Introduction To Sustainability

INTRODUCTION TO SUSTAINABILITY
MANAGEMENT
Christian N. Madu∗ and Chu-hua Kuei†
Department of Management and Management Science, Lubin School of Business,

Pace University, 1 Pace Plaza, New York, NY 10038, USA ∗cmadu@pace.edu
†ckuei@pace.edu
This chapter is an introduction of sustainability management (SM). Two models are

used to illustrate the transformation to sustainability, and the interconnectivity of SM.
These models offer guidelines to policy and decision makers on how to effectively and
successfully implement SM. The basic concepts of SM are also introduced in this chapter.
1. Introduction
Sustainability is development that meets present needs without compromising the
ability of future generations to meet their own needs (United Nations, 1987).
To respond to this challenge, over the last few years, a wide array of visions and exe-
cutable actions have been developed based on the principles of the triple bottom line
(TBL). TBL focuses on economic development, environmental protection, and social

equity. This focus directs organizations not only to maximize profit or shareholders’
wealth but also to become socially responsible. Hardjono and de Klein (2004) note
that this has presented the challenge of innovation to organizations as they strive for
survival and also face the reality of economic, ecological, and social balance. Com-
panies such as McDonald’s Corp., Hewlett-Packard (HP), and Wal-Mart have long
taken the lead in sustainability management (SM) and are consequently benefiting
from this early lead.
Lo and Sheu (2007, p. 346) define corporate sustainability as “a business
approach that creates long-term shareholder value by embracing opportunities and
managing risks from three dimensions: economic, environmental, and social dimen-
sions.” The aim of such a system is to reach a “sustainable future state” by engag-
ing in voluntary business activities. Nidumolu et al. (2009) suggest five distinctive
stages of SM: viewing compliance as opportunity, making value chains sustain-

able, designing sustainable products and services, developing new business models,
and creating next-practice platforms. It is apparent from these discussions that
September 15, 2011 19:16 9.75in x 6.5in Handbook of Sustainability Management b1163-ch01 2nd
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2 C. N. Madu and C.-H. Kuei
sustainability makes economic sense and creates unprecedented marketing opportu-

nities that companies can exploit. Hence, while satisfying the ecological and social
needs of the society, businesses can equally maximize shareholders value. Thus,
the call for sustainability is not only good for preserving earth’s limited and non-
renewable resources but is also a good strategy in improving the bottom line of
corporations. Innovative companies that exploit these opportunities are likely to be

ahead of their competitors. Epstein (2010) also proposes a four-step strategic pro-
cess for managing sustainability. His approach involves understanding the inputs
and the outcomes of a sustainability practice. The inputs look at the business con-
text such as the structure of the organization, the human factor and other resources.
The resultant effect is improved sustainability performance and long-term financial
performance. Winkler (2010, p. 293) and many others, on the other hand, have sug-
gested focusing on the entire supply chain in managing sustainability. This would
have more sustained impact on the organization as the entire value chain is needed
to effectively achieve sustainable growth.
1.1. Sustainability reporting
Corporate sustainability programs are increasingly being developed. It is the way to
the future and may affect the survival of the organization. For example, companies
are now creating market niche by differentiating their products on sustainability
practices that enable them to produce greener products and services. Companies
such as Dell, HSBC, and others have developed “carbon neutral” programs. Indus-
try leaders such as Wal-Mart work with suppliers to control emissions and waste
from the source. In addition to these sustainability practices, corporate sustain-

ability indexes are now emerging and measure sustainability performance. One of
the popular ones is SAM for the Dow Jones Sustainability Index (DJSL). These
indexes provide vital and timely information to both customers and shareholders
on the environmental health and sustainability of companies. Such information are
crucial in making both purchase and investment decisions. This growing need for
information on corporate sustainability practice has also led to more disclosures on
environmental risks, which are often published in corporate sustainability or respon-
sibility reports. These reports disclose environmental and social risks. For example,
in 2010, the US Securities and Exchange Commission published guidelines for dis-
closure of climate change risks. There is a growing emphasis on quantifying environ-
mental impacts such as waste production, greenhouse gas emissions, deforestation,
and other environmental hazards. Corporate sustainability reporting highlights the

role of business community in creating long-term shareholders’ value by exploiting
opportunities and managing risks associated with economic, environmental, and
social development. A UNEP Financial Initiative Report notes the trend toward
corporate sustainability report. This report defines sustainability reporting as “a
generic term for corporate extra-financial reporting.” It further states that this
reporting system measures “performance on a number of sustainability dimensions
such as economic, environmental, social, and corporate governance performance.”
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Introduction to Sustainability Management 3

Sustainability could be either internal or external. As outlined in the UNEP report,
some benefits of the report include revenue growth, risk management, access to
capital, and cost savings and efficiency.1
1.2. Green value stream mapping (GVSM)
To achieve sustainability, it is important to understand the sequence of activities
that lead to the creation of goods and services. Value stream mapping (VSM) is a
lean process-mapping method to understand this sequence of activities. The aim of
VSM is to identify non-value added activities and to eliminate them and streamline
the process. GVSM is an extension that enables us to achieve the same goal by
eliminating non-value added time or materials, identifying areas to cut waste, and
opportunities to reduce costs and improve performance.
Green Supplier Network has extended the conventional VSM to include both
“lean and clean” elements in its mapping technique. Specifically, they focus on
environmental wastes such as2
• energy, water, or raw material usage beyond the expected needs of the customer;
• the release of pollutants and material wastes such as air emissions, wastewater
discharges, hazardous wastes, and solid waste (trash or discarded scrap) into the
atmosphere;
• hazardous substances that adversely affect human health and/or environment
and their use in the production process or their presence in the product.
It is important to understand where and how these environmental burdens occur
in the process. Thus, with VSM, we can
• identify where environmental impacts occur in a process by reviewing the process
flow;
• review and quantify material requirements to cut waste and excesses;
• eliminate the activities that create pollution and generate waste;
• identify the root causes of waste and inefficiencies and do something about them.
Through this approach, the major sources of waste are identified and improve-
ment efforts are prioritized. VSM may be complemented by process analyses. The
goal in process analyses is to identify process wastes and bottlenecks, and to stream-
line the process so that it becomes effective and efficient. A sustainability grid may
be developed to benchmark world-class industry leaders (see Appendix A).

