Supply Chain Uncertainty and Environmental Management

Read this article, which examines the impact of supply chain uncertainty on environmental management spending in manufacturing. Focus on the sections of Supply Chain Uncertainty and Linking Supply Chain Uncertainty to Environmental Management. What is your definition of uncertainty in supply chain management?

Discussion and Concluding Remarks

The empirical analysis provides support for the hypotheses developed in Linking Supply Chain Uncertainty to Environmental Management section. While supply chain uncertainty has a limited impact on the level of resources devoted to environmental management ("the size of the pie"), it has an important role in the allocation of these resources ("how the pie is shared"). In particular, organizations with higher supply chain uncertainty taking the form of unreliable supplier performance (i.e., lots quality and delivery) or unpredictable demand, are likely to favor structural investment that are more peripheral in nature such as remediation projects, end-of-pipe technologies, or proper discharging mechanisms. Supply chain uncertainty as a contextual variable might explain the observed bias for pollution control investments and expenditures found in Canadian macro data presented in the introduction.

The fact that uncertainty diverts away structural pollution prevention solutions has certainly important managerial implications. The environmental literature has determined that pollution prevention is the segment of environmental management (as opposed to control) that creates value for organizations. Therefore, higher level of supply chain uncertainty has a crowding-out effect on possible green value-added solutions. If an organization wants its managers to privilege value-added environmental solutions, it needs to reduce supply chain uncertainty. A reduction of supply chain uncertainty not only reduces the need for resilience mechanisms such as building buffers in the system, but also creates a more suitable context for adopting performance enhancing environmental solutions. Furthermore, the results also imply that the addressing downstream uncertainty is more impactful on both the level and the allocation of resources pertaining to environmental management.

This paper confirms supply chain uncertainty as an important operating context variable as it further constrains managerial attention. It forces the managers to focus increasingly on the organization core operations and objectives, which generally do not related to green issues. The resulting lower level of attention to environmental management in the organization encourages managers to privilege less disruptive and less intrusive technologies to address environmental issues – in other words, pollution control devices. As such, the empirical analysis supports the ABV and recent related environmental management research. Another theoretical contribution resides in the fact that most studies does not fully account for the business context when studying the adoption of environmental technologies. In addition, it is conceivable that even when pollution prevention is adopted that the level of attention to implement effectively the value-added technology is not adequate lessening, in turn, the technological performance. Therefore, studies examining the link between environmental management efforts and organizational performance should consider controlling for supply chain uncertainty. The newly developed scale to measure such uncertainty can be used for future research and constitutes an empirical contribution to the literature.

This study comes with limitations. The first aspect of limitation is the reliance on a single-respondent in the survey – this is particularly true when perceptual scales are used in the analysis. Multiple respondents with interrater reliability assessment would be preferred. However, other recent environmental management studies have argued that if this potential bias exists, it should not be a major concern. A second issue related to the study is its emphasis on discrete goods manufacturing sector. While focusing on such a targeted sector provides insightful results, it leaves aside the resource industries along with the chemical and paper industries, i.e. the most polluting industries. Considering other industries can lead to another path for future research – building on the work from Lo, the relative impact of demand and supply uncertainty might shift depending on the position of the organization in the supply chain. As we move upstream in the supply chain, demand uncertainty might have a relatively lower impact than supply uncertainty.

This study can be refined further by considering the impact of uncertainty on pollution prevention adoption in core activities (direct process or product modification) and non-core activities as defined in Thoumy and Vachon. Pollution prevention technologies such as better ventilation systems, redesigned packaging, or renewable energy can be considered as peripheral to the core operations and their adoption might not be as affected by supply chain uncertainty.

This paper started with the premise that supply chain uncertainty might explain the propensity of organizations to adopt pollution control instead of value creating technologies that reduce pollution at the source (i.e., pollution prevention). It developed hypotheses ground in the ABV and tested them with Canadian manufacturing data. The results suggest that while supply chain uncertainty does not overly impact the level of resources devoted to environmental management, it does influence how these resources are allocated to different technologies.