17.7 Summary of Learning Objectives

Understand the importance of sustainability in a supply chain. As supply chains have globalized and emerging countries have grown, it has become increasingly clear that the world’s resources and environment will not be able to support this growth unless supply chains become more sustainable. Besides the need to make the world more sustainable, an increased focus on sustainability has allowed some supply chains to reduce risk, become more efficient, and attract some customers who value these efforts.

Discuss the challenge to sustainability posed by the tragedy of the commons. Many actions that improve sustainability of a supply chain impose costs that are local (to an individual, a firm, supply chain, or country) but provide common benefits that are more global. In contrast, a disregard for sustainability provides benefits that are local but costs that are shared globally. As a result, encouraging sustainability without some external pressure, in the form of either a public mandate or an economic incentive, can be difficult.

Describe key dimensions of sustainability for a supply chain. Supply chain sustain- ability can be evaluated in terms of social, environmental, and economic impacts. The social pillar includes the impact on the workforce, customers, and society. The environmental pillar includes resource reduction, emission reduction, and environmental product innovation.

Understand the role of incentives for successful sustainability efforts. The tragedy of the commons makes it difficult to improve sustainability efforts by firms and individuals with- out some external pressure. To decrease resource consumption and increase recycling and remanufacturing, a suitable approach is to tax the producer to encourage resource reduction and reward the recycler to increase the percentage recycled. A price on emissions is the most cost- effective way of reducing emissions. Emissions can be priced through either a carbon tax or a hybrid cap-and-trade mechanism.