Journal of Operations Management 29 (2011) 577–590

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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
Oregon State University, College of Business, 200 Bexell Hall, Corvallis, OR 97331-2603, United States
b
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 a b s t r a c t

Article history: The need for environmental protection and increasing demands for natural resources are forcing com-
Received 28 June 2008 panies to reconsider their business models and restructure their supply chain operations. Scholars and
Received in revised form proactive companies have begun to create more sustainable supply chains. What has not been fully
27 September 2010
addressed is how organizations deal with short-term pressures to remain economically viable while
Accepted 25 October 2010
implementing these newly modeled supply chains. In this study, we use theory-building through case
Available online 3 November 2010
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
Keywords:
Green supply chain management
present five sets of propositions that explain how exemplars in green supply chain management make
Decision-making decisions and balance short and long term objectives. We also identify four environmental postures
Sustainability 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 Managing this trade-off is going to test every organization – and

Organizations have begun to examine their supply chains in
response to numerous interrelated economic and environmental
challenges such as fluctuations in commodity prices and climate
change. Critics confront “business as usual” and demand sustain-
able practices. Many organizations initially resist change, but some
companies have recently begun to transform their supply chains in
efforts to become more sustainable.
How difficult 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 environ-
mental 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, proac-
tive investment in green technology may not pay off for decades.
And there is evidence that some companies take bold environmen-
tal action at the expense of their financial 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.
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

0272-6963/$ – see front matter © 2010 Elsevier B.V. All rights reserved.
doi:10.1016/j.jom.2010.10.001
578 Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577–590
decision-making processes underlying sustainable supply chain
management. Understanding these models and processes will shed
light on how organizations manage the intrinsic dynamic and com-
peting 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 envi-
ronmental 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 environ-
mental needs, in an environment of uncertainty and/or incomplete
information. We cover four decision areas that are central to under-
standing the supply chain: product and process design, purchasing
and supply management, internal operations management, and
logistics.
The research takes an incremental step towards understand-
ing 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. Specifically, we set out to
explore the following question: how do organizations balance the
need for short-term profitability and long-term environmental sus-
tainability 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 Eco-
nomic Development describes a sustainable business as one “that
meets the needs of the present without compromising the abil-
ity of future generations to meet their own needs” (WCED, 1987).
This definition 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 certification 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 man-
agement (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 find mixed results when examining the rela-
tionship between organizations’ economic and environmental
outcomes. Many studies have found a positive connection between
firms’ environmental actions and financial performance (e.g.
Melnyk et al., 2003; Pagell et al., 2004). In operations management
literature this view is often exemplified by the total quality environ-
mental 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 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-
 Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577–590
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 con-
clusion, 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 organization’s 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 dis-
cussion 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 interdepen-
dency 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 profitable while attaining environmental sustain-
ability and competitiveness.
3. Methods
This study adopted the grounded theory building approach
(e.g. Glaser and Strauss, 1967; Strauss and Corbin, 1990). More
specifically, the principles of theory building based on case stud-
ies were adopted (Eisenhardt, 1989; McCutcheon and Meridith,
1993; Miles and Huberman, 1994; Yin, 1994). Since we were explor-
ing a relatively new research area, case studies were appropriate
(McCutcheon and Meridith, 1993; Yin, 1994).
3.1. Sampling
This study focuses on organizations’ environmental decision-
making, 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 profitable 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
win–win 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 environmen-
tal issues with greater levels of uncertainty as well as complex
trade-offs between profitability today and sustainability in the
future.
We identified the initial pool of companies through trade mag-
azines such as Sustainable Industries, newspapers such as the New
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
Building Renovation Local custom house remodeler.
Market: homeowners
Cleaning Products Regional producer and distributor of cleaning products.
Market: Janitorial service providers
Forest and Wood Regional grower and processor of forest products.
Market: Wholesale dimensional lumber
Pizza Restaurants Local pizza restaurant chain with 4 outlets.
Market: Retail food and beverage
IT Hardware Multi-national IT hardware and services provider.
Markets: Consumer electronics and B to B
Snack Foods Multinational producer and distributor of organic and
all-natural snack foods.
Market: retail – consumer food
Period Lighting National producer and distributor of authentic period
lighting.
Market: consumer lighting fixtures
Specialty Food & Beverage Global distributor of retail food and beverages.
Market: Retail food and beverage
a
Based on the external sources used to identify the possible participants in the research.
b
At the end of our data collection, Snack Foods was bought by a private equity firm.
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 clarification
and, on occasion, redefinition of the constructs and discussion of
the evidence. The researchers reached consensus on all constructs
before calling the process complete, which assured inter-rater reli-
ability 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 financial performance.
Second, we explored how organizations incorporate environ-
mental initiatives in their decision-making in key areas of supply
chain management and operations including design, operations,
sourcing, and logistics. Respondents were probed specifically about
“difficult” decisions where environmental actions could have a neg-
ative impact on the company’s financial 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 opera-
tions issues in each company.
Cross-case analysis identified common themes as to how
companies handle information uncertainty, make trade-offs, and
balance the potentially competing needs to be profitable and envi-
ronmentally sustainable. Eventually, a coherent understanding of
trade-off decision-making emerged. The findings are presented in
the next section.
4. Findings
In our analysis, we find that organizations do indeed face infor-
mation uncertainty when making environmental decisions, and
that they address this uncertainty by establishing and adopting
simple rules. We also find that an organization’s environmental
posture helps to explain the trade-offs they face as well as the deci-
sions they make. This posture leads to the specific decision rules
that are created. Finally, it is a sequence of decisions that overtime
lead to the development of a unique supply chain.
Size/ownership Process(s) at which they are considered
exemplarsa
Medium/private Product and design service, internal operations
Medium/private Product development and design, service
operations
Large/private Operations
Small/private Supply chain design, operations, product
design, supply management
Large/public 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
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
Operating Principle that protects growers.
a
Does the organization get a green premium (charge higher prices) because of its sustainability efforts?

