Journal Identification = OPEMAN Article Identification = 715 D.docx

Journal Identification = OPEMAN Article Identification = 715
Date: May 16, 2011 Time: 5:11 pm
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Journal of Operations Management 29 (2011) 577–590
Contents lists available at ScienceDirect
Journal of Operations Management
j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c
a t e / j o m
alancing priorities: Decision-making in sustainable supply chain
management
haohui Wu a,∗ , Mark Pagell b,1
Oregon State University, College of Business, 200 Bexell Hall,
Corvallis, OR 97331-2603, United States
Schulich School of Business, York University, 4700 Keele
Street, Toronto, Ontario M3J 1P3, Canada

r t i c l e i n f o
rticle history:
eceived 28 June 2008
eceived in revised form
7 September 2010
ccepted 25 October 2010
vailable online 3 November 2010
a b s t r a c t
The need for environmental protection and increasing demands
for natural resources are forcing com-
panies to reconsider their business models and restructure their
supply chain operations. Scholars and
proactive companies have begun to create more sustainable
supply chains. What has not been fully
addressed is how organizations deal with short-term pressures
to remain economically viable while
implementing these newly modeled supply chains. In this study,
we use theory-building through case
eywords:
reen supply chain management
ecision-making
ustainability
studies to answer the question: how do organizations balance
short-term profitability and long-term
environmental sustainability when making supply chain
decisions under conditions of uncertainty? We
present five sets of propositions that explain how exemplars in
green supply chain management make
decisions and balance short and long term objectives. We also
identify four environmental postures
that help explain the decisions organizations make when dealing

with strategic trade-offs among the
economic, environmental and social elements of the triple-
bottom-line.
. Introduction
Organizations have begun to examine their supply chains in
esponse to numerous interrelated economic and environmental
hallenges such as fluctuations in commodity prices and climate
hange. Critics confront “business as usual” and demand sustain-
ble practices. Many organizations initially resist change, but
some
ompanies have recently begun to transform their supply chains
in
fforts to become more sustainable.
How difficult this transformation will be is debatable. There is
body of research which suggests that many organizations can
imultaneously achieve business goals and reduce their environ-
ental impacts (e.g. Russo and Fouts, 1997; Christmann, 2000;
elnyk et al., 2003). However, while waste and pollution
reduction
re aligned with the traditional goals of operations management,
ot all environmental practices will bring cost savings and some
ill increase costs, especially in the short term. For instance,
proac-
ive investment in green technology may not pay off for decades.
nd there is evidence that some companies take bold environmen-
al action at the expense of their financial health (Margolis et
al.,
007). The challenge is how to run a viable business today while
ot compromising the natural environment in the future.

∗ Corresponding author. Tel.: +1 541 737 3514; fax: +1 541
737 4890.
E-mail addresses: [email protected] (Z. Wu), [email protected]
M. Pagell).
1 Tel.: +1 416 736 2100x77939.
272-6963/$ – see front matter © 2010 Elsevier B.V. All rights
reserved.
oi:10.1016/j.jom.2010.10.001
© 2010 Elsevier B.V. All rights reserved.
Managing this trade-off is going to test every organization –
and
not just because environmental issues will be new to many.
Recent
studies suggest that organizations making choices regarding the
natural environment operate in a complex and dynamic setting
(Matos and Hall, 2007; Devinney, 2009). When making
decisions
about the environmental impact of their supply chains,
organiza-
tions face information uncertainty, evolving decision parameters
and changing decision boundaries (Chechile, 1991; Matos and
Hall,
2007). In such a setting organizations are going to be forced to
navigate a dynamic environment without a clear road map.
Deci-
sions about the trade-off between short-term profitability and
long-term environmental sustainability involve uncertainty and
risk (Kahneman et al., 1982; March and Simon, 1993).
Further, since environmental and social issues are intertwined,
stakeholders such as NGOs who were not traditionally
considered

in supply chain decisions, suddenly are involved (Gladwin et
al.,
1995; Pagell and Wu, 2009). Freeman (1984) defines a
stakeholder
in an organization as “any group or individual who can affect,
or
is affected by, the achievement of the organization’s
objectives.”
Organizations have stakeholders with different priorities due to
their values and issue saliency (Donaldson and Preston, 1995),
and
therefore are often forced to make trade-offs (Hertwich et al.,
2000).
For instance, owners and managers will focus on profitability,
while
members of the community are likely concerned with the over-
all livability of the community and environmental impacts from
production.
The challenge is how to balance environmental issues and sound
business practices in this dynamic, complex and uncertain set-
ting. Existing research has not addressed the business models
and
dx.doi.org/10.1016/j.jom.2010.10.001
http://www.sciencedirect.com/science/journal/02726963
http://www.elsevier.com/locate/jom
mailto:[email protected]
mailto:[email protected]
dx.doi.org/10.1016/j.jom.2010.10.001

5 tions
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78 Z. Wu, M. Pagell / Journal of Opera
ecision-making processes underlying sustainable supply chain
anagement. Understanding these models and processes will shed

ight on how organizations manage the intrinsic dynamic and
com-
eting priorities between business and environmental goals.
We examine how leading practitioners of sustainable supply
hain management address environmental issues. First, at the
trategic level, we investigate how companies incorporate envi-
onmental issues into their overall business and supply chain
trategies. We focus on supply chain decisions that incorporate
nvironmental issues and the trade-offs these decisions may
force
rganizations to make. However, since operational strategy is
riven by organizational strategy (Hayes and Wheelwright,
1979),
ne must simultaneously understand the role of environmental
ssues in organizational decisions.
Second, we explore the decision process itself to understand
ow organizations handle the interplay of business and environ-
ental needs, in an environment of uncertainty and/or incomplete
nformation. We cover four decision areas that are central to
under-
tanding the supply chain: product and process design,
purchasing
nd supply management, internal operations management, and
ogistics.
The research takes an incremental step towards understand-
ng how companies incorporate environmental issues into their
upply chain decision-making. We take a grounded approach to
xamine the supply chain operations of eight leaders in
sustainable
usiness practices in the United States. Specifically, we set out
to
xplore the following question: how do organizations balance the

eed for short-term profitability and long-term environmental
sus-
ainability when making supply chain decisions under conditions
f uncertainty?
. Literature and theoretical background
.1. Balancing economic and environmental priorities
Environmental issues are considered an integral part of the
road framework of sustainability. The World Commission on
Eco-
omic Development describes a sustainable business as one “that
eets the needs of the present without compromising the abil-
ty of future generations to meet their own needs” (WCED,
1987).
his definition captures the three intrinsically related dimensions
social, environmental and economic) of the triple-bottom-line
ramework (Elkington, 1998). The triple-bottom-line framework
as gained rapid recognition as evidenced by its incorporation in
growing number of third-party certification programs such
LEED
usgbc.org) and FSC (fsc.org), as well as a number of
sustainability
eporting initiatives such the Climate Action Partnership (2010).
ustainability means that business activities should also protect
atural resources and the environment, and serve the common
ood of society.
Following the growing stream of research on environmental
ssues in supply chain management (Linton et al., 2007), we will
ocus on the environmental dimension of sustainability. In a
supply
hain context this is often referred to as green supply chain man-

gement (e.g. Zhu and Sarkis, 2004; Vachon and Klassen, 2006).
he social dimension of sustainability will be discussed only in
the
ontext of the research question we set out to investigate.
Existing studies find mixed results when examining the rela-
ionship between organizations’ economic and environmental
utcomes. Many studies have found a positive connection
between
rms’ environmental actions and financial performance (e.g.
elnyk et al., 2003; Pagell et al., 2004). In operations
management
iterature this view is often exemplified by the total quality
environ-
ental management (TQEM) perspective that sees a strong
positive
ssociation between quality management systems and environ-
Management 29 (2011) 577–590
mental management systems (e.g. Curkovic et al., 2000; Corbett
and Klassen, 2006; Curkovic et al., 2008). The same processes
that
improve quality, reduce waste, cut costs and improve competi-
tiveness can be used to improve environmental outcomes as
well,
implying that multiple stakeholders can be simultaneously satis-
fied (Curkovic et al., 2000).
However, there is research that suggests that not all stakehold-
ers can be satisfied all the time. Strategic decisions with
ambitious
environmental goals can come with real economic costs (Walley

and Whitehead, 1994; Hoffman et al., 1999; Morris and Su,
1999).
Walley and Whitehead argue that once firms move beyond the
“low hanging fruit” such as reducing energy use, scrap and the
like
(the focus of TQEM efforts) and start to examine more
fundamental
issues such as supply chain design and business models, they
will
recognize that further environmental action will require
significant
investment, radical changes in operational practices and reengi-
neering of existing supply chains (Devinney, 2009). This school
of thought notes that proactive environmental actions can place
an economic burden on companies that competitors do not have.
This literature suggests a trade-off between environmental and
economic outcomes.
More importantly, as companies begin to confront global com-
petition for resources and tighter environmental regulations, the
debate has moved beyond the consideration of whether or not it
pays to be green (e.g. Florida, 1996; King and Lenox, 2001,
2002)
to focus on how to address environmental challenges while
main-
taining competitiveness (Kleindorfer et al., 2005).
Indeed, the real challenge for organizations is when the impacts
of environmental actions are not clear or when such actions
impose
costs in the short term while benefits accrue to the supply chain
– as well as external stakeholders – only in the long term. Thus,
environmental actions offer opportunities as well as challenges.
Organizations have to figure out how to balance competing
prior-
ities by weighing short-term and long-term consequences, while

