Description
It presents a learning-based approach as an effective way of engaging members of the supply chain, working with 'messy problems' (those that are complex, hard to define and involve many people and issues), and embedding change in policies and practice.
S US TAI NAB I L I T Y I N S UP P LY CHAI NS
Us i n g s y s t e ms t h i n k i n g t o
wo r k t o wa r d s s u s t a i n a b i l i t y
i n c o r p o r a t i o n s a n d t h e i r
s u p p l y c h a i n s
i
SUSTAINABILITY IN SUPPLY CHAINS
Using systems thinking to work towards sustainability in corporations and their supply chains
Alice Woodhead*, Janelle Thomas** and Jeremy Mah**
March 2009
*Link Strategy Pty Ltd **Australian Research Institute in Education for Sustainability (ARIES)
The Australian Research Institute in Education for Sustainability under commission from the
The Australian Government Department of the Environment, Water, Heritage and the Arts
PROGRAM CONTACTS:
Prof Suzanne Benn
The Australian Research Institute in Education for Sustainability (ARIES)
www.aries.mq.edu.au
E: [email protected]
Dr Alice Woodhead
Link Strategy.
www.linkstrategy.com.au
E: [email protected]
Key words: supply chains, corporate sustainability, collaboration, multiple stakeholders, systemic
thinking, transformational projects, learning, education.
Citation: Woodhead, A, Thomas, J and Mah, J (2009) Sustainability in Supply Chains. Link Strategy
and the Australian Research Institute in Education for Sustainability for the Australian Government
Department of the Environment, Water, Heritage and the Arts, Canberra, Australia.
ii
KEY PARTICIPANTS
(Listed alphabetically
by organisation name)
Bovis Lend Lease
Anita Mitchell, Head of
Sustainability – Asia Paci?c
Genevieve Scarfe, Sustainable
Development Consultant
Goodman Fielder
Mike Searles, National Sustainability
Manager, Corporate Division
Georg Meisch, National Logistics
Manager, Bakery Division
Don Ball, Logistics Project Manager,
Bakery Division,
Kylie Kindred, Customer Relationship
Manager, Commercial Division,
Louise Wood, National Logistics
Manager
Dan Schiebaan, Environmental
Manager
NSW Landcom
Matthew Napper, Environment
Manager
Stockland
Chewy Chang, Sustainability Project
Manager – Development Division
Mimi Vu, Procurement Manager
KEY CONTRIBUTORS
AMP Capital Investors
Nick Edgerton, Research Analyst,
Sustainable Alpha Funds
Australian Government
Department of the Environment,
Water, Heritage and the Arts
Tony Marker, Director, Building
Energy Ef?ciency and Sustainability
Chris Baker, Acting Branch Head,
Energy Futures Branch
Jeanette Schwarz, Director,
Technology Futures Team
Boral
Nathan Barrell, National Planning
and Corporations, Development
Manager
Cement Concrete and
Aggregates Australia
Samia Guirguis, Manager, Research
and Technical Services
Cement Australia
Bruce Hunter, National
Corporations Development
Manager, Marketing & Sales
Cemex
Graeme Reid, Sales and Marketing
Manager
Scott Carter, National Environment
Manager
City of Sydney
Ben Pechey, Specialist Planner
Concrete Institute of Australia
Ben Cosson, Project Manager,
Technical Services
Delta Electricity
Peter Coombes, Manager
Sustainability
Peter Reed, Asset Manager,
External Plant
Green Building Council
Hal Dobbins, National Technical
Manager, Certi?cation
Hanson
Jeremy Smith, General Manager
Corporations Development
HBM Group
Craig Heidrich, CEO, Ash
Development Association of Australia
& Australasian Slag Association
Independent Cement and Lime
James Howard, Marketing Manager
Kellogg
Matthew McGinness,
Environmental Manager
Venkata, Subramanyan, Customer
and Logistics Services Manager
Macquarie Generation
Wayne Enks, Asset Manager,
Bayswater Power Station
NSW Department of Environment
and Climate Change
Rod Clare, Corporations
Partnerships, Building Products NSW
ORIX
Mark Willington, Business
Development Manager, Commercial
Vehicles
Ian Leggatt, Operations Executive,
Commercial Vehicles
iii
ACK NOWL E DGE ME NT S
We wish to acknowledge the support of the ARIES partners
and contributors. In addition to those acknowledged under key
participants, there were many other employees in participant
corporations who contributed time and ideas. We would also
like to record our appreciation to the following companies
who provided input: ARUP, Bakers Delight, Clarendon, Linfox,
JL Pierce, Green Fleet Systems International, Investa, Hino, Isuzu,
OES CNG, OSMU Technology, Richard Crook Construction and
Toll Holdings.
We are grateful to David Morrissey, CSR Sydney, who
established the projects with the participant corporations.
Expert advice was received from Prof. John Gattorna, Macquarie
Graduate School of Management, and from the Systemic
Development Associates: Bruce McKenzie and Prof. Roger
Packham, the University of Western Sydney.
Prof Daniella Tilbury, then ARIES Director, initiated this program
of research and obtained funding for its implementation.
1
CONT E NT S
E X E CUT I V E S UMMAR Y 2
1 . I NT R ODUCT I ON 5
High uncertainty and high risk issues 5
What is a sustainable supply chain? 7
About the Sustainability in Supply Chains Program 7
2 . CUR R E NT T HI NK I NG AND L I T E R AT UR E 1 1
Sustainability is a dynamic concept 12
About supply chain management 13
Organisational change in complex social systems 16
Learning for sustainability 19
3 . L E AR NI NG T O T HI NK S Y S T E MI CAL LY 2 3
What is critical systems thinking? 23
How to think systemically and critically 24
4 . CAS E S T UDI E S 3 1
Sustainable concrete supply chain 32
Sustainability in food distribution systems 43
5 . E X P L OR I NG T HE CHAL L E NGE S OF WOR K I NG S Y S T E MI CAL LY 5 2
6 . T HE S I GNI F I CANCE OF T HI S P R OJ E CT 5 7
R E F E R E NCE S 6 0
GL OS S AR Y AND ACR ONY MS 6 2
2
E X E CUT I V E S UMMAR Y
It presents a learning-based
approach as an effective way
of engaging members of the
supply chain, working with ‘messy
problems’ (those that are complex,
hard to de?ne and involve many
people and issues), and embedding
change in policies and practice.
Managing sustainability and supply
chains is a report by Link Strategy
and the Australian Research Institute
in Education for Sustainability.
The program was funded by the
Australian Government Department
of the Environment, Water, Heritage
and the Arts, and supported by
Macquarie University. Foundation
participants were Bovis Lend
Lease, Stockland and Landcom
(the construction and built
environment sector), and Goodman
Fielder (food manufacturing and
distribution). Over 20 corporations,
from SMEs to multinationals,
were involved in the project.
The report is for CEOs, managers,
educators and staff within industry
and government who seek to
integrate sustainability into their
vision, culture and practices. The
report’s methods, discussion, case
studies and insights are based on
a critical systems approach. The
report will be helpful in providing
guidance on the drivers (the why),
the process of change (the how) and
the actions required (the what) to
achieve sustainability outcomes.
The critical systems approach to
complex problems can be used in
any circumstance where no one
individual or group can create
change without the cooperation
of other parties. Sustainability and
supply chain problems and solutions
frequently fall into the domain of
high uncertainty and high risk issues
where the outcomes from a course
of action cannot be predicted; and
indeed, even de?ning the problems
can be dif?cult.
The construction sector project
focused on sustainable concrete
as an important, persistent
problem that no single company or
partnership in a construction supply
chain could ?x. It involved:
Multi-stakeholder engagement •
– identifying the stakeholders
(developers, construction ?rms,
suppliers and competitors)
and engaging the range of
perspectives on an issue
Institutional change – identifying •
persistent problems and systemic
constraints to implementation
of new technology, products
or improving practices,
and considering ways
to overcome them
Policy and practice change •
– developing policies and
processes for improving
information and management.
This report explores
a systems-based
learning approach
taken by a group of
corporations in two
sectors to improve
the sustainability of
their products and
services, including how
to respond to scarce
resources and evolving
climate change policies.
3
The food sector project examined
a feasibility pilot to reduce
greenhouse emissions in fuel use,
by reviewing options to improve
fuel ef?ciency in a short-haul bakery
distribution network. The focus of
this project was on:
Clarifying values and priorities – •
managers explored their values
and the strategic importance
and impact of sustainability on
their business and stakeholders,
including employees, customers
and investors
Research and development – •
reviewing current and emerging
alternative fuel options in
commercial vehicles
Innovation – the feasibility of •
implementation and exploring
how to operationalise cutting-
edge vehicle technology in the
bakery division
Monitoring – diagnosis of •
current and new processes with
the objective of developing
monitoring programs and
key performance indicators
for emerging legislation e.g.
greenhouse gas.
KEY FINDINGS
The key ?nding of this supply chain
project are:
1. The critical systems approach to
complex sustainability issues can be
used in any circumstance where no
single individual or group can create
change without the cooperation
of other parties. Bene?ts of a
systems approach include increased
knowledge of corporate and
supply chain operations, holistic
and systemic thinking about
risks and uncertainty, increased
capacity for decision-making about
sustainability options and more
targeted and effective responses to
issues.
2. Supply chain sustainability
initiatives require multi-disciplinary,
intra- and inter-divisional, and inter-
organisational cooperation. The
case studies revealed the need for
stronger collaboration throughout
the supply chain, with a greater
emphasis on working systemically
with suppliers and stakeholders.
Collaboration creates new networks,
business opportunities and research
partnerships
3. To effectively build the capacity
of individuals and organisations
towards more sustainable supply
chains, it is essential to understand
the diversity of stakeholder
perspectives and sustainability
challenges; the complexity of
the system and the options for
in?uencing change.
4. Learning and organisational
change takes time and involves
new skills. People need time to
make sense of new ideas and ways
of doing business. Facilitation and
support from senior management
are essential for maintaining
momentum and focus.
5. The drivers of change in the area
of sustainability are diverse. They
include competition and access to
resources, public concern about
environmental and social impacts,
brand credibility, and a desire to
be green and responsible. Some
problems were too dif?cult for the
participants to tackle within the
scope of this program. Managing
logistics in several participants’
supply chains was considered
imperative for reducing transport
costs and increasing effectiveness,
but exploring changes to logistics
requires a longer time frame,
extensive collaboration, and
commitment to share knowledge
among a broad range of
stakeholders.
4
The bene?ts of learning
about sustainability in a
multi-disciplinary group using
a systems approach include:
more holistic, systemic thinking •
about risks and uncertainty
improved capacity to de?ne •
and prioritise sustainable supply
chain problems
increased knowledge of •
corporate and supply
chain operations which
improves decision-making
about sustainability
options and trade-offs
increased capacity for decision •
making about options for
verifying sustainable credentials
of products and services,
reducing waste and improving
energy ef?ciency
more comprehensive strategy •
and policy development for
in?uencing systemic change
towards a corporate culture
that encourages sustainable
management practices.
This report discusses sustainability
in the context of corporate
sustainability and supply chains.
We joined corporations on their
journey towards developing
sustainable products and services,
and explored with them the options
for responding to scarce resources
and evolving climate change
policies. There are currently limited
resources available for corporations
to develop these skills.
RECOMMENDATIONS
To encourage corporations to
become more sustainable, this
report recommends:
support be provided by •
government concerning
appropriate leadership and
management strategies and
policies for complex situations.
This will enable corporations to
respond more systemically, and
therefore more effectively, to
climate change issues.
learning material is developed •
about how to establish
collaborative multi-stakeholder
forums and management
practices to in?uence
sustainability performance
throughout supply chains using
systemic learning processes.
This study provides a systems-based
learning approach for corporations
to address their sustainability
management and research needs
with supply chain partners. The
learnings from the case studies
also provide unique insights
and ideas for other corporations
and government agencies who
are considering how to respond
to emerging climate change
challenges, risks and opportunities.
E X E CUT I V E S UMMAR Y ( CONTI NUED)
5
Corporations have transformed the
world’s resources and shaped the
physical and social world in which we
live (Dunphy et al 2007). Gradually
over the last century, awareness
about the negative impacts of these
activities on the natural environment
and the limits of the world’s
resources has increased. In response,
sustainability strategies have been
developed and incorporated into
many public and private sector
visions, policies and management
practices (Delaney and Woodhead
2007). The drivers of change in the
area of sustainability are diverse.
They include competition and access
to resources, public concern about
environmental and social impacts,
brand credibility, and a desire to be
green and responsible.
While addressing sustainability
issues is often dif?cult, complex, and
beyond daily business practices, the
Garnaut (June 2008) and Stern (2006)
reviews on the economics of climate
change both emphasised the cost
of doing nothing. This report,
Managing Sustainability and Supply
Chains, discusses sustainability
in the context of corporate
sustainability and supply chains. We
joined corporations on their journey
towards developing sustainable
products and services, and we
discuss how these corporations
thought about responding to scarce
resources and evolving climate
change policies.
We discuss sustainability
in the context of corporate
sustainability and supply
chains, with a focus on the
human and organisational
dimensions.
The World Commission on
Environment and Development
(1987) in their report, Our Common
Future, de?nes sustainable
development as development that
meets the needs of the present
without compromising the ability
of future generations to meet their
own needs. While there seems to be
general agreement on sustainability
in its theoretical sense, agreement
on what is supposed to last, who
decides, or how to prioritise and
balance trade-offs, is constantly
negotiated among corporations and
governments (Woodhead et al 2006).
HIGH UNCERTAINTY
AND HIGH RISK ISSUES
Sustainability and supply chain
problems and solutions frequently
fall into the domain of high
uncertainty and high risk issues
where the outcomes from a course
of action cannot be predicted.
These problems are complex and
messy to work with. Complex
because they involve many
stakeholders, issues, locations,
management practices and
technologies. Messy because the
problems are ill structured. That is,
the problem is often complicated
and dif?cult to de?ne because each
individual has a different perception
of the problem and the solution,
based on their own reality and
their position in the supply chain.
Cause and effect relationships are
therefore only apparent with the
bene?t of hindsight.
Messy problems are usually
systemic, so the ?aws and perverse
outcomes of policies and practices
may have been hidden for years,
and as such they require a multi-
disciplinary, multi-layered approach.
For example, a rating system may
incentivise a recycled resource,
whilst failing to account for other
factors such as local availability
and transport impacts. Figure 1
shows a simple model of a supply
chain, with systems interactions,
in?uences and policy tools. Each
corporation has numerous sub-
systems of specialist knowledge and
processes, the sum of which makes
up the supply chain system, which
itself is a part of other systems.
1 . I NT R ODUCT I ON
6
The process of critical
systems thinking requires
that people, when
searching for solutions to
problems, consider the
interactions between the
solution(s) and the external
and internal environment.
The concept, critical systems
thinking, acknowledges the
limitations of traditional scienti?c
inquiry in dealing with the complex
reality of social institutions
interacting with natural phenomena
(Flood and Romm 1996). Traditional
inquiry breaks an issue down into
manageable units. This approach
can yield valuable insights, but
does not lend itself to situations
that are interconnected, complex
and dynamic. It doesn’t reveal the
richness of the social interactions
among numerous events and actors
over time that form the behaviour of
a complex system.
The process of critical systems
thinking requires that people,
when searching for solutions to
problems, consider the interactions
between the solution(s) and a
range of factors in the external
and internal environment. Systemic
thinking is therefore appropriate for
sustainability problems, or messy
problems, such as climate change,
that involve the perspectives of
various actors operating in different
systems at different scales (Röling
2000) (e.g. invoicing is a sub-system
of the product sales system).
1 . I NT R ODUCT I ON
This Link Strategy systems diagram shows a supply
chain (represented by the black line) connecting
suppliers (the small red circles) which are all part
of a larger system (the large red circle). Each
system and sub-system has social, environmental
and economic elements (indicated by the icons).
The red and black arrows show the potential
points in a system where one-way and two-way
interactions occur between different systems.
Each organisation has a range of tools (the
spanners) for managing internal and external issues
(sales, audits, certi?cation, training and so forth).
Figure 1 Supply chain interactions and boundaries
Thinking
systems
7
Every individual and
corporation in the supply
chain differs in the way
they value, perceive and
de?ne social, economic
and environmental issues.
WHAT IS A SUSTAINABLE
SUPPLY CHAIN?