Building Renovation’s Operating Principle of conserving the
embodied energy in existing buildings does not prescribe spe-
cific actions or provide precise directions on how to preserve the
embodied energy in any individual building. Instead, the Operat-
ing Principle forces designers to think about choices that can better
utilize natural light and airflow within the confines of the exist-
ing 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 under-
stood by every employee as the code of conduct and embodies the
ethos of their culture. For example, the management of the com-
pany 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 regu-
lations in the supplier’s country. Hence, they delayed outsourcing
to China and India until they could identify and develop suit-
able suppliers. By postponing outsourcing, they not only incurred
significant 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 benefits 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 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-

Table 3
Operating Principles and Technical Standards.

Operating Principles Technical Standards

Definition General schema or simple rules to guide all decisions. Specific rules and criteria that define the scope of a
company’s 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 specific 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, codified
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 specification of the standard delimit actions.
582 Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577–590
Table 4
Operating Principles.
Company Operating Principle
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
IT Hardware This is the only case where no specific Operating Principle
was identified.
Snack Foods 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 effluent management. The
standard also comprises a social component that includes tracking
the flow 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 certification program, but with a
narrower focus than Specialty Food & Beverage. Their supplier cer-
tification 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 prac-
tices (for instance conditions of farm laborers) that are not directly
related to a product’s status as all natural. This Technical Stan-
dard then helps Snack Foods adhere to the Ingredient Philosophy
Operating Principle.
IT Hardware has developed a supplier code of conduct that cov-
ers suppliers’ social and environmental actions and, like supplier
certification, 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
specific than the other companies’ supplier certifications, it func-
tions more to reduce the risk of supplier non-conformance than as
a conduit of information.
In all three cases the supplier certification functions as a Techni-
cal Standard that aids decision-making: buyers may only purchase
from organizations that have been certified 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 certification. Cleaning Products is
a small regional company in an industry dominated by multi-
nationals. 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
Explanation
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.
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.
Be aware of environmental and social consequences of decisions. Minimize
negative impacts – try and have positive impacts.
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
 Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577–590
values of the organization and incorporate the institutional inter-
pretation 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 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.
4.2. A committed workforce
A committed workforce is one of the concrete ways that the
studied organizations mitigate trade-offs between short term prof-
itability and long term environmental sustainability. All eight
organizations noted that their sustainability initiatives had pro-
vided significant benefits 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 per-
sonally sought work at this specific 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 thought-
fulness 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 sacrifice 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, commit-
ment still lead to specific 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 orga-
nizations in the sample were then spending less on compensation,
recruitment, training, and the like.
The most important benefits from the committed workforces
would not show up directly on a balance sheet. Lighting Prod-
ucts’ 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 significant 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 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 Management 29 (2011) 577–590
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
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 profits first.
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 con-
versation 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 exemplified 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 pre-
serve 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 implica-
tions when business conditions changed. This incremental progress
supports the notion of TQEM (Curkovic et al., 2000) – sustainable
practices are part of a company’s 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 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-
 Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577–590
nization faced in the specific 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, ana-
lyzing multiple decisions simultaneously to get a better sense of