The goal here is to understand what industry leaders are doing to trim down
waste, control emissions and environmental hazards. Next is to position oneself
against the leaders in the different activities and identify areas for improvement.
1Sustainability Management and Reporting — Benefits for financial institutions in developing and
emerging economies, UNEP Finance Initiative, December 2006.
2https://www.greensuppliers.gov/gsn/htm/gsn/docs/vsm.pdf.
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This will present opportunities for copying or benchmarking from the best-in-class.
From the sustainability grid, we can create different class of companies namely lag-
gards (L), mediocre (M), and world-class (WW). There are two axis in the grid
namely efficiency and effectiveness. Efficiency is about doing things right whereas
effectiveness is about doing the right things. The grid has nine cells showing the
levels of efficiency and effectiveness a firm has achieved in sustainability practice.
Irrespective of the cell a firm is positioned in, it aims to be world-class by attain-

ing the enviable position of WW. Any firm that is not WW has areas that need
improvement to achieve the benefits of sustainability.

Laggards: Companies that have laggard in their labels are behind in their VSM.
They have not fully exploited the gains from sustainability practices and may have
inefficient or ineffective processes or both. They would need a lot of training and
learning to modify, rebuild, or re-engineer their processes. There is also a possibility
that leadership or organizational culture may not support sustainability practices.
The laggards may be in need of re-engineering whereby leadership style, technol-

ogy, and organizational structure and culture may need to be changed to adapt to
sustainability practices.
Mediocre: Companies in this category are average in some aspects. Their pro-
cesses are not fully optimized and there is still room to grow. They may not be
taking full advantage of opportunities available and are still creating wastes since
their processes are not yet streamlined or optimized. They need to make more com-
mitment to sustainability and copy the practices of world-class competitors.
World-class: They are the best-in-class. When a company is rated WW, it

has both a highly efficient and a highly effective process. These processes are
streamlined and the target is zero-waste. They remain innovative and apply
continuous improvement strategies. These are companies others are emulating
or copying from. These companies have world-class, stable, and predictable
processes.
1.3. Leadership and SM defined
Sustainability is a key to achieving competitiveness. It is a strategy that proactive
companies are adopting knowing that minimization of wastes and prevention of
environmental hazards lead to long-term economic and social benefits. Companies
with effective sustainability practices have been able to cut down on the cost of
raw materials by re-using and recycling without depending on the non-renewable
virgin products that are more expensive. Such companies do have stakeholder
loyalty and support as their roles in SM are well acknowledged and promoted
even by unlikely allies. Companies such as Kodak, Xerox, Dell, HP, Wal-Mart
have all achieved sustainability successes through several innovative sustainabil-

ity programs. Sustainability practices, in fact, maximize both shareholders’ and
stakeholders’ values and provide higher return on investment, and cash flows for
companies.
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Sustainability cannot be achieved without leadership. It is a strategic initiative
that requires the immediate attention and support of top management. Without top
management support, involvement, and engagement, sustainable practices cannot
be achieved. SM involves reallocation of resources, change of organizational culture,
modernization of technology, change of work policies and practices, training, and
empowerment of employees through teams. Top management has the authority to
effect change as decisions affecting sustainability lay in its purview. Sustainability
is a long-term project whose benefits may not be easily captured if the focus is on
quick results.
In this chapter, we define SM with two simple equations where each equation
represents the letters that make up SM. The definition is as follows:
• sustainability = continuity of economic development, environmental protection,
and social equity; and
• management = enabling conditions for sustainability.
This definition of SM stresses that the effective and efficient management of
sustainability depends on a systematic and a systemic evaluation of an organiza-

tion’s sustainability competencies. Strategic components and critical success factors
must be aligned with sustainability initiatives. Organizations must develop strate-

gic, technical, procedural, and organizational capabilities and capacities to respond
to SM. Organizations must, therefore, be able to address the following questions:

• What are the primary dimensions of sustainability?
• What is the dynamic state of modern organizations when moving toward sustain-
ability?
• What are the circumstances, interventions, mechanisms, and outcomes in the

implementation of SM?
• What are top management strategies for SM?
2. Dimensions of Sustainability
To drive sustainability through the organization, top management must have a clear
idea of corporate changes that must be implemented. These change variables are
outlined below as dimensions of sustainability.
2.1. Economic responsibilities
Carroll (1991) introduced a “pyramid of corporate social responsibility.” According
to Carroll’s (1991) model, developing and initiating a strategy on corporate social
economic responsibility is the foundation on which the other three dimensions are
based on. Epstein (2010), in supporting this concept, notes that any plan that calls
for a change of strategy on sustainability should both itemize costs of implementing
sustainability and identify potential benefits. The ultimate goal of such a process
is long-term financial performance. This is possible because a sustainable practice
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must be economic in the long run and must also serve as the catalyst to process
productivity. It is, therefore, necessary that corporations adopt strategic sustain-