making decisions under uncertainty.
2.2. Decision-making under uncertainty
The complexity of supply chain decision-making is multiplied
when organizations address the uncertainty that surrounds envi-
ronmental decisions, environmental issues due to the number
of entities in the chain, and the interconnectedness of supply
chain and ecological systems. As companies set out to evaluate
the environmental impact of their supply chains, they often do
not have complete information on decision parameters or con-
sequences. Organizations may have limited scientific
information
about the environmental problems they face, how environmental
issues interact and affect other dimensions of sustainability, and
the consequences of such interactions. Furthermore, their deci-
sions have to incorporate the expectations of external
stakeholders
(Freeman, 1984; Donaldson and Preston, 1995). Even when
differ-
ent stakeholders are exposed to the same information, they can
still
differ as to the best course of action (Hertwich et al., 2000).
When companies are constrained by limited information and
information processing ability, they experience bounded
rational-
ity in considering environment-business trade-offs (March and
Simon, 1993). They can hardly be certain of environmental con-
sequences when the information itself is uncertain and
ambiguous
and they are not fully aware of all of the factors involved in the
decision in the first place (Chechile, 1991; Alvesson, 1993).
Because of these limitations researchers have proposed that we
must consider environmental decisions as taking place in com-

plex and adaptive systems (Choi et al., 2001; Matos and Hall,
2007;
Surya et al., 2007). In such a system, organizations navigate
“rugged
landscapes” as they process the information available to them
(Kauffman, 1993). In the absence of complete or reliable infor-
tions
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Z. Wu, M. Pagell / Journal of Opera
ation on the interactions between environmental and economic
arameters, organizations make local decisions that have less
than
ptimal outcomes at the system level (Frenken, 2001).
Choi et al. (2001) conclude that companies will follow a set of
imple rules or schemas when they make decisions in such
rugged
andscapes. The decision-making literature reaches a similar
con-
lusion, pointing out that because of uncertainty, decision
makers
esort to simple rules when they search for solutions (Tversky
and
ahneman, 1974; Feldman and Lynch, 1988; Hall and
Vredenburg,
003; Camerer, 1998; Cowell et al., 2002). For instance Zhou
(1997)
ound that organizations in crisis often adopt rules quickly to
induce
redicable behavior. Simple rules provide a way for
organizations
o deal with uncertainty and hence are likely a component of
how
hey approach the inherent uncertainty in supply chain decisions
bout environmental sustainability. Such rules are based on the
ecision-makers’ interpretation of their organization’s

institutional
orms and the information available to them (Eoyang, 1997; Choi
t al., 2001; Frenken, 2001).
While these studies of complex and adaptive systems begin to
xamine how companies deal with uncertainty, there is little dis-
ussion of how companies make trade-offs in the decision
process.
nd we do not know if organizations establish simple rules to
deal
ith uncertainty in environmental trade-off decisions.
Existing studies have informed managers of the interdepen-
ency of environmental and economic systems but they fall short
n explaining how organizations handle the competing priorities
f different stakeholders, make sense of the complex supply
chain
nvironment, deal with information uncertainty and take actions
o induce change. This research explores decision-making in this
etting to better explain how organizations manage the short-
term
eed to remain profitable while attaining environmental sustain-
bility and competitiveness.
. Methods
This study adopted the grounded theory building approach
e.g. Glaser and Strauss, 1967; Strauss and Corbin, 1990). More
pecifically, the principles of theory building based on case stud-
es were adopted (Eisenhardt, 1989; McCutcheon and Meridith,
993; Miles and Huberman, 1994; Yin, 1994). Since we were
explor-
ng a relatively new research area, case studies were appropriate
McCutcheon and Meridith, 1993; Yin, 1994).

.1. Sampling
This study focuses on organizations’ environmental decision-
aking, with the unit of analysis being the company or
rganization, therefore we took a theoretical sampling approach
o identify companies for this study. We focused on exemplars
n sustainable supply chain management to answer our research
uestion. All the companies in the sample are leaders in their
ndustries when it comes to environmental sustainability. One
key
riterion for being an exemplar was that the organization had to
go
ell beyond regulatory compliance in their environmental efforts.
hey are also profitable and have a record of long term viability.
n addition, by sampling exemplars we were much more likely to
e dealing with organizations that had already addressed obvious
in–win opportunities. Because the “low hanging fruit” (Walley
nd Whitehead, 1994) was more likely to have been picked at
these
rganizations, they were expected to be dealing with
environmen-
al issues with greater levels of uncertainty as well as complex
rade-offs between profitability today and sustainability in the
uture.
We identified the initial pool of companies through trade mag-
zines such as Sustainable Industries, newspapers such as the
New
Management 29 (2011) 577–590 579

York Times and the Wall Street Journal and membership lists of
non-profit environmental organizations such as The Natural
Step
Network (US chapter). Existing studies have found that
company
size influences the likelihood of adopting sustainability
practices
and companies of different types of ownership will have differ-
ent challenges and opportunities in their environmental
initiatives
(Pagell et al., 2004; Sharma and Henriques, 2005). Therefore we
purposefully selected companies of various sizes, with different
types of ownership and across a variety of industries with an
aim
of creating a sample from which we could generalize. The
sample
contains everything from multinationals with global supply
chains
to regional and local chains. This mix allowed us to examine the
research question in a broad spectrum of settings.
Fourteen companies were initially identified and invited to par-
ticipate in the study. Data from eight companies were
eventually
used. We were unable to gather reliable information in four of
the
organizations. Two additional organizations provided us access,
but
they did not do any production themselves. They had limited
con-
trol or visibility into decisions about design, sourcing,
operations
and logistics that we are exploring. Therefore we dropped them
because neither faces the types of decisions of interest.
Eisenhardt (1989) suggested about seven cases as an adequate

number for theory-development. A sample of eight cases allows
us
to generalize while remaining cognitively manageable for
qualita-
tive data analysis. Table 1 profiles the participants in the
research.
At the request of the participants, we used the generic prod-
uct/service to name each company to ensure anonymity. Data
were
collected between 2006 and 2008.
3.2. Data collection and analysis
To answer our research question, a semi-structured interview
protocol was developed (see Appendix A). The protocol called
for multiple respondents from multiple functional areas; a mem-
ber of the top management team, the top managers in charge of
operations, R&D, purchasing, marketing and logistic, one or
more
people involved in product and/or process design, and the per-
son with responsibility for “sustainability.” Interviewing
multiple
respondents allowed us to examine different areas of a
company’s
supply chain and triangulate data. In general each interview
lasted
between 60 and 90 min, with several interviews lasting more
than
120 min.
To understand the role of environmental practices in the com-
pany’s business model, we asked how sustainable practices are
adopted in internal operations (i.e. R&D, production, and mar-
keting) and supply chain management (i.e. purchasing, customer
relationship management, and logistics). We also gathered
infor-

mation about the history and evolution of sustainability in these
organizations. These questions shed light on managerial motives
and company strategy. To understand how organizations balance
competing priorities in their decision-making processes, respon-
dents were asked to walk through real cases where the
organization
needed to resolve challenging issues. Finally, although the
compa-
nies were known as exemplars, we asked for more
comprehensive
information on economic and environmental performance.
Data were collected by multiple interviewers at six of the
eight companies. In seven companies, including both with a
single
interviewer, the interviews were taped and later transcribed. We
also collected archival data from company websites, trade jour-
nals, reports published by NGOs and government agencies such
as the Environmental Protection Agency. Data collection
stopped
when we reached a saturation point (Glaser and Strauss, 1967;
Eisenhardt, 1989) where additional data would not provide new
information to our understanding of the research question.
We first conducted within-case analysis following the proce-
dures of Miles and Huberman (1994). The coding was conducted
580 Z. Wu, M. Pagell / Journal of Operations Management 29
(2011) 577–590

Table 1
Sampled organizations.
Company Description Size/ownership Process(s) at which they
are considered
exemplarsa
Building Renovation Local custom house remodeler.
Market: homeowners
Medium/private Product and design service, internal operations
Cleaning Products Regional producer and distributor of cleaning
products.
Market: Janitorial service providers
Medium/private Product development and design, service
operations
Forest and Wood Regional grower and processor of forest
products.
Market: Wholesale dimensional lumber
Large/private Operations
Pizza Restaurants Local pizza restaurant chain with 4 outlets.
Market: Retail food and beverage
Small/private Supply chain design, operations, product
design, supply management
IT Hardware Multi-national IT hardware and services provider.
Markets: Consumer electronics and B to B
Large/public Operations, reverse logistics