the implications of multiple choices. This showed that the organi-
zations often balanced short term economic needs and long term
environmental needs with a sequence of decisions. We find that
there is an underlying relationship among an organization’s deci-
sions 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 envi-
ronmental practice and performance.
Each organization started by addressing an initial environmen-
tal opportunity or need. This action led to future opportunities and
changes that were possible because of both accumulated learn-
ing and changes taking place in the organization’s operations and
supply chain infrastructure.
For example Forest and Wood Products stopped taking water
from the local river, thus improving resource efficiency 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 find a way
to use the “extra treated water” immediately. Workers and engi-
neers 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 capi-
tal. Simultaneously the organization learned not only about water
and energy use, but about improving operations. Finally, the expe-
rience motivated workers who saw immediate benefits from their
efforts in terms of facility efficiency and in their community’s water
supply.
By analyzing the decisions at each company holistically, we
began to recognize the inherent logic among many of their deci-
sions. Specifically, earlier environmental actions lead to new
challenges and opportunities, and trigger new choices and actions.
Some decisions are directly influenced by earlier decisions, and sub-
sequent 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 organiza-
tions’ sequence of environmental decisions. First, the organizations
assess the feasibility of multiple environmental actions simultane-
ously, taking actions when feasible and compromising when they
have to. Second, over time the outcome of this sequence of deci-
sions 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/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
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-
586 Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577–590
Table 6
Environmental postures.
Posture/companies The role of environmental issues in
business strategy
Environment first Environmental issues addressed as
Building Renovation part of their initial business plan.
Pizza Restaurants Achieving their business agenda helps
Snack Foods achieve their environmental agenda.
Equal footing Environmental and social issues
Forest and Wood equally addressed as part of business
Period Lighting plan.
Opportunity first Environmental issues addressed as a
Cleaning Products business opportunity.
Community first Environmental issues addressed
IT Hardware because poor environmental
Specialty Food & performance was not congruent with
Beverage social values.
tal issues. The owners and managers at these organizations take
great pride in their ability to be both green and financially success-
ful. 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 environmen-
tally, are differentiated from their competitors and able to charge
price premiums, but are generally not leaders or significantly dif-
ferentiated 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.
4.4.2. The Equal Footing posture
Two organizations, Forest & Wood Products and Period Light-
ing comprise the Equal Footing posture. Their key commonality is
that they have always done business sustainably, and their envi-
ronmental and social efforts directly benefit employees, suppliers
and local communities. In these organizations environmental and
social issues are highly integrated and equally important.
Specifically, Forest & Wood Products’ conservation-based phi-
losophy has allowed them to maintain a stable workforce while
the forestry industry as a whole has experienced declining employ-
ment and production over the past two decades. This approach does
limit growth and profits in some years, but in return they have pro-
vided decent-paying jobs to their employees and stability to the
communities in which they operate.
Similarly, Period Lighting is willing to forgo some potential prof-
its 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 Light-
ing used a conservation mindset to redesign operations. They have
used TQEM principles to reduce the impact of production facili-
ties (theirs and suppliers’), while increasing efficiency 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 efficiency 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 bene-
fits to employees, suppliers, and the communities in which they
operate. These organizations are leaders environmentally and
What it means to customers Triple-bottom-line implications
A green product offering that they are Social aspect of triple-bottom-line is
willing to pay extra for. deemphasized relative to economic
and environmental aspects.
A responsible organization that charges Balanced approach to
basically the same prices as other triple-bottom-line that means all
organizations that are less responsible. aspects equally weighted which can
limit short term growth
A green product offering that comes Economic aspect of triple-bottom-line
from an organization without a long most heavily weighted, environmental
pedigree of being green: there is little aspect of nearly equal importance,
to no price premium. social aspect not emphasized
A socially responsible product that Environmental aspect of
customers are willing to pay extra for triple-bottom-line is deemphasized
as long as it does not harm the relative to economic and social aspects.
environment.
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.
 Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577–590 587

