Copyright © 2014 McGraw-Hill Higher Education. All rights reserved. CHAPTER 16 Sustainable Operations Management— Preparing for the Future McGraw-Hill/Irwin

16–2 Learning Objectives LO16-1 Explain what it means to have “sustainable” operations LO16-2 Describe the “triple bottom line” LO16-3 Explain why operations managers are focusing on environmental impacts LO16-4 Evaluate products using life cycle waste composition assessment LO16-5 Discuss the approaches to social responsibility LO16-6 Understand the challenges of developing and maintaining a sustainable competitive advantage

Sustainable Operations Management: Preparing for the Future 16–3 Sustainable operations management is focused on reducing any potentially negative impacts of a firm’s processes and products on the environment and society. LO16-1

Sustainable Operations Management: The Triple Bottom Line Triple Bottom Line (3BL): full impact of activities on profit, people, and planet Instead of seeking only profits, managers today are developing balanced sustainable strategic visions 16–4 LO16-2

The First P: Planet Sustainability: meeting today’s needs without compromising the ability to meet tomorrow’s 16–5 LO16-2

Emphasis on Environmental Sustainability Emphasis on environmental sustainability is growing Customer expectations Economic factors Diminishing natural resources Increased business demand for scarce resources New initiatives Global climate change 16–6 LO16-3

A Broader View of Waste Life Cycle Assessment: evaluates the cost of waste throughout product lifecycle Extraction Production Packaging and Transportation Usage Disposal/Recycling 16–7 LO16-4

ISO Standard for Environmental Management Systems ISO 14000: international standard and certification for environmental management Identifying & controlling the impact of activities, products and services Improving environmental performance continuously Implementing a systematic approach to setting and achieving goals 16–8 LO16-4

Environmental Sustainability Challenges Tradeoffs are not always clear Environmental impacts are always going to be present Managers are required to consider complex interactions 16–9 LO16-4

The Second P: People Sustainable operations management also focuses attention on people The operations of a business directly or indirectly affect: – customers, – workers, – suppliers, – investors. Each of these stakeholder groups has its own needs and priorities 16–10 LO16-5

Four Key Stakeholders Customers “Value” for money Products safety Privacy protection Honesty and integrity in fulfilling Quick response System transparency Workers Fair labor practices Safe working conditions Equal opportunities Development support Suppliers Shared values Development opportunities and support Shared Success Consistency and fairness Investors Competitive returns Sustainable business models Integrity in reporting Reduction of unreasonable risks 16–11 LO16-5

The Third P: Profit Profit is equally important for the sustainability of an enterprise Business models evolve due to: –Changes in economic conditions: –Changes in competitor’s actions –Changes in income levels –Changes in educational levels Value propositions are dynamic 16–12 LO16-6

Measuring and Reporting Sustainability 16–13 Figure 16-4 – Breakdown of criteria assessed by the Dow Jones index. LO16-6

Sustainable Operations Management Summary 1.Operations managers must be concerned with sustainability 2.Environmental sustainability is becoming increasingly critical 3.Sustainability also addresses human issues 4.Operations managers need to manage and adapt to cultural differences 5.Operations managers need to continually improve or change the firm’s business model 6.Organizations and agencies are growing in their influence in promoting sustainable practices 16–14