able programs to prevent potential ecological hazards. The cost of taking corrective
actions when ecological problems occur has been shown to be very disastrous and
detrimental to the survival of business enterprises. A more proactive response is
needed in achieving sustainability. Sustainability is not only economical but also
socially responsible and helps organizations meet the needs of its operating commu-
nities. Failure to adhere to sustainability practices may threaten the survival of the
organization as it incurs higher costs, lower productivity, and loss of customer and
community goodwill. Sustainability has positive effect on economic growth. Wagner
(2010) and Wagner (2007) identified the sustainability factors that drive economic
performance.
2.2. Environmental responsibilities
The biggest challenge today is how to preserve natural resources that provide essen-
tial functions to human society (Winkler, 2010). This involves
• efforts to minimize wastes;

• developing new and environmentally friendly technologies;
• creating low carbon/pollution supply chain, effectively using renewable/non-

renewable resources;
• using of alternative energy sources;

• fostering harmony between supply chains and nature;
• offering effective ways of cleaning up the environment; and
• enforcing extended producer responsibility through principles such as account-

ability and process change.
These efforts to achieve sustainability could be further explained using the

“4R + 1D” system adopted by HP:
• Reduce: Reducing the waste generated either through the depletion of limited
resources or as by-products of supply networks’ operations that end up polluting
the earth is important to realize the full potential of SM.
• Recycle: Organizations such as HP use open-loop and closed-loop recycling pro-

cesses to reduce the amount of waste produced for disposal and help protect
natural resources.
• Reuse: Reusability is a direct function of the frequency of use along the expected
life of products. HP normally classifies products at the point of return into three
groups: full reusability, partial reusability and recyclability, and zero reusability
and recyclability.
• Report: Since 2005, HP has published its global citizenship report highlighting
its efforts in the following areas: physical, biological, intellectual, social, and eco-
nomic systems (http://www.hp.com/hpinfo/globalcitizenship/gcreport/).
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• Disposal: The non-usable and non-recyclable computer components are discarded,
according to HP’s reuse–recycle–disposal hierarchy, in a safe, secure, environmen-

tally friendly manner.
Being sensitive of the natural system does not imply a neglect of the importance
of economic development. The term “sustainability” suggests that the focus on
economic development should be cognizant of the interests of future generations
and the important needs of the earth such as biodiversity and forests ecosystems.
While helping to improve organizations’ competitive positions, corporate strategy
should also support the preservation of the earth.
2.3. Social responsibilities
According to the DJSI, social responsibilities involve corporate citizenship/ phi-

lanthropy, labor practice indicators, human capital development, social report-
ing, talent attraction and retention, and industry specific criteria (http://
www.sustainability-indexes.com). Clearly, social responsibility goes deeper than

the direct production of goods and services to reflect an organization’s concern
with the social needs of its employees and extended environment. An organiza-
tion with a social responsibility function will position itself as one that is ready
to contribute resources to the community and improve quality of life (i.e., phil-
anthropic responsibilities), avoid harm and do what is right, be just and fair
(i.e., ethical responsibilities), and obey the law (i.e., legal responsibilities) (Carroll,
1991). The fast-food giant McDonald’s, for example, is known for its philan-
thropic activities in the wake of the 2008 earthquake in China. Other well-cited
examples include Ronald McDonald House Charities (RMHC) and McDonald’s

children programs. McDonald’s also adopts three strategies to manage and cope
with employee competence. They are employee experience, talent management,
and commitment enhancement. As a result of those initiatives, employees at
McDonald’s are motivated to do the “right work” right the first time. To ensure
that McDonald’s sustainability vision and policies are carried out in an effective
and transparent manner, McDonald’s includes corporate social responsibility in
its organization structure. It maintains, for example, (1) corporate responsibil-

ity board of directors, (2) worldwide corporate relations council, and (3) specific
governing bodies such as corporate responsibility department, global environmen-

tal council, quality assurance board, and sustainable supply steering committee
(http://www.crmcdonalds.com/publish/csr/home/report/corporate ethics.html).
Another aspect of social responsibility that should not be overlooked involves
the creation and expansion of the job base. As noted by Madu and Kuei (1995,
p. 5), job creation “is perhaps the most important function any firm can render
to its community. However, the job base cannot expand if productivity and qual-
ity are not simultaneously improved.” Therefore, managing quality along a supply
chain is critical (Kuei et al., 2008). Supply chain quality management will lead
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to increases in quality and productivity and subsequently to an expansion of the
market share and job base. If indicators with regard to supply chain quality fall,
there is need for concern because resources are not being optimized and jobs may
be lost. To achieve this, McDonald’s uses sustainable supply chain strategies to lead
its suppliers. It communicates and works with its suppliers in three areas: ethical
responsibility, environmental responsibility, and economic responsibility. Suppliers,
as a result of this development, contribute positively to the quality, safety, and
integrity of McDonald’s final products.
The dimensions of sustainability outlined here expand the focus on traditional
business management. These dimensions need to be added and considered simulta-

neously to deliver a more sustainable result. They allow organizations of all sizes to
understand sustainability from a strategic and a holistic point of view.