Snack Foods Multinational producer and distributor of organic
and
all-natural snack foods.
Market: retail – consumer food
Medium/privateb Operations, supply management
Period Lighting National producer and distributor of authentic
period
lighting.
Market: consumer lighting fixtures
Medium/private Operations, supply management, distribution
Specialty Food & Beverage Global distributor of retail food and
beverages. Large/public Supply management in the developing
world,
esearc
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Market: Retail food and beverage
a Based on the external sources used to identify the possible
participants in the r
b At the end of our data collection, Snack Foods was bought by
a private equity fi

teratively. First, each researcher individually coded the data.
We
hen compared the individually coded data to assure consistency.
e discussed and resolved disagreements before we combined our
ata into a consensus document. This process led to clarification
nd, on occasion, redefinition of the constructs and discussion of
he evidence. The researchers reached consensus on all
constructs
efore calling the process complete, which assured inter-rater
reli-
bility between the two coders was 100%.
The within-case analysis had two objectives. First, we tried to
ain a broad understanding of the business model of each
company
nd the operations of its supply chain. We determined how the
rganization makes money, the role of environmental
management
n their product and service value proposition and the impact of
nvironmental initiatives on financial performance.
Second, we explored how organizations incorporate environ-
ental initiatives in their decision-making in key areas of supply
hain management and operations including design, operations,
ourcing, and logistics. Respondents were probed specifically
about
difficult” decisions where environmental actions could have a
neg-
tive impact on the company’s financial performance. We further
sked the managers how they handled information uncertainties,
anaged the dilemmas associated with competing stakeholders,
nd sorted out possible trade-offs to make decisions. Analysis of
ultiple examples and perspectives from multiple managers in

ach company provided insight into decision patterns within each
ompany. Table 2 summarizes the salient supply chain and opera-
ions issues in each company.
Cross-case analysis identified common themes as to how
ompanies handle information uncertainty, make trade-offs, and
alance the potentially competing needs to be profitable and
envi-
onmentally sustainable. Eventually, a coherent understanding of
rade-off decision-making emerged. The findings are presented
in
he next section.
. Findings
In our analysis, we find that organizations do indeed face infor-
ation uncertainty when making environmental decisions, and
hat they address this uncertainty by establishing and adopting
imple rules. We also find that an organization’s environmental
osture helps to explain the trade-offs they face as well as the
deci-
ions they make. This posture leads to the specific decision rules
hat are created. Finally, it is a sequence of decisions that
overtime
ead to the development of a unique supply chain.
supply chain design
h.
4.1. Decision-making under uncertainty: Operating Principles
and Technical Standards

These organizations have to make environmental decisions
without complete information on a regular basis. Managers in
the sample share the sentiment that environmental challenges
for
them are multi-layered and like “peeling an onion.” In the
process
of addressing one particular issue, additional, unexpected issues
will come up. And because these exemplar organizations
already
surpass regulatory compliance the “correct path” is often impos-
sible to identify because there is no target, and in many cases no
good way to measure all of the consequences of a decision.
In our sample, organizations use Operating Principles and
Technical Standards which are “rules” to help make decisions in
this uncertain setting (Zhou, 1997; March et al., 2000). Operat-
ing Principles are broad schema to help organizations navigate
information uncertainty and provide decision guidelines while
Technical Standards are created to provide specific direction in
a
single decision-making setting. Table 3 provides additional
details
on the Operating Principles and Technical Standards.
4.1.1. Operating Principles
Seven of the eight companies have established and adopted
an Operating Principle. Operating Principles can guide all types
of
decisions but they do not prescribe specific actions; instead,
they
articulate the organizations’ environmental values and goals and
compel managers to innovate to achieve these goals (see Table 4
that describes the principles for all organizations).
For instance, Snack Foods’ Operating Principle is explicated in

their “ingredient philosophy” which stipulates that the
ingredients
in their products must be both all-natural and genuine: “We are
about ‘you get what you see, you get what it says.’ If it says
roasted
red pepper and goat cheese, then it is going to have roasted red
pepper and goat cheese in it. We are about transparency.”
This principle influences how the company designs products,
selects suppliers and then tracks every ingredient in their sup-
ply chain. They recognize that they do not have the expertise or
resources to quantify the environmental benefits of being all
nat-
ural for every single ingredient they source, but their rationale
is
that sourcing only all natural ingredients provides
environmental
and health benefits in general, even if this is not always true.
But
because these specific instances are hard to identify they adhere
to the Operating Principle with the assumption that it leads to
the
best long-term outcomes.
Z. Wu, M. Pagell / Journal of Operations Management 29
(2011) 577–590 581
Table 2
Salient sustainable supply chain management issues in each

case.
Company Price premiuma Key sustainable supply chain
management issues
Building Renovation Yes Their design-build projects have no
prescribed roadmap to implement environmental practices
because each project
is unique and needs a customized solution.
The environmental issues associated with home remodeling
include using environmentally-friendly building
materials, local sourcing, architectural design to reduce overall
energy usage, and construction waste reduction.
Customers are usually not exposed to the environmental issues
associated with design and construction. As a result,
behind-the-scenes environmental endeavors are not recognized
by the customers.
Cleaning Products No Existing cleaning products contain toxic
chemicals that are detrimental to people and the environment.
Generally not able to charge a price premium for their products,
and they have had to invest significant resources into
R&D, customer training and creating service-oriented business
processes.
Forest and Wood No Sustainable forestry and production has led
to much more efficient operations, but limited top line benefits.
The bulk
of their business is commodity products where customers
normally are not willing to pay a price premium for wood
that is grown or processed sustainably.
Pizza Restaurants Yes Buying locally grown produce creates
supply variability. The company pays significantly above
market prices for
produce to guarantee both quality and supply.

The company tries to reduce energy use in pizza delivery,
packaging and restaurant operations.
IT Hardware No Disposable products not in line with brand or
prevailing direction the industry. Need to address electronic-
waste
without disrupting existing supply chain. Reverse-logistics is
costly
Snack Foods Yes Ingredient philosophy mandates strict
sourcing control. Packaging imposes a serious environmental
challenge.
Period Lighting No Many processes are inherently dirty and
labor intensive.
Need to compete without violating Operating Principle of
“being thoughtful and treading lightly.” Most competitors
outsource production to low-wage countries with relatively lax
environmental standards.
Specialty Food & Beverage Yes Rapid growth makes it difficult
to find and maintain supplies of high quality ingredients created
in accordance with
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Operating Principle that protect
a Does the organization get a green premium (charge higher
prices) because of it
Building Renovation’s Operating Principle of conserving the
mbodied energy in existing buildings does not prescribe spe-
ific actions or provide precise directions on how to preserve the
mbodied energy in any individual building. Instead, the Operat-
ng Principle forces designers to think about choices that can
better
tilize natural light and airflow within the confines of the exist-
ng building and directs on site personnel to reuse material when
ossible and minimize scrap in general.
At Period Lighting, the Operating Principle of being thoughtful
nd treading lightly appears to be rather intangible, yet it is
under-

tood by every employee as the code of conduct and embodies
the
thos of their culture. For example, the management of the com-
any was adamant that they “would not outsource pollution”.
This
eant that they would not use a less expensive supplier who
could
ot meet their own environmental criteria, regardless of the regu-
ations in the supplier’s country. Hence, they delayed
outsourcing
o China and India until they could identify and develop suit-
ble suppliers. By postponing outsourcing, they not only incurred
ignificant costs, but expended additional resources on supplier
evelopment.
The analysis suggests that when an organization is faced with a
rade-off decision, especially in situations where the
environmental
osts or benefits of a choice are uncertain, they choose the option
hat is best aligned with the Operating Principle. Operating Prin-
able 3
perating Principles and Technical Standards.
Operating Principles
Definition General schema or simple rules to guide all dec
Main purpose To offer managers and employees a decision gu
information about the environmental challenge
certain.
Range of decisions it can be applied to Used on a daily basis for

decision-making at bo
tactical levels.
Discretion Remains in hands of decision maker
Source Linked to organizational culture, values and bro
issues associated with the product and industry
Limitation Broad and often open to employees’ interpretat
ers.
inability efforts?
ciples enable the organizations to make decisions in an
uncertain
setting. The principles set the environmental agenda and
prescribe
conduct in each company. Thus they identify the choices a com-
pany needs to make in different areas of operations.
Additionally,
since the principles do not prescribe specific actions or choices,
they
allow flexibility for decision makers to make trade-off choices.
They
motivate managers to process all the information available,
weigh
choices in consideration of the cost and constraints and choose
the
best possible alternative.
4.1.2. Technical Standards
We find that four of the organizations developed Technical
Standards (see Table 3) to specify the scope of particular deci-
sions thus reducing uncertainty and risk and often improving the
flow of information in the chain. Technical Standards are