A working de?nition of a sustainable
supply chain (Seuring et al, 2008)
is ‘the management of material
and information ?ows as well as
cooperation among companies
along the supply chain while taking
goals from all three dimensions
of sustainable development, i.e.
economic, environmental and social,
and stakeholder requirements into
account’.
Supply chains are a source of:
opportunity – effective •
logistics and quality control
can improve resource use
ef?ciency and pro?tability
risk – because products •
and services can expose
corporations to sustainability
issues that other corporations
have limited control over
uncertainty – global issues such •
as climate change have multiple
unknown consequences.
The Sustainability in Supply Chains
program addressed some of these
challenges. Participant corporations
thought about ways to include
sustainability parameters into
their operations and supply chain
management. The likely impacts of
change in both the short and longer
term, who would be impacted and
the tangible and intangible bene?ts
were also considered.
Every individual and corporation
in the supply chain differs in the
way they value, perceive and
de?ne social, economic and
environmental issues. Each link
in the supply chain provides
different services and processes
and employs skilled professionals
appropriate to each operation.
Therefore the way these issues are
de?ned and acted upon differs, as
does how risk and mutual bene?t
is perceived by people. Mutual
bene?t was de?ned as more than
?nancial gains or improved quality
control, for it to be considered
sustainable. It became apparent
that change towards sustainable
practices requires establishing
and maintaining collaborative
partnerships. This requires:
de?ning mutual bene?ts •
understanding how con?ict •
and the exercise of power
in?uences capacity and
resistance to change
aligning the short-term (low •
hanging fruit) with a long-term
view (dif?cult, messy problems)
multiple intervention points and •
a range of policies, regulations,
education, incentives, standards,
and research and development.
ABOUT THE
SUSTAINABILITY
IN SUPPLY CHAINS
PROGRAM
This program, Sustainability in
Supply Chains, was funded by the
Australian Government Department
of the Environment Water, Heritage
and the Arts (DEWHA), and
supported by Macquarie University.
The intention was organisational
change towards sustainability
in corporations and their supply
chain operations. Understanding
the factors that in?uence learning
and change in corporate decision-
making towards sustainable
outcomes is important to DEWHA
and a key focus under the Australian
Government’s National Action
Plan for Environmental Education
and Caring for Our Future: The
Australian Government’s Strategy
for the UN Decade of Education for
Sustainable Development, a more
recent document setting out policy
directions and priorities.
The objective was to enhance corporations’ sustainability
thinking, strategies and management of supply chains via
learning-based change and systems thinking.
8
The recommendation to address
sustainability in supply chains
came from corporate participants
in an earlier Industry Sustainability
Project conducted by the Australian
Research Institute in Education for
Sustainability (ARIES). Education for
sustainability and action learning
can provide a basis for adaptive
change management. One of
the principles of education for
sustainability is systemic thinking.
Given the systemic emphasis of
this program, Link Strategy, a
consultancy that specialises in
systemic thinking, was invited to
lead the systemic enquiry.
The objective was to enhance
supply chain corporations’ thinking
and operations for sustainability
via learning-based change.
The research approach was
monitored and its effectiveness
evaluated by the research team
(ARIES and Link Strategy).
The expected outcomes of the
Sustainability in Supply Chains
program were:
Participant corporations •
enhance the sustainability
performance of their supply
chain management by improving
policies, procurement standards
and practices.
Supply chain companies •
introduce or improve
sustainability in their activities,
such as improved product design,
production, packaging, life cycle
management, resource use, waste
management and transport.
Demonstrated progress •
in culture change towards
sustainability in supply chain
corporations e.g. through
increased engagement and
changes in relationships,
practices and ways of
approaching supply chain issues.
Potential created for indirect •
and longer term sustainability
impacts through: the in?uence
of sectoral clusters on extended
supply chain networks, ongoing
learning relationships, or
program results being scaled up
or transferred to other contexts.
Monitoring of program activities, •
evaluation of intermediate
indicators of progress towards
sustainable outcomes, and
assessment of program impacts
and success factors.
Learning resources created that •
document Program/Project
outcomes, such as reports,
case studies, and an overview
of useful tools and models, and
promotion of these ?ndings.
Two sectors, construction
and food, engaged in
supply chain projects.
Participant corporations
and projects
Prominent corporations in the
Australian industry sector were
invited to participate. Participants
needed to demonstrate that
they were receptive to making
sustainability improvements
and could exert a signi?cant
effect through their supply chain
position, in?uence and reach. Each
participant corporation was asked to
nominate sustainability changes to
speci?c aspects of their supply chain
system (e.g. product line, resource
use, transport, waste management,
site locations, a particular
production focus or a subset of their
procurement relationships) and
involve approximately 3–5 of their
supply chain member corporations.
Two sectors, food and construction,
participated in the program. People
in the foundation corporations had
titles that were environmental or
sustainability managers. After initial
consultation with the ARIES research
team, they facilitated introductions
and meetings with key people in
their corporation and with potential
9
partner corporations in their supply
chain. The research team also
broadened the scope of participant
corporations once the project issues
began to emerge.
Kellogg, Bakers Delight and Investa
engaged in initial meetings and
explored options for projects.
Foundation corporations that
established ongoing projects were
Goodman Fielder (food sector),
Stockland, Bovis Lend Lease and
Landcom (construction sector).
The project teams engaged in
envisioning and critical systems
thinking to explore the range of
conditions and plausible outcomes
within their corporations, and in
their supply chains.
The focus of the construction
project was sustainable concrete
in the built environment. Beyond
the immediate issues, logistics,
waste, emissions trading, embodied
energy, energy ef?ciency and
resource considerations, there was
broader debate. What impacts do
concrete production, infrastructure
and buildings have on human health
and community wellbeing, what
are the cities of the future going to
look like and what infrastructure will
society require? In a similar vein the
food sector project incorporated
big picture issues into their analysis
of alternative fuels. For example,
were bio-fuels an acceptable source
of fuel for a food manufacturer
considering food security and
competition for commodities;
the drought and their role as a
responsible corporate citizen?
These projects led to the
exploration of a variety of supply
chain collaborations. DEWHA
contributed expertise, particularly
on greenhouse gas impacts, to
both project teams. ORIX became a
key partner with Goodman Fielder,
and ORIX in turn invited several
alternative vehicle manufacturing
corporations. The construction
companies agreed to work
together because the complexity
of the concrete supply chain
necessitates a collaborative effort.
Representation was invited from
concrete and cement suppliers,
the ?nancial and governance
sector, associations and the energy
sector. Participant organisations
included Boral, Hanson, Cemex,
Independent Cement, Cement
Australia, Macquarie Generation,
Delta Electricity, AMP, Green
Building Council, Concrete Institute
of Australia, Concrete Cement and
Aggregates Australia, HBM Group,
DEWHA, NSW Department of
Environment and Climate Change,
and Sydney City Council.
Research team
ARIES established the program
and provided research direction,
program coordination, and
monitoring and evaluation.
The approach drew upon an
action research methodology
and principles of education
for sustainability, particularly
envisioning an alternative future,
collaboration, critical re?ection and
systemic thinking.
CSR Sydney was involved in the
program start-up, with establishing
program objectives, identifying
sectors of interest, recruiting
foundation participants, facilitating
initial scoping and envisioning
sessions, and establishing project
objectives and supply chain
considerations.
Link Strategy Pty Ltd facilitated
program implementation and
led the principal Critical Systems
Analysis (CSA). This included
facilitating and guiding the
methodological approach to
systemic enquiry, semi-structured
interviews, focus groups, ongoing
communication with participants
and supply chain partners and
reporting.
10
Expert knowledge
As a catalyst in the Participants’
change process, occasional
project input or participation
was also sought from external
change agents. These agents were
subject matter experts, industry
or government representatives,
or experienced sustainability
practitioners.
In addition to the primary data
gathered during project activities
with participants, the report
draws on a range of scienti?c
literature, discussion papers and
the popular media to provide
insights into the range of
perspectives on these issues.
About this document –
contents and how to read it
The uncertainty of evolving
climate change policies, along
with the emergent status of
corporate sustainability thinking
provided the program team with
challenging dilemmas about how
to best in?uence and embed
sustainability thinking within the
participants’ corporations and in
their supply chains. The report is
structured to enable the reader
to build an understanding of the
complexity and scope of the issues
within the Sustainability in Supply
Chain program and attempts
to identify where and how the
research team most in?uenced
the participants’ systems.
In this report we outline the
sustainability in supply chains
program. The report has four major
sections which cover: (1) current
thinking and literature on supply
chains and sustainability, learning
and knowledge management; (2)
the systems thinking approach; (3)
the case studies; and ?nally (4)
our re?ections on the process
and the outcomes.
11
Increasing uncertainty in the global
environment is changing the very
nature of risk, so that management
now needs to consider a far wider
range of issues to operate in
tomorrow’s markets. The decision
process, organisational culture,
and the social and organisational
dimensions of change are all
important considerations in this
transition process. These are brie?y
discussed along with the ARIES
learning model.
When considering the present and
the future, a historical perspective
is important to identify longer term
in?uences and emerging patterns.
For example, prior to the agricultural
and industrial revolutions, most
energy for production came
from the sun, wind, water mills or
biomass fuels. One hundred and
?fty years of industrialisation has
seen the development of systems
and products that rely on non-
renewable energy resources (Clift
2006). Widespread assumptions that
suf?cient resources exist to supply
continuous economic growth and
that markets give adequate signals
for innovation to overcome any
resource shortages are now being
seriously tested, most notably water,
oil and greenhouse gas emissions.
Leading corporations are now
exploring how to in?uence and
change this cumulative legacy of
business practices, assumptions and
professional disciplines. They have
re-examined their corporate policies
and are working on strategies
for simultaneously achieving
revenue growth, operational
ef?ciency and sustainability.
This report explores issues of
developing an organisation’s
capacity to respond effectively by
adapting to emerging issues. This
means extending traditional growth
and operational foci to include
the social, environmental and
governance dimensions in decision
making and strategic thinking at
all levels of the corporate system.
We contest that there are many
intangible, long-term bene?ts to
organisations and supply chain
partners from becoming more
sustainable, and that there is a
need for greater awareness of these
bene?ts. According to UNESCO
(2005), ‘the larger corporations,
especially manufacturers, are
reaping huge ?nancial bene?ts from
training measures introduced to
address energy, water and waste
management issues. Addressing
other environmental, social and
human resources issues are proving
to be rewarding.’
Whilst advocating a three-
pillars de?nition of sustainability
(environmental, social and
economic), our process focuses
on the human and organisational
dimension. Understanding the social
and governance systems is a vehicle
for in?uencing business strategy and
2 . CUR R E NT T HI NK I NG AND L I T E R AT UR E
This chapter establishes
the context and need
for the Sustainability in
Supply Chains program.
It introduces sustainability
and supply chain
concepts, messy problems
and a learning-based
systemic approach.
There are long-term bene?ts of incorporating sustainability
thinking into business strategy, policy and management practices.
12
operational procedures (Dunphy et
al 2007). In this chapter we introduce
concepts relevant to exploring
sustainability in supply chains and
systemic learning for enabling
organisational change, collaboration
and learning with reference to the
construction and food projects
undertaken as part of this program.
A complex system is a
system composed of
many parts that interact
in non-linear manner.
SUSTAINABILITY IS A
DYNAMIC CONCEPT
Governments and corporations
are continually exposed to
new technologies, regulations,
market threats and opportunities,
management practices and
natural phenomena. Sustainability
strategies and policies are
attempting to recognise,
understand and in?uence the links
among environmental, social and
governance factors and ?nancial
performance. The dimensions of
sustainability, as pointed out by
Parker (2005), exceed the traditional
legal boundary of a corporation,
requiring consideration of external
factors, such as input and output
dependencies in the supply
chain, community and labour
relationships, ethics and people’s
values. Corporate sustainability is
therefore constantly evolving at the
con?uence of science and society.
CEOs, managers and employees
who are involved in sustainability
policy now have to deal with – and
manage – uncertainty, complexity,
indeterminacy, surprise, ambiguity
and ignorance. The word complex
literally means ‘composed of
interlaced parts’. A system is
de?ned as ‘a set of interacting or
interdependent entities, real or
abstract, forming an integrated
whole’. A complex system is a
network of systems (such as a supply
chain), with each system functioning
more or less independently, yet
interdependently. A complex social
system is a networked system of
actors, that is, people who are
capable of autonomous choice.
A key challenge for managers is how
to examine the range of plausible
future pathways of combined social,
environmental and business systems
under these conditions. Further
compounding this complexity is the
high degree of variability between
individual levels of knowledge about
sustainability. In the participant
projects, establishing mutual
understanding and compatible
visions of the future emerged as a
key determinant of the success of
the supply chain collaboration.
Discussions about the why of
sustainability and how it relates to
speci?c situations therefore provide
the basis for establishing common
knowledge and developing a shared
vision of supply chain management.
Some issues that can be expected
to challenge and shape thinking
about sustainability in supply chains
(Delaney and Woodhead 2007) are:
ethics, societal values and •
intellectual property con?icts
around future research –
nanotechnology, genetically
modi?ed organisms (GMO),
bio-technology and
nuclear science
complexity, resilience theory and •
systems thinking for developing
understanding about climatic
change and other ‘massive’
issues such as global poverty,
multinational corporations
and energy
emissions trading schemes •
and new valuations of
ecological and societal
services to establish incentives
and market mechanisms
resource scarcity, drought and •
environmental impacts, e.g.
the Murray Darling Basin
emerging economies, wealth •
creation and distribution in
these economies, such as
China and India.
13
ABOUT SUPPLY
CHAIN MANAGEMENT
Supply chains are purposeful
networks of operations that enable
the production and movement
of goods from raw commodity to
?nished goods, but their effective
operation is underpinned by human
relationships. At each stage in the
network of operations, people make
choices about which packaging,
equipment, waste disposal, energy
source, and so forth, provide the
best outcome. For example, a bottle
of orange juice can be a blend of
oranges from up to seven global
origins, to ensure a consistent
?avour for the consumer. An OECD
report (2002, p 2), de?ned a supply
chain as a ‘network of facilities
and distribution channels that
encompasses the procurement
of materials, production and
assembly, and delivery of product
or service to the customer’. Supply
chain management is the process
of planning, implementing and
controlling the operations of
the supply chain. This includes
the movement and storage of
raw materials, operations, and
all activities that are required to
process goods from origin to
consumption. The value chain refers
to the value adding activities that
an organisation provides to support
the ef?cient operation of the supply
chain and deliver maximum value for
the customer. These activities can
include infrastructure management,
human resources, research and
development, sales and marketing.
Distribution of
economic bene?ts
Identifying the distribution of
economic bene?ts (who gains,
and by how much) and where in the
supply chain most value is added
(as perceived by the customer or
by society) can provide insights
into the challenges of in?uencing
the system. Clift (2006) discusses
how identifying economic traits in
a supply chain shows a
“highly skewed distribution,
with primary resource industries
apparently responsible for major
environmental impacts but
achieving limited added economic
value and with the later stages of
the supply chain, including retailing,
characterised by high added value
with much less environmental
impact; in other words, global trade
can act to export unsustainability
from the consuming country to
countries whose economies are
dominated by primary industries.”
Control over supply chain
management has moved
downstream (towards the retail
end). Historically supply chains were
manufacturer-dominated. However,
for example in the food sector, what
emerged in the 1980s was a highly
competitive retailer section, where
‘the retailer is king’ (AEGIS 2001).
Broadly speaking, food retailers
have three drivers for managing
their supply chains:
the desire to cut costs •
concern about regulation, •
that is, increasing compliance
to reduce risk
productivity ef?ciency. •
There naturally evolved a strong
emphasis on technology to help
manage transport logistics and
trace products through supply
chains. To date, these models
have improved ef?ciency by
removing redundant costs
from production systems.
Future supply chains
and collaboration
New factors in?uencing supply
chain thinking (Capgemini 2008)
are the increasing ?ow of goods,
new technology, resource scarcity,
emissions trading, and changing
patterns of consumer purchasing.
The literature on supply chain
management has primarily focused
on optimising the value chain.
There is limited writing on the
inherent social complexity of
collaboration among corporations
in supply chains, although it is
frequently noted as a key enabler
of operational effectiveness.