3. The Transformation Process Model
The competitive landscape is changing in the new global economy. It is imperative
that organizational-wide changes be initiated to adapt to the changing environment.
A discussion of sustainability in the previous section reveals that sustainability
strategies and capabilities are increasingly important and complex for enterprises
around the globe. To simultaneously achieve excellence in economic, environmental,
and social performance is not simple. An organization must undergo a transforma-

tion to change from its traditional management approach to SM. In this section, we
present a total transformation process that will involve preparing for responsible
change. Figure 1 is a graphic depiction of such a model and its components. The
aim of this theoretical framework is to offer practical guidelines to sustainability
leaders and their value chain partners.
Natural
System
Social
System
Stakeholders
Current
Organization
Current
Competencies
System
Transformation
Process
Working with
Stakeholders
Cultural
Transformation
Process
Economic
Development
Environmental
Performance
Social Equity
New
Organization
New
Competencies
Continuous Improvement
Further Innovation Opportunities
Fig. 1. The transformation process model.
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When policy/decision makers are aware of the value of the concept of sustain-
ability, they will encourage process and organizational transformation. Clearly, this
transformation is driven by a new vision that understands the interactions of the
organization with its natural and social systems and the need to listen to stake-
holders. As shown in Fig. 1, the stakeholders interact with both natural and social
systems. Stakeholders’ needs are holistic as a result of this interaction there must be
a balance among economic, environmental, and social impacts in the context of sus-
tainability. To respond to these emerging needs and challenges, core competencies
for sustainability need to be recognized. If the core competencies for sustainability

are faulty or insufficient, course corrections and major changes need to be taken,
at one point or another. The aim of such courses of action is to change existing
situations into preferred ones. Figure 1 demonstrates that three main areas will
be impacted by this process of change: a system transformation process, work-

ing with stakeholders, and a cultural transformation process. They are the critical
steps required to transform the current organization at the points of reflection. It
is, however, important to first distinguish between the notions “system transforma-
tion” and “cultural transformation.” The former usually results from the process
of emergence — the whole is more than the total of its parts. As suggested by
Gharajedaghi (2006), it normally involves using system principles (openness, pur-

posefulness, multi-dimensionality, emergent property), system dimensions (mem-
bership, decision system, measurement system, organization processes, throughput
processes), and system methodology. The latter is also possible due to “the influ-
ence the relatedness of the parts of a system has on the behaviors of the parts
(Luisi and Houshmand, 2009, p. 101).” In Epstein’s (2009, p. 24) words, economic,
environmental, and social impacts “are sometimes managed using ‘soft’ leadership
elements such as people and culture along with a variety of informal systems.” It
thus involves leadership, employee fulfillment, conflict management, and cultural
acceptance. Hopefully, all these changes may lead to a new organization with new
competencies for sustainability. Along with these transformation processes, orga-

nizations must also work with stakeholders on how best to simultaneously achieve
excellence in economic development, environmental protection, and social equity. In

a supply chain setting, this means product designs, process designs, manufacturing,
handling, packaging, and recycling of materials must take into consideration these
concerns. Organizations must commit the necessary resources to ensure that the
goal of sustainability is achieved.
Clearly, once a transformation is done and a process for sustainability is mature,
a new organization is born. At this point, however, the complexity of process change
will draw policy and decision makers’ attention to the notion of non-linear living
systems as they relate to self-organization and emergence. At this point of reflection,
they need to ask a number of essential questions.
• Can a system in motion be considered a sustainable operations system?
• Is the new system always willing to do something for its own sake (intrinsic good)
or for the sake of something else?
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• How can a sustainable operations system stay motivated to achieve its goals?
• Are there leverage points that support a sustainable operations system such that
this new organization may continuously improve or should we focus on control
mechanisms?
• Is it better to design than to control, or are they equally important?
• To get a system to the top, the transformation process model proposed here
encourages goodwill and good behavior. Courses of action, as a result, should
always be carried out in a constructive way to change existing situations into
preferred ones. As Luisi and Houshmand (2009, p. 100) put it, “it is the whole
process that is the foundation.”
Figure 1 also shows that the transformation process assumes a continuous cycle
that is never ending. The organization operates as an open system that evaluates the
process maturity for sustainability at the point of reflection and receives feedback
from its internal as well as external environments for innovation and continuous
improvement opportunities. This process involves evaluation of value creation rela-

tive to risks and costs.
The transformation process model presented here can be used in a cognitive

map to demonstrate that the new organization may be more sustainable than the
traditional one.
4. The CIMO Model
Building a total sustainability organization requires vision. The vision of the orga-
nization should be known to all employees and supply chain partners. We use a
strategic cycle to illustrate how SM can be developed. This model adopts a systems
approach with a focus on the context–intervention–mechanism–outcome (CIMO)
logic (Denyer and Tranfield, 2009). As Fig. 2 demonstrates, there are four major
components (Denyer and Tranfield, 2009, p. 683):
• institutional/social/natural setting;
• interventions;
• mechanism;
• relevant outputs and outcomes.
Figure 2, which we call the CIMO model, is built around the concepts and
philosophies of SM in order to adopt a holistic perspective of sustainability. We
shall briefly discuss each component.
4.1. Context
Understanding the complexity of institutional/social/natural systems is critical to
successful application of the CIMO model.
First, policy/decision makers must pay attention to the elementary constituents
of “forms” in a business context (i.e., aim, function, appearance, and interacting
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Context (C) Interventions (I)