imposed
by management to tackle environmental issues in a specific pro-
cess or function. They are created to help achieve
environmental
goals articulated in the Operating Principle, thus they do
prescribe
explicit actions.
Specialty Food & Beverage purchases horticultural products
from suppliers who operate in many developing countries and
often
in ecologically sensitive areas. They worked with several non-
profit
organizations to create a supplier certification program and
rating
system which offers full transparency and traceability. The sys-
Technical Standards
isions. Specific rules and criteria that define the scope of a
company’s environmental tasks and prescribe decisions.
ideline when
and solution is not
To reduce risk, speed decision-making and create standard
solution by removing uncertainty for specific or narrow
decisions.
th strategic and Targeted and focused decision area with
relatively narrow
scope.
Removes much discretion from decision maker, codified
rules and measures

ad environmental
.
Supports Operating Principle in single decision-making
area.
ion and discretion. Creates clear boundaries on what can and
cannot be done.
Less useful for deciding how to do something. The scope
and specification of the standard delimit actions.
(2011) 577–590
Table 4
Operating Principles.
Company Operating Principle Explanation
Building Renovation Conserve the embodied energy A house is
a living system. Designers and workers need to consider the
environmental impact of (re)building and living in a house.
Conserve energy
through better layout and design, material/equipment choice,
reuse and
recycling, etc.
Cleaning Product Phase out toxic chemicals Long term goal is
to replace traditional cleaning products with ones that are
not toxic to people or the planet. Creating a green brand has

expanded the
meaning of this beyond product development and into all
aspects of the
supply chain. The same principle that initially led to product
development and
redesign led to service offerings such as training and vendor-
managed
inventory to reduce total chemical usage by customers.
Forest and Wood Never log more than annual growth of the
forest Limiting logging is an essential part of holistic forest
land management;
bio-diversity, forest thinning, and riparian protection are all
part of the
operations. This informs a general conservation mindset in all
operations.
Pizza Restaurants Use local foods; minimize energy use Attempt
to source only foods grown within 100 miles of restaurant as
part of
larger efforts to reduce energy use. Local sourcing has multiple
implications
including food-mile/energy conservation, environmental
protection and
protection of local communities.
IT Hardware This is the only case where no specific Operating
Principle
was identified.
Snack Foods All natural ingredients Products must be all natural
and contain what the label says they contain – no
fine print. All natural ingredients philosophy predicates farming
and sourcing
practices. This philosophy, which originated from pollution
concerns, also

informs pollution reduction effort in the organization’s
operations.
Period Lighting Being thoughtful and tread lightly Be aware of
environmental and social consequences of decisions. Minimize
negative impacts – try and have positive impacts.
t
a
s
t
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p
n
t
e
S
i
t
r
d
O
e
c
t
s
n
s
t
a
c
f
o

u
a
n
m
m
p
w
o
Specialty Food & Beverage Sustainable agriculture
em measures the growers’ environmental practices in areas such
s soil conservation, pest control and effluent management. The
tandard also comprises a social component that includes
tracking
he flow of money in the supply chain to ensure that growers, not
ntermediaries, reap the economic rewards of their environmental
erformance.
Snack Foods also has a supplier certification program, but with
a
arrower focus than Specialty Food & Beverage. Their supplier
cer-
ification system demands extensive information from suppliers
to
nsure all ingredients provided meet their “all natural” Technical
tandard. However unlike Specialty Food & Beverage, no attempt
s made to trace money in the chain or to determine other prac-
ices (for instance conditions of farm laborers) that are not
directly
elated to a product’s status as all natural. This Technical Stan-
ard then helps Snack Foods adhere to the Ingredient Philosophy
perating Principle.
IT Hardware has developed a supplier code of conduct that cov-
rs suppliers’ social and environmental actions and, like supplier

ertification, reduces uncertainty about how suppliers behave and
he materials they use. Suppliers promise to refrain from
activities
uch as child labor or use of banned materials. However,
suppliers
eed not disclose what they do. Because this code of conduct is
less
pecific than the other companies’ supplier certifications, it
func-
ions more to reduce the risk of supplier non-conformance than
as
conduit of information.
In all three cases the supplier certification functions as a
Techni-
al Standard that aids decision-making: buyers may only
purchase
rom organizations that have been certified or adhere to the code
f conduct. However, the programs vary with the organization.
We also found evidence that Technical Standards were being
sed in areas besides supplier certification. Cleaning Products is
small regional company in an industry dominated by multi-
ationals. They have the additional complication that they both
anufacture their own line of products and distribute products
ade by others. They can control what goes into their own
cleaning
roducts, but they have limited control over the organizations for
hom they act as a distributor. To address their desire to
distribute
nly products that are aligned with their Operating Principle to

Provide the best quality products without sacrificing the
environment; protect
the supply – and the suppliers, who are generally farmers in
developing
countries.
phase out toxic chemicals, they worked with external labs and
reg-
ulators to create a Technical Standard, their “green gate
keeper,” so
that they could determine the toxicity of product. Before they
will
distribute a product it has to go through the “gate keeper”
process
to ensure that it is in line with the Operating Principle. They
cannot
tell vendors how to formulate their products, but they can and
do
tell vendors that they will not distribute specific products that
they
deem too toxic: “So it is not like we are shutting them out of the
market place. It is just that we have a very high standard.”
Rather
than certifying the organizations, Cleaning Products ensures
that
each individual product meets the Technical Standard.
IT Hardware’s business depends on the production of what are
effectively disposable products. Growing their business
necessar-
ily increases the flow of discarded products going to landfills, a
proposition that puts them at risk for increased regulation and
a diminished reputation. To address this risk, top management
imposed a Technical Standard of creating a closed loop supply
chain
to take back and reuse the materials. The Technical Standard

spec-
ifies material choices, design for environment requirements, and
the logistical and remanufacturing processes.
Technical Standards specify how these organizations deal with
certain aspects of the supply chain such as sourcing, supplier
practices, material selection, and reverse logistics. In addition,
envi-
ronmental decisions in these areas are well-defined and can be
measured objectively. As a result, managers making these deci-
sions are not as burdened as managers who only have an
Operating
Principle to guide them. Operating Principles reduce informa-
tion uncertainty by setting a broad environmental agenda and
prescribing guidelines, while Technical Standards further
remove
uncertainty from specific decisions. Both Operating Principles
and
Technical Standards are decision rules. The Operating Principle
can
be applied to any decision, while Technical Standard(s) will
have a
much narrower scope, so an organization would have one
Operat-
ing Principle, but could have numerous Technical Standards.
Our findings corroborate Zhou’s (1997) observation that orga-
nizations are more likely to create and follow rules when they
experience a higher level of information uncertainty. Operating
Principles and Technical Standards embody the environmental
tions

v
p
o
i
c
4
s
i
o
v
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t
s
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g
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c
f
y
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h
r
a
f
i
m
f
s
n
r

w
u
o
c
B
t
p
w
i
w
alues of the organization and incorporate the institutional inter-
retation of the issues they face. Thus decision makers in each
rganization share a common understanding of the rules, which
n turn induces predicable behavior, a necessity for
organizational
ontrol in a dynamic environment.
P1: Organizations develop Operating Principles and Techni-
cal Standards in order to make decisions about environmental
issues.
P1a: The Operating Principles and Technical Standards reflect
the values of the organization and manifest the institutional
understanding of the environmental issues they face.
P1b: An organization will have only one Operating Principle
which can be applied to all organizational decisions, but can
have multiple Technical Standards, each of which will apply to
a specific environmental issue.
P1c: The development of an Operating Principle or Technical
Standard reduces uncertainty when making decisions relating

to environmental actions supporting the organization’s values
when there is a trade-off between environmental and economic
goals and improving decision efficiency.
.2. A committed workforce
A committed workforce is one of the concrete ways that the
tudied organizations mitigate trade-offs between short term
prof-
tability and long term environmental sustainability. All eight
rganizations noted that their sustainability initiatives had pro-
ided significant benefits in recruiting and retaining workers.
More
mportantly, these organizations had committed workforces
which
hey leveraged to make continuous improvements and to
innovate.
A frequent refrain from the respondents was that they had per-
onally sought work at this specific organization because of how
it
id business. For instance an employee who left a leader in the
lobal logistics industry to manage distribution and shipping at
ighting Products told us: “This is where I wanted to work, and
of
ourse took a substantial cut in pay. . . It is because of the
thought-
ulness that goes into our product. . . how we treat our
employees,
ou know, how we are in the community.”
And it was not just managers who sought employment at these
rganizations, this occurred at all organizational levels. People
were
ighly motivated to work for these companies for non-economic
easons.