14
The Capgemini report, Future
Supply Chain 2016, sees the future
supply chain as a collaborative
model where information sharing,
collaborative warehousing and
collaborative logistics de?ne industry
or geographical sectors. However,
developing effective collaboration
and networks of knowledge-sharing
among diverse and frequently
competitive private and public
agencies is a messy problem.
Construction supply chains, for
example, involve hundreds of
different companies supplying
materials, components and a wide
range of construction services
(Dainty et al, 2001). Within a single
construction corporation, the
structure of the supply chain and
the position of the developer in the
supply chain can differ markedly
between corporate divisions and
even between different projects.
Fundamental structural issues have
constrained collaboration within
the sector, according to Briscoe and
Dainty (2005), who make these points:
Limited integration across •
different tiers compared to
other industrial supply chains,
which are more ef?cient
and closely integrated.
Relationships characterised •
by adversarial practices and
disjointed supply relationships.
‘Commonly, construction
clients appear to distrust
their main contractors, who
in turn maintain an arms
length relationship with their
subcontractors and suppliers.’
Construction projects have •
de?ned time frames with
teams existing for the life
of the project. ‘Projects are
treated as a series of sequential
and predominantly separate
operations where the individual
players have very little stake in
the long-term success of the
resulting building or structure
and no commitment to it.’
Vested interest and lack of desire •
to build trust among supply
chain partners have thwarted
attempts to extend partnering
and collaborative working.
‘Reliance on a fragmented and •
largely subcontracted workforce
has increased the complexity
of this supply network and
delimited opportunities for
process integration.’
Bene?ts of a collaborative supply
chain approach are often cited
as reduced costs and improved
quality control. Other less
quantitative bene?ts are innovation,
transparency, knowledge generation,
information ?ow and increased
capacity to manage emerging risks
rapidly and holistically (Gattorna
2007, Woodhead et al 2006). A recent
Global Reporting Initiative study
(Small, Smart and Sustainable, 2008)
focused on de?ning the added
value of sustainability reporting in
supply chains. Their initial results
indicate that a supply chain focus in
a sustainability report, while initially
challenging and complex, enhanced
the reputation, competitive
advantage and improved internal
processes and leadership on
sustainability issues.
Thorpe et al (2003) argue that long-
term strategic partnerships are the
key to providing better outcomes,
but believe the temporary nature of
one-off projects is a major challenge.
In these circumstances, the ?ow
of information, management of
relationships in all supply chain
sectors to build a level of trust, and
strategic management are critical
for providing a level of continuity
and a prerequisite for performance
improvement (Graham and Hardaker
1998, cited in Thorpe).
Gattorna (2007, p 233) addresses
collaboration with a ‘dynamic
alignment’ framework that aligns the
culture and leadership styles with
the dominant buying behaviour of
each buyer market segment. The
objective of Gattorna’s dynamic
alignment model is to build
15
knowledge and coordination to
give a supply chain a competitive
advantage over competing supply
chains. This refocuses the source
of competitive strategy, beyond
a single corporation or top-down
management of a supply chain.
Vachon and Klassen (2008) found
that environmental management
in supply chains had not been
strategically linked to organisational
performance. Woodhead et al (2006)
noted the failure of corporations
to move from a competitive to a
collaborative model was inhibiting
the effective management of
sustainability imperatives.
These authors found that value
in collaboration comes from
inter-organisational learning that
can develop new skills, improve
operations, services and products
and increase transparency and
veri?cation of sustainable products
and services. Competition within a
supply chain can inhibit sustainable
practices and business pro?tability.
Improving trust and transparency
Improving supply chain collaboration
is deeply connected with the push
to improve transparency. The
Global Reporting Initiative (GRI)
sustainability reporting program is a
key driver, as is consumer backlash
against greenwash and demands for
veri?cation of the sustainability of
products. Sustainability standards
and procurement policies for
product and service provision are
rapidly developing in most industry
sectors, for example, the Green
Building Council’s rating system for
Green Buildings, Carbon labelling,
Fair Trade, FSC, Better Sugar
Initiative and so forth.
Value in collaboration comes
from inter-organisational
learning that can develop
new skills, improve
operations, services and
products and increase
transparency and veri?cation
of sustainable products
and services.
Procurement policies are most
appropriate for tangible ‘?nished’
product categories that have routine
supply and manufacturing processes.
This allows repeat volume buyers to
specify in contracts what they wish
to purchase based on sustainability
criteria. Examples include packaged
coffee and tea, paper products, and
building items such as bath tubs
and taps. Effective management
and certi?cation of procurement
policies for sustainability criteria
require a commitment to monitoring
and veri?cation of supplier
systems. However, assuming that a
procurement policy will negate all
sustainability risks or suit all types
of products is naïve, and fails to
acknowledge the complexity of
some products.
Products that have less consistency
or that are customised for each
job, e.g. concrete, require a more
holistic approach to sustainability.
These more complicated products
have multiple inputs, design and
operational considerations that
can vary at several points along
the supply chain. For example,
‘sustainable concrete’ involves a
complex set of operational decisions
and input variables that includes
logistics, raw materials, durability,
longevity and energy ef?ciency of
the building or infrastructure. This is
discussed further in the Sustainable
Concrete case study.
Fundamental to developing
sustainability standards and policies
are collaborative relationships
with suppliers that involve more
parties and considerations than the
traditional market-based, buyer-to-
seller relationship. Unfortunately,
as Burch and Lawrence (2004)
noted, most of the participants in
a supply chain want it both ways:
they want to exercise market and
supply chain power to extract
value from upstream suppliers,
but deny their own downstream
buyers from exercising the same
market and supply chain power
to extract value for themselves.
Assuming control of purchasing using procurement policies
can be a recipe for failure in a complex situation that requires
a holistic and comprehensive approach.
16
Hence the importance of
understanding where in the supply
chain rent is being extracted;
building knowledge about the
broader, long-term bene?ts
of collaborative efforts; and
de?ning what mutual bene?ts
can be established that achieve
sustainable outcomes.
ORGANISATIONAL
CHANGE IN COMPLEX
SOCIAL SYSTEMS
Organisations are complex social
systems with numerous sub-systems.
Supply chains are even more
complex; they represent interactions
within and between corporations and
multiple social sub-systems. Figure
2 shows an abstract representation
of system interactions, where
each oval represents a different
system (such as an individual, a
business unit, a corporation, an
association, or an industry). There
are practical limits to anyone’s ability
to perceive multiple dimensions
of systems. The ‘rule of thumb’ is
that three levels of interactions
(i.e. your own system, plus one
system up and one level down) can
be considered at any one time.
Frequently, communication between
sub-systems within corporations
is weak. People in each sub-
system tend to have considerable
knowledge about their own activities
and vertical lines of control, but
horizontal interactions are limited.
This is because current systems
don’t require interactions; for
example, the marketing manager
has not traditionally worked with the
environmental manager. Horizontal
interactions are increasing by
necessity. Using the same example,
in the mid sections of the supply
chain, purchasing and marketing
people are ?nding that they need
information from sustainability
managers (pers.com, NSW
Department of Environment and
Climate Change) in order to respond
to procurement and contract
requirements from downstream in
the supply chain. While some of this
information can be derived from
current certi?cation and assurances
processes, there is also a need for
holistic thinking across all divisions of
the corporation.
The decision process under
uncertain conditions
Decisions made in isolation
of systemic in?uences in the
operational environment can
undermine the sustainability and
credibility of initiatives. For example,
if a corporation is progressing a
sustainability policy to develop a
six-star green building while ignoring
its purchasing of supplies that may
have had child labour input, the
greening of the corporate brand
will have limited credibility and it
may be vulnerable to media reports
of ‘green washing’. A strategically
aligned whole-of-system approach
is therefore crucial for the long-term
credibility of the corporate brand.
Figure 2 Systems and sub-systems
Thinking
systems
17
Just providing decision makers with
more information about sustainability
issues is not enough. Firstly, there
is not a simple, causal relationship
between “more information” and
“better decisions”, nor between
purchasing intent and purchasing
behaviour. Secondly, decisions in
situations of low uncertainty and
low risk are the conventional basis
for reductionist sciences such as
engineering and “Management
By Analysis” (Mintzberg, 2004);
but, when decisions have high
uncertainty and risk, post normal
science thinking is pertinent (see
Figure 3). This is because these
types of decisions stem from messy,
ill-structured problems, where the
full range of cause and effects is
dif?cult to de?ne. A more holistic,
systemic approach provides a better
understanding of the complexity
of the problem, the scope of
information available, and the range
of risk, opportunities and solutions.
Risk (Knight (1964 cited in Mayumi
and Giampietro 2006) “represents
a situation in which the distribution
of the outcome in a group of
instances is known either a priori or
from statistics. While uncertainty
represents a situation in which it is
impossible to form a reliable group
of instances because the situation
is to a high degree unique.” In
other words, the outcomes can’t be
predicted, they emerge after the
event. Sustainability issues frequently
fall into the domain of high
uncertainty and high risk problems.
There tends to be a lack of clear
criteria to guide decisions about
sustainability because when different
systems interact, the response of a
system to a changed policy can be
unpredictable. Knight (1964 cited
in Mayumi and Giampietro 2006)
discusses four sources of uncertainty
that are inherent in complex issues:
“perception uncertainty due to •
two main problems: we cannot
perceive the present as it is; and
we cannot perceive and represent
the present in its totality
anticipation uncertainty due to •
the fact that we have to infer the
future from the present without
being able to obtain a high
degree of dependability from
our models
effect uncertainty due to the •
fact that we cannot know all
the consequences of our own
actions in the future
implementation uncertainty •
due to the fact that any
policy formulation cannot
be implemented in the
precise form in which it was
imagined and chosen”.
Figure 3 Post normal science (Clift 2005)
Low
Applied
science
Professional
consultancy
Post-normal
science
System uncertainty High
High
D
e
c
i
s
i
o
n
s
t
a
k
e
s
Sustainability issues frequently fall into the domain of high uncertainty and high
risk problems. Sustainability decisions tend to lack clear criteria because behaviour
is not usually predictable when different systems interact.
When decisions have high uncertainty
and risk post normal thinking is
relevant. Post normal thinking is
about the science of how to work with
imperfections, and is most relevant
where the problem is complex and
uncertain and therefore requires
multiple perspectives and multiple
interventions of the system.
18
Even if change has become the
norm, as Brunnhubera et al (2004)
note, many decision makers still
dismiss uncertainties and plan as
if there is only one possible future.
Brunnhubera et al concluded that
decision makers who were able to
work proactively with uncertainties
would be the successful ones.
However, we are not good at
reasoning with uncertainty.
These realisations have led some
companies to look more closely
at systems thinking and scenarios
that include more than one future
and focus on experiential learning.
Senge et al (2008) stated that the
corporation that can capture these
sustainability principles will ‘shape
the future of their industry’.
Cultural in?uence on change
A key attribute of successful
collaborative relationships is the
culture of the organisation and
industry. Culture refers to shared
assumptions, beliefs, values, norms
and actions as well as artifacts
and language patterns. Every
corporation has its own unique
culture even though it may not have
consciously tried to create it. Rather
it will have developed unconsciously,
based on the values of the founders
or core people who build and/or
direct that corporation. Values and
leadership are core tenets of culture.
While an observer may perceive
some cultural characteristics to be
in?exible, culture is not static and a
range of drivers can in?uence the
development of culture in people,
organisations and even countries.
In the context of a particular
industry sector, organisational
culture stems from experiences
and assumptions about the basis
of power and in?uence, what
motivates people, how people
think and learn, and how change
occurs. Industries are a collection
of corporations with common
interests that are usually members
of professional and product-based
associations. The organisational
culture of an industry association
can have a considerable in?uence
on the members, and vice versa.
Organisations are complex
social systems with
numerous sub-systems.
Achieving organisational
change takes time because
people are often not aware
of the need for a strategic
shift in thinking.
Cultural assumptions enable
and constrain corporations
Although most corporations realise
that they have a culture, few have
a comprehensive understanding
about the implications of their
culture on the ability of their sector
to become more sustainable.
Cultural assumptions both enable
and constrain what corporations
are able to do. Understanding the
different cultural values by assessing
the organisations’ culture (e.g. a
power culture involves a powerful
central character or group who
controls all actions) can enable
a corporation to move forward
beyond entrenched positions and
reconcile divergent perspectives.
Schein (1999) discusses the
importance of culture stating that:
decisions made without •
awareness of the operative
cultural forces may have
unanticipated or undesirable
consequences
the extent to which culture •
contributes to an corporation
as either an asset or a liability
is underestimated
culture is an explanatory •
construct underlying numerous
organisation phenomena.
19
Differences of opinion within an
industry sector can lead to con?ict
within and between associations,
which in turn may have a negative
impact on the capacity of the
corporations to change practices
by creating hurdles in any of the
four areas identi?ed by Kim and
Mauborgne (2005) (see Figure 4).
These organisational hurdles need
to be understood to effectively
incite change by both CEO and staff.
However, the Kim and Mauborgne
review of corporate transformations
found that the hardest battle was
making people aware of the need
for a strategic shift.
We have now established some
background to working with messy
problems, the complexity of supply
chains and sustainability. Climate
change and other sustainability
issues represent signi?cant cultural
and management challenges and
responding to them requires new
thinking and ?exible decision
making processes. The next section
introduces the principles behind
the learning methods used in this
program.
LEARNING FOR
SUSTAINABILITY
This section describes the
learning concept that informed
the Sustainability in Supply Chains
program and participants’ projects.
Learning for change
As a conceptual framework for
working with corporations on
developing thinking and learning
about sustainability, experiential
learning and critical thinking
formed the theoretical basis of
this program. The research team
worked with groups on change
projects that tackled current
sustainability problems.
Figure 4 Adaptation of the Four Organisational Hurdles to strategy execution
Cognitive Hurdle
An organisation wedded
to the status quo
Motivated Hurdle
Unmotivated staff
Resource Hurdle
Limited resource
Source: Blue Ocean Strategy.
Kim & Mauborgne 2005 p151.
Political Hurdle
Opposition from powerful
vested interests
Transformational projects must establish an environment where learning can occur
in a comfortable, creative atmosphere. This enables ideas for solutions to emerge.
20
The learning-based change
process included facilitated forums
and occasional communication
(see project case studies for
more detail). Through these
projects the participants
reviewed broader corporate
issues and instigated change.
The basic premise of facilitation
theory is that learning will occur
by establishing an atmosphere in
which learners feel comfortable
to consider new ideas and are not
threatened by external factors (Laird
1985). Whilst its importance is clear,
this theory can be challenging to
apply when attempting to bring
about systemic change in a complex
environment where vested interests
and power inequalities exist. The
action learning approach required
the research team to be co-learners
in an emergent (unpredictable)
process. Simultaneously, they were
responsible for leading the program
towards its expected outcomes.
The importance of education and
learning for achieving change
towards sustainable practices has
been frequently noted. For example:
‘Professional skills and knowledge
of sustainable development should
be improved continuously and,
consequently, be part of the lifelong
learning of individuals including
those in sectors such as public
administration, the private sector,
industry, transport and agriculture.
The development of new knowledge
and the need to introduce new
skills in order to give more speci?c
substance to the concept of
sustainable development will remain
a constant need, as many areas of
expertise are constantly developing.’
(UNECE 2005a, p 10)
Turning information into action
requires a person to develop
their capacity for independent
thinking and decision making.
However, while gaining knowledge
is a precursor to action, it
does not guarantee change.
Knowledge is not acquired
from one source. Lundvall and
Johnson (1994) discuss knowledge
in a multi-faceted context:
Know what: refers to knowledge •
about facts (i.e. ability to assess
alternative fuel options for
commercial vehicles).
Know why: refers to knowledge •
about principles and laws in
nature, human kind and society
(i.e. the source of ground water
and its source of recharge).
Know how: refers to skills (i.e. •
ability to operate a computer).
Know who: involves the social •
ability to cooperate and
communicate (i.e. working
in groups and collaborating
towards agreed outcomes).
Clearly, achieving social change is a
complex process and it takes time.
Studies related to the motivational
elements of behaviour have stressed
that ‘the decision to act in a certain
way is affected by a “balancing”
or weighing of a number of
in?uences’ (Beedell and Rehan
1999). These include environmental,
physical and commercial factors,
policy environment, support
structures and education in
addition to the personality and
motivation of the individual.
