Journal of Operations Management 29 (2011) 577590

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

Balancing priorities: Decision-making in sustainable supply chain management

Zhaohui Wu a, , Mark Pagell b,1
a
b

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

a r t i c l e

i n f o

Article history:
Received 28 June 2008
Received in revised form
27 September 2010
Accepted 25 October 2010
Available online 3 November 2010
Keywords:
Green supply chain management
Decision-making
Sustainability

a b s t r a c t
The need for environmental protection and increasing demands for natural resources are forcing companies 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
studies to answer the question: how do organizations balance short-term protability and long-term
environmental sustainability when making supply chain decisions under conditions of uncertainty? We
present ve 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.
2010 Elsevier B.V. All rights reserved.

1. Introduction
Organizations have begun to examine their supply chains in
response to numerous interrelated economic and environmental
challenges such as uctuations in commodity prices and climate
change. Critics confront business as usual and demand sustainable practices. Many organizations initially resist change, but some
companies have recently begun to transform their supply chains in
efforts to become more sustainable.
How difcult this transformation will be is debatable. There is
a body of research which suggests that many organizations can
simultaneously achieve business goals and reduce their environmental impacts (e.g. Russo and Fouts, 1997; Christmann, 2000;
Melnyk et al., 2003). However, while waste and pollution reduction
are aligned with the traditional goals of operations management,
not all environmental practices will bring cost savings and some
will increase costs, especially in the short term. For instance, proactive investment in green technology may not pay off for decades.
And there is evidence that some companies take bold environmental action at the expense of their nancial health (Margolis et al.,
2007). The challenge is how to run a viable business today while
not compromising the natural environment in the future.

Corresponding author. Tel.: +1 541 737 3514; fax: +1 541 737 4890.
E-mail addresses: wuz@bus.oregonstate.edu (Z. Wu), mpagell@schulich.yorku.ca
(M. Pagell).
1
Tel.: +1 416 736 2100x77939.
0272-6963/$ see front matter 2010 Elsevier B.V. All rights reserved.
doi:10.1016/j.jom.2010.10.001

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, organizations 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. Decisions about the trade-off between short-term protability 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) denes a stakeholder
in an organization as any group or individual who can affect, or
is affected by, the achievement of the organizations 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 protability, while
members of the community are likely concerned with the overall 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 setting. Existing research has not addressed the business models and

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Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

decision-making processes underlying sustainable supply chain

management. Understanding these models and processes will shed
light on how organizations manage the intrinsic dynamic and competing priorities between business and environmental goals.
We examine how leading practitioners of sustainable supply
chain management address environmental issues. First, at the
strategic level, we investigate how companies incorporate environmental issues into their overall business and supply chain
strategies. We focus on supply chain decisions that incorporate
environmental issues and the trade-offs these decisions may force
organizations to make. However, since operational strategy is
driven by organizational strategy (Hayes and Wheelwright, 1979),
one must simultaneously understand the role of environmental
issues in organizational decisions.
Second, we explore the decision process itself to understand
how organizations handle the interplay of business and environmental needs, in an environment of uncertainty and/or incomplete
information. We cover four decision areas that are central to understanding the supply chain: product and process design, purchasing
and supply management, internal operations management, and
logistics.
The research takes an incremental step towards understanding how companies incorporate environmental issues into their
supply chain decision-making. We take a grounded approach to
examine the supply chain operations of eight leaders in sustainable
business practices in the United States. Specically, we set out to
explore the following question: how do organizations balance the
need for short-term protability and long-term environmental sustainability when making supply chain decisions under conditions
of uncertainty?

2. Literature and theoretical background

2.1. Balancing economic and environmental priorities
Environmental issues are considered an integral part of the
broad framework of sustainability. The World Commission on Economic Development describes a sustainable business as one that
meets the needs of the present without compromising the ability of future generations to meet their own needs (WCED, 1987).
This denition captures the three intrinsically related dimensions
(social, environmental and economic) of the triple-bottom-line
framework (Elkington, 1998). The triple-bottom-line framework
has gained rapid recognition as evidenced by its incorporation in
a growing number of third-party certication programs such LEED
(usgbc.org) and FSC (fsc.org), as well as a number of sustainability
reporting initiatives such the Climate Action Partnership (2010).
Sustainability means that business activities should also protect
natural resources and the environment, and serve the common
good of society.
Following the growing stream of research on environmental
issues in supply chain management (Linton et al., 2007), we will
focus on the environmental dimension of sustainability. In a supply
chain context this is often referred to as green supply chain management (e.g. Zhu and Sarkis, 2004; Vachon and Klassen, 2006).
The social dimension of sustainability will be discussed only in the
context of the research question we set out to investigate.
Existing studies nd mixed results when examining the relationship between organizations economic and environmental
outcomes. Many studies have found a positive connection between
rms environmental actions and nancial performance (e.g.
Melnyk et al., 2003; Pagell et al., 2004). In operations management
literature this view is often exemplied by the total quality environmental management (TQEM) perspective that sees a strong positive
association between quality management systems and environ-

