity, company, industry, supply chain, and economy is dependent in some way on the availability of (often limited) resources. Companies’ competitive­ness is affected by these conditions and thus by the three pillars of sustainable development. Perfor­mance indicators such as quality, costs, delivery reliability, and flexibility undoubtedly remain relevant, but their importance has to be evaluated as the conditions, under which businesses operate, aim toward sustainable development.

From the perspective of industry, the change in the manufacturing paradigm correlates to the evolution of sustainability aspects and their interaction. Figure, taken from [ScVo10], shows this evolution on a time line of selected events and developments. In the figure, a larger bubble depicts the specific relevance of a sustainability aspect. The larger arrows depict increasing impact and the specific direction of impact.

In the past 50 years, various events influenced industrial business condi­tions. The events can be categorized in the three aspects of sustainability, but because of the interdependencies, the classification is rather soft. Some of these events may be categorized in one of the other aspects as well.

In the 1960s, environmental issues peaked, with noticeable impacts on so­ciety. In some regions, environmental movements emerged. For example, the Clean Air Act in the UK regulated smoke from furnaces, as the coal smoke from households and industries affected everyday life negatively. The oil crisis in the 1970s created — as artificial scarcity — worldwide attention to the existing oil dependency and triggered energy efficiency im­provements in industry. The toxicity of wastes and the chemicals used in production of goods and food was being recognized. Directives were developed that impacted the business conditions of companies, such as the Dangerous Substances directive (on classification, packaging, and labeling of dangerous substances) and the Waste Framework Directive (on disposal, and prevention of harmful effects through collection, transport, storage, and tipping of waste). The growing public interest led to the foundation of, for example, the US Environmental Protection Agency. The “Limits to Growth” commissioned by the Club of Rome pointed out the fundamental issue of the contrast between the growing need for resources and the scarcity of those resources.

Fig.        Companies impacted by the three pillars: The paradigm change correlates to the evolution of sustainability aspects and their interaction [ScVo10].

In the 1980s “green parties” achieved breakthroughs in politics, and envi­ronmental protection moved up on the political agendas. The interaction between GOs, NGOs, stakeholders in society, and industrial companies increased, which was partly due to the media attention to the topic. As a result, emerging regulations and pressures further impacted business conditions. The implemented Montreal Protocol (phasing out ozone deple­ting substances, like CFCs [chlorofluorocarbons]) became an example of a very successful international treaty for which some industries were required by law to implement changes in production facilities and products. Environmental reports found their way into the annual reporting of companies, representing the basis for the sustainability reports later to come. In the 1990s, the European Environ­ment Agency, as a counterpart to the US Environmental Protection Agency, was founded. The Global Reporting Initiative formed in 1997 developed sustainability standards for organizations. In that same year, the well-known Kyoto Protocol was set up, under which participating countries commit to reduce greenhouse gas emissions by a specified level. The Kyoto Protocol offers countries various mechanisms to reach the targets, such as the emissions trading (the EU Emission Trading System ETS commenced operation in 2005) and the Clean Development Mechanism.

The environmental management standard ISO 14000, complementing quality management standard ISO 9000, was published in 2004. Econo­mic changes, such as the oil price (e.g., the peak in 2008 exceeded U.S. $140/barrel) on the supply side and the Lifestyles of Health and Sustaina­bi­lity (LOHAS) demographic on the demand side, represent important econo­mic drivers. From a regulatory perspective, increasing the ecological awareness and the facilitation of eco-innovation remain important. Based on the re­cent developments, it seems that companies are required to react when en­vironmental pressure increases. The pressure comes from the pub­lic (GOs, NGOs, customers) as well as from the environment (as certain re­source-depleting activities, e.g., conventional oil production, will not be sus­tainable in the medium and long term), and thus creates economic impact.

For further reading, see [Pack60], [Cars02], [Mead77], [UN87], and Web sites such as, and

Course section 3.3: Subsections and their intended learning outcomes

  • 3.3 Sustainable Supply Chains

    Intended learning outcomes: Explain the changing concept of sustainability with reference to the triple bottom line. Disclose economic opportunities for social commitment and for environmental commitment. Describe energy management concepts and measures for improved environmental performance. Produce an overview on the measurement of the environmental performance. Present social and environmental dimensions in industrial practice.

  • 3.3.1 TBL — The Changing Concept of Sustainability with Reference to the Triple Bottom Line

    Intended learning outcomes: Produce an overview on the concept of the triple bottom line. Present the paradigm change that correlates to the evolution of sustainability aspects and their interaction.

  • 3.3.2 Economic Opportunities for Social Commitment of Sustainable Supply Chains

    Intended learning outcomes: Disclose the term “double bottom line”. Produce an overview on ethical standards, or code of conduct (CoC). Differentiate between groups of company-internal ethical standards and groups of company-external ethical standards. Present the supplier code of conduct (SCoC) and the certificate of compliance.

  • 3.3.3 Economic Opportunities for Environmental Commitment of Sustainable Supply Chains

    Intended learning outcomes: Produce an overview on energy-intensive industries. Disclose examples of using alternative fuels and raw materials in order to decrease the carbon footprint and the amount of fossil fuels required in the cement industry. Differentiate between opportunities and threats favoring proactive and reactive environmental involvement.