P4c: In the Opportunity First posture the economic aspect of Strategic trade-offs among all elements of the triple-bottom-line
triple-bottom-line is most heavily weighted with the environ- are then a function of the environmental posture of the organiza-
mental aspect of nearly equal importance and the social aspect tion.
not emphasized.
P5: A company’s environmental posture predicts which ele-
P4c1: Organizations with an Opportunity First posture will have ments of the triple-bottom-line it will prioritize when facing a
above average growth rates, be exemplars on certain aspects strategic trade-off in decision-making. The organizations’ triple
of environmental performance and have average social perfor- bottom line performance will be predicated on their priorities.
mance.
5. Discussion
4.4.4. The Community First posture
We set out to answer the question: how do organizations
Two organizations, IT Hardware and Specialty Food & Bever-
balance short-term profitability and long-term environmental sus-
age compose the Community First posture. Their key commonality
tainability when making supply chain decisions under conditions
is that they address environmental issues in reaction to threats to
of uncertainty? Summarizing the results from our systematic
their socially sustainable values and branding. Both organizations
examination of the supply chain operations of eight exemplar orga-
valued people and communities and both had brands that were
nizations, we have three core findings.
built on these values to some extent. And both took on environ-
First, we find that managers in the eight sampled organizations
mental initiatives only when the negative environmental impacts
often lack sufficient information in making environmental deci-
of their business became a salient managerial concern.
sions. Factors such as uncertainty about environmental outcomes
Specialty Food & Beverage had a reputation for caring about the
and future regulations, the saliency of each environmental issue to
community and protecting their workers’ well-being. As the com-
multiple stakeholders, as well as a lack of visibility and influence in
pany grew, close scrutiny from the public and NGOs compelled
one’s supply chain, all can contribute to the uncertain decision envi-
them to consider environmental issues in food-growing countries.
ronment. In response, organizations in our sample establish and
To protect the environment and communities where it purchased,
adopt an Operating Principle and Technical Standards as decision
Specialty Food & Beverage created a supply chain that was funda-
rules to mitigate this information uncertainty. Our study highlights
mentally different from the industry norm. They used a Technical
how these rules are applied in environmental decision-making
Standard (supplier certification) linked to financial incentives to
(Zhou, 1997; March et al., 2000).
manage supplier environmental and social performance and bring
Second, we find that when making environmental decisions,
supply chain management into line with the organization’s and
the managers in these exemplar organizations do make short-term
external stakeholders’ values.
concessions to business needs. What makes these organizations
Similarly, IT Hardware had a reputation for commitment to
unique is neither that they face trade-offs and experience dilem-
employees’ welfare as well as a culture built on a history of innova-
mas, nor that they often put profits first. Rather it is what happens
tion. The environmental problems created by disposable products
after a trade-off is identified that makes these organizations suc-
were incongruent with the organization’s culture. This was mag-
cessful both environmentally and economically.
nified by changing regulation which was also putting pressure on
Specifically, the companies in our sample maintain business
their business model. In response, IT Hardware created a world-
viability and financial health while pushing for improved environ-
wide closed-loop supply chain to collect and recycle its disposable
mental outcomes. We find that these organizations make practical
products. However, their solution had to protect the existing busi-
environmental decisions; environmental efforts have to make busi-
ness model built on disposable products, and has turned out to be
ness sense. However, cost and other resource constraints do not
very expensive.
necessarily hamper environmental innovation. In fact, environ-
In addition to continuing to communicate their messages of
mental challenges offer these companies a new lens to examine
being socially aware, these organizations now explicitly commu-
their supply chain operations. Furthermore, the costs and resource
nicate their environmental messages of reducing impacts and
constraints associated with environmental issues force managers
conserving resources to customers. However, not all of their
to consider not only profits and sustainability, but also short-
environmental efforts directly benefit customers. IT Hardware’s
term growth and long-term competitiveness. These challenges are
environmental goals are not currently aligned with their economic
addressed by committed workers who are intrinsically motivated
goals. Environmental management at these organizations is often
by the organization’s values and objectives.
undertaken either to minimize risk or in response to a misalign-
Finally, we are able to specify four unique environmental pos-