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 competitiveness can be used to improve environmental outcomes as well,
implying that multiple stakeholders can be simultaneously satised (Curkovic et al., 2000).
However, there is research that suggests that not all stakeholders can be satised 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 rms 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 signicant
investment, radical changes in operational practices and reengineering 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 competition 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 maintaining 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 benets 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 gure out how to balance competing priorities 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 environmental 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 consequences. Organizations may have limited scientic 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 decisions have to incorporate the expectations of external stakeholders
(Freeman, 1984; Donaldson and Preston, 1995). Even when different 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 rationality in considering environment-business trade-offs (March and
Simon, 1993). They can hardly be certain of environmental consequences 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 rst place (Chechile, 1991; Alvesson, 1993).
Because of these limitations researchers have proposed that we
must consider environmental decisions as taking place in complex 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-

Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

mation on the interactions between environmental and economic

parameters, organizations make local decisions that have less than
optimal outcomes at the system level (Frenken, 2001).
Choi et al. (2001) conclude that companies will follow a set of
simple rules or schemas when they make decisions in such rugged
landscapes. The decision-making literature reaches a similar conclusion, pointing out that because of uncertainty, decision makers
resort to simple rules when they search for solutions (Tversky and
Kahneman, 1974; Feldman and Lynch, 1988; Hall and Vredenburg,
2003; Camerer, 1998; Cowell et al., 2002). For instance Zhou (1997)
found that organizations in crisis often adopt rules quickly to induce
predicable behavior. Simple rules provide a way for organizations
to deal with uncertainty and hence are likely a component of how
they approach the inherent uncertainty in supply chain decisions
about environmental sustainability. Such rules are based on the
decision-makers interpretation of their organizations institutional
norms and the information available to them (Eoyang, 1997; Choi
et al., 2001; Frenken, 2001).
While these studies of complex and adaptive systems begin to
examine how companies deal with uncertainty, there is little discussion of how companies make trade-offs in the decision process.
And we do not know if organizations establish simple rules to deal
with uncertainty in environmental trade-off decisions.
Existing studies have informed managers of the interdependency of environmental and economic systems but they fall short
on explaining how organizations handle the competing priorities
of different stakeholders, make sense of the complex supply chain
environment, deal with information uncertainty and take actions
to induce change. This research explores decision-making in this
setting to better explain how organizations manage the short-term
need to remain protable while attaining environmental sustainability and competitiveness.
3. Methods
This study adopted the grounded theory building approach
(e.g. Glaser and Strauss, 1967; Strauss and Corbin, 1990). More
specically, the principles of theory building based on case studies were adopted (Eisenhardt, 1989; McCutcheon and Meridith,
1993; Miles and Huberman, 1994; Yin, 1994). Since we were exploring a relatively new research area, case studies were appropriate
(McCutcheon and Meridith, 1993; Yin, 1994).
3.1. Sampling
This study focuses on organizations environmental decisionmaking, with the unit of analysis being the company or
organization, therefore we took a theoretical sampling approach
to identify companies for this study. We focused on exemplars
in sustainable supply chain management to answer our research
question. All the companies in the sample are leaders in their
industries when it comes to environmental sustainability. One key
criterion for being an exemplar was that the organization had to go
well beyond regulatory compliance in their environmental efforts.
They are also protable and have a record of long term viability.
In addition, by sampling exemplars we were much more likely to
be dealing with organizations that had already addressed obvious
winwin opportunities. Because the low hanging fruit (Walley
and Whitehead, 1994) was more likely to have been picked at these
organizations, they were expected to be dealing with environmental issues with greater levels of uncertainty as well as complex
trade-offs between protability today and sustainability in the
future.
We identied the initial pool of companies through trade magazines such as Sustainable Industries, newspapers such as the New

579

York Times and the Wall Street Journal and membership lists of
non-prot environmental organizations such as The Natural Step
Network (US chapter). Existing studies have found that company
size inuences the likelihood of adopting sustainability practices
and companies of different types of ownership will have different 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 identied and invited to participate 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 control 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 qualitative data analysis. Table 1 proles the participants in the research.
At the request of the participants, we used the generic product/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 member 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 person with responsibility for sustainability. Interviewing multiple
respondents allowed us to examine different areas of a companys
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 companys business model, we asked how sustainable practices are
adopted in internal operations (i.e. R&D, production, and marketing) and supply chain management (i.e. purchasing, customer
relationship management, and logistics). We also gathered information 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, respondents were asked to walk through real cases where the organization
needed to resolve challenging issues. Finally, although the companies 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 journals, 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 rst conducted within-case analysis following the procedures of Miles and Huberman (1994). The coding was conducted

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Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

Table 1
Sampled organizations.
Company

Description

Size/ownership

Process(s) at which they are considered

exemplarsa

Building Renovation

Local custom house remodeler.

Market: homeowners
Regional producer and distributor of cleaning products.
Market: Janitorial service providers
Regional grower and processor of forest products.
Market: Wholesale dimensional lumber
Local pizza restaurant chain with 4 outlets.
Market: Retail food and beverage
Multi-national IT hardware and services provider.
Markets: Consumer electronics and B to B
Multinational producer and distributor of organic and
all-natural snack foods.
Market: retail consumer food
National producer and distributor of authentic period
lighting.
Market: consumer lighting xtures
Global distributor of retail food and beverages.
Market: Retail food and beverage