21
The ARIES learning model
There is international consensus
that sustainability requires an
ongoing process of learning
(UNECE 2005b), which supports
adaptive governance and
leadership for sustainability
thinking in corporations. Core
to ARIES’ model for learning-
based change are envisioning
alternative futures, participation
and partnership, critically re?ective
thinking, systemic practice and
iterative learning through social
interactions. Critical thinking and
systemic practice helps a group of
people to better understand and
make sense of a complex issue
and the world around it so that
they can act more effectively.
Fundamental to the ARIES approach
is embedding learning-based
change within organisations to
work towards a shared vision of
the future. An action learning
methodology provides a basis for
continual learning and adaptive
management to respond more
effectively to emerging issues of
sustainability. Learning processes
in an inter-organisational
setting enable ‘“collaborative”
continuous improvement’ in
the supply networks of the
Extended Manufacturing
Enterprise (Middel et al 2005).
The process:
PROBLEM: Start with re?ection
on the current situation, and
jointly diagnose the issue that the
participants have in common.
PLAN: Envision an alternative
future. With that shared vision in
mind, participants develop a plan
of critically informed action to
innovate in the area of concern.
Figure 5 represents the
action research phases
(plan, act, observe,
re?ect, then learn and
communicate) and
iterative cycles in this
ARIES program. The
diagram also includes
the phases of monitoring
and evaluation (plan,
collect data, monitor
outcomes, evaluate
and communicate).
Cycle 1 Cycle 2
Project management
Cycle 3
LEARN &
communicate
ACT
& collect
data
OBSERVE
& monitor
outcomes
PLAN
LEARN
ACT
REVISE
PLAN
REFLECT
OBSERVE
ACT
REVISE
PLAN
REFLECT
OBSERVE
ACTION
REFLECT
& evaluate
LEARN
ARIES action research cycles
PROBLEM
22
ACT: Implement the plans. Engage
stakeholders in envisioning an
outcome that differs from business
as usual, in developing collaborative
partnerships, and in critically
re?ective, systemic practice.
Collect information (baseline •
data, information from activities
undertaken, and responses and
indicators of change).
OBSERVE: actions and associated
responses, products and outcomes.
Monitor the results and •
continue to collect information
on processes, experiences
and outcomes (including both
successes and failures).
REFLECT: on these observations.
Evaluate the actions undertaken
and the responses of the system
(are there indications that the
activities are improving the situation
of concern, in line with the vision?).
Critically examine your assumptions
and expectations.
Evaluate the evidence. Does •
it support your conclusions?
Compare different sources
of data. Are they consistent?
This may involve a search for
additional information, diverse
perspectives or relevant sources
of expertise.
LEARN: from experience, and
through sharing insights in meetings
and discussing assumptions (e.g.
about power or control, or about
expected results from a particular
course of action).
REVISE: plans and practices based
on observed responses, insights and
shared learnings. The adjusted plans
are implemented and the cycle of
learning in action is repeated.
In practice the phases are not neatly
sequential or as clearly de?ned as
the cycles above portray, but this
model provides a useful structure
for the process of learning tied with
more effective action. An action
learning approach to systemic
practice on complex sustainability
issues can provide a basis for
informed, ?exible adaptive thinking
for managing messy problems.
By holding a vision of a more
sustainable outcome and applying
critical systemic thinking to the
situation, the ARIES approach
sought to identify the barriers
and levers to change, within and
between organisations.
CHAPTER SUMMARY
This chapter established the
context and background to
the Sustainability in Supply
Chains program. In the next
chapter we introduce critical
systems analysis as a method
that provides the analytical
construction for understanding
the complexity of supply chains
using transitional projects.
23
Thinking systemically provides
people with the understanding
to respond more effectively to
uncertainty and risk because they
are more aware of the local and
global environments that they
operate within (Bawden 2007).
It encourages individuals to think
about an issue, holistically, while
also ?nding solutions for speci?c
problems. The project therefore
becomes a transformational
process whereby stakeholders
experience, think, act and plan
together in an ongoing cycle
of learning and re?ection.
This chapter discusses the critical
systems approach used to work
with the participant corporations.
It describes how to create conditions
for (micro/macro) change by
establishing mutual understanding
and de?ning shared bene?ts to
support ongoing collaboration and
transformation in supply chains.
WHAT IS CRITICAL
SYSTEMS THINKING?
Critical systems thinking has three
commitments (Schecter 1991 and
Flood and Jackson 1991a cited in
Midgley 2000, p10). They are:
‘Critical awareness – examining •
and re-examining taken-for-
granted assumptions, along
with the conditions that give
rise to them.
Emancipation – ensuring •
that research is focused on
“improvement”, de?ned
temporarily and locally, taking
issues of power (which may affect
the de?nition) into account.
Methodological pluralism – •
using a variety of research
methods in a theoretically
coherent manner, becoming
aware of their strengths and
weaknesses, to address a
corresponding variety of issues.’
Critical systems thinking
requires people to think
critically about their
assumptions and interests.
It asks individuals to
consider the impacts of the
solution(s) on the external
and internal environment,
and vice versa.
The process of critical systems
analysis requires that people,
when searching for solutions to
problems, consider the impacts of
the solution on the external and
internal environment, and vice versa.
Individuals think critically about
their own assumptions and interests,
and when they re?ect on this as a
team, they look beyond ‘business
as usual’. This is because the range
of potential impacts cannot be
understood without an appreciation
of the individual as part of a system.
This involves developing self-
awareness and an understanding
of the role of the actors; including
facilitators, the participants and
other stakeholders. By building
an understanding of these
relationships and dimensions of
power, along with the organisational
culture, environment and external
in?uences, the project team can
then optimise the positive impacts
and reduce the negative impacts of
any intervention.
Solutions emerge
spontaneously under
the right conditions
Fundamental to critical systems
thinking is the concept of
emergence. It is a key attribute
of complex systems. Mihata
cited in Seel (2000) described
emergence as ‘the process by
which patterns or global-level
structures arise from interactive
local-level processes’. This evolving
structure of patterns, according
to Seel, is unpredictable because
it comes as a result of interactions
between agents in the system.
3 . L E AR NI NG T O T HI NK S Y S T E MI CAL LY
24
When enough connectivity happens
between systems (if, for example,
dialogue occurs between two
companies in a supply chain, or two
sections in a company interact on
a project), emergence can occur
spontaneously. Seel’s conclusion
was that we ‘should move away
from trying to change corporations
and instead to look at how we
might help them become ready
for change – to move to a state of
self-organised criticality’. Viewed
from an individual perspective
and explored as a group, this
means achieving a level of self-
awareness and trust so that people
can con?dently collaborate, and
think holistically and systemically
when solving messy problems
and attempting to transform the
corporation and the supply chains.
About messy problems
Messy problems are hard-to-de?ne
problems that have many systemic
causes and effects. No one
individual holds the solution, and
quick ?xes can produce unintended
results. Past successes aren’t a
reliable guide because the ‘solution’
to a messy problem is only obvious
with the bene?t of hindsight.
Therefore processes to engage
multiple actors in jointly diagnosing
problems and exploring responses
are essential because:
each individual will have a •
different perspective on the
problem de?nition and solutions
the problem de?nition and •
solutions constantly evolve and
take new forms throughout
the project time frame and
afterwards.
Key challenges when working with
messy problems are:
differing stakeholder and •
societal expectations, and
unquestioned assumptions
misaligned policies and •
incentives can lead to
unexpected outcomes
political in?uence, vested •
interest and lobby groups.
Using transformational projects
and learning materials to
stimulate thinking
Learning materials such as supply
chain diagrams, systems models and
issues matrices can guide people
through the process and stimulate
discussion. Learning materials need
continual re?nement based on
participant input and feedback.
These learning tools are key to
framing conversations and building
shared understanding among the
participants, and will act as useful
tools for the participants to employ
in other areas of their corporations
beyond the project’s completion.
HOW TO THINK
SYSTEMICALLY
AND CRITICALLY
The following provides an outline
of the critical analysis process
as adapted for the supply chain
program. Each sector participated
in a transformational project that
was de?ned in the ?rst stage of the
analysis. Transformational projects
focus on changing a current state to
a desired future state. Each sector
engaged their supply chain partners
in discussion about the projects.
The three main phases are:
Create conditions •
for collaboration and
systemic thinking.
Critically analyse supply chain •
and transformational projects.
Capture emergent strategies •
and policies.
Messy problems are hard to de?ne problems
that have many systemic causes and effects.
25
The ?rst step in a critical systems
analysis (CSA) is to build shared
knowledge about the organisation as
a system and the organisation as part
of a larger system. The next step is
to gain an understanding of the key
people’s knowledge and perspectives
and to de?ne the key stakeholders.
Once this process has commenced
(it is ongoing), a shared vision of an
alternate future can be developed or
re?ned. The vision also needs to include
speci?c goals and strategies, such as,
to reduce greenhouse gas emissions
by incorporating alternate fuels into
the delivery systems and increasing
awareness of energy ef?ciency initiatives.
B
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t
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Discuss your organisation’s operations and identify the full range of sustainability issues
that are or could have an impact:
1. Share information on the environment in which your system is operating:
e.g. local, regional and global pressures from the natural environment; the economy, ?nance, •
regulations and markets; technology and media; society, politics and culture.
2. De?ne core stakeholders in your corporation who in?uence or are affected by the issue, and identify
key actors to be involved in the project. A diversity of professional perspectives is needed.
3. Identify the culture, including sources of power and the in?uence of key stakeholders.
4. Identify relevant information resources (e.g. internal sustainability and procurement reports
and policies).
5. Discuss with the group:
perceptions about and knowledge of sustainability •
people’s in?uence and levels of support •
perceptions of risk, sensitivities and politics. •
6. Develop a shared vision for an alternative future, at a given future point in time.
7. Imagine placing yourself in the future vision, look backwards and identify the actions that improved
the issue.
8. Discuss these potential actions, get commitment and develop objectives and expected outcomes.
Sustainability issues frequently fall into the domain of high uncertainty and
high risk problems. Sustainability decisions tend to lack clear criteria because
behaviour is not usually predictable when different systems interact.
PHASE 1: CREATE CONDITIONS FOR COLLABORATIONS
Thinking
systems
Environment -
Define external factors
(local and global) affecting
your system but over which
you have no control
26
The next step is to undertake a critical
analysis into the parts (sub-systems)
that make up the whole (the system) of
the corporation. This enquiry should
focus on systems and sub-systems that
are directly and indirectly associated
with the issue. This analysis includes
the participation of the supply chain
partners. When engaging other supply
chain corporations, it is important to
explore the potential mutual bene?ts
– for the corporations. There may not
be any, in which case it becomes very
dif?cult to sustain the collaborative
effort. In this situation, the issue may
need to be rede?ned to include the
interests of the core stakeholders.
B
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Considering the issue of shared interest:
1. De?ne systems and sub-systems within these systems: i.e. the logistics division and distribution
centre(s), and how these sections relate to the overall organisation’s structure.
2. Explore the pressures on the systems and sub-systems: i.e. what external and internal forces
are in?uencing the operations, such as scarcity of resources. Identify corporate/societal areas
of systemic operational failure and misaligned policies or con?icting incentives.
3. De?ne the internal environments within which the system operates.
4. De?ne the boundaries around the sub-systems and systems of interest: i.e. what sections
does the logistics network interact with and who is responsible for these interactions?
De?ne people/corporate levels of in?uence and control over these systems/sub-systems. •
Discuss the direct or indirect in?uence that external systems have – •
e.g. supply chain stakeholders.
5. Draw diagrams of system process, operations and stakeholders, (see examples in case studies).
The bene?t lies in the shared understanding that arises from the process of doing •
this as a group.
CREATE CONDITIONS FOR SYSTEMIC THINKING
Thinking
systems
Boundaries -
Define the boundaries
of your systems and
sub-systems?
27
Pressure
Environmental,
social and
economic impacts
State
Current
practices
Strategy
Actions towards
the best way
forward
Response
Better
practices
In Phase 1, participants developed
an understanding about their
system and sub-systems. In Phase
2 the objective is to extend the
enquiry with supply chain partners
using a mutually agreed problem as
the basis for dialogue and action.
An adaptation of the OECD’s
Pressure State Response (PSR)
model (see below) was provided as
a framework for the enquiry in the
focus groups. Strategy/action
was added to the PSR model to
emphasise the importance of
strategic alignment to change for
achieving better practices, the
Response. The elements of the
model are described thus:
Pressure • – the environmental,
social or economic impacts
(i.e. high CO2 emissions
from cement, concrete and
construction operations, and
fuel used for food distribution).
State • – the current practices
that are contributing to these
pressures (i.e. the production
of concrete and the utilisation
of concrete in buildings and
infrastructure).
Response • – the better
practices (i.e. that produce
lower carbon in product and
associated operations).
Strategy • (or actions) that
enable these better practices
to occur, informed by a
systemic understanding.
B
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With supply chain partners:
1. Explore potential bene?ts of collaboration. Discuss initial analysis and the scope of the
sustainability issue and options for improving sustainability management and outcomes.
2. Expand critical analysis to include supply chain systems and sub-systems. Together, revise
stakeholders, environment de?nition, boundary analysis and vision statement.
3. De?ne projects and agree the boundaries of the project, the key team and the systems
and sub-systems for critical analysis.
PHASE 2: CRITICAL ANALYSIS OF SUPPLY CHAIN
28
Transformational projects focus on changing a current state to a desired
future state. Core groups work across corporate sectors and supply chains to
share knowledge, analyse problems and ?nd solutions. The two applications
of critical systems thinking as applied in the program are noted here.
P
r
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w
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h
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&
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f
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s
1. Explore technology options with suppliers, scientists and other experts and
users as appropriate, using PSR model.
2. Critical analysis: challenge assumptions and technology/ process options.
3. Document analysis and key assumptions.
Refer to food case where the project had strong leadership from one company downstream
(near the retail end) and collaborative support from suppliers further upstream in the supply chain.
P
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s
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f
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u
s
1. Re-de?ne the problem with broader audience using Pressure State Response model
and other analysis of systems that were developed with the key participants.
2. Engage supply chain stakeholders in dialogue about project issues, challenges
and vision for future outcomes.
3. Document outcomes and communicate to stakeholders for feedback.
Refer to construction case where the project reached the supply chains of several leading
companies and involved a range of suppliers and stakeholders.
TRANSFORMATIONAL PROJECTS
29
By Phase 3, the participants have
begun developing their internal
and supply chain teams and
enhancing their understanding of
the operational systems, the supply
chain, the key external stakeholders
and how the transformational
project interfaces with these systems
and the broader environment.
Emergent problems and solutions
identi?ed during Phases 1 and 2
form the basis of this re?ective,
strategic phase. Working out what
can be in?uenced and where
(see diagram below), and how to
empower enablers and manage
blockers is crucial for achieving
short-term project transformations
and effective ongoing collaborative
activities. Opportunities may include
developing interdisciplinary expert
groups, extending collaborations,
new technology, information
sheets about sustainability issues,
procurement and sustainability
policies and so forth.
PHASE 3: EMERGENT STRATEGIES AND POLICIES
Thinking
systems
Influence -
Define what you can
influence and how?
E
m
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n
t
s
t
r
a
t
e
g
i
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s
a
n
d
p
o
l
i
c
i
e
s
1. Review transformation projects with participants and develop strategies/tactics and
sustainability policies. De?ne what you can in?uence, and how. De?ne which policies
need to be changed or developed.
2. Develop recommended practices/standards/procurement policies to improve the sustainable
management of products and supply chain processes including transport, logistics and waste.
3. Review strategies to consult/inform senior management and embed sustainability policies
into business strategy.
4. Create strategies to in?uence key external stakeholders and the supply chain system
to improve sustainability outcomes.
30
Thinking
systems
Aligning policies -
Review and develop energy and waste
strategy and align with corporate
sustainability policies and supply
chain procurement
Diagnosis
Where is energy
being used?
Where is waste
going?
Measure
and Monitor
Define KPIs
and reporting
systems
Technology
Define new
technology and
innovation
opportunities
Facilities
Plan and
implement
infrastructure
upgrades
Communicate
CSR, decision
support and
knowledge
management
Policy
Review/
develop/align
sustainability, CSR,
procurement
policies
Review
Ongoing
review and
reflection with
interdisciplinary
teams
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o
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o
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s
1. Review the effectiveness of the projects and the collaboration. Consider the vision,
re?ect on the successes and failures. Discuss the process with the sustainability team
and review options for other sustainability issues.