Outcomes (O) Mechanisms (M) 5W+1H
Business
(Inter-
Industry
Context
Behavioral
Managerial
Technical
Structural
Plan-Do-Study-Act
Define-Measure-
Analyze-Improve-
Control
Define-Measure-
Analyze-Design-Verify
Economic
Development
Environmental
Performance
Social Equity
Natural
System
Social
System
Capability
Maturity
Model
Integration
(CMMI)
Fig. 2. The CIMO model.
components) at all times. In complex operating environments, this simple exercise

separates great policy makers and sustainability managers from the average ones.
These four constituents of forms represent a screen through which policy makers
and sustainability managers may come to see the complexity of organizations fully
and effectively. Systems that are designed and developed on this basis are robust,
coherent, and persistent. Boylston (2009, p. 59) noted that “a change in one industry
often informs positive change in others.” Innovative paperboard CD cases made
from 100% recycled content in the CD and DVD industry, for example, may provide
inspiration to the packaging industry (Boylston, 2009). The elementary constituents
of “forms” in the inter-industry context should be acknowledged when organizations
are making positive changes to sustainability.
Successful policy and decision makers must be active listeners, facilitators,
designers, and communicators. They should hear ideas and concepts on philan-
thropic, ethical responsibilities, and legal responsibilities. They should also employ
the 4R + 1D model. They should be willing to define the problem space, focus on
sustainability, outline a vision statement, enhance effective communication, encour-

age everyone to participate, and deliver critical information at the appropriate time
to everyone in their internal and extended environments. The four essential princi-
ples for the Sustainable Projects and Activities in China outlined by President Hu
Jintao of China, at the United Nations Climate Summit in New York on Sep. 22,
2009, is a good example in point. Although the applications and use of sustainability
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practices are not new in China, President Hu still points out that everyone in China
needs to pay attention to the following: fulfilling respective responsibilities, achiev-

ing mutual benefits and a win–win outcome, promoting common development, and
ensuring financing and technology structures. World-wide businesses, communities,

and the natural environment may be profoundly affected by President Hu’s vision
of sustainability in the future.
4.2. Intervention
SM is a holistic and a strategic approach to compliance, financial robustness, sus-

tainable operations, social development, environmental management, crisis manage-
ment, and stakeholder relationship management. All these could be classified into
four components: behavioral, managerial, technical, and structural.

The behavioral component calls for intrinsic motivation for sustainability in
the workplace. Policy/decision makers need to anticipate social and cultural conse-
quences. To effectively implement sustainability, top management needs to set up
sustainability councils or offices, understand the cultural shifts/patterns, encourage

entrepreneurial spirit, provide resources, train and educate employees, adopt and
fund the change vehicles (e.g., Kaizen workshops), create a favorable social climate,
respond positively to innovative ideas and improvement opportunities, work with
the critical mass in the organization, treat people just and fair, and manage and
measure social and environmental impacts.
The managerial component centers on planning and control methods. There
are three hierarchical groupings for this component, namely, strategic, tactical, and
operational. The elements of a supply chain system can be strategic. When signal-
ing a commitment to sustainability, it is prudent for the organization to incorpo-
rate sustainability policy deployment, sustainability process management, human
and financial resources, sustainable/green design, and technology management into

any strategic analysis. To accomplish this, top management should use a four-stage
process to implement sustainability strategies: (1) strategy formulation, (2) strat-

egy implementation on a small scale, (3) evaluation and control, and (4) strategy
implementation on a full scale. The elements of a sustainable operations system
can be tactical. Trying to bring all the units with competencies for sustainabil-
ity within the boundary of systems defined by the policy makers and sustainability
manager to make, shape, and transform the organization is not an easy task. Includ-
ing supplier and deciding on the optimal level of system capacities and capabilities
may ensure that sustainable operation processes are operating efficiently and effec-
tively. Members within the boundary of sustainable operation systems should be
able to sense new pressures and react proactively to ensure organizational success
and survival. A well-designed sustainable operations system should have guidelines
for effectively addressing complexity. Complexity could arise from environmentally
preferred e-purchasing, cleaner production, sustainable packaging, distribution and
transportation, reverse logistics, and waste management.
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The technical platform within the boundary of sustainable operations systems
offers means of optimizing the use of resources, improving process efficiency and
effectiveness, and supporting the preservation of the earth. Winkler (2010) sug-
gests that modern organizations should develop intelligent systems for sustain-
ability. Such a system should be cognizant of the important needs of the earth
and its importance and value to life and nature. Two such technical platforms,
namely, product life cycle management (PLM) and enterprise resource planning
(ERP), are briefly introduced here. PLM can offer “an integrated information man-
agement system where enterprise stakeholders can exchange and manage product
data on a real-time basis. As PLM is web-enabled, the open standards of the

Internet enable seamless collaboration among members of both the internal and
extended enterprise (Madu and Kuei, 2004, p. 97).” Once the product passes its
maturity stage in its life cycle, an exit strategy can be planned and developed for
the product. With the product design completed, an ERP system may be applied
to purchasing, manufacturing resource planning, distribution and transportation,
cost accounting, human resource planning, and enterprise scorecard reporting. The
aim of such is to develop a system whereby all the organizational units are inte-
grated into a single computer system that will serve their different needs. If PLM
and ERP are properly implemented, they may help organizations and their sup-
ply chain partners to better serve their stakeholders by cutting down on cost,
improving productivity and environmental quality, facilitating information acqui-
sition and knowledge management, and enabling stakeholders to collaborate in
real time.
Although behavioral changes, managerial components, and technical platforms
are important in achieving sustainability, structural change is also critical. The
structural component normally includes work flow (or business process) structures,
organizational structures, communication infrastructures, product flow structures,
and transportation facility structures. Traditionally, they need to be designed and
developed to link everyone in the value chain and to deliver results. The focus
on sustainability, however, calls for a total redesign of these structures. Reducing
the amount of paper waste created in an office setting, for example, can be accom-
plished by using a computerized communication system. Promoting and implement-
ing executable reverse logistics plans on collection, inspection, selection, sorting, and
product recovery are not possible until the structural elements are in place. Policy
and decision makers should thus use benchmarking and reengineering techniques to
identify the current state of an organizational structure and where to position the
organization.
4.3. Mechanism
SM relies on applications of proven methods to achieve process improvement or
breakthrough. We shall characterize this aspect of SM using “5W + 1H.” They are
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presented as follows:
• Why sustainability? Economic responsibilities, environmental protection, and
social equity.
• Who does it? Trained personnel (critical mass).
• What is it? Effective and efficient use of proven techniques and decision sciences
models.
• Where is it? Structured horizontal organization with lateral flow of information.
How is it done? Standardized frameworks such as capability maturity model inte-