Employees who willingly sacrifice higher pay for what they see
s higher ideals allow these organizations to hire and retain
talent
or lower costs than their less sustainable competitors. And even
n organizations that paid at or above industry averages, commit-
ent still lead to specific savings. Operational employees worked
or Pizza Restaurants for years, in an industry where average
yearly
taff turnover at the time of data collection was over 80%. The
orga-
izations in the sample were then spending less on compensation,
ecruitment, training, and the like.
The most important benefits from the committed workforces
ould not show up directly on a balance sheet. Lighting Prod-
cts’ distribution manager not only took a pay cut to join the
rganization; she came with knowledge and experience base that
ompetitors likely could not match. And while Specialty Food
and
everage could match salaries at the Fortune 500, they were able
o offer the chance for top managers to “change the world” in a
ositive way, a significant motivation for many of our
respondents.
Respondents noted that their employees wanted to come to
ork; they helped to spread the message to customers and
mproved the organization in innovative ways they would not
have
ithout their commitment to the organization and its ethos. Pizza
Management 29 (2011) 577–590 583
Restaurants’ staff helped develop alternative means of pizza
deliv-
ering; designers at IT Hardware spent their own time reducing

the
environmental impacts of a design (but not on non-
environmental
features), skilled trades people came to work for Building Ren-
ovation to find novel ways to make buildings greener and so
on. Innovation depends on the knowledge and commitment the
workforce. And these organizations could attract and retain
knowl-
edgeable people for lower costs than their competitors. More
importantly, the employees of these organizations were
motivated
to participate in innovation.
Thus, as these companies confront environmental challenges,
they face the same financial and other business constraints as
other
companies. But rather than using cost and resource constraints
as an excuse for inaction, they use these constraints to motivate
cost-neutral solutions and innovation. Their committed
workforces
drive innovation and help create supply chain practices that
clearly
differ from industry norms.
P2: Cost-environment trade-offs are mitigated at these orga-
nizations because of the benefits of having a committed
workforce.
P2a: Managerial employees, especially highly skilled senior
managers, will accept lower pay to work for a more sustainable
organization.
P2b: Recruitment and retention of motivated and skilled
employees will enable environmental innovation.
4.3. A sequence of decisions

The research question focuses attention mainly on orga-
nizational performance outcomes and the trade-off between
short-term economic viability and long term environmental sus-
tainability. Our data suggests that while this tradeoff does
indeed
exist, many of the trade-off decisions made by organizations
were
shorter-term in nature, and that these short-term trade-offs were
common. Table 5 details some of the trade-offs faced by the
orga-
nizations.
The studied organizations are leaders in sustainability, yet they
usually do not address environmental issues at the expense of
their
companies’ financial well-being. These managers are as
pragmatic
as their counterparts at less sustainable organizations. Several
of
them asked us to clarify the definition of sustainability and
made
the point that “one has to be economically sustainable to be
envi-
ronmentally sustainable.” For these organizations, there is
always
the tension to figure out “how much one wants to be green and
how
much one can afford to be green.” Sustainability does not exist
if a
company is not profitable.
The respondents offered many examples where the costs of
an environmental initiative were currently too high. Period
Light-
ing’s very old facility was expensive to heat and not amenable

to air-conditioning. This meant wasted energy in the winter and
uncomfortable employees in the summer. Management realized
that a retrofitted building would have a smaller footprint,
provide
enhanced employee wellness, and be cheaper to operate, but the
expense of a new building was impossible to justify for real, but
relatively small, improvements in social and environmental out-
comes.
In addition, other business needs often forced them to forego
environmental initiatives, in the short to medium term. For
instance, after a few trials Pizza Restaurants had to give up
using a recycled paper box for take-out salads and switched to
a clear plastic box, which was better for food presentation.
Simi-
larly, Snack Foods had to store some seasonal organic
ingredients
in temperature-controlled warehouses to maintain a year-round
supply, because retailers would not stock the end-product on a
584 Z. Wu, M. Pagell / Journal of Operations
Table 5
Examples of trade-offs where the organization is “practical” or
prioritizes short term
profits.
Company

Building Renovation Projects are only as “green” as the
customers are
willing to pay for in terms of design and the
selection of construction materials. Some
individual projects do not conserve as much
embodied energy as the organization would like.
Cleaning Products Often continue to produce a more toxic
formulation alongside a new green product
because customers hesitate to change to new
green products when old products “work just fine.”
Forest and Wood Being Forest Stewardship council (FSC)
certified
has brought increased brand awareness, but the
company does not always promote FSC because
the certified products usually do not bring price
premiums.
Pizza Restaurants Packaging – especially plastic – is resource
intensive and not easy to recycle.
Customers demand organic products out of season
and hence they must be stored in
temperature-controlled warehouse.
IT Hardware Can make products that would last 50–100%
longer
for 20% higher price but customers prefer the
present product (which means more frequent
purchase and disposal as well higher total cost to
customer).a
Snack Foods Store seasonal ingredients to provide product year
round. Packaging not recyclable.
Period Lighting The old production facility is not energy

efficient,
yet the company cannot economically justify a
renovation.
Produce fixtures designed for old style
incandescent bulbs because customers demand
them.
Specialty Food & Beverage Do not own most retail locations
and hence cannot
control practices such as energy use and recycling
which are at the property owner’s discretion.
Has not been successful in shifting consumers (in
s
h
t
p
t
I
m
u
v
w
t
b
F
n
a
d
o
s
c
h

t
s
p
general) to reusable packaging.
a To protect anonymity and proprietary information numbers
have been changed.
easonal basis. Management worries that their all-natural
products
ave lost their meaning, given the high energy involved in
storing
he ingredients.
Individual decisions about environmental issues are then very
ragmatic and all of the organizations keep sight of the fact that
hey must be both economically and environmentally sustainable.
n the short term this often means placing profits first.
All good managers make decisions that minimize costs and or
aximize customer satisfaction. What makes these organizations
nique is that the environmental impacts are part of the daily
con-
ersation such that they do not accept the status quo and actively
ork to mitigate the trade-offs they identify. The end result is
that
hey remain economically viable in the short term as they try to
ecome more environmentally sustainable over the long term.
This pragmatism is exemplified by a packaging problem at
Snack
oods. The transportation of their products required the use of a
on-recyclable bag made up of multiple layers of virgin plastics
nd metal. When the expiration date of their products was

reduced
ue to faster turnover, they immediately decided to remove a
layer
f plastic from the bag because it was no longer needed to pre-
erve the freshness of the products. While such changes also
reduce
osts, the managers’ primary concern was plastic usage, not cost.
It
ad become natural for them to consider environmental implica-
ions when business conditions changed. This incremental
progress
upports the notion of TQEM (Curkovic et al., 2000) –
sustainable
ractices are part of a company’s continuous improvement effort.
P3a: Incremental changes through continuous improvement
take place when companies make decisions to conserve
Management 29 (2011) 577–590
resources (material and energy) and reduce pollution in an
existing production system and supply chain.
Continuous improvement of the existing production system and
supply chain is often not sufficient. Our analysis suggests that
these exemplar companies may have radically different environ-
mental practices because of the dynamic interplay between
trying
to adhere to the Operating Principle and making tactical trade-
off decisions. The managers are deeply aware of the practical
and
technical aspects of the environmental issues they face in their
daily operations, and strong values accentuate the challenges
the
companies face. Because of this, organizational goals based on

envi-
ronmental values and Operating Principles contend with
practical
constraints, creating cognitive tension. This tension pushes
orga-
nizations away from considering only tactical trade-offs and
forces
them to consider bold environmental decisions that lead to
system
changes.
For instance, Period Lighting had a metal-finishing process that
created a stream of toxic contaminants that were discharged into
the sewer system, leading to close monitoring by the local
environ-
mental regulator. This process was unsatisfactory because of
both
the environmental impact and the paperwork involved and fre-
quent intrusive inspections. They could have invested in
improved
processes that reduced the discharge, but they realized that as
long
as they discharged waste they faced regulatory scrutiny as well
as creating tension with their Operating Principle. Therefore,
they
approached the problem from a new perspective; they asked
“what
if we had no discharge?” Reframing the issue led to the
develop-
ment of a closed-loop system that differed radically from
traditional
systems. The upfront costs of this change were high, but the
orga-
nization justifies the change based on the elimination of both
the
waste stream and the regulatory oversight. They no longer spend

managerial time doing paperwork, preparing for inspections and
so on. And they do not have to worry about future changes in
regulation because they no longer discharge into the sewer
system.
The tension between adhering to the Operating Principle and
accepting a trade-off prods managers to create innovative
solutions
in supply chain systems and operational routines. For instance,
Building Renovation’s top management conscientiously pushed
designers and workers to reduce material usage and waste. In
house renovation projects, however, it is often cheaper to buy
new construction materials than to salvage old materials by
decon-
structing a building. In one case, instead of specifying new
lumber,
a carpenter used 1920s vintage studs found in a local shop sell-
ing used building/remodeling materials at discount price.
Practices
like this were promoted as success stories to employees and
exter-
nal contract workers. Designers and workers were encouraged to
improvise to find create new work routines and alternative
supply
sources. Such innovative practices lead to business practices
that
are better aligned with the Operating Principles.
Thus, as these companies are confronted with environmental
challenges, they face financial and other business constraints
sim-
ilar to other companies. And the trade-off decisions they make
do not always favor more environmentally oriented choices,
espe-
cially in the short run. Yet at the same time, we find that rather
than using cost and resource constraints as an excuse for inac-

tion, these companies search for cost-neutral solutions and
become
more innovative. As a result, the committed workforces create
sup-
ply chain practices that are clearly different from industry
norms.
P3b: When organizations encounter tension between their
Operating Principle and business realities such as costs and cus-
tomer expectations they innovate to create unique supply chain
processes, knowledge and routines.
In our initial analysis we treated each decision independently,
which made it easier to pinpoint what, trade-off, if any, the
orga-
tions
n
c
e
l
t
z
e
t
s
b
s

r
t
c
i
s
f
a
d
t
a
s
t
n
h
m
w
s
T
l
t
a
r
e
s
b
s
c
S
s
e
F
k
p

a
l
b
t
a
o
h
s
i
w
ization faced in the specific setting. However, the unique supply
hains we studied were the result of multiple decisions made
over
xtended periods of time. Therefore, we re-examined the data,
ana-
yzing multiple decisions simultaneously to get a better sense of
he implications of multiple choices. This showed that the
organi-
ations often balanced short term economic needs and long term
nvironmental needs with a sequence of decisions. We find that
here is an underlying relationship among an organization’s deci-
ions and these decisions are not independent. This connectivity
etween decisions helps to explain the differences between the
ample companies and their peers in terms of supply chain envi-
onmental practice and performance.
Each organization started by addressing an initial environmen-
al opportunity or need. This action led to future opportunities
and
hanges that were possible because of both accumulated learn-
ng and changes taking place in the organization’s operations
and
upply chain infrastructure.