2. Build ongoing collaborative partnerships by interdisciplinary sustainability teams.
3. Develop effective communication, learning and training materials.
Developing representative diagrams
is essential when working with
complex systems, especially complex
social systems where every individual
has unique perspectives on the
system. Facilitated discussion using
diagrams helps people to discuss
their role, values, perspectives and
the risks and challenges in their
section, and see the interconnections
and interdependencies. Diagrams
were useful as a visual prompt for
building understanding of systems
boundaries, the levers and barriers
and the in?uence of people. They
provided a basis for discussion
about how and where to most
effectively in?uence the systems
and, in the latter stage of the
enquiry, which policy tools (R&D,
education, incentives, standards
and regulations) could be used
to in?uence the system. How
adaptations of this process were
applied and adapted is discussed in
the next chapter on case studies.
SUMMARY
31
This chapter discusses two
transitional projects: the application
of critical systems analysis; and the
outcomes, the implementation of
the sustainability policies and the
change processes. Both projects
featured a ‘walk the supply chain’
approach, with the aim of extending
participants’ knowledge and
experiences of other parts of the
supply chain. In the construction
sector this happened through
dialogue at multi-stakeholder focus
groups, whereas in the food sector
we visited a distribution centre
and a bakery, inspected trucks and
literally walked that section of the
supply chain.
The construction sector project
focused on sustainable concrete
and incorporated:
multi-stakeholder •
analysis – identifying the
stakeholders and the range
of perspectives on an issue
institutional change – •
identifying persistent problems
and systemic constraints
to implementation of new
technology, products or
improving practices
incremental change – •
developing policies and
processes for improving
management and information.
The food sector project reviewed
options to improve fuel ef?ciency.
The focus was on:
research and development – •
reviewing current and emerging
alternative fuel options in
commercial vehicles
innovation – the feasibility of •
implementation and exploring
how to operationalise cutting
edge vehicle technology in the
bakery division
monitoring – diagnosis of •
current and new processes with
the objective of developing
monitoring programs and KPIs
for emerging legislation, e.g.
greenhouse gas (GHG).
4 . CAS E S T UDI E S
32
S US TAI NAB L E CONCR E T E
S UP P LY CHAI N
With the accelerating pace of globalisation
and increasing emphasis on sustainability, it
was inevitable that those in the construction
sector increased their focus on reducing
carbon in buildings. Global trends indicate
that Australian government legislation and
market pressure will eventually require
developers to build zero-carbon buildings.
Cement accounts for 5% of the world’s CO
2
1
.
Cement, when combined with aggregates,
water, chemicals and energy makes concrete.
Concrete provides excellent thermal mass,
has durability, can last for over 100 years
and can be recycled. Therefore effective
building design can contribute signi?cantly
to a building’s energy ef?ciency and longevity,
which means a building’s lifetime carbon
footprint can be reduced.
Given the complexity of this problem, the
foundation companies, Bovis Lend Lease,
Stockland and Landcom, recognised the need
to collaborate. Over 20 companies from the
concrete supply chain became involved.
This case study facilitates
discussion on using critical systems
analysis with multi-stakeholders
to understand options for
procuring sustainable concrete.
Learning objectives:
1 >
Understand the diversity of
perspectives in the concrete
supply chain
2 >
Work with multiple stakeholders
using CSA and developing
systemic thinking
3 >
Build ongoing dialogue and
making sense of complex issues
4 >
Work with the barriers
to change in the concrete
supply chain
5 >
Explore critical systems analysis
for developing corporate
sustainability policy and strategy.
1 Australian Cement Industry Sustainability Report 2007
33
BACKGROUND
Three companies – Bovis Lend
Lease, Stockland and Landcom
– were invited to participate
in the Sustainability in Supply
Chains program. Bovis Lend
Lease is an Australian-based
global project management and
construction company; Stockland
is one of Australia’s largest
diversi?ed property groups. Both
companies provide a range of
expertise, including construction
management, project and program
management, design management,
design engineering, procurement
and facilities management.
Landcom is a state-owned
corporation and a development
arm of the New South Wales
Government. Landcom’s primary
focus is planning and developing
residential and commercial
properties in NSW.
All three companies identi?ed
the carbon impact of the use of
concrete in construction as an
intractable, messy problem that
no one organisation by itself
could address. It was agreed that
collaboration was needed and
independent facilitation would be
important to bring stakeholders
together.
The sustainable concrete
supply chain project required
time, insight and input from a
wide range of industry players,
including developers, engineers
and architects, builders, cement
and concrete manufacturers and
associations, power stations,
industry standards organisations
and the ?nancial sector. The team
conducted extensive interviews and
systemic analysis of the concrete
supply chain – ?rst identifying the
key stakeholders, then the changes
required and the barriers. We
explored why more sustainable
practices were not happening and
who had the power and in?uence.
A sense of powerlessness and
inertia existed, mainly due to the
complexity and interconnectedness
of the concrete production process.
So we invited a group of industry
stakeholders to come together in
March 2008. The intention was to
establish mutual understanding of
the barriers and incentives towards
a more sustainable construction
sector. The participants included
some of the nation’s top concrete
and cement companies, joined
by leaders from several of the
industry’s raw material suppliers,
associations and government
agencies. For a day they worked
their way through the issues in the
concrete supply chain and, in the
end, they agreed on ways each
sector could contribute to the
sustainability of the supply chain.
PARTICIPATING SUPPLY
CHAIN COMPANIES:
Cement and Concrete
Boral
Cement Australia
Cemex
Hanson
Independent Cement and Lime
Associations
Ash Development Association
of Australia & Australasian
Slag Association
Cement Concrete and
Aggregates Australia
Concrete Institute of Australia
Green Building Council
Energy
Delta Electricity
Macquarie Generation
Finance
AMP
Government
Australian Government
Department of the Environment,
Water, Heritage and the Arts
NSW Department
of Environment and
Climate Change
City of Sydney
34
CRITICAL SYSTEMS
ANALYSIS
Between June 2007 and August
2008 exploratory meetings
were held with the construction
companies and associated
concrete supply chain agencies.
The objective was to develop
understanding of the diversity of
perspectives in the supply chain
along with the:
impact of policies, including •
unintended consequences
role that each stakeholder can •
play in implementing change
potential levers and •
barriers for change.
Initial enquiry found that the
construction companies wanted
facilitated discussion that built on
their knowledge of the barriers
and opportunities for increasing
the use of sustainable concrete
in the construction sector. They
also wanted to understand how
sustainable was sustainable
concrete, and under what conditions.
For example, what were the options
for reducing embodied energy
and increasing energy ef?ciency?
Sustainable concrete is a messy
problem because there are many
drivers, complex in?uences and
perverse policy outcomes due to:
a complex range of contractual •
relationships
a complicated product with •
numerous inputs, uses and
speci?cations
many vested interests, •
entrenched positions
and lobby groups
a wide range of opportunities •
and barriers to in?uence
decision making processes
perceptions of high risk in •
relation to certain applications
of sustainable concrete
a culture of long hours •
and tight deadlines.
Supply chain issues are
particularly complex due to the
many stakeholders involved. To
in?uence the system requires
an understanding of the social,
institutional and policy processes,
as well as the production and
operational systems.
An adaptation of the OECD’s
Pressure State Response model
(see Chapter 3) was provided
as a framework for the dialogue
and analysis. Putting the ‘system
at the table’ (a supply chain or
inter-disciplinary group) is a
powerful and effective approach
to breaking down barriers and
building common knowledge.
WHAT IS CONCRETE
MADE FROM?
Concrete is a combination of
cement and materials that when
combined with water can be
poured into virtually any form.
It hardens into a strong, durable
material that is predominant in
building and construction.
The materials in concrete can
include many combinations
of coarse aggregate (crushed
rock or gravel), ?ne aggregate
(sand), chemical admixtures
(used for mix enhancement),
special additives, water and
supplementary cementitious
materials (SCMs) and
cement. The production of
Portland cement involves
a chemical reaction that
produces CO
2
. SCMs can be
substituted in some cases
to reduce the CO
2
impact.
35
Members of the concrete supply
chain gathered for a one-day focus
group in Sydney on 19 March 2008.
The objective of the session was to
build a broader understanding of
the range of perspectives and to
jointly develop plans and initiatives
for a more sustainable concrete
supply chain. The participants were
seated at tables of 7–8 people each
with representatives from sectors
of the concrete supply chain.
Groups alternated between small
and whole-of-forum discussion.
‘Thought starter’ talks identi?ed
key issues in the sector and helped
to start discussion around the
following areas:
Understanding the production •
of sustainable concrete.
Exploring project •
management, procurement
and sustainability drivers.
Understanding the current •
standards, incentives
and regulations.
Systemic, messy problems
often have complex drivers,
numerous in?uences
and interdependencies.
Systemic solutions require
a collaborative approach
with a shared vision and
mutual bene?ts.
No single person or entity
can control the issue or
determine its outcome.
A diversity of perspectives
is needed to make sense
of the issue.
WHY USE
SUSTAINABLE
CONCRETE?
Reducing the carbon footprint
of a building (the volume of
greenhouse gases expressed
in equivalent units of CO
2
)
is becoming an increasingly
important driver for builders
and developers. One way
to achieve this is to improve
the ef?cient use of energy in
operation during the life of a
building. Another is to reduce
the embodied energy in the
materials and construction of a
building; particularly concrete.
36
PRESSURE: WHY
SUSTAINABLE CONCRETE
IS IMPORTANT
From the developer and
construction companies’
perspective, reducing the levels of
embodied energy (the energy used
in production) in the production of
concrete and the use of concrete
in buildings, and increasing the
information about concrete
purchasing options are the key
drivers for change. The inability
of the companies’ sustainability
managers to in?uence decision
making in the concrete supply chain
was a key driver for this project.
Issues putting pressure on the
sector to increase its focus on
sustainable concrete are:
increasing demands by clients •
and tenants for ‘green’ buildings
limited speci?cation of •
sustainable concrete by
architects and engineers
(speci?ers)
project Directors lack the •
incentives or knowledge to
critique concrete procurement
speci?cations
limited information on how to •
specify sustainable concrete
and to support the range of
sustainability issues
lack of sustainable concrete •
products to provide speci?ers
with options.
The sum result was low awareness of
opportunities, optimum applications
and bene?ts of sustainable concrete.
With the prospect of an emissions
trading scheme, stakeholders
expressed the view that the sector
will have to change its production
practices and develop knowledge
and practices about how to be
more sustainable. The foundation
participants held a vision of
responsible business practice that
could cut GHG emissions in excess
of that required by the new ETS.
CURRENT STATE
OF THE CONCRETE
SUPPLY CHAIN
A systemic enquiry of the concrete
supply chain systems, links and
boundaries is shown in Figure 6. This
diagram was developed after initial
discussion with the key participants.
It was used during meetings to
discuss the roles of the supply
chain stakeholders, to help them
explore from their perspective at
their point in the system their risks,
uncertainty, in?uence and control.
The diagrams and other learning
materials were adapted as new
knowledge emerged. There are
numerous interactions and a range
of relationships among customers,
developers, construction companies,
speci?ers and builders in this supply
chain, which the diagram sought to
generalise into a working model.
Hence it was referred to as a ‘generic
sustainable concrete model of
stakeholders and processes’. For
example, architects and/or engineers
and project directors can be in-house
or outsourced, and this can vary
from project to project, or between
different arms of a given corporation.
THE STAKEHOLDERS
The key stakeholders in this
supply chain are clients and
tenants, developers, construction
companies, concrete and cement
suppliers and contractors, raw
material suppliers, builders,
associations and building standards
corporations. The context is the use
of concrete in the construction of
the built environment. Participants
described the cultural context
as very market-oriented and
pressured. The key elements are
productivity and competitiveness.
Project managers received ?nancial
incentives for projects delivered on
time and on budget.
The boundaries of the system
analysis for this project extended
from the developers through to
building construction (represented
by the grey background in the
diagram below). Key sub-systems
included: transport and logistics;
supplementary cementitious
materials (SCMs); concrete and
cement production; building
policies and standards agencies;
speci?ers; and environmental and
social systems.
37
The focus group discussion
provided insights into the
perspectives and issues in the
concrete supply chain. While not a
key group in the concrete supply
chain, the ?nancial sector and
building tenants provide leadership
within the construction sector.
Financial institutions are facing
increasing demands to ensure
that their funds have sustainable
investments and the practices
used in construction support
their investment principles. These
institutions can provide leverage
for change in corporations; e.g.
through dialogue with CEOs about
corporate performance against
world’s best ‘sustainable’ practices.
Concrete and cement suppliers are
a key group. The exact speci?cation
for the use of concrete in buildings
is highly contextual, i.e. concrete
speci?cations are dependent on
the particular building and site
location. Factors that in?uence the
use of concrete include design and
engineering speci?cations: e.g.
strength and setting time; location
(distance from concrete silos and
resources); timing/scheduling and
availability of materials and logistics;
and structural function of the
building element.
Figure 6 Sustainable concrete model of stakeholders and processes
Client
Contractor
Builders
Concrete
suppliers
Manufacturing
process
LCA Embodied
energy, Waste
Cement
suppliers
Customer /
tenant
Concrete,
Cement Slag,
Fly Ash Assoc.
Customer
Relations
Manager
Architects
Engineers
Project
Director /
Manager
Bovis Lend
Lease
Stockland
Landcom
Sustainable and
SC procurement
policy
Market segment,
budget, design
optimisation,
availability
Standards
Australia
Sustainable
concrete
NSW State
BASIX
Residential Regulatory
Developer Specifiers Buildings/Suppliers Building Land
Construction / Sustainable concrete supply chain: Generic model
Design
optimisation
Supplementary
cementitious
materials
GBC
Green Star
Commercial Incentives
38
MATERIALS AND
RESOURCES
There are large quantities of
supplementary cementitious
materials (SCMs) available that are
presently under-utilised in some
regions of Australia, such as New
South Wales.
SCMs are currently viewed as a
commoditised waste product
rather than a specialist product.
Considerable potential exists
to increase the use of SCMs in
concrete and in new building
products. Other important factors in
the availability and sustainable use
of SCMs in concrete and building
products include:
availability of water and materials •
uneven distribution of SCMs •
in Australia, the associated
transport distance, economic
and carbon costs
existing contractual •
arrangements that restrict
the capacity of SCM suppliers
(e.g. power stations that
produce ?y ash) to develop the
market to its full potential.
The concrete suppliers have
infrastructure constraints on their
capacity to utilise SCMs in concrete
mixes. Their current capacity is
highly location dependent – mainly
driven by the number of silos on
site. Increasing silo infrastructure
would enable the concrete sector to
provide a greater range of concrete
blends. High silo infrastructure
costs, space and council planning
requirements are major restrictions
to this development.
Performance speci?cations of built
structures are also an important
factor in the use of concrete. Some
participants expressed concern
about the emphasis on SCMs as the
principal vehicle to create a more
sustainable concrete product.
Over-reliance on rating systems to
provide incentives to use SCMs,
without considering the context
for their use, does not necessarily
achieve more sustainable outcomes.
For example, speci?ed concrete
mixes that ‘prescribe’ SCMs as part
of a percentage of replacement
materials may produce unintended
outcomes. Longer curing times
of SCMs can affect concrete
pour cycles, which in turn may
result in subcontractors charging
builders extra. To compensate,
additional cement may be used
to reduce curing times, which
is counter-productive.
SUPPLEMENTARY
CEMENTITIOUS
MATERIALS (SCMS).
Fly ash, ground granulated blast
furnace slag, or other pozzolanic
materials are collectively
referred to as supplementary
cementitious materials (SCMs).
SCMs can be
included in concrete, •
either as an ingredient
added at batching, or as a
component of a blended
cement, or both.
added during batching •
along with Portland cement.
added to concretes made •
with blended cements.
The advantage of using
SCMs and other recycled
materials is that it reduces
the embodied energy.
Source
City of Sydney
www.cement.org/
tech/faq_scms.asp
39
Other alternatives exist to reduce
carbon footprints, such as design
optimisation to reduce the amount
of concrete required and the
use of post-tensioned slabs.