gration (CMMI), plan–do–study–act (PDSA), define–measure–analyze–improve–
control (DMAIC), and define–measure–analyze–design–verify (DMADV).

• When is it done? No finish line.
• How is it done? Leadership, sustainability reporting, green value chain mapping,
and project management.
To improve the decision-making capabilities of the stakeholder team, there are
many proven approaches. The approaches are grouped into two and are briefly
discussed here.
The first group, called CMMI, is used to guide efforts and help to attain high
process maturity. There are five distinctive stages associated with the CMMI model:
initial, managed, defined, quantitatively managed, and optimized. The initial stage
is generally characterized by unpredictable, poorly controlled processes (e.g., for-

est restoration); in the managed stage, programs and projects for sustainability are
normally adopted to help improve current processes, while proper management and
standard procedures can also be set in motion; in the defined stage, guidelines to
measure and verify process outputs and outcomes are available and organizational
infrastructure to ensure execution and implementation is well-established; in the
quantitatively managed stage, information systems and models are used to perform
tasks in achieving sustainability; in the optimized stage, emphasis is on innova-
tive/incremental improvements, carrying everyone along, and world-class delivery
processes. In the area of forest restoration, Yuen Foong Yu Paper Manufacturing

Co., Ltd. in Taiwan, for example, is now at a solid level four (or five). As a result
of such an achievement, policy and decision makers at Yuen Foong Yu Paper Man-
ufacturing Co. have been working on the establishment of consulting businesses
in forest management. Organizations can help each other to achieve sustainability.

The emphasis of any system capability development is on “potential” (Cheong and
Corbitt, 2010).
The second group has two sets of models. One is the PDSA cycle introduced
by Dr Walter Shewhart and popularized by Dr Edward Deming, while the other is
Six Sigma. The PDSA cycle is used to achieve high process quality. The plan stage
articulates the mission and purpose of the R&D process. The do stage deals with the
design of the process and product. Designers need to take into account stakeholder
requirements, technical feasibility, labor and cost requirements, and target values or
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standards. In the check stage, a comparative analysis of the green product/process
and the design requirements/plans with that of competitors and the best in class is
conducted. The act stage involves large-scale introduction to the market. The PDSA
cycle is a never-ending process with the ultimate goal of continuously improving
the quality of the process/product so that stakeholder satisfaction can be achieved.
The Six Sigma concept involves two approaches: (1) DMAIC and (2) DMADV. The
DMAIC cycle is used to achieve incremental improvement, whereas the DMADV is
used to achieve breakthrough results. Both approaches rely heavily on the applica-
tion of statistical techniques and management theories.
4.4. Outcome
Sustainability requires that organizations maintain the integrity of social and envi-
ronmental systems while reconfiguring human resources, management, technical
platforms, and structural components to maximize their financial performances.

This change induced by sustainability has instigated the development of new types
of performance indicators. Hutchins and Sutherland (2008), for example, identify
five themes to evaluate the social performance of organizations: equity (poverty,
gender equality), health (mortality, sanitation, drinking water, nutritional status,
healthcare delivery), education (literacy, educational level), housing security (crime,
living conditions), and population change. Using these five themes, a firm can
assess its “impact on society.” Brown et al. (2009), Moneva and Cuellar (2009),
and Skouloudis et al. (2009) also encourage organizations to report a wide array
of metrics for environmental quality and to focus on financial and non-financial
reports such as sustainability reports, environmental statements, and the SA8000
(social accountability standard) report. As performance measures are not all equally
important, the relative importance of each performance indicator must be identified
first by organizations with different complexities before devoting any resource to the
programs for sustainability.
The presented framework in this chapter ensures that sustainability conscious
systems are designed and developed. To show the robustness of our proposed frame-
work, we also apply our model to the study of Esquer-Peralta et al. (2008). Esquer-
Peralta et al. (2008) carried out interviews with 24 experts in the field of sustain-
ability for the purpose of discovering concepts with respect to SM. We shall organize
their findings into a theoretical explanatory scheme. This is presented in Fig. 3.