For example Forest and Wood Products stopped taking water
rom the local river, thus improving resource efficiency and
ddressing potential water shortages in the region. Their initial
ecision was to treat and reuse water within the plant. They
leased
he only available piece of farm land and built a wetland to store
nd treat the discharge, but the wetland turned out to be too
mall to store all of the treated water, forcing them to find a way
o use the “extra treated water” immediately. Workers and engi-
eers realized that they could cut electricity use by modifying the
eat exchange and cooling systems in the production process to
ake use of the extra water. The initial decision to stop taking
ater forced managers to re-engineer the production process. A
ingle decision to reduce water use led to sequence of decisions.
he result – a much different production process – not only uses
ess water, but also requires less energy to run, freeing up capi-
al. Simultaneously the organization learned not only about
water
nd energy use, but about improving operations. Finally, the
expe-
ience motivated workers who saw immediate benefits from their
fforts in terms of facility efficiency and in their community’s
water
upply.
By analyzing the decisions at each company holistically, we
egan to recognize the inherent logic among many of their deci-
ions. Specifically, earlier environmental actions lead to new
hallenges and opportunities, and trigger new choices and
actions.
ome decisions are directly influenced by earlier decisions, and
sub-
equent decisions sometimes replicate the logic of earlier
decisions

ven though there is no direct operational linkage among them.
or instance at Specialty Food & Beverage, the standard for the
ey agricultural product was later adopted for other agricultural
roducts. Similarly, Building Renovation applied what they
learned
bout saving energy, with the accumulated knowledge eventually
eading to a more holistic design philosophy based on viewing
the
uilding as a system.
There are two main implications of looking at the organiza-
ions’ sequence of environmental decisions. First, the
organizations
ssess the feasibility of multiple environmental actions
simultane-
usly, taking actions when feasible and compromising when they
ave to. Second, over time the outcome of this sequence of deci-
ions is the unique supply chain system that arises from
continuous
mprovement and innovation in an attempt to mitigate tradeoffs
hile adhering to the Operating Principle.
P3c: Companies’ decisions addressing environmental issues are
sequential, where earlier decisions induce further choices that
are unique/specific to the individual company and its supply
chain.
P3d: Far-reaching supply chain and operational changes take
place when sequential decisions are made over time. Sequential
Management 29 (2011) 577–590 585
decisions fundamentally change a company’s value proposi-
tion, tacit knowledge of environmental management and supply

chain structure.
4.4. Environmental postures
One of the core objectives of these case analyses was to iden-
tify the business model of each organization emphasizing how
each organization incorporated environmental concerns in
strate-
gic decision-making. It became clear that while the focus of the
research is on environmental issues, social and environmental
issues are closely connected, but interrelate differently for
different
organizations.
Therefore to understand business and environment trade-offs, it
is necessary to bring in the social dimension and examine the
busi-
ness models in the context of the triple bottom line framework.
The
analysis suggested that the organizations address sustainability
dif-
ferently because of their history, stakeholders, and the
experiences
of owners and key managers.
We are able to categorize the organizations based on their
business models and priorities in decision-making. Specifically,
we find that they configure social, environmental and business
strategies differently. We use the term “strategy” not in the
sense
of Porter’s generic strategies (Porter, 1980) which are content-
based, but instead follow Mintzberg and Waters (1985) concepts
of realized and intended strategies. Our interest lies in the real-
ized configurations of environmental behaviors, social
behaviors
and business strategy. These configurations, which we will refer

to
as environmental postures, are then the result of a pattern of
deci-
sions about business, social and environmental goals made over
time. We identify four unique environmental postures that help
to
explain both the decisions the organizations make and more
impor-
tantly the strategic trade-offs they face between elements of the
triple-bottom-line.
Table 6 describes the elements of each environmental posture
and which companies they comprise.
4.4.1. The Environment First posture
Three organizations, Building Renovation, Pizza Restaurants
and
Snack Foods comprise the Environment First posture. Their key
com-
monality is that their founders’ values led them to capitalize on
environmental issues in the creation of a viable business. For
orga-
nizations with an Environment First posture, business success is
contingent on the accomplishment of their environmental goals.
From their inception, these organizations were motivated by
the strong environmental values of the founders and managers.
These businesses were started with the intention of being
environ-
mentally sustainable and the business is a vehicle to carry out
an
environmental agenda. While all three companies are engaged in
community service and do discuss social issues when making
deci-
sions, tackling environmental issues is an essential part of

business
operations, while social issues are secondary.
These organizations can and do explicitly communicate their
environmental messages to customers. Pizza Restaurants’ cus-
tomers are made aware that their pizza is made from local and
often organic ingredients, cooked in an energy efficient manner,
and delivered using a carbon-neutral vehicle. Their environmen-
tal attributes are also quality attributes, so their pizza is better
for both the customer and the environment. When these
organiza-
tions improve their environmental performance, the customer
also
benefits via higher quality products and a healthier
environment.
Because the customers explicitly benefit from the company’s
envi-
ronmental efforts, organizations with an Environment First
posture
can charge a price premium over less sustainable competitors.
This
price premium can offset the costs of some of the environmental
activities or provide resources to address additional
environmen-
(2011) 577–590
Table 6

Environmental postures.
Posture/companies The role of environmental issues in
business strategy
What it means to customers Triple-bottom-line implications
Environment first
Building Renovation
Pizza Restaurants
Snack Foods
Environmental issues addressed as
part of their initial business plan.
Achieving their business agenda helps
achieve their environmental agenda.
A green product offering that they are
willing to pay extra for.
Social aspect of triple-bottom-line is
deemphasized relative to economic
and environmental aspects.
Equal footing
Forest and Wood
Period Lighting
Environmental and social issues
equally addressed as part of business
plan.
A responsible organization that charges
basically the same prices as other
organizations that are less responsible.

Balanced approach to
triple-bottom-line that means all
aspects equally weighted which can
limit short term growth
Opportunity first
Cleaning Products
Environmental issues addressed as a
business opportunity.
A green product offering that comes
from an organization without a long
pedigree of being green: there is little
to no price premium.
Economic aspect of triple-bottom-line
most heavily weighted, environmental
aspect of nearly equal importance,
social aspect not emphasized
Community first Environmental issues addressed A socially
responsible product that
ustom
s long
nviro
Environmental aspect of
t
g
f
a
o
t
p

f
4
i
t
r
a
s
l
t
m
l
v
c
i
p
r
i
u
t
t
s
o
o
i
m
fi
o
IT Hardware
Specialty Food &
Beverage

because poor environmental
performance was not congruent with
social values.
c
a
e
al issues. The owners and managers at these organizations take
reat pride in their ability to be both green and financially
success-
ul. While all show a concern for people and societal issues, they
re primarily motivated by a concern for the environment. From
an
utcome perspective these organizations are leaders environmen-
ally, are differentiated from their competitors and able to charge
rice premiums, but are generally not leaders or significantly dif-
erentiated from competitors when it comes to social outcomes.
P4a: In the Environment First posture the social aspect of the
triple-bottom-line is deemphasized relative to economic and
environmental aspects.
P4a1: Organizations with an Environment First posture will
be exemplars on environmental performance, have average to
above-average profit margins and average social outcomes.
.4.2. The Equal Footing posture
Two organizations, Forest & Wood Products and Period Light-
ng comprise the Equal Footing posture. Their key commonality
is
hat they have always done business sustainably, and their envi-
onmental and social efforts directly benefit employees,
suppliers
nd local communities. In these organizations environmental and