Developers and construction
companies have speci?c criteria
for the supply of some other
building products (such as certi?ed
timber products) to ensure their
‘sustainable’ credentials. However,
which supplier provides the
concrete for a particular project
is largely determined by proximity
(the weight and curing time of
concrete makes logistics and
transport important). This means the
companies are unable to manage
this supply chain in the conventional
manner – they can’t work with a
preferred supplier to an agreed
standard. They have been unable to
implement consistent sustainable
concrete product standards across
the range of suppliers.
Whole-of-supply-chain thinking
introduces systems considerations.
Design optimisation needs a
‘cradle to grave’ view that includes
GHG emitted from mining and
production processes through
to end-of-life disposal or reuse.
Improvements to the operational
energy ef?ciency of a building that
draws on non-renewable energy
sources by itself won’t reduce the
volume of GHG in the atmosphere.
Developing a shared
understanding of a supply
chain system can support
more effective decisions
and solutions to messy
problems.
CHALLENGES
Speci?cations for concrete need
to support sustainable outcomes
through the more effective use
of SCMs in a) building design
optimisation; b) performance
speci?cations for the % of SCMs
in different applications; and
c) improved time and logistics
management to reduce waste.
Key challenges are:
How to increase the speci?cation •
of SCMs to reduce the
embodied GHGs in the built
environment. There is currently
limited speci?cation of SCMs
by engineers. Pressure from
developers and construction
companies for the fast
laying of concrete does not
support the use of SCMs as
they take longer to cure.
How to balance sustainability •
tradeoffs – reducing GHG from
embodied energy vs energy
ef?ciency during the operational
life of a building. For example,
concrete provides insulation
bene?ts that are closely aligned
with concrete mass and effective
building design: i.e. concrete
can signi?cantly improve energy
ef?ciency by reducing the need
for air conditioning and heating.
For this reason, attempts to
reduce the use of concrete
could adversely impact on the
energy ef?ciency, durability and
longevity during the operational
life of the building.
How inef?cient practices such as •
a lack of quality control, over-
ordering of product, and rigid
timing/scheduling of deliveries
can lead to considerable
concrete and energy waste.
For example, currently twice
the number of trucks are used
to meet morning deadlines than
would otherwise be required
if deliveries could be spread
evenly throughout the day.
Note: participants indicated
that attempts by the concrete
industry to manage logistics
and scheduling with clients have
achieved limited success so far.
40
POLICY TOOLS AND
MEASUREMENT
Depending on the position of the
organisation in the supply chain,
there are different drivers, trade
offs and barriers. People also have a
range of incentives and constraints
to achieving outcomes. These
contextual issues need to be taken
into account when considering the
policy tools for sustainable concrete.
The Green Star rating system is a
building standard for commercial
‘green buildings’. There is limited
incentive for their increased use of
SCMs due to the small allocation
of points. It was argued that a
higher point allocation would help
to address this issue. However,
a key question is whether SCM
rating criteria create better
sustainability outcomes. The
limitations to the current rating
system were discussed. For
example, the rating system does
not accommodate embodied
energy or energy ef?ciency design
considerations for concrete.
The Green Building Council is
planning to review the rating
criteria and will consider how to
ensure that point allocations do
not create unintended impacts
on the sustainable performance
of the building. Addressing
the issues raised above may
take up to three years.
When searching for
solutions to problems,
consider the impacts of the
solution on the external and
internal environment. Align
policies with sustainability
vision, strategies and
corporate culture.
The Life Cycle Analysis (LCA) of a
product within the supply chain
is needed to fully understand
the embodied GHG and other
resources used to produce the
product. Currently, LCA tools are
fairly simplistic. LCA tools are not
currently recommended state
practice, nor are they consistent
between states. An LCA can be
information intensive and costly
to conduct, and is limited to a
de?ned product in a point in time,
so allowance needs to be made
for parameters that change. There
are numerous mixes of cement
and concrete and a large variety of
input materials available. It’s also
uncertain whether the results of an
LCA will align with the incentives
of a future ETS. In assessing the
impact and longevity of a building,
an LCA needs to inform not just
the decision of what to build, but
how to build. This would include a
focus on optimal design upfront: a)
to extend the life of a building; and
b) to provide decision support on
whether to refurbish or rebuild an
existing structure.
CO
2
from products is undervalued
and the ETS will help to solve
this issue by placing a price on
carbon. Over time, carbon pricing
will become an integral part of
incentives, regulations and other
market and legislative instruments.
The Australian Government
Department of the Environment,
Water, Heritage and the Arts
(DEWHA) has started dialogue
with the Building Products
Innovation Council (BPIC) to
develop a nationally consistent
approach to carbon accounting
in the built form. The scope of
the ETS in measuring carbon
performance may include design,
material, utility and construction/
operations considerations. A carbon
accounting methodology will need
to determine where in the supply
chain the transaction costs reside
for existing and new products (e.g.
the trade of ‘packets of emissions’).
Considerations include: the
equitable distribution of bene?ts
from carbon savings; who would
bear the costs of an ETS; and
at what point would a carbon
price translate into change.
Participants expressed a need for
The process of de?ning the problem and
solutions constantly evolves and can take new
forms throughout the project and afterwards.
41
communication/education to enable
decision-makers in the supply
chain to interpret these signals
and respond with product and
design choices that reduce carbon.
Irrespective of a national carbon
accounting scheme, participant
construction companies expressed
the need to proactively reduce CO2
emissions as a moral imperative.
THE WAY FORWARD,
THE RESPONSE
Corporations within the
construction sector need to
demonstrate leadership in order
to build momentum for change.
The culture of ‘fast turn around’
in this sector limits the ability of
staff to engage in sustainable
initiatives. Senior management
can provide support by allocating
time and resources, incentives and
performance KPI for their staff to
drive sustainability outcomes.
Participants indicated that there is
a need for stronger collaboration
throughout the concrete supply
chain and consistent messages,
policies and incentives for
stakeholders. To build the capacity
of people and organisations to
better understand the issues,
and effectively work towards a
sustainable concrete supply chain,
the recommendations were:
Develop a range of •
communication and education
material on the use of
sustainable concrete products
and processes for a broad range
of stakeholders across the supply
chain, such as project managers,
speci?ers, suppliers, etc.
Improve decision-making •
support tools such as
LCA, design, product and
performance optimisation
tools to enable more informed
decision-making at all levels of
the supply chain.
Develop incentives, standards •
and best practice performance
speci?cations that provide
assurance of the sustainable
credentials of products, a
consistent message, and
market drivers that do not lead
to unintended/unsustainable
outcomes.
Develop contracts and •
procurement policies
that encourage the use of
sustainable concrete and
support green building criteria.
Encourage leadership and •
cultures within corporations that
support sustainability practices
in the concrete supply chain.
There are extensive knowledge
gaps within and across the supply
chain about sustainability in the
supply of concrete. This lack of
knowledge and awareness often
drives behaviour and practice that
produce unsustainable outcomes.
Questions raised included:
What is the impact of different •
concrete mixes?
What are the links to other issues •
within the supply chain such as
water, waste and logistics?
What does a ‘green building’ •
actually mean?
More industry-wide and
stakeholder-speci?c information is
needed to help support decision-
making (e.g. case studies about
the trade-offs between embodied
energy and energy ef?ciency).
This type of information will
enable stakeholders to make more
informed decisions about the
options for sustainable design and
the use of construction materials,
and how to most effectively achieve
sustainable outcomes.
42
REFLECTIONS
ON THE PROJECT
The ‘walk the supply chain’
approach at the focus group and
during meetings, using diagrams
and critical system analysis learning
tools, broadened participants’
knowledge and understanding of
other parts of the supply chain.
Below are comments recorded by
the participants on review forms
after the focus group:
‘Positive development of our •
understanding of other areas of
the supply chain – get feedback
from downstream members on
their view of your sections.’
‘Write up results and circulate, •
hold another meeting, ongoing
collaboration.’
‘Very informative and insightful. •
It helped me to understand
the key factors and drivers into
sustainable concrete.’
‘Good to meet the participants •
and hear their concerns.’
‘… challenge to convey •
complexity of issues across
in?uencers – speci?ers.’
‘Increased awareness and •
collaboration between various
sectors [are] important.’
Sustainable concrete is a complex
issue and a messy problem. When
working with so many stakeholders
from different disciplines and
sections of the supply chain, there
are major challenges. A collective
response to make sense of complex
issues that have persistent, systemic
barriers to change can generate
simple communication material.
Fact sheets, when written in a
credible style with relevant, useful
information, can help build shared
knowledge and can become a
tool for leveraging change. One
outcome from this project is the
development of a Sustainable
Concrete Fact Sheet. The Concrete
Institute of Australia (CIA) is taking a
leading role and is working with its
members and participants from the
construction project.
Participants indicated that ongoing
discussion in the form of a follow-up
focus group or small working groups
to review the ?ndings and explore
next steps would be helpful. An
extensive set of recommendations
for future research and policy
development was formulated during
the focus groups and interviews.
These recommendations provided
incentive for the CIA to develop
its own research and development
forum and the fact sheet.
43
S US TAI NAB I L I T Y I N F OOD
DI S T R I B UT I ON S Y S T E MS
In 2007 recognition of the potential
consequences of climate change and
emissions trading systems (ETS) heightened
awareness of the crucial role of effective
supply chain delivery systems in Australia.
As a food manufacturer and distributor,
Goodman Fielder was aware of growing
market competition and rising prices for grain
as input for both fuel and food. Advances
in alternative fuels, gas, electric and hybrid
electric vehicles (HEV) technologies
appeared to be showing promise for
reducing GHG and fuel consumption.
This study discusses a collaboration
among Goodman Fielder, ORIX and truck
manufacturers to reduce greenhouse gases
from food distribution networks.
This case study facilitates discussion
on using critical systems analysis with
emerging research and innovation to
understand options for distribution
networks and alternative fuels and
vehicle transport.
Learning objectives:
1 >
Explore the challenges faced by
GF in the baking supply chain.
2 >
Examine measures taken
by GF and ORIX to address
these challenges.
3 >
Describe the systemic enquiry
process as applied to this project.
4 >
Discuss the rationale behind
GF sustainability strategies.
44
BACKGROUND
Goodman Fielder (GF) is an
Australian/Asia-Paci?c company
that has expanded greatly through
takeovers of small niche brands.
They manufacture and distribute
a wide range of food products –
fresh bread, frozen pastries and
dairy products, requiring a range
of storage systems. The range
of variables includes delivery
schedules and locations, traf?c
regulations (e.g. routes for large
trucks); storage and freighting
requirements for different products
(e.g. heavy oils versus voluminous
bread products, refrigeration
needs); and variable shelf life (from
one day for fresh bread to months
for frozen pastry). Their truck
delivery systems re?ect this diversity
of frozen, refrigerated and fresh
products. Manufacturing plants and
distribution centres are dispersed
throughout Australia and the
Asia-Paci?c region.
GF has shifted its corporate focus
from environmental compliance
to improved ef?ciencies, and is
now addressing issues such as
climate change (e.g. measuring
GHG footprint of supply chain
logistics). GF is planning its ?rst
sustainability report – internally in
2008, and publicly available in 2009.
A primary in?uence on this shift
in focus has been the perspective
at the executive board level, with
awareness of external drivers
such as carbon pricing; consumer,
shareholder and investor values; and
employee attraction and retention.
The senior management of GF
has demonstrated leadership by
canvassing potential sustainability
projects (including links between
food and health) that went beyond
its own corporate boundary. Senior
management nominated the right
people to lead the project and
ensured they had adequate support
and resources.
THE PARTICIPANTS
The GF supply chain project
required time, insight and input
from a wide range of GF staff
and industry players. GF had
representation from staff in the
bakery, commercial and corporate
divisions, including specialists in
supply chains, logistics, marketing,
customer relations, environmental
and sustainability management.
This meant that divisions, which
had previously seen each other
as separate businesses under
the one corporate banner,
came together and learnt about
each other’s operations.
GF invited ORIX to participate once
it became evident that alternative
truck bodies, engines and fuels
were key initiatives to reduce GHGs.
ORIX lease commercial vehicles to
the bakery division. ORIX in turn
invited specialist alternative fuel
and technology suppliers to present
their products to the project
team. These companies were:
Green Fleet Systems International;
Clear Sky Solutions; OES CNG;
HINO (subsidiary of Toyota); and
ISUZU. The Australian Government
Department of the Environment,
Water, Heritage and the Arts also
provided expertise in GHG policy
and measurement for alternate
fuel vehicles.
CRITICAL SYSTEMS
ANALYSIS
Between November 2007 and
May 2008 workshops were held
with GF and supply chain partners.
GF’s vision for the project had
this objective: to reduce the
GHG footprint of distribution and
develop a model of the change
process that can help to further
improve the sustainability of its
supply chain activities. The initial
meetings with GF aimed to build
mutual understanding about:
sustainability •
the culture and operational •
environment
boundaries of the systems •
and the sub-systems
potential stakeholders •
perceptions of risk, •
barriers, challenges and
systemic problems.
45
Establishing the range
of mutual bene?ts is
essential for effective and
ongoing collaboration. The
bene?ts need to connect
the stakeholders and the
sustainability vision. As new
parties join the project and
understanding evolves, the
vision and mutual bene?ts
should be revisited.
After several months of exploring
potential projects, and discussing
project options with some suppliers
and customers, GF corporate,
commercial and bakery divisions
identi?ed two areas to focus on to
improve the GHG footprint of its
supply chain performance:
their short- and long-haul •
trucking ?eet
transport logistics between •
distribution centres.
The key objective was to explore
opportunities to reduce GHG per
unit of product delivered, through
such options as fuel ef?ciencies,
substitute fuels or new engines.
This case focuses on the baking
division’s analysis of alternatives for
its light-weight, short-haul vehicles.
PRESSURE: WHY
ALTERNATIVE FUELS AND
GHG AND THE BAKERY
DELIVERY SYSTEM?
In GF, the bakery division has
the largest ?nancial investment
in distribution. The main drivers
in?uencing GF are:
Reduce exposure to increasing •
fuel costs by improving logistics.
Maintain current product •
pricing, given the likelihood of
substantial increases in both fuel
and food commodity resources.
Anticipate compliance to •
emerging regulations –
emissions trading scheme (ETS),
which will provide strong cost
incentives to reduce energy use
and GHG.
Do the right thing – GF •
developed a corporate
sustainability strategy that
requires futures thinking and
actions to be aligned with
improving the sustainability of GF.
Expectations of carbon content •
labelling, and emerging
demands for information
about a product’s GHG.
CURRENT STATE:
WALKING THE GF BAKERY
DELIVERY SYSTEM
The context to serve as a case study
in this project was the delivery of
bread in the Sydney metropolitan
region. The baking delivery system is
a ‘spider web’ from the distribution
centre to large and small retailers
with ?xed routes and low variability
in load size and orders.
Specify your system
boundary and determine
what the project group can
control or in?uence, and
how. If something affects
your project but you can’t
in?uence it, then monitor it.
The boundaries of the system
were de?ned as from GF bakery
distribution centre to retail
distribution centres. Key sub-
systems included: transport and
logistics; the bakery; depot; trucks;
transit; logistics; and environmental
and social systems. The main
stakeholders in the alternative fuel
project were GF permanent staff
and contractors, ORIX, suppliers,
customers and the retail sector.
46
GF’s Ermington Distribution Centre
(DC) is the largest stand-alone DC
in NSW with half a million deliveries
of fresh bakery products per day.
Products are delivered from the
Moorebank Bakery which services
the whole of Sydney. Deliveries from
Ermington cover Bondi, the city,
the north shore and the northern
beaches. Contractors are paid by
commission on cents per unit sold.
This is a strong incentive to reduce
per unit delivery costs through
improved ef?ciencies. A software
package called Transit schedules
distribution according to the most
ef?cient routes and vehicle type.
Inputs include satellite information,
roadmaps, peak traf?c times, vehicle
size, etc. This provides a platform
for building an ef?ciencies analysis.
Figure 7 shows the initial discussion
points for starting a CSA into the
Ermington sub-systems.
Scan for issues that
currently impact the
supply chain systems.
Potential impacts of
interventions (micro and
macro) include societal
and environmental issues.
In a systemic enquiry into whole-
of-supply-chain sustainability,
participants scan for issues that
currently impact the system.
Potential impacts of making
changes to the system should
also be considered. Some issues
considered during multi-disciplinary
discussions during the project were:
Regulations are likely to become •
more stringent, and carbon-
intensive fuels will become more
expensive. Commonwealth
Government mandated
GHG reporting is currently
under development and it is
anticipated that ETS will be
introduced in 2010. Information
on GHG emissions may need to
Figure 7 Ermington DC analysis
Morebank
Bakery
Monitoring: Define data for
KPIs: Energy, Waste, OH&S...
Diagnosis: Define energy use
and where waste is going
Trucked to
Ermington
Current Energy:
Energy saving opportunities:
Trucks – Hybrid/Electric/Gas
Depot – Solar/batteries
Optimise truck design
Reduce wasted space
Optimise delivery routes/loads (requires customer collaboration)
Diesel? Electricity – lights and computers
Source: NSW grid
Diesel?
Bread
scanned
Customer
orders allocated
Trucked, CBD,
eastern and
northern Sydney
GF / Ermington Depot: Current supply chain
47
be communicated along a supply
chain. Transport fuels are also
included in a mandatory federal
energy ef?ciency program.
Potential future impacts on GF
of evolving sustainability and
climate policy, government
incentives and regulations, local
and international market drivers
were considered.
Vehicle design optimisation •
opportunities included the
weight-carrying capacity of
vehicles, the options to redesign
vehicles, chassis, and the
number of wheels. Operations
and maintenance of vehicles
would be required but at no
additional cost to GF. Some
changes may require OH&S
training for drivers. Operational
procedures would be provided
by suppliers and managed by
ORIX as part of the leasing
arrangement. Maintenance costs
are included in the lease. It was
anticipated that the commercial
leasing arrangements with
ORIX would incur no immediate
additional costs to GF.
Options to reduce the distances •
travelled or the frequency of
deliveries involved trade-offs.
Opportunities to improve the
logistics required discussion with
retailers whose contracts can
constrain ef?ciency options by
specifying such things as delivery
times, the choice of engines and
truck body sizes. Travel distances
may increase if GF depots are
consolidated or if fuel locations
are changed (compressed natural
gas (CNG) depot option). Can
the empty space be reduced and
load capacity increased within
current weight restrictions?
Societal attitudes towards fuels •
were also considered important.
What are the community/
consumer perceptions of petrol?
Community considers this fuel to
be a major contributor to climate
change. Community perceptions
are likely to continue to drive
consumers away from petroleum
fuels towards more alternative
fuels. Bio-fuels were not
considered a viable alternative
fuel. GF is a food manufacturer
and there is growing concern
about the impact of using food
for fuel on global food supplies.
Any electric vehicles drawing on
coal-generated electricity along
Australia’s east coast would emit
more GHGs than traditional
fuels, according to one
participant. Was it possible to
put solar panels on factory roofs
to charge the solar batteries for
the electric vehicles?
Figure 8 shows the alternatives
identi?ed for further review.
Suppliers were invited to
provide detailed information
on alternative vehicle and fuel
options. This included the
advantages and disadvantages
of each option in relation to the
upcoming ETS and the broader
context of climate change.
Figure 8 Alternate vehicle fuel options
Manufacturing/
Bakeries
Electric
Truck
Hybrid
Diagnosis
Gas
DC Transport Retail DSD
Diesel
Truck
Traffic
routing
Review
# scenarios
Large, medium
small customer
CONSUMERS
Alternative fuel options
48
DEWHA also participated and made
these points during a forum with
ORIX, GF and the gas suppliers:
It is a myth or an assumption •
that alternative fuels must be
better. The new generation
diesel engines made to
European standards (Euro IV)
are a lot cleaner and emit less
GHG. At the heavy-vehicle end
of the market there is no current
evidence that there are better
alternatives to diesel.
In some cases, attempts to •
decrease CO
2
can increase
emissions of CH
4
(methane).
Currently it is dif?cult to measure
CH
4
and NOx as the equipment
is not available in Australia.
Engine tests conducted overseas
may not be a reliable guide
to emissions under Australian
conditions.
Hybridisation is a key enabling •
system for going forward,
but battery cost, life, space
taken on truck and weight are
constraining issues.
A decision support matrix
helps to consider the range
of perspectives. There were
differing views on what the
important factors were for
making a decision.
The suppliers informed the group
about the range of issues to
be considered when looking at
alternative fuels. General points
made by suppliers included the
importance of driver skills (a 10%
difference in fuel consumption);
collaborative opportunities (six-
month free trials for new hybrid
electric vehicles); and how
government assistance is needed to
install fuel depot infrastructure for
CNG (a low GHG fuel option which
has advantages for Australia). Simply
upgrading the vehicle ?eet with new
automatic/manual transmissions
(AMT) would result in economic
and environmental bene?ts from
lower diesel consumption. AMT
helps to take the ‘bad driver’ out of
the equation – this in turn reduces
maintenance costs and fuel use.
There were differing views on what
the important factors were for
making a decision. The government
focused on GHGs; whereas
suppliers were also concerned
about particulate matter and air
quality. Suppliers emphasised
cost savings. Some suppliers
lacked knowledge about climate
change implications and emissions
trading; others had high awareness
but their initiatives to develop
technologies that emitted less
GHG were hampered by the lack of
vehicle testing facilities and speci?c
information to guide their activities.
Some frustration was expressed
that government tests had a limited
range of applications.
The decision support matrix
below is a useful tool for scoping
the options. Data in the matrix
and notes captures some of the
discussion about options during
project meetings. The accuracy of
this data hasn’t been veri?ed.
49
TABLE 1 ALTERNATIVE FUEL DECISION MATRIX
PETROLEUM-
DIESEL
ELECTRICITY GAS LPG GAS-CNG HYBRID ELECTRIC
VEHICLES
+
P
o
s
i
t
i
v
e
s
Conventional
fuel currently
used. Supply
infrastructure in
place.
Can extend with
biofuels but lack
of consistency
in product.
New generation
of diesel
engines are
much cleaner.
Battery power can
mean zero emission
by vehicle. Good for
back-to-base runs.
Probable lower
running cost. Low
maintenance cost.
Introduced in Europe
but not currently
available in Australia.
LPG infrastructure
in place. Readily
available and good
supply in Australia.
Lower price – no tax
on LPG. Lower fuel
running cost and
maintenance. Zero
emissions.
Add-on LPG kits
– if breakdowns,
turn back to diesel
automatically.
Australian pricing of
CNG currently not
in?uenced by world
prices. Lower fuel
running cost and
maintenance. No tax.
Zero emissions.
Helps to break the
reliance on petrol/
oil and sources fuel
in Australia. Good
supply.
Lower GHG.
New lightweight
trucks available for
collaborative trial.
Lower fuel running
costs. Hybrid
vehicles gaining
support from
government for
GHG bene?ts,
lower emissions.
Good for the stop/
start nature of the
baking delivery
operations.
-
N
e
g
a
t
i
v
e
s
High emissions
especially CO
2
.
Limited crude
oil supply
with demand
increasing and
price forecast
to increase.
Less resilience if
dependent on
one fuel supply.
New technology, in
development stage.
Batteries heavy and
bulky. Limited vehicle
options. Australian
compliance is
required.
Larger upfront capital
costs. Re-charge
through domestic
main. GHG impact
when using coal-?red
power stations.
May only be feasible
with solar panels &
inverters/batteries.
Battery life & cost
of replacement.
Potential rapid
depreciation
of investment
(resale value).
Infrastructure cost
for refueling. If 100%
LPG, short runs or
sacri?ce load space
to carry gas. Larger
upfront vehicle costs.
Maintenance
issues. No warranty
insurance from
diesel engine
manufacturers with
retro?tted systems.
Low resale value
of vehicle.
LPG still emits GHGs.
If 100% CNG, distance
of runs limited
to within fuelling
station. Substantial
upfront capital costs
for establishing
infrastructure for
refuelling ($0.25million
per station).
Larger upfront
vehicle costs.
Maintenance issues.
No insurance from
engine manufactures
with add-on systems.
No secondary market
for CNG trucks
(related to lack of
fuelling infrastructure).
Option: use after-
market kit and convert
back to diesel.
New technology
in development
stage for
lightweight
commercial
vehicles.
Larger upfront
capital costs,
not cost neutral,
capital and
operational
expense high.
No market history,
presumed low
resale value.
50
TABLE 1 ALTERNATIVE FUEL DECISION MATRIX (continued)
PETROLEUM-
DIESEL
ELECTRICITY GAS LPG GAS-CNG HYBRID ELECTRIC
VEHICLES
RISK
S
h
o
r
t
t
e
r
m
LOW-MEDIUM HIGH MEDIUM HIGH HIGH
L
o
n
g
t
e
r
m
HIGH MEDIUM-HIGH LOW MEDIUM MEDIUM
TIME FRAME
Current Longer term –
dependent on
technology and
infrastructure costs.
Short term. LPG
dual fuel add-on (life
expectancy six years)
is available now.
Longer term
– possible for
collaborative fuel
depot. Dependent
on infrastructure and
technology.
Medium term –
dependent on
infrastructure and
technology.
Technical notes on fuel options
The LPG and CNG systems were
available as dual-fuel add-on
for diesel engines, Dual Phase
Induction Systems. Suppliers
claimed that adding LPG or
CNG to diesel engines helps to
reduce CO
2
by reducing diesel
consumption. In addition to
running the engine, diesel also
acts as an engine lubricant and a
solvent to help keep the engine
clean. Therefore, the balance of
gas to diesel has tradeoffs with
engine ef?ciency, maintenance
and fuel economy. LPG and CNG
also have GHG impacts. CNG has
the lowest GHG impact but there
are few fuel stations.
Hybrid vehicles use either Exhaust
Gas Recirculation (EGR) or
Select Catalytic Reduction (SCR)
technology. The EGR + Diesel
Particulate Diffuser (DPD) achieves
Euro 4 standard (the highest). DPD
is a ceramic ?lter that collects
and incinerates particulates. EGR
and DPD vehicles can potentially
achieve up to 30% reduction in
fuel use and 25% reduction in
GHG emissions. Some vehicles use
EGR + DPD + Variable Geometry
System (VGS) turbo chargers, with
potential to reduce particulates by
81.25% and NOx by 30%.
NB: Particulates in the exhaust
are an air-quality not a GHG
issue. Suppliers urged the need
to also understand the impact of
particulates on air quality. The
relationship between particulates
and climate change surfaced, but
wasn’t addressed.
51
INITIAL OUTCOMES
FROM THE PROJECT
There was uncertainty about how
alternative fuel regulations would
evolve. Changes in alternative
fuel policies in relation to CNG
infrastructure, hybrid and electric
vehicle tariffs could substantially
alter the economics of the vehicle.
Financial data from ORIX indicated
the cost of leasing hybrid trucks was
substantially higher than leasing
the new diesel vehicles with AMT.
The problem was the uncertainty
around the re-sale value of these
vehicles in three years and the
additional costs such as battery
and inverter maintenance. The
batteries are expensive and battery
life is unknown. There is currently no
market for hybrid vehicles, whereas
diesel vehicles have an established
re-sale market.
Sustainability issues cannot be
viewed in isolation of ?nancial
considerations, where substantial
investment is required. The risk
would be perceived as being
too high if there isn’t reasonable
certainty about the costs. The
information does not build a
strong enough case to justify a
substantial investment in gas,
electric or hybrid vehicles.
While this presented a setback for
the project team, they remained
optimistic about improving the
sustainability of the vehicle ?eet.
Without having consulted a diverse
range of stakeholders, GF may
have pursued a ‘quick win’ using an
alternative fuel under a mistaken
impression about its environmental
credentials. One of the outcomes
from the discussion was the
opportunity to work with ORIX and
ISUZU on a collaborative six-month
trial using a new hybrid diesel-
electric truck. GF staff will monitor
the performance of the hybrid and
build a better understanding of the
operational implications of this new
technology. The trial progress will
be communicated to GF staff and
will be used to raise awareness of
the sustainability opportunities and
challenges in the trucking ?eet.
Sustainability issues
in isolation of ?nancial
considerations will not
convince the Board to make
substantive investment.
Some additional improvements
occurred at GF. The GF team
engaged a wide range of
employees, including people
from marketing, logistics, supply
chain management, customer
relations and sales in considering
a number of potential projects.
Some project initiatives were
explored but were delayed, for
example, by an imminent change in
suppliers, or the inability to obtain
the information that was needed.
Improving logistics management
is also a key initiative, but progress
on this area was slow due to data
limitations and the complexity
of the logistics network. There is
also a need to collaborate with
the retail sectors, but building
these collaborative partnerships
appeared to be challenging.
GF developed more systemic
interactions and alignment between
strategy and sustainability options,
within its own corporation and
with organisations along its supply
chain. GF instigated the supply
chain collaboration with ORIX,
which in turn invited its suppliers to
become involved in the project. GF
kept senior management informed
and consistently demonstrated
openness to broader systemic
issues and the need for new ways
of thinking and collaborating. They
also provided valuable feedback
on the constraints of their business
and industry sector. As discussed
in Chapter 2, it is imperative that
corporations engage in active
discussions about sustainability and
their values and roles in society as
well as the business world.
Alignment of strategies and policies in collaboration with suppliers
enables more sustainable practices in the supply chain.
52
This chapter provides a critical
examination of the systemic activities
of the participants and the research
team. This discussion includes
observations from participants
outside of the core projects.
Working systemically and
collaboratively on sustainability
problems can be perceived as
a challenge to the culture of
‘business as usual’ by employees.
Corporations are starting to
associate a business value with
sustainability, especially where
emerging markets and regulations
are now placing ?nancial values on
aspects of corporate sustainability
(e.g. putting a price on greenhouse
gas emissions). Employees and
managers generally have de?nite
lines of authority, accountability and
roles to perform. Critical re?ection
and systemic practice requires
employees and senior management
to examine their assumptions,
expand their responsibilities, and
form inter-disciplinary networks
to share knowledge, and explore
uncertainties and systemic
drivers. This departs from normal
business roles and challenges the
expectation that a management
decision or a new policy will
in?uence a given issue.
There was considerable enthusiasm
for the projects and the majority of
participants and experts consistently
demonstrated a commitment
to prioritise time and resources.
The critical systems framework
was re-visited throughout the
conversations. The supply chain
diagrams formed an ongoing basis
for analysis and discussion. Given
the very short time frame of most
meetings (usually one–two hour
meetings), it provided a ?exible
framework and a useful tool for quick
introduction to new stakeholders,
issues and problems.
While outcomes will continue to
evolve and the full in?uence of
the projects is dif?cult to assess,
there were immediate tangible
outcomes: a fact sheet is under
development; new interactions
and supply chain networks;
new research collaborations;
procurement policies; greater
knowledge of systems thinking and
sustainability as a business strategy;
and understanding of the supply
chain. The value of this capacity
building was frequently noted, as
were the challenges and bene?ts
of working collaboratively across
corporate and professional silos.
There were many comments about
the bene?ts of interdisciplinary
discussion and the importance of
a neutral facilitator when engaging
the supply chain in discussions.
5 . E X P L OR I NG T HE CHAL L E NGE S
OF WOR K I NG S Y S T E MI CAL LY
The challenges of
collaboration were
discussed at various
times during the food
and construction
sector projects:
> How to build
collaboration with
the retail sector?
> How to build
collaboration
with suppliers?
> What is the mutual
bene?t for these
parties?
> How do you maintain
a collaborative
relationship among
suppliers?
53
It is important to note that the
systems enquiry processes used
with these participants cannot be
exactly replicated, as the facilitator
must respond to the unique needs
and challenges of each corporation.
The model and discussion in this
report are intended to offer an
insight to the experience, and
offer some process guidelines
that can be adapted. The critical
systems approach as applied in
the Sustainability in Supply Chains
program aimed to:
build a shared understanding of •
the problems, the systems and
sub-systems, the boundaries and
the environment within which
companies operate
extend the project team learning •
about the supply chain
de?ne the risks and •
opportunities in the supply chain
operating environments
understand the impact of •
culture and policies, including
incentives, standards, and
regulations on the operation of
companies and the impacts of
misaligned policies
watch for solutions, develop ways •
forward and in?uence future
decision making processes
develop capacity to think •
systemically and collaborate
with supply chain partners
to implement more effective
responses to issues of
sustainability.
The critical systems approach
used a range of analytical and
learning techniques including
qualitative interviews, systems
enquiry with diagrams and
envisioning exercises, expert
knowledge and multi-stakeholder
focus groups. Experts, policy and
communication documentation
also formed part of the process of
informing the participants about
the broader issues. The process was
underpinned by a monitoring and
evaluation program that required
participants to provide feedback
throughout the life of their project.
Key insights from the process
include:
ENGAGING SUPPLY
CHAINS
Initially, there was limited supply
chain engagement. Despite
proposing their own project
focus that would involve other
organisations in a collaborative
project to address an issue of
sustainability that cut across
their supply chain network, many
participating organisations (or
their supply chain partners) proved
hesitant to engage more than one
other supply chain participant and
to extend the engagement beyond
one internal representative. In
some corporations, supply chain
engagement was very limited and
there was resistance to engaging
internal people. Reasons were
not all clear, but there are some
indications that participants:
need tangible bene?ts (or •
con?dence in the process and
facilitation) before they will
engage other supply chain
stakeholders
have concerns about the •
power and in?uence of other
organisations (in?uence of
large organisations on smaller
organisations) and the unknowns
of collaboration
54
lack experience, knowledge and •
skill to work on sustainability
across the supply chain. Some
participants did not have the
con?dence to engage other
corporate divisions, senior
management and supply
chain companies. An absence
of collaboration reinforces
perceived limits to responsibility
and business-as-usual
practices that don’t support
cross-divisional initiatives
are coping with rapid •
commercial and market
developments. Supplier
relationships can change quickly
and frequently have both
competition and cooperation.
Uncertainty leads to risk aversion
such as a reluctance to share
information, particularly if that
information might have a value
under new markets, such as an
emissions trading scheme.
PERSPECTIVES AND
KNOWLEDGE OF
SUSTAINABILITY
Knowledge of sustainability was
highly variable among participants
and new participants joined
regularly. Consequently there
was a constant need to re-assess
the levels of understanding of
sustainability and knowledge of the
ARIES project during the meetings.
Conversations about
sustainability issues in
supply chains would not
normally occur as part of
everyday business.
The project leaders predominantly
came from an Environmental
Manager background. Their training
focuses on reducing risk by meeting
environmental regulations. In
general they were unfamiliar with
the human and organisational
dimensions of sustainability,
innovating beyond compliance,
or strategic opportunities to
incorporate sustainability into
the business model or work
throughout the supply chain.
Logistics, marketing and customer
relations people are not focused on
sustainability, so there is need for
cross-pollination of knowledge and
practices.
Few business people come
from a discipline or a working
background that prepares them
for the breadth of topics in a
sustainability role. Strategic thinking
about sustainability and business
alignment across divisions is
therefore essential. Developing a
shared or compatible vision can
provide a basis for working and
learning together. It’s important
to create a learning environment
in which participants interact
to co-create a comprehensive
understanding of an issue, even if
they’re individually expected to be
the expert in their day-to-day role.
EMBEDDING NETWORKS
Participants indicated that they do
not usually communicate across the
corporate silos or with supply chain
corporations (except supply chain
specialists and buyers). All agreed
that ‘sustainability’ conversations
about supply chain processes would
not normally occur. The role of the
neutral facilitation was essential.
Facilitation helped to overcome
constraints to collaboration such
as time pressures, contractual
obligations, regulations and risks
that collaborative projects could
be perceived as anti-competitive.
Participants were highly
appreciative of the opportunity
to build these relationships and
to have these conversations, they
could see the immediate value and
that they were essential for the
future to break out of short-term
business-as-usual habits.
55
SHARED
UNDERSTANDING,
ASSUMPTIONS AND
INFLUENCE
Facilitation, voluntary participation
and a shared vision are all crucial
for participants to practise critical
systems thinking to explore the
roles of different systems (e.g.
individuals, business units or
organisations) and make explicit
the power relationships, leadership
and in?uence at different levels
of the system. The willingness of
all core participants to engage
in critical re?ection of one’s
assumptions, own role and impact
on the situation (constraining or
creating opportunities for change)
was important. For example, Bovis
Lend Lease provided a high level
of leadership and understanding of
sustainability. They played a pivotal
role in the project by:
perceiving the need for •
collaboration in a complex
challenge and proposing the
project
providing crucial information •
that built a rich picture of the
concrete supply chain
acting as advocates for •
the other participants.
Bovis Lend Lease argued that climate
change needs business leadership
to exceed the proposed GHG
reductions under the proposed ETS.
The opportunity to observe the
culture within this corporation also
served as a good case study for how
participants in this sector engage in
conversation about complex issues.
Entrenched values and behaviour
can reinforce institutional inertia
to change irrespective of senior
leadership for the change.
Developing the capacity and culture
to critically examine one’s own
role and assumptions, and discuss
expectations, roles and in?uence in
a systemic group can reveal roles,
power and politics that co-create
barriers or levers to change. The
act of sharing this information in a
group can threaten an individual’s
expert role. If they sense a loss of
control and in?uence, they may
become resistant or cause delays.
In one case, a senior executive
withdrew support from the
participation of employees in the
project, claiming that they weren’t
capable of systemic thinking.
MUTUAL BENEFIT AND
COLLABORATION
The program highlighted the
importance of establishing mutual
bene?t (‘what’s in it for me?’)
among stakeholder corporations
that in?uence the sustainability
problem. The mutual bene?ts
(or the mutual problems) should
be signi?cant enough to warrant
senior management support from
each organisation, and should
strategically align with corporate
priorities. It should offer more
than just ?nancial gains, and can
include tangible and intangible
sustainability gains, such as
improved staff morale or corporate
reputation.
Mutual bene?t also in?uences
the perceived advantages and
disadvantages of collaboration
among stakeholders within and
across supply chains. Successful
collaboration that alters current
business practices needs
participants to have compatible
visions that ?t their business
strategies.
In construction, the importance of •
transport and logistics operations
restricts any single company from
supplying the concrete needs
of a developer and construction
company. No system of standards
or ratings addresses the diversity
of sustainability issues involved
in the concrete supply chain.
Solutions to systemic messy
problems require collaboration to
build shared understanding of the
problems and potential solutions.
For example, the construction
companies jointly identi?ed that
industry inertia resulted from
a lack of incentives to obtain
information and increase the use
of the more sustainable concrete
products that were available.
It is essential to obtain senior-level understanding and active support
upfront. This helps to ensure commitment, strategic ?t and adequate
resourcing to avoid burnout in the champions.
56
One of the food companies •
?rst had to understand its
own interest and potential
risks before approaching
large retailer clients about a
collaborative project.
The need to establish mutual
bene?t and revise it during the
project became apparent. For
example, the mutual bene?t
amongst the construction
participants was less tangible,
more distributed and had longer
lead times than it did for the food
companies. As a result, it wasn’t
championed internally by senior
management and the enthusiasm
for the process was not as strong.
The bene?ts need to be clear to
senior management for participants
to have the direction and support to
actively engage with sustainability.
The participants also need to
see the bene?ts in the critical
systems and action learning
approach. That is, recognise that
a linear decision-making process
that assumes control over messy
problems is likely to fail and can
produce unintended consequences.
Understanding this helps to increase
the participants’ enthusiasm for
collaboration and willingness to
attend meetings, be open to new
ideas, think critically, implement
the change actions identi?ed and
become champions within their
corporations and with suppliers.
Systemic practice engages a range
of stakeholders because multiple
perspectives offer richer insights,
yet increased diversity brings with
it more agendas and different
interests. Judgment should be
exercised regarding the extent of
collaboration, and caution not to
assume that the mutual bene?t
for an individual or one group of
stakeholders applies to a larger
group. A reason underlying the
need for change in one project
generated some controversy
among supply chain members
whose business agenda didn’t
align with that reason and who
rejected its validity. This highlights
the importance, in creating the
conditions for collaboration (see
Learning to Think Systemically), of
identifying sources of in?uence,
power and levels of support.
Participants share perceptions of
risk, sensitivities and politics before
they surface unexpectedly.
BUILDING NEW
NETWORKS AND
RELATIONSHIPS
The participants built new networks
within their own corporations
and with a range of supply chain
members across their supply chains.
They acknowledged the need to
build trans-disciplinary relationships
because of the complexity and
diversity of sustainability issues.
These new sustainability teams
provided the participants with a
better understanding of how their
corporation operates, the range
of perspectives on the issue, and
the barriers and challenges to
organisational change.
It is also essential to obtain senior
level understanding and active
support upfront. This senior
management support helps ensure
commitment, strategic ?t and
adequate resourcing for the project
to avoid burnout in the champions
and to nominate other participants
in addition to the project leader.
This becomes particularly important
when an individual has competing
demands, and in situations of rapid
staff turnover.
CHAPTER SUMMARY
The diversity and complexity of
stakeholders and issues provided
the research and project teams
with challenging dilemmas about
how to best in?uence the systems,
and how to capture the outcomes.
Supply chains are complex, con?ict-
prone systems and embedding
sustainability principles within
these operations is providing new
challenges to people, and corporate
structures and mindset. In the
previous chapter we discussed two
supply chain projects, one with a
focus on technological research
and the other on multi-stakeholder
dialogue. Both were attempting
to work with messy, ill-structured
problems and explore solutions that
require systemic changes.
The program highlighted the importance for establishing mutual bene?t
or ‘what’s in it for me?’.
Where mutual bene?t was not clearly established the process and the
relationships needed to drive the change tended to ?ounder.
57
Chapters 1 and 2 introduced
the Sustainability in Supply
Chains program concepts and
the background to this research.
The approach was outlined in
Chapter 3. Chapter 4 discussed the
case studies, providing practical
examples of how the systems
approach was used and Chapter 5
discussed the factors that emerged
from these transformation activities.
This chapter discusses some
further ?ndings and insights from
the Sustainability in Supply Chains
program and projects.
TRANSITIONING TO A
SUSTAINABLE FUTURE
The overriding objective for the
program was to achieve general
sustainability gains in supply
chain companies and operations
via learning-based change. The
philosophy of the process behind
the Sustainability in Supply Chains
program was that change and
learning occur most effectively when
participants are actively engaged in
the change process of transitioning
to a more sustainable future.
The complexity of sustainability
challenges necessitates a learning-
based approach. Further, when
participants experience the full
range of issues and develop their
own strategies for in?uencing the
change process they take greater
ownership of the issue. Learning
is fundamental to the adaptive
management skills to cope with the
dynamic nature of sustainability.
Because the problems of
sustainability in supply chains
are too remote, too big and too
complicated and therefore dif?cult
to de?ne, each individual has a
different perception of the problem
based on their reality. Critical
systems analysis was proposed as
the methodology to account for
this diversity, while also facilitating
change with people and with the
entire supply chain system. The
aim was to develop a sustainability-
focused project team that:
acknowledges uncertainty and •
the multiple issues encompassed
in sustainability thinking
is ?exible enough to respond •
to the broader demands of the
sustainability agenda
developed their capacity •
to think and act sustainably
and accept the diversity
of responses required.
Ultimately some level of agreement
was reached about the actions
required to in?uence the supply
chain to create a desired future
state. The enquiry developed
a broad appreciation of the
various factors that in?uence the
participants’ ability to effectively
6 . T HE S I GNI F I CANCE OF T HI S P R OJ E CT
“How an organization
can effectively evaluate
its many options and
focus its sustainability
commitment (i.e.
investments) where
they will produce the
greatest measurable
impact within the
context of an often pre-
de?ned procurement
capital plan, remains a
noteworthy challenge
impacting the most well
intentioned groups.”
Intertek
Sustainability Solutions
President Andre Raghu
58
engage in processes of change
for sustainability. The critical
systems approach enabled a
more detailed understanding of
individual roles, perceptions of risk
and uncertainty, and power and
control among the participants
and their supply chain members.
THE VALUE OF SYSTEMIC
COLLABORATION
Observations suggest that ongoing
bene?ts from a collaborative supply
chain approach to solving messy
problems are:
Joint initiatives improve •
knowledge about problems
and overall operations by
developing knowledge about
processes and imperatives at
all points in the supply chain.
This will reduce the exposure
to increased costs through the
reduction in the use of energy
and other resources such as
packaging, water and waste.
Building understanding of the •
sustainability criteria positioned
collaborating corporations for
ETS and engaged them in a
process of thinking about how
to reduce their exposure to ETS
and manage other emerging
issues, e.g. embodied energy,
energy ef?ciency, carbon
labelling and food miles.
Collaborative work has the •
potential to improve all parties’
sustainability credibility
through the development of
systems that demonstrate
the sustainable credentials of
products. New products and
processes often emerge from
conversations and analysis of
broader supply chain issues.
BUILDING A CULTURE
OF CHANGE TOWARDS
SUSTAINABILITY
To achieve effective learning
and cultural change towards
sustainability in organisations and
their supply chains, it is critical to:
ascertain the participants’ •
level of understanding of
sustainability issues and
challenge assumptions
align the sustainability initiatives •
with the business model
establish an ongoing multi- •
disciplinary team for driving
sustainability initiatives.
Building partnerships and
constructive working teams
takes time. To avoid loss of
momentum due to the challenges
of implementing transformational
projects it is important to
realistically appraise the pressures
of the operational environments,
and time required to make change
happen and for learning to occur.
Where change is occurring in
conditions of certainty – that is,
history, trends and facts provide
more con?dence in outcomes –
trust in buyer/seller relationships is
less important. Where change and
decisions are occurring in situations
of high risk and uncertainty,
trust and establishing mutual
bene?t between supply chain
stakeholders is more important.
In these circumstances advice is
often sought from trusted advisors.
However, these advisors are
often not equipped to deal with
the complexity of sustainability
problems and solutions. Leaders
need to draw on inter-disciplinary,
multi-stakeholder sources of
information and develop skills for
strategic decision making within
emergent, uncertain environments
such as supply chains. For example,
some participants had a very low
awareness of sustainability – no
knowledge of fundamental issues,
corporate social responsibility,
sustainability reporting frameworks
and so forth. Others took
sustainability as an extension of
environmental regulation and
regard it as a GHG measurement
process, yet others understand the
broader context but seek advice
on how to think systemically, to
in?uence the culture and the
decision making processes in their
organisations.
59
There were indications that a sense
of ‘powerlessness’ exists within
some people, that this type of
thinking is too complex, exceeds
their role, and the system doesn’t
facilitate this type of dialogue.
The limited project time frame
was also a contributing factor.
Building shared understanding and
knowledge about how to engage
sustainably with supply chain
participants, who do not normally
communicate, takes time and
external facilitation. Collaborative,
transitional projects need to be
sensitive to:
the complex networks of •
information sources used by
corporations and industry
associations
the diversity of stakeholders •
in each industry sector, the
‘green’ fringe, the ‘industry
leaders’, the ‘laggards’, the
lobby groups and the minority
gender and ethnic groups
the diversity of relationships •
and potential tiers of
resistance to change
the value systems – such as •
individualism, management
control, and IP ownership
future positioning and •
opportunities for embedding
sustainability in corporate
supply chains.
The projects established network
interactions and common goals
that have the potential to in?uence
long-term learning and outcomes
in the participant corporations.
The Sustainability in Supply Chains
program indicates that when
participants have unambiguous
information about agreed, practical
industry solutions, and they can
see the ‘win-win’ from collaborating
with a supply chain partner, they are
likely to positively embrace changes
to work practices, providing that:
con?ict of interests can be •
negotiated
sense of control is not •
threatened (i.e. it does not place
their systems at risk)
it does not involve major •
expense and time
people are supported through •
the process
the corporation and government •
provide leadership, support and
consistent messages to support
the vision.
SUMMARY
The Sustainability in Supply
Chains program ?ndings have
been presented at several forums.
For example, the supply chain
diagrams were used as a reference
point by presenters at a Concrete
Research Forum and the focus
group summary was provided
as background reading and the
outcomes were used as guidelines.
The ?ndings of this ARIES program
correlate with those of an action
research project for collaborative
improvement in European supply
networks (Middel et al 2005 p. 377).
Those researchers found that there
was a need for organisations ‘to
understand each other’s positions
and to create a shared sense
of direction’; create a learning
environment to communicate
information; generate trust and
commitment; use tools and frequent
workshops; and have a facilitated
learning process. These authors
drew a similar conclusion: ‘Action
learning has provided a useful
methodology for the development
of a capacity for learning as part
of the collaborative improvement
process’. (p 378).
The supply chain program has
wider implications because it deals