5. Top Management Strategies for SM
Although the specific strategy used for sustainability policy deployment and pro-
cess management varies from one organization to another, all generally have a focus
on the stakeholders, sustainable operations goals, internal/external enablers, inte-

grated systems, managerial constraints, modern design thinking, business results,
innovation opportunities, continuous improvement, learning and growth, enterprise

reporting, strategic/tactical choice, and economical/environmental/social impact.
Reading
Context (C) Interventions (I)

Outcomes (O) Mechanisms (M)
Ideas
on
SMS
Mgt. Sys. In Relation to SD

People Involved
Incentives/Barriers for an
SMS
Overcoming Barriers
Integration of Mgt. Sys
Product/Service Mgt.
Using Comprehensive
and Practical Programs
Voluntary-or
Regulatory-Based
Approach
Plan-Do-Study-Act
Process
Performance
Assessment
Driving Changes
within the
Company
The Concept
of Sustainable
Development
The Name
of the SMS
Fig. 3. Linking core elements for sustainability management system (SMS) ∗ to the CIMO model.
Source: Esquer-Peralta et al. (2008).
Top management strategy outlined here is one of the many ways that a firm can
use to achieve a competitive advantage.
5.1. Identifying aspects of managerial and policy challenges
and strategic responses
Globalization has presented new opportunities to modern organizations. These new
opportunities are, however, accompanied by a host of new challenges. As suggested
by Kuei et al. (2011), there are five main pressures affecting the functioning and
quality of today’s global supply chain systems: outsourcing, protecting the envi-
ronment, reducing waste, developing communities, and adopting advanced tech-
nologies. Clearly, organizations with different sizes and complexities are being put
under pressure to strike a balance between development economics and sustainable

economics (Kuei et al., 2011). To achieve this, it requires (1) the understanding
of the varying needs of the stakeholders, (2) a strategic change with a set of well-
articulated sustainable operations goals and strategies, (3) the commitment of top
management and the endorsement of employees and suppliers, (4) restructuring and
reengineering the operations system to drive sustainability, (5) adopting and fund-
ing change vehicles and programs, (6) building the foundation of SM with suitable
technology and science, and (7) maintaining the momentum. Responsible changes
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are necessary to help transform the traditional firm so that it is supportive of SM
initiatives. Such drastic changes, however, could affect other organizational changes
and may even be resisted by members of the organization. It will, therefore, require
tremendous investment in training and education in the field of sustainability.
5.2. Developing design system for sustainability leadership
A sustainable operations system can help to achieve economic development, envi-
ronmental protection, and social equity. To attain these goals, organizations need to
proactively direct their attention and efforts on developing design systems for sus-
tainability. The correct choice of a strategic portfolio and implementation blueprint
in the first place can enhance the competitive advantage and position of the orga-
nization. In being responsible to the needs of business systems, natural systems,
and social systems, designers and sustainability managers have to strive to define
the design problem space, find solutions, and develop plans for systemic imple-
mentation. Designers today need to be trained and educated in SM. They need
to comprehend fundamental issues such as building powerful enabling infrastruc-

tures at operational levels. Specifically, there should be a considerable emphasis on
the following: designing for sustainability, process changes, outputs, and methods.
Design of systems plays an important role when an organization is moving toward
sustainability.
5.3. Investigating and developing competencies to guide
the organization into the future
The new sustainability standards demanded in the global environment today include
not only product/process quality and financial performance but also competencies in
achieving social and environmental performance. Competence is a portfolio of orga-

nizational, managerial, technical, and strategic capabilities and skills developed by
organizations over time. As noted by Kuei et al. (2008), competence is the collective
learning of the organization. Competency development can be classified into four
groups: (1) examining the preconditions for competency development, (2) making
the right choice and following through, (3) identifying actual competencies, and
(4) taking further countermeasures if needed. Organizations that will flourish in the
future are those who are able to develop their (as well as their suppliers’) compe-
tence on economic, legal, ethical, environmental, and philanthropic responsibilities.
Although such competence can be initiated through training and planning, it must
be refined and extended through practical engagement and on-going learning to
drive sustainability through the organization and its supplier bases. As a result of
this, Wal-Mart has been working on both the preconditions for competency devel-
opment and the output dimensions of sustainable operations since 2005. Visionary
leaders should develop an innovative plan to build competencies in sustainability

and to guide their organizations into the future.
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5.4. Evaluating the effectiveness of specific interventions,
mechanisms, and innovative initiatives
Top management should take the lead in the SM transformation process. The check
(study) stage of Deming’s plan–do–check (study)–act cycle should also be one of the
focal points for evaluating any process of change. Environmental scans and internal
scrutiny at both policy development and process management levels are needed
to identify an organization’s strengths and weaknesses as well as its threats and
innovation opportunities. For internal scrutiny at the process level, for example, the
five-stage model proposed by Nidumolu et al., (2009) (i.e., viewing compliance as
opportunity, making value chains sustainable, designing sustainable products and
services, developing new business models, and creating next-practice platforms)
will be a very useful tool to apply. By management taking steps to evaluate the
effectiveness of interventions, mechanisms, and innovative initiatives along the five
stages identified by Nidumolu et al. (2009), a linkage can be established between
sustainable operations system and a company’s vision. If these are not achieved,
then the organization is not mature enough to effective sustainability performance.
Top management should identify problems at work, develop corrective mea-

sures, and evaluate the effectiveness of specific interventions, programs, and
initiatives.
5.5. Designing a supply chain-wide SM scorecard
For organizations with global supply networks, a supply chain-wide report card that
incorporates the business, social, and environmental contexts and results, must be
established. Enterprise reporting using a balanced scorecard approach is strategic. It
helps the organization, on a regular basis, to ensure its directional consistency, coor-
dinate its internal functions, verify its operational reality, have tactical flexibility
in its organizational routines, and communicate and deliver outputs and outcomes
more effectively to its stakeholders. This supply chain-wide report card can also
help supply chain partners monitor their systems and structures periodically to
ensure that sustainability is an integral component of global supply chain strategy.
The quality and integrity of the natural and social systems are the ultimate goal as
organizations adopt SM.
5.6. Validating the theory of sustainability and listening
to signals of internal and external communities
A number of questions need to be effectively answered along the stages of SM and
development. Some of the questions are highlighted here.
• Does the cost fit with the budget for sustainability?
• Is it cost effective to integrate sustainability initiatives with existing business
processes?
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• Will the organization (as well as its supply networks) readily adapt to sustainable
operations systems?
• Where does the organization (as well as its supply networks) want to be?
• What are the current states of the organization’s processes (e.g., strategic pro-
cesses, business processes, supporting processes, and continuous improvement
processes) and how do they affect the TBL?