Medium/private

Product and design service, internal operations

Medium/private

Product development and design, service

operations
Operations

Cleaning Products
Forest and Wood
Pizza Restaurants
IT Hardware
Snack Foods

Period Lighting

Specialty Food & Beverage

a
b

Large/private
Small/private
Large/public

Supply chain design, operations, product

design, supply management
Operations, reverse logistics

Medium/privateb

Operations, supply management

Medium/private

Operations, supply management, distribution

Large/public

Supply management in the developing world,

supply chain design

Based on the external sources used to identify the possible participants in the research.
At the end of our data collection, Snack Foods was bought by a private equity rm.

iteratively. First, each researcher individually coded the data. We

then compared the individually coded data to assure consistency.
We discussed and resolved disagreements before we combined our
data into a consensus document. This process led to clarication
and, on occasion, redenition of the constructs and discussion of
the evidence. The researchers reached consensus on all constructs
before calling the process complete, which assured inter-rater reliability between the two coders was 100%.
The within-case analysis had two objectives. First, we tried to
gain a broad understanding of the business model of each company
and the operations of its supply chain. We determined how the
organization makes money, the role of environmental management
in their product and service value proposition and the impact of
environmental initiatives on nancial performance.
Second, we explored how organizations incorporate environmental initiatives in their decision-making in key areas of supply
chain management and operations including design, operations,
sourcing, and logistics. Respondents were probed specically about
difcult decisions where environmental actions could have a negative impact on the companys nancial performance. We further
asked the managers how they handled information uncertainties,
managed the dilemmas associated with competing stakeholders,
and sorted out possible trade-offs to make decisions. Analysis of
multiple examples and perspectives from multiple managers in
each company provided insight into decision patterns within each
company. Table 2 summarizes the salient supply chain and operations issues in each company.
Cross-case analysis identied common themes as to how
companies handle information uncertainty, make trade-offs, and
balance the potentially competing needs to be protable and environmentally sustainable. Eventually, a coherent understanding of
trade-off decision-making emerged. The ndings are presented in
the next section.
4. Findings
In our analysis, we nd that organizations do indeed face information uncertainty when making environmental decisions, and
that they address this uncertainty by establishing and adopting
simple rules. We also nd that an organizations environmental
posture helps to explain the trade-offs they face as well as the decisions they make. This posture leads to the specic decision rules
that are created. Finally, it is a sequence of decisions that overtime
lead to the development of a unique supply chain.

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 impossible 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). Operating Principles are broad schema to help organizations navigate
information uncertainty and provide decision guidelines while
Technical Standards are created to provide specic 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 specic 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 inuences how the company designs products,
selects suppliers and then tracks every ingredient in their supply chain. They recognize that they do not have the expertise or
resources to quantify the environmental benets of being all natural for every single ingredient they source, but their rationale is
that sourcing only all natural ingredients provides environmental
and health benets in general, even if this is not always true. But
because these specic 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) 577590

581

Table 2
Salient sustainable supply chain management issues in each case.
Company

Price premiuma

Key sustainable supply chain management issues

Building Renovation

Yes

Cleaning Products

No

Forest and Wood

No

Pizza Restaurants

Yes

IT Hardware

No

Snack Foods
Period Lighting

Yes
No

Specialty Food & Beverage

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.
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 signicant resources into
R&D, customer training and creating service-oriented business processes.
Sustainable forestry and production has led to much more efcient operations, but limited top line benets. 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.
Buying locally grown produce creates supply variability. The company pays signicantly 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.
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
Ingredient philosophy mandates strict sourcing control. Packaging imposes a serious environmental challenge.
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.
Rapid growth makes it difcult to nd and maintain supplies of high quality ingredients created in accordance with
Operating Principle that protects growers.

Does the organization get a green premium (charge higher prices) because of its sustainability efforts?

Building Renovations Operating Principle of conserving the

embodied energy in existing buildings does not prescribe specic actions or provide precise directions on how to preserve the
embodied energy in any individual building. Instead, the Operating Principle forces designers to think about choices that can better
utilize natural light and airow within the connes of the existing building and directs on site personnel to reuse material when
possible and minimize scrap in general.
At Period Lighting, the Operating Principle of being thoughtful
and treading lightly appears to be rather intangible, yet it is understood by every employee as the code of conduct and embodies the
ethos of their culture. For example, the management of the company was adamant that they would not outsource pollution. This
meant that they would not use a less expensive supplier who could
not meet their own environmental criteria, regardless of the regulations in the suppliers country. Hence, they delayed outsourcing
to China and India until they could identify and develop suitable suppliers. By postponing outsourcing, they not only incurred
signicant costs, but expended additional resources on supplier
development.
The analysis suggests that when an organization is faced with a
trade-off decision, especially in situations where the environmental
costs or benets of a choice are uncertain, they choose the option
that is best aligned with the Operating Principle. Operating Prin-

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 company needs to make in different areas of operations. Additionally,
since the principles do not prescribe specic actions or choices, they
allow exibility 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 nd that four of the organizations developed Technical
Standards (see Table 3) to specify the scope of particular decisions thus reducing uncertainty and risk and often improving the
ow of information in the chain. Technical Standards are imposed
by management to tackle environmental issues in a specic process 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-prot
organizations to create a supplier certication program and rating
system which offers full transparency and traceability. The sys-

Table 3
Operating Principles and Technical Standards.
Operating Principles
Denition

General schema or simple rules to guide all decisions.