ment between existing business models and social values. These
tures which capture environmental strategies through empirical
organizations are leaders socially and above average environmen-
specification of archetypes based on the actual behaviors of these
tally, but from an economic perspective the reactive nature of some
firms. Specification of the postures is itself theory-development,
of their environmental efforts can be expensive.
because each posture describes the dynamics among different
P4d: In the Community First posture the environmental aspect factors and predicts certain performance outcomes (McKinney,
of triple-bottom-line is deemphasized relative to economic and 1966; Bailey, 1994; Boyer et al., 2000). These environmental pos-
social aspects. tures capture unique configuration of the three dimensions of the
triple-bottom-line framework. More importantly, they predict the
P4d1: Organizations with a Community First posture will be
decision patterns of these companies when they face trade-offs
exemplars on social performance, have average profit margins
among competing needs embedded in the notion of the triple-
and above average environmental outcomes.
bottom-line.
In conclusion, the four postures offer important insight into our In this sense, our study moves beyond a normative prescrip-
research question. They suggest that even the leaders in green sup- tion that companies need to strive for excellence across all three
ply chain management are on different trajectories with different dimensions of the triple-bottom-line. Our findings offer an under-
motivations. More importantly, they also explain how organiza- standing as to how companies consider social and environmental
tions prioritize elements of the triple-bottom-line and determine issues through their supply chain operations. The postures suggest
which stakeholders are most important when making decisions. that in reality, even exemplar organizations’ sustainability agendas
588 Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577–590
A Sequence of Trade-
Environmental Operating Principle
Posture and Technical
Standard(s)
Committed
Workforce
Fig. 1. Sequential trade-off decisions in a sustainable supply chain.
usually do not equally emphasize all three dimensions. Only orga-
nizations 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 competi-
tive markets. Our analysis suggests that these companies are able
to establish distinct sustainable supply chain practices and rou-
tines that allow them to compete with the norm in their industry;
meanwhile, such practices and routines contain difficult-to-imitate
capabilities. Research that uses the resource-based view of the firm
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 company’s environmental posture leads to the development
of the Operating Principle and Technical Standard(s) that drive the
decisions the organization makes. Operating Principles and Techni-
cal 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 effi-
cient 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 knowl-
edge. These committed workforces are willing and able to provide
their knowledge and tackle difficult problems that might not be
addressed by similarly paid workers at competitors. These organi-
zations 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 fur-
ther down this vector it builds a supply chain radically different
from its less-sustainable competitors. Each decision informs sub-
sequent decisions, creating a feedback loop of knowledge, practices
and routines that moves the organization along their unique tra-
jectory.
The creation of a supply chain that is more sustainable than com-
petitors implies that the supply chain has fewer trade-offs between
Continuous
Improvement
Incremental
Environmental
Performance Gains
off Decisions
Radical Change in
Supply Chain
Structure and
Operational Practices
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
 Z. Wu, M. Pagell / Journal of Operations Management 29 (2011) 577–590
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 com-
panies 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 sug-
gesting 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 (Handfield et al.,
1997; Zhu and Sarkis, 2004), focuses mainly on the environ-
mental practices and their connection with traditional business
performance. A comprehensive analysis of sustainable business
operations should consider all three dimensions simultaneously.
While the four configurations 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 manager’s
decision-making role in a complex and adaptive supply chain sys-
tem. 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 envi-
ronmental areas such as life cycle assessment (Matos and Hall,
2007) and public policies (Pimentel, 2003).
This research provides important insight into the decision-
making of exemplars in sustainable supply chain management. As
organizations navigate the trade-offs between profits and envi-
ronmental 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 firms and numerous man-
agers who generously devoted their time to participate in this
study. We also acknowledge and thank Regina Hauser of The Natu-
ral Step Network (USA) for introducing us to the firms 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 sustain-
ability 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 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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