• What is the learning curve for the sustainable operations system?
• What are the strengths, weaknesses, opportunities, and threats?
• What are the current/future major trends in the new sustainable economy?
• How do we get to where we want to be?
• What is the level of environmental quality (and social equity) of the organization?
And, how does it measure up (or compare with other organizations)?
• What are the metrics for measuring success? And how do organizations assess
success?
• How user friendly is the sustainable operations system?
With an understanding of its present position, the organization can further explore
other integrated approaches to sustainable development.
5.7. Understanding the dynamic sustainable future state
of organizations and the transformation process
for sustainability
The sustainability transformation process should be supported with strategic think-
ing, leadership, statistical thinking, system capabilities, employee fulfillment, and
cultural adaptation. When the transformation process is present (see Fig. 1),
dynamic forms can arise. Rules and guidelines for sustainability enable conditions
and produce patterns of behavior. It is of paramount importance to show the mem-

bers of organizations that new conditions and patterns can emerge by integrating
sustainability into all strategic and operational decisions. Policy makers must also
understand that while organized structure (pattern) is possible, instability (chaos) is
also possible. Course corrections are thus the norm and should be expected. During
the transition to dynamic forms (system structures) with many interacting parts,
policy/decision makers must be aware that the relationships in a sustainable sys-

tem are not fixed and non-linear. As explained by Nidumolu et al. (2009, p. 62),
when moving toward sustainability, “although directional consistency is important,

tactical flexibility is critical.”

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INTRODUCTION TO SUSTAINABILITY

Department of Management and Management Science, Lubin School of Business,

This chapter is an introduction of sustainability management (SM). Two models are

(TBL). TBL focuses on economic development, environmental protection, and social

stages of SM: viewing compliance as opportunity, making value chains sustain-

and creating next-practice platforms. It is apparent from these discussions that

2 C. N. Madu and C.-H. Kuei

sustainability makes economic sense and creates unprecedented marketing opportu-

corporations. Innovative companies that exploit these opportunities are likely to be

The resultant effect is improved sustainability performance and long-term financial

from the source. In addition to these sustainability practices, corporate sustain-

and other environmental hazards. Corporate sustainability reporting highlights the

Introduction to Sustainability Management 3

be developed to benchmark world-class industry leaders (see Appendix A).

4 C. N. Madu and C.-H. Kuei

Irrespective of the cell a firm is positioned in, it aims to be world-class by attain-

improvement to achieve the benefits of sustainability.

The laggards may be in need of re-engineering whereby leadership style, technol-

World-class: They are the best-in-class. When a company is rated WW, it

have all achieved sustainability successes through several innovative sustainabil-

Introduction to Sustainability Management 5

sustainability depends on a systematic and a systemic evaluation of an organiza-

must be aligned with sustainability initiatives. Organizations must develop strate-

to SM. Organizations must, therefore, be able to address the following questions:

• What are the circumstances, interventions, mechanisms, and outcomes in the

6 C. N. Madu and C.-H. Kuei

productivity. It is, therefore, necessary that corporations adopt strategic sustain-

• efforts to minimize wastes;

• creating low carbon/pollution supply chain, effectively using renewable/non-

• using of alternative energy sources;

• enforcing extended producer responsibility through principles such as account-

These efforts to achieve sustainability could be further explained using the

• Recycle: Organizations such as HP use open-loop and closed-loop recycling pro-

Introduction to Sustainability Management 7

according to HP’s reuse–recycle–disposal hierarchy, in a safe, secure, environmen-

According to the DJSI, social responsibilities involve corporate citizenship/ phi-

www.sustainability-indexes.com). Clearly, social responsibility goes deeper than

examples include Ronald McDonald House Charities (RMHC) and McDonald’s

its organization structure. It maintains, for example, (1) corporate responsibil-

governing bodies such as corporate responsibility department, global environmen-

8 C. N. Madu and C.-H. Kuei

business management. These dimensions need to be added and considered simulta-

understand sustainability from a strategic and a holistic point of view.

and social performance is not simple. An organization must undergo a transforma-

Fig. 1. The transformation process model.

Introduction to Sustainability Management 9

transformation is driven by a new vision that understands the interactions of the

for sustainability need to be recognized. If the core competencies for sustainability

be impacted by this process of change: a system transformation process, work-

steps required to transform the current organization at the points of reflection. It

Gharajedaghi (2006), it normally involves using system principles (openness, pur-

competencies for sustainability. Along with these transformation processes, orga-

excellence in economic development, environmental protection, and social equity. In

improvement opportunities. This process involves evaluation of value creation rela-

The transformation process model presented here can be used in a cognitive

Introduction to Sustainability Management 11

Context (C) Interventions (I)

components) at all times. In complex operating environments, this simple exercise

sustainability, outline a vision statement, enhance effective communication, encour-