Technical Standards

Specic rules and criteria that dene the scope of a

companys environmental tasks and prescribe decisions.
Main purpose
To offer managers and employees a decision guideline when
To reduce risk, speed decision-making and create standard
information about the environmental challenge and solution is not solution by removing uncertainty for specic or narrow
certain.
decisions.
Range of decisions it can be applied to Used on a daily basis for decision-making at both strategic and
Targeted and focused decision area with relatively narrow
tactical levels.
scope.
Discretion
Remains in hands of decision maker
Removes much discretion from decision maker, codied
rules and measures
Source
Linked to organizational culture, values and broad environmental Supports Operating Principle in single decision-making
issues associated with the product and industry.
area.
Limitation
Broad and often open to employees interpretation and discretion. Creates clear boundaries on what can and cannot be done.
Less useful for deciding how to do something. The scope
and specication of the standard delimit actions.

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Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

Table 4
Operating Principles.
Company

Operating Principle

Explanation

Building Renovation

Conserve the embodied energy

Cleaning Product

Phase out toxic chemicals

Forest and Wood

Never log more than annual growth of the forest

Pizza Restaurants

Use local foods; minimize energy use

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.
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.
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.
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
Snack Foods

This is the only case where no specic Operating Principle

was identied.
All natural ingredients

Period Lighting

Being thoughtful and tread lightly

Specialty Food & Beverage Sustainable agriculture

tem measures the growers environmental practices in areas such

as soil conservation, pest control and efuent management. The
standard also comprises a social component that includes tracking
the ow of money in the supply chain to ensure that growers, not
intermediaries, reap the economic rewards of their environmental
performance.
Snack Foods also has a supplier certication program, but with a
narrower focus than Specialty Food & Beverage. Their supplier certication system demands extensive information from suppliers to
ensure all ingredients provided meet their all natural Technical
Standard. However unlike Specialty Food & Beverage, no attempt
is made to trace money in the chain or to determine other practices (for instance conditions of farm laborers) that are not directly
related to a products status as all natural. This Technical Standard then helps Snack Foods adhere to the Ingredient Philosophy
Operating Principle.
IT Hardware has developed a supplier code of conduct that covers suppliers social and environmental actions and, like supplier
certication, reduces uncertainty about how suppliers behave and
the materials they use. Suppliers promise to refrain from activities
such as child labor or use of banned materials. However, suppliers
need not disclose what they do. Because this code of conduct is less
specic than the other companies supplier certications, it functions more to reduce the risk of supplier non-conformance than as
a conduit of information.
In all three cases the supplier certication functions as a Technical Standard that aids decision-making: buyers may only purchase
from organizations that have been certied or adhere to the code
of conduct. However, the programs vary with the organization.
We also found evidence that Technical Standards were being
used in areas besides supplier certication. Cleaning Products is
a small regional company in an industry dominated by multinationals. They have the additional complication that they both
manufacture their own line of products and distribute products
made by others. They can control what goes into their own cleaning
products, but they have limited control over the organizations for
whom they act as a distributor. To address their desire to distribute
only products that are aligned with their Operating Principle to

Products must be all natural and contain what the label says they contain no
ne print. All natural ingredients philosophy predicates farming and sourcing
practices. This philosophy, which originated from pollution concerns, also
informs pollution reduction effort in the organizations operations.
Be aware of environmental and social consequences of decisions. Minimize
negative impacts try and have positive impacts.
Provide the best quality products without sacricing 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 regulators 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 specic 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 Hardwares business depends on the production of what are
effectively disposable products. Growing their business necessarily increases the ow of discarded products going to landlls, 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 species 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, environmental decisions in these areas are well-dened and can be
measured objectively. As a result, managers making these decisions are not as burdened as managers who only have an Operating
Principle to guide them. Operating Principles reduce information uncertainty by setting a broad environmental agenda and
prescribing guidelines, while Technical Standards further remove
uncertainty from specic 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 Operating Principle, but could have numerous Technical Standards.
Our ndings corroborate Zhous (1997) observation that organizations 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

Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

values of the organization and incorporate the institutional interpretation of the issues they face. Thus decision makers in each
organization share a common understanding of the rules, which
in turn induces predicable behavior, a necessity for organizational
control in a dynamic environment.
P1: Organizations develop Operating Principles and Technical Standards in order to make decisions about environmental
issues.
P1a: The Operating Principles and Technical Standards reect
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 specic environmental issue.
P1c: The development of an Operating Principle or Technical
Standard reduces uncertainty when making decisions relating
to environmental actions supporting the organizations values
when there is a trade-off between environmental and economic
goals and improving decision efciency.