ocial issues are highly integrated and equally important.
Specifically, Forest & Wood Products’ conservation-based phi-
osophy has allowed them to maintain a stable workforce while
he forestry industry as a whole has experienced declining
employ-
ent and production over the past two decades. This approach
does
imit growth and profits in some years, but in return they have
pro-
ided decent-paying jobs to their employees and stability to the
ommunities in which they operate.
Similarly, Period Lighting is willing to forgo some potential
prof-
ts in order to meet environmental goals such as not outsourcing
ollution and social goals such as employing refugees who often
equire extra-training. Like Forest & Wood Products, Period
Light-
ng used a conservation mindset to redesign operations. They
have
sed TQEM principles to reduce the impact of production facili-
ies (theirs and suppliers’), while increasing efficiency and
allowing
hem to offer better working conditions for employees and
overseas
uppliers. Like members of the Environment First posture these
rganizations are able to attain resource efficiency in many areas
f their supply chains.
The organizations in the Equal Footing posture are willing to
nternalize some of the environmental costs that are not
presently

andated by existing regulations to provide long term bene-
ts to employees, suppliers, and the communities in which they
perate. These organizations are leaders environmentally and
ers are willing to pay extra for
as it does not harm the
nment.
triple-bottom-line is deemphasized
relative to economic and social aspects.
socially, but from an economic perspective do not grow as fast
as
competitors.
P4b: In the Equal Footing posture, a balanced approach to the
triple-bottom-line means all aspects are equally emphasized,
which can limit growth.
P4b1: Organizations with an Equal Footing posture will be
exemplars on environmental and social performance, but will
have restrained growth.
4.4.3. The Opportunity First posture
Cleaning Products is the only organization in the Opportunity
First posture. This posture is significantly different from the
previ-
ous two in that the environmental efforts of the organization are
relatively recent and driven by an economic opportunity not the
values of the founders or managers. Cleaning Products initially
pur-
sued environmental sustainability as a way to achieve economic
goals.

The organization faced a commodity trap because their cus-
tomers bought janitorial supplies based on price, and national
competitors had economies of scale they could not match. By
refor-
mulating their own brand cleaning products to be free of toxic
chemicals they created a way to differentiate beyond price.
Cleaning Products were already in the market as a traditional
(not sustainable) competitor whose customers already associated
the organization with specific attributes, including low prices.
Because customer expectations are slow to change, the manage-
ment team soon recognized that they needed to offer a “total
cost”
value proposition to recover their higher costs that resulted
from
smaller production volumes. Consequently, the company
expanded
their efforts into service areas such as vendor-managed
inventory
and custodian training to reduce usage for customers. Organiza-
tions in the Opportunity First posture can brand their products
as sustainable, but unlike Environment First organizations, they
will have to overcome customers’ deeply held perceptions,
formed
before the decision to capitalize on the environmental
opportunity.
In addition, organizations with an Opportunity First posture
are engaged in a relatively recent entrepreneurial venture with
high upfront costs. The high upfront costs and resources needed
to changing customer expectations suggest that Opportunity
First
organizations are less likely to invest in environmental
initiatives,
especially if the environmental pay-off is far in the future.
These

organizations are environmental leaders when they can leverage
to create economic opportunity, have above average growth
rates
but are generally not leaders or significantly differentiated from
competitors when it comes to social outcomes.
tions
4
a
i
t
v
b
m
o
c
p
t
T
S
m
S
m
s
e

e
t
w
n
t
w
p
n
v
b
n
c
e
e
g
u
m
o
t
o
r
p
m
t
w
P4c: In the Opportunity First posture the economic aspect of
triple-bottom-line is most heavily weighted with the environ-
mental aspect of nearly equal importance and the social aspect
not emphasized.
P4c1: Organizations with an Opportunity First posture will have
above average growth rates, be exemplars on certain aspects

of environmental performance and have average social perfor-
mance.
.4.4. The Community First posture
Two organizations, IT Hardware and Specialty Food & Bever-
ge compose the Community First posture. Their key
commonality
s that they address environmental issues in reaction to threats to
heir socially sustainable values and branding. Both
organizations
alued people and communities and both had brands that were
uilt on these values to some extent. And both took on environ-
ental initiatives only when the negative environmental impacts
f their business became a salient managerial concern.
Specialty Food & Beverage had a reputation for caring about the
ommunity and protecting their workers’ well-being. As the com-
any grew, close scrutiny from the public and NGOs compelled
hem to consider environmental issues in food-growing
countries.
o protect the environment and communities where it purchased,
pecialty Food & Beverage created a supply chain that was
funda-
entally different from the industry norm. They used a Technical
tandard (supplier certification) linked to financial incentives to
anage supplier environmental and social performance and bring
upply chain management into line with the organization’s and
xternal stakeholders’ values.
Similarly, IT Hardware had a reputation for commitment to
mployees’ welfare as well as a culture built on a history of
innova-

ion. The environmental problems created by disposable products
ere incongruent with the organization’s culture. This was mag-
ified by changing regulation which was also putting pressure on
heir business model. In response, IT Hardware created a world-
ide closed-loop supply chain to collect and recycle its
disposable
roducts. However, their solution had to protect the existing
busi-
ess model built on disposable products, and has turned out to be
ery expensive.
In addition to continuing to communicate their messages of
eing socially aware, these organizations now explicitly commu-
icate their environmental messages of reducing impacts and
onserving resources to customers. However, not all of their
nvironmental efforts directly benefit customers. IT Hardware’s
nvironmental goals are not currently aligned with their
economic
oals. Environmental management at these organizations is often
ndertaken either to minimize risk or in response to a misalign-
ent between existing business models and social values. These
rganizations are leaders socially and above average environmen-
ally, but from an economic perspective the reactive nature of
some
f their environmental efforts can be expensive.
P4d: In the Community First posture the environmental aspect
of triple-bottom-line is deemphasized relative to economic and
social aspects.
P4d1: Organizations with a Community First posture will be
exemplars on social performance, have average profit margins
and above average environmental outcomes.
In conclusion, the four postures offer important insight into our

esearch question. They suggest that even the leaders in green
sup-
ly chain management are on different trajectories with different
otivations. More importantly, they also explain how organiza-
ions prioritize elements of the triple-bottom-line and determine
hich stakeholders are most important when making decisions.
Management 29 (2011) 577–590 587
Strategic trade-offs among all elements of the triple-bottom-line
are then a function of the environmental posture of the
organiza-
tion.
P5: A company’s environmental posture predicts which ele-
ments of the triple-bottom-line it will prioritize when facing a
strategic trade-off in decision-making. The organizations’ triple
bottom line performance will be predicated on their priorities.
5. Discussion
We set out to answer the question: how do organizations
balance short-term profitability and long-term environmental
sus-
tainability when making supply chain decisions under
conditions
of uncertainty? Summarizing the results from our systematic
examination of the supply chain operations of eight exemplar
orga-
nizations, we have three core findings.
First, we find that managers in the eight sampled organizations
often lack sufficient information in making environmental deci-
sions. Factors such as uncertainty about environmental

outcomes
and future regulations, the saliency of each environmental issue
to
multiple stakeholders, as well as a lack of visibility and
influence in
one’s supply chain, all can contribute to the uncertain decision
envi-
ronment. In response, organizations in our sample establish and
adopt an Operating Principle and Technical Standards as
decision
rules to mitigate this information uncertainty. Our study
highlights
how these rules are applied in environmental decision-making
(Zhou, 1997; March et al., 2000).
Second, we find that when making environmental decisions,
the managers in these exemplar organizations do make short-
term
concessions to business needs. What makes these organizations
unique is neither that they face trade-offs and experience dilem-
mas, nor that they often put profits first. Rather it is what
happens
after a trade-off is identified that makes these organizations
suc-
cessful both environmentally and economically.
Specifically, the companies in our sample maintain business
viability and financial health while pushing for improved
environ-
mental outcomes. We find that these organizations make
practical
environmental decisions; environmental efforts have to make
busi-
ness sense. However, cost and other resource constraints do not
necessarily hamper environmental innovation. In fact, environ-
mental challenges offer these companies a new lens to examine

their supply chain operations. Furthermore, the costs and
resource
constraints associated with environmental issues force managers
to consider not only profits and sustainability, but also short-
term growth and long-term competitiveness. These challenges
are
addressed by committed workers who are intrinsically motivated
by the organization’s values and objectives.
Finally, we are able to specify four unique environmental pos-
tures which capture environmental strategies through empirical
specification of archetypes based on the actual behaviors of
these
firms. Specification of the postures is itself theory-
development,
because each posture describes the dynamics among different
factors and predicts certain performance outcomes (McKinney,
1966; Bailey, 1994; Boyer et al., 2000). These environmental
pos-
tures capture unique configuration of the three dimensions of
the
triple-bottom-line framework. More importantly, they predict
the
decision patterns of these companies when they face trade-offs
among competing needs embedded in the notion of the triple-
bottom-line.
In this sense, our study moves beyond a normative prescrip-
tion that companies need to strive for excellence across all three
dimensions of the triple-bottom-line. Our findings offer an
under-
standing as to how companies consider social and environmental
issues through their supply chain operations. The postures
suggest
that in reality, even exemplar organizations’ sustainability

agendas
(2011) 577–590
Radical Change in
Supply Chain
Structure and
Operational Practices
Environmental
Posture
Operating Principle
and Technical
Standard(s)
A Sequence of Trade-
off Decisions
Continuous
Improvement
Committed
Workforce
Incremental
Environmental

Performance Gains
isions
u
n
t
t
t
t
t
m
c
t
w
d
o
e
t
o
d
c
s
u
B
n
c
t
o
a
c

e
t
a
z
l
t
H
p
t
f
s
a
j
p
Fig. 1. Sequential trade-off dec
sually do not equally emphasize all three dimensions. Only
orga-
izations with the Equal Footing posture are able to integrate the
hree dimensions in a balanced fashion.
The organizations adopt environmental initiatives proactively
o protect their brands and differentiate themselves in competi-
ive markets. Our analysis suggests that these companies are able
o establish distinct sustainable supply chain practices and rou-
ines that allow them to compete with the norm in their industry;
eanwhile, such practices and routines contain difficult-to-
imitate
apabilities. Research that uses the resource-based view of the
firm
o explore environmental outcomes (e.g. Russo and Fouts, 1997)
ould predict this outcome. Our research helps to understand the
ecision-making processes that lead to this outcome.

Our analysis shows that it was a sequence of decisions made
ver time, as well as the inter-relatedness of these decisions, that
nabled the organizations to create differentiated supply chains
hat are economically and environmentally viable (See Fig. 1).
A company’s environmental posture leads to the development
f the Operating Principle and Technical Standard(s) that drive
the
ecisions the organization makes. Operating Principles and
Techni-
al Standards are central to environmental decision-making in
the
tudied organizations because they set decision boundaries,
reduce
ncertainty, and reduce the search space for acceptable solutions.
y providing direction and boundaries, the principles and
standards
ot only make decision-making tractable, they make it more effi-
ient because fewer options need to be considered and less time
is
aken with justifying choices.
The commitment of the workforce is also a key component
f mitigating trade-offs and creating a unique supply chain. In
ddition to reducing the actual costs of training, retention and
ompensation, the committed workforce is a source of knowl-
dge. These committed workforces are willing and able to
provide
heir knowledge and tackle difficult problems that might not be
ddressed by similarly paid workers at competitors. These
organi-
ations can then address environmental issues at a lower cost
than
ess-sustainable competitors in the same situation.

Many of the individual decisions will be incremental and occur
hrough the continuous improvement of the existing supply
chain.
owever, over time the sequence of organizational decisions
makes
uts it on a unique trajectory. And as the organization travels
fur-
her down this vector it builds a supply chain radically different
rom its less-sustainable competitors. Each decision informs sub-
equent decisions, creating a feedback loop of knowledge,
practices
nd routines that moves the organization along their unique tra-
ectory.
The creation of a supply chain that is more sustainable than
com-
etitors implies that the supply chain has fewer trade-offs
between
in a sustainable supply chain.
economic and environmental outcomes. However, this same pro-
cess also creates trade-offs between the elements of the triple
bottom line. So while all of the organizations in the sample are
exemplars in sustainable supply chain management and (by
defini-
tion) have fewer trade-offs than their less-sustainable
competitors,
they still face long term strategic trade-offs among triple bottom
line outcomes, due to the prioritization in their sequential
decision
paths.
This study has two significant practical implications. First, the
four environmental postures provide managers with a template

to examine their strategic options and create sustainable busi-
ness models. Since the postures suggest different performance
implications (Doty and Glick, 1994), managers can use them as
a
framework to identify opportunities for performance
improvement
and evaluate the integration of environmental goals into
business
performance.
We note two things about the four environmental postures that
managers should consider. Our sample is of exemplars in
sustain-
able supply chain management, most of whom have been
pursuing
environmental and or social performance for decades. For most
organizations that are just confronting these issues, the most
likely
posture available will be the Opportunity First posture, because
the
existing values and decision-making scheme will not (yet)
support
the other postures.
Additionally, the experience of Cleaning Products suggests that
over time, customers, employees and other stakeholders of the
Opportunity First posture will come to expect more responsible
behavior. What started as a business opportunity for Cleaning
Products has indeed radically changed their products. However,
the organization has also been pushed by numerous stakehold-
ers to confront a host of other issues because these stakeholders
now expect that an organization that sells responsible products
is truly responsible in all of its actions. In essence, protecting
and
growing the brand means that the Opportunity First posture will
likely embrace broad environmental and social tasks over time,

and
migrate toward the Equal Footing posture.
The second practical implication is that environmental deci-
sions have a profound impact on a wide range of supply chain
issues and an organization’s ability to compete. Managers can
gain
insights from the practices of these leading companies to assess
their own decision environment and create coherent
sustainability
strategies.
6. Conclusion
Sustainable supply chain management has gained increas-
ing attention in recent years. Besides addressing technical
issues
tions
s
r
e
m
a
e
t
e
u
r
l

F
l
p
w
v
g
c
t
t
T
1
m
p
o
W
i
d
w
s
(
b
d
t
m
a
a
g
r
2
m
o
r
r

p
a
A
a
a
s
r
s
A
a
a
uch as product design and reverse logistics (Guide et al., 2003),
esearchers have started to address broad strategic issues (Linton
t al., 2007) that involve system implementation (Sroufe, 2003),
anufacturing strategy (Klassen and Whybark, 1999; Corbett
nd Kirsch, 2001) and supply chain system design (Karakayali
t al., 2007; Matos and Hall, 2007). Along this line, our study
akes another incremental step to understanding companies’
nvironmental decision-making processes. There are still many
nanswered questions.
First and foremost, the external validity of our proposed theory
emains to be empirically tested. Like all case studies, the theory
is
imited by the idiosyncratic nature of the cases (Eisenhardt,
1989).
or instance, both companies in the Community First posture are
arge publicly owned companies. We do not know how these
com-

anies would behave today if they were privately owned, though
e do know that Specialty Food & Beverage developed their
social
alues when they were a small private origination, strongly sug-
esting that this posture is not the sole domain of large public
ompanies. Regardless, future research should use large samples
o test the propositions empirically.
Second, sustainable supply chain management concerns all
hree dimensions outlined in the triple-bottom-line framework.
his study, like many other supply chain studies (Handfield et
al.,
997; Zhu and Sarkis, 2004), focuses mainly on the environ-
ental practices and their connection with traditional business
erformance. A comprehensive analysis of sustainable business
perations should consider all three dimensions simultaneously.
hile the four configurations emerging from this study suggest
nteresting interactions among the three dimensions, the social
imension and the social impact of environmental management
ere not the focus of this study. We suggest that future research
hould more fully tap the conceptual domain of sustainability
WCED, 1987; Wacker, 2004) to better understand how
companies
alance all three dimensions of sustainability.
Finally, more research is needed to investigate the manager’s
ecision-making role in a complex and adaptive supply chain
sys-
em. Such research can provide practical guidance to how
managers
ake responsible decisions (Fiske and Taylor, 1991; Glac, 2009)

nd make decisions under uncertainty (Simon, 1962, 1969; Cyert
nd March, 1963; Eisenhardt and Zbaracki, 1992). A lack of such
uidance has resulted in suboptimal performance in critical envi-
onmental areas such as life cycle assessment (Matos and Hall,
007) and public policies (Pimentel, 2003).
This research provides important insight into the decision-
aking of exemplars in sustainable supply chain management. As
rganizations navigate the trade-offs between profits and envi-
onmental outcomes, their decisions provide the opportunity to
e-conceptualize the supply chain and develop new products and
rocesses, many of which also create new business opportunities
nd long-term competitive advantage.
cknowledgements
This study was partially funded by the Summer Research Grant
t Oregon State University. We thank the firms and numerous
man-
gers who generously devoted their time to participate in this
tudy. We also acknowledge and thank Regina Hauser of The
Natu-
al Step Network (USA) for introducing us to the firms used in
this
tudy and Deborah Rose for helping us with the data collection.
ppendix A. Interview instrument
Review the project. Explain the objectives of the study. Explain
nd clarify that we focus on the environment aspect of the
sustain-
bility issues.
Management 29 (2011) 577–590 589
1. Strategy and practices
1.2 Understand the business model of the company. How does

this company make money because of/in spite of sustain-
ability?
1.3 Internal operations: sustainability operations in terms of
product development, manufacturing and service opera-
tions, lean practice, human resource management, logistics
and marketing.
1.4 Supply chain management: Sourcing, supplier and customer
relationship management. The roles of the suppliers, cus-
tomers, NGOs, competitors, and government.
2. Decision-making
2.2 Technical challenges of being sustainable (i.e. product and
process technology, industry norms, suppliers, customers).
2.3 Organizational challenges (human resources, management
and employees, learning)
2.4 What are the dilemmas, trade-offs and costs in decision-
making? Illustrate with examples and explain the decision-
making process.
3. History
3.1 History and evolution of sustainability practices in the com-
pany.
3.2 Motivations behind the company’s sustainability initiatives.
4. Performance
4.1 The effect of sustainability practices on business perfor-
mance.
4.2 Business performance, environmental and social perfor-

mance as a result of the sustainability practices.
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