4.2. A committed workforce

A committed workforce is one of the concrete ways that the
studied organizations mitigate trade-offs between short term profitability and long term environmental sustainability. All eight
organizations noted that their sustainability initiatives had provided signicant benets in recruiting and retaining workers. More
importantly, these organizations had committed workforces which
they leveraged to make continuous improvements and to innovate.
A frequent refrain from the respondents was that they had personally sought work at this specic organization because of how it
did business. For instance an employee who left a leader in the
global logistics industry to manage distribution and shipping at
Lighting Products told us: This is where I wanted to work, and of
course took a substantial cut in pay. . . It is because of the thoughtfulness that goes into our product. . . how we treat our employees,
you know, how we are in the community.
And it was not just managers who sought employment at these
organizations, this occurred at all organizational levels. People were
highly motivated to work for these companies for non-economic
reasons.
Employees who willingly sacrice higher pay for what they see
as higher ideals allow these organizations to hire and retain talent
for lower costs than their less sustainable competitors. And even
in organizations that paid at or above industry averages, commitment still lead to specic savings. Operational employees worked
for Pizza Restaurants for years, in an industry where average yearly
staff turnover at the time of data collection was over 80%. The organizations in the sample were then spending less on compensation,
recruitment, training, and the like.
The most important benets from the committed workforces
would not show up directly on a balance sheet. Lighting Products distribution manager not only took a pay cut to join the
organization; she came with knowledge and experience base that
competitors likely could not match. And while Specialty Food and
Beverage could match salaries at the Fortune 500, they were able
to offer the chance for top managers to change the world in a
positive way, a signicant motivation for many of our respondents.
Respondents noted that their employees wanted to come to
work; they helped to spread the message to customers and
improved the organization in innovative ways they would not have
without their commitment to the organization and its ethos. Pizza

583

Restaurants staff helped develop alternative means of pizza delivering; 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 Renovation to nd 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 knowledgeable 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 nancial 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 organizations because of the benets 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 organizational performance outcomes and the trade-off between
short-term economic viability and long term environmental sustainability. 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 organizations.
The studied organizations are leaders in sustainability, yet they
usually do not address environmental issues at the expense of their
companies nancial well-being. These managers are as pragmatic
as their counterparts at less sustainable organizations. Several of
them asked us to clarify the denition of sustainability and made
the point that one has to be economically sustainable to be environmentally sustainable. For these organizations, there is always
the tension to gure 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 protable.
The respondents offered many examples where the costs of
an environmental initiative were currently too high. Period Lightings 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 retrotted 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 outcomes.
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. Similarly, 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

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Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

Table 5
Examples of trade-offs where the organization is practical or prioritizes short term
prots.
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 ne.
Forest and Wood
Being Forest Stewardship council (FSC) certied
has brought increased brand awareness, but the
company does not always promote FSC because
the certied 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 50100% 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 efcient,
yet the company cannot economically justify a
renovation.
Produce xtures 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 owners discretion.
Has not been successful in shifting consumers (in
general) to reusable packaging.
a

To protect anonymity and proprietary information numbers have been changed.

seasonal basis. Management worries that their all-natural products

have lost their meaning, given the high energy involved in storing
the ingredients.
Individual decisions about environmental issues are then very
pragmatic and all of the organizations keep sight of the fact that
they must be both economically and environmentally sustainable.
In the short term this often means placing prots rst.
All good managers make decisions that minimize costs and or
maximize customer satisfaction. What makes these organizations
unique is that the environmental impacts are part of the daily conversation such that they do not accept the status quo and actively
work to mitigate the trade-offs they identify. The end result is that
they remain economically viable in the short term as they try to
become more environmentally sustainable over the long term.
This pragmatism is exemplied by a packaging problem at Snack
Foods. The transportation of their products required the use of a
non-recyclable bag made up of multiple layers of virgin plastics
and metal. When the expiration date of their products was reduced
due to faster turnover, they immediately decided to remove a layer
of plastic from the bag because it was no longer needed to preserve the freshness of the products. While such changes also reduce
costs, the managers primary concern was plastic usage, not cost. It
had become natural for them to consider environmental implications when business conditions changed. This incremental progress
supports the notion of TQEM (Curkovic et al., 2000) sustainable
practices are part of a companys continuous improvement effort.
P3a: Incremental changes through continuous improvement
take place when companies make decisions to conserve

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 sufcient. Our analysis suggests that
these exemplar companies may have radically different environmental practices because of the dynamic interplay between trying
to adhere to the Operating Principle and making tactical tradeoff 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 environmental values and Operating Principles contend with practical
constraints, creating cognitive tension. This tension pushes organizations 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-nishing process that
created a stream of toxic contaminants that were discharged into
the sewer system, leading to close monitoring by the local environmental regulator. This process was unsatisfactory because of both
the environmental impact and the paperwork involved and frequent 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 development of a closed-loop system that differed radically from traditional
systems. The upfront costs of this change were high, but the organization justies 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 Renovations 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 deconstructing a building. In one case, instead of specifying new lumber,
a carpenter used 1920s vintage studs found in a local shop selling used building/remodeling materials at discount price. Practices
like this were promoted as success stories to employees and external contract workers. Designers and workers were encouraged to
improvise to nd 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 nancial and other business constraints similar to other companies. And the trade-off decisions they make
do not always favor more environmentally oriented choices, especially in the short run. Yet at the same time, we nd that rather
than using cost and resource constraints as an excuse for inaction, these companies search for cost-neutral solutions and become
more innovative. As a result, the committed workforces create supply 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 customer 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-

Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

nization faced in the specic setting. However, the unique supply

chains we studied were the result of multiple decisions made over
extended periods of time. Therefore, we re-examined the data, analyzing multiple decisions simultaneously to get a better sense of
the implications of multiple choices. This showed that the organizations often balanced short term economic needs and long term
environmental needs with a sequence of decisions. We nd that
there is an underlying relationship among an organizations decisions and these decisions are not independent. This connectivity
between decisions helps to explain the differences between the
sample companies and their peers in terms of supply chain environmental practice and performance.
Each organization started by addressing an initial environmental opportunity or need. This action led to future opportunities and
changes that were possible because of both accumulated learning and changes taking place in the organizations operations and
supply chain infrastructure.
For example Forest and Wood Products stopped taking water
from the local river, thus improving resource efciency and
addressing potential water shortages in the region. Their initial
decision was to treat and reuse water within the plant. They leased
the only available piece of farm land and built a wetland to store
and treat the discharge, but the wetland turned out to be too
small to store all of the treated water, forcing them to nd a way
to use the extra treated water immediately. Workers and engineers realized that they could cut electricity use by modifying the
heat exchange and cooling systems in the production process to
make use of the extra water. The initial decision to stop taking
water forced managers to re-engineer the production process. A
single decision to reduce water use led to sequence of decisions.
The result a much different production process not only uses
less water, but also requires less energy to run, freeing up capital. Simultaneously the organization learned not only about water
and energy use, but about improving operations. Finally, the experience motivated workers who saw immediate benets from their
efforts in terms of facility efciency and in their communitys water
supply.
By analyzing the decisions at each company holistically, we
began to recognize the inherent logic among many of their decisions. Specically, earlier environmental actions lead to new
challenges and opportunities, and trigger new choices and actions.
Some decisions are directly inuenced by earlier decisions, and subsequent decisions sometimes replicate the logic of earlier decisions
even though there is no direct operational linkage among them.
For instance at Specialty Food & Beverage, the standard for the
key agricultural product was later adopted for other agricultural
products. Similarly, Building Renovation applied what they learned
about saving energy, with the accumulated knowledge eventually
leading to a more holistic design philosophy based on viewing the
building as a system.
There are two main implications of looking at the organizations sequence of environmental decisions. First, the organizations
assess the feasibility of multiple environmental actions simultaneously, taking actions when feasible and compromising when they
have to. Second, over time the outcome of this sequence of decisions is the unique supply chain system that arises from continuous
improvement and innovation in an attempt to mitigate tradeoffs
while adhering to the Operating Principle.
P3c: Companies decisions addressing environmental issues are
sequential, where earlier decisions induce further choices that
are unique/specic 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

585

decisions fundamentally change a companys value proposition, tacit knowledge of environmental management and supply
chain structure.
4.4. Environmental postures
One of the core objectives of these case analyses was to identify the business model of each organization emphasizing how
each organization incorporated environmental concerns in strategic 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 business models in the context of the triple bottom line framework. The
analysis suggested that the organizations address sustainability differently 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. Specically,
we nd that they congure social, environmental and business
strategies differently. We use the term strategy not in the sense
of Porters generic strategies (Porter, 1980) which are contentbased, but instead follow Mintzberg and Waters (1985) concepts
of realized and intended strategies. Our interest lies in the realized congurations of environmental behaviors, social behaviors
and business strategy. These congurations, which we will refer to
as environmental postures, are then the result of a pattern of decisions 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 importantly 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 commonality is that their founders values led them to capitalize on
environmental issues in the creation of a viable business. For organizations 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 environmentally 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 decisions, 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 customers are made aware that their pizza is made from local and
often organic ingredients, cooked in an energy efcient manner,
and delivered using a carbon-neutral vehicle. Their environmental attributes are also quality attributes, so their pizza is better
for both the customer and the environment. When these organizations improve their environmental performance, the customer also
benets via higher quality products and a healthier environment.
Because the customers explicitly benet from the companys environmental 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-

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Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

Table 6
Environmental postures.
Posture/companies

The role of environmental issues in

business strategy

What it means to customers

Triple-bottom-line implications

Environment rst
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 rst
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 rst
IT Hardware
Specialty Food &
Beverage

Environmental issues addressed

because poor environmental
performance was not congruent with
social values.

A socially responsible product that

customers are willing to pay extra for
as long as it does not harm the
environment.

Environmental aspect of
triple-bottom-line is deemphasized
relative to economic and social aspects.

tal issues. The owners and managers at these organizations take

great pride in their ability to be both green and nancially successful. While all show a concern for people and societal issues, they
are primarily motivated by a concern for the environment. From an
outcome perspective these organizations are leaders environmentally, are differentiated from their competitors and able to charge
price premiums, but are generally not leaders or signicantly differentiated 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 prot margins and average social outcomes.
4.4.2. The Equal Footing posture
Two organizations, Forest & Wood Products and Period Lighting comprise the Equal Footing posture. Their key commonality is
that they have always done business sustainably, and their environmental and social efforts directly benet employees, suppliers
and local communities. In these organizations environmental and
social issues are highly integrated and equally important.
Specically, Forest & Wood Products conservation-based philosophy has allowed them to maintain a stable workforce while
the forestry industry as a whole has experienced declining employment and production over the past two decades. This approach does
limit growth and prots in some years, but in return they have provided decent-paying jobs to their employees and stability to the
communities in which they operate.
Similarly, Period Lighting is willing to forgo some potential profits in order to meet environmental goals such as not outsourcing
pollution and social goals such as employing refugees who often
require extra-training. Like Forest & Wood Products, Period Lighting used a conservation mindset to redesign operations. They have
used TQEM principles to reduce the impact of production facilities (theirs and suppliers), while increasing efciency and allowing
them to offer better working conditions for employees and overseas
suppliers. Like members of the Environment First posture these
organizations are able to attain resource efciency in many areas
of their supply chains.
The organizations in the Equal Footing posture are willing to
internalize some of the environmental costs that are not presently
mandated by existing regulations to provide long term benets to employees, suppliers, and the communities in which they
operate. These organizations are leaders environmentally and

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 signicantly different from the previous 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 pursued environmental sustainability as a way to achieve economic
goals.
The organization faced a commodity trap because their customers bought janitorial supplies based on price, and national
competitors had economies of scale they could not match. By reformulating 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 specic attributes, including low prices.
Because customer expectations are slow to change, the management 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. Organizations 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 signicantly differentiated from
competitors when it comes to social outcomes.

Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

P4c: In the Opportunity First posture the economic aspect of

triple-bottom-line is most heavily weighted with the environmental 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 performance.

587

Strategic trade-offs among all elements of the triple-bottom-line

are then a function of the environmental posture of the organization.
P5: A companys environmental posture predicts which elements 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

4.4.4. The Community First posture

Two organizations, IT Hardware and Specialty Food & Beverage compose the Community First posture. Their key commonality
is that they address environmental issues in reaction to threats to
their socially sustainable values and branding. Both organizations
valued people and communities and both had brands that were
built on these values to some extent. And both took on environmental initiatives only when the negative environmental impacts
of their business became a salient managerial concern.
Specialty Food & Beverage had a reputation for caring about the
community and protecting their workers well-being. As the company grew, close scrutiny from the public and NGOs compelled
them to consider environmental issues in food-growing countries.
To protect the environment and communities where it purchased,
Specialty Food & Beverage created a supply chain that was fundamentally different from the industry norm. They used a Technical
Standard (supplier certication) linked to nancial incentives to
manage supplier environmental and social performance and bring
supply chain management into line with the organizations and
external stakeholders values.
Similarly, IT Hardware had a reputation for commitment to
employees welfare as well as a culture built on a history of innovation. The environmental problems created by disposable products
were incongruent with the organizations culture. This was magnied by changing regulation which was also putting pressure on
their business model. In response, IT Hardware created a worldwide closed-loop supply chain to collect and recycle its disposable
products. However, their solution had to protect the existing business model built on disposable products, and has turned out to be
very expensive.
In addition to continuing to communicate their messages of
being socially aware, these organizations now explicitly communicate their environmental messages of reducing impacts and
conserving resources to customers. However, not all of their
environmental efforts directly benet customers. IT Hardwares
environmental goals are not currently aligned with their economic
goals. Environmental management at these organizations is often
undertaken either to minimize risk or in response to a misalignment between existing business models and social values. These
organizations are leaders socially and above average environmentally, but from an economic perspective the reactive nature of some
of 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 prot margins
and above average environmental outcomes.
In conclusion, the four postures offer important insight into our
research question. They suggest that even the leaders in green supply chain management are on different trajectories with different
motivations. More importantly, they also explain how organizations prioritize elements of the triple-bottom-line and determine
which stakeholders are most important when making decisions.

We set out to answer the question: how do organizations

balance short-term protability and long-term environmental sustainability when making supply chain decisions under conditions
of uncertainty? Summarizing the results from our systematic
examination of the supply chain operations of eight exemplar organizations, we have three core ndings.
First, we nd that managers in the eight sampled organizations
often lack sufcient information in making environmental decisions. 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 inuence in
ones supply chain, all can contribute to the uncertain decision environment. 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 nd 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 dilemmas, nor that they often put prots rst. Rather it is what happens
after a trade-off is identied that makes these organizations successful both environmentally and economically.
Specically, the companies in our sample maintain business
viability and nancial health while pushing for improved environmental outcomes. We nd that these organizations make practical
environmental decisions; environmental efforts have to make business sense. However, cost and other resource constraints do not
necessarily hamper environmental innovation. In fact, environmental 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 prots and sustainability, but also shortterm growth and long-term competitiveness. These challenges are
addressed by committed workers who are intrinsically motivated
by the organizations values and objectives.
Finally, we are able to specify four unique environmental postures which capture environmental strategies through empirical
specication of archetypes based on the actual behaviors of these
rms. Specication 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 postures capture unique conguration 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 triplebottom-line.
In this sense, our study moves beyond a normative prescription that companies need to strive for excellence across all three
dimensions of the triple-bottom-line. Our ndings offer an understanding 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

588

Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

Continuous
Improvement

Environmental
Posture

Operating Principle
and Technical
Standard(s)

A Sequence of Tradeoff Decisions

Incremental
Environmental
Performance Gains

Radical Change in
Supply Chain
Structure and
Operational Practices

Committed
Workforce

Fig. 1. Sequential trade-off decisions in a sustainable supply chain.

usually do not equally emphasize all three dimensions. Only organizations with the Equal Footing posture are able to integrate the
three dimensions in a balanced fashion.
The organizations adopt environmental initiatives proactively
to protect their brands and differentiate themselves in competitive markets. Our analysis suggests that these companies are able
to establish distinct sustainable supply chain practices and routines that allow them to compete with the norm in their industry;
meanwhile, such practices and routines contain difcult-to-imitate
capabilities. Research that uses the resource-based view of the rm
to explore environmental outcomes (e.g. Russo and Fouts, 1997)
would predict this outcome. Our research helps to understand the
decision-making processes that lead to this outcome.
Our analysis shows that it was a sequence of decisions made
over time, as well as the inter-relatedness of these decisions, that
enabled the organizations to create differentiated supply chains
that are economically and environmentally viable (See Fig. 1).
A companys environmental posture leads to the development
of the Operating Principle and Technical Standard(s) that drive the
decisions the organization makes. Operating Principles and Technical Standards are central to environmental decision-making in the
studied organizations because they set decision boundaries, reduce
uncertainty, and reduce the search space for acceptable solutions.
By providing direction and boundaries, the principles and standards
not only make decision-making tractable, they make it more efcient because fewer options need to be considered and less time is
taken with justifying choices.
The commitment of the workforce is also a key component
of mitigating trade-offs and creating a unique supply chain. In
addition to reducing the actual costs of training, retention and
compensation, the committed workforce is a source of knowledge. These committed workforces are willing and able to provide
their knowledge and tackle difcult problems that might not be
addressed by similarly paid workers at competitors. These organizations can then address environmental issues at a lower cost than
less-sustainable competitors in the same situation.
Many of the individual decisions will be incremental and occur
through the continuous improvement of the existing supply chain.
However, over time the sequence of organizational decisions makes
puts it on a unique trajectory. And as the organization travels further down this vector it builds a supply chain radically different
from its less-sustainable competitors. Each decision informs subsequent decisions, creating a feedback loop of knowledge, practices
and routines that moves the organization along their unique trajectory.
The creation of a supply chain that is more sustainable than competitors implies that the supply chain has fewer trade-offs between

economic and environmental outcomes. However, this same process 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 denition) 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 signicant practical implications. First, the
four environmental postures provide managers with a template
to examine their strategic options and create sustainable business 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 sustainable 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 stakeholders 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 decisions have a profound impact on a wide range of supply chain
issues and an organizations 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 increasing attention in recent years. Besides addressing technical issues

Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577590

such as product design and reverse logistics (Guide et al., 2003),

researchers have started to address broad strategic issues (Linton
et al., 2007) that involve system implementation (Sroufe, 2003),
manufacturing strategy (Klassen and Whybark, 1999; Corbett
and Kirsch, 2001) and supply chain system design (Karakayali
et al., 2007; Matos and Hall, 2007). Along this line, our study
takes another incremental step to understanding companies
environmental decision-making processes. There are still many
unanswered questions.
First and foremost, the external validity of our proposed theory
remains to be empirically tested. Like all case studies, the theory is
limited by the idiosyncratic nature of the cases (Eisenhardt, 1989).
For instance, both companies in the Community First posture are
large publicly owned companies. We do not know how these companies would behave today if they were privately owned, though
we do know that Specialty Food & Beverage developed their social
values when they were a small private origination, strongly suggesting that this posture is not the sole domain of large public
companies. Regardless, future research should use large samples
to test the propositions empirically.
Second, sustainable supply chain management concerns all
three dimensions outlined in the triple-bottom-line framework.
This study, like many other supply chain studies (Handeld et al.,
1997; Zhu and Sarkis, 2004), focuses mainly on the environmental practices and their connection with traditional business
performance. A comprehensive analysis of sustainable business
operations should consider all three dimensions simultaneously.
While the four congurations emerging from this study suggest
interesting interactions among the three dimensions, the social
dimension and the social impact of environmental management
were not the focus of this study. We suggest that future research
should more fully tap the conceptual domain of sustainability
(WCED, 1987; Wacker, 2004) to better understand how companies
balance all three dimensions of sustainability.
Finally, more research is needed to investigate the managers
decision-making role in a complex and adaptive supply chain system. Such research can provide practical guidance to how managers
make responsible decisions (Fiske and Taylor, 1991; Glac, 2009)
and make decisions under uncertainty (Simon, 1962, 1969; Cyert
and March, 1963; Eisenhardt and Zbaracki, 1992). A lack of such
guidance has resulted in suboptimal performance in critical environmental areas such as life cycle assessment (Matos and Hall,
2007) and public policies (Pimentel, 2003).
This research provides important insight into the decisionmaking of exemplars in sustainable supply chain management. As
organizations navigate the trade-offs between prots and environmental outcomes, their decisions provide the opportunity to
re-conceptualize the supply chain and develop new products and
processes, many of which also create new business opportunities
and long-term competitive advantage.
Acknowledgements
This study was partially funded by the Summer Research Grant
at Oregon State University. We thank the rms and numerous managers who generously devoted their time to participate in this
study. We also acknowledge and thank Regina Hauser of The Natural Step Network (USA) for introducing us to the rms used in this
study and Deborah Rose for helping us with the data collection.
Appendix A. Interview instrument
Review the project. Explain the objectives of the study. Explain
and clarify that we focus on the environment aspect of the sustainability issues.

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 sustainability?
1.3 Internal operations: sustainability operations in terms of
product development, manufacturing and service operations, lean practice, human resource management, logistics
and marketing.
1.4 Supply chain management: Sourcing, supplier and customer
relationship management. The roles of the suppliers, customers, 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 decisionmaking? Illustrate with examples and explain the decisionmaking process.
3. History
3.1 History and evolution of sustainability practices in the company.
3.2 Motivations behind the companys sustainability initiatives.
4. Performance
4.1 The effect of sustainability practices on business performance.
4.2 Business performance, environmental and social performance as a result of the sustainability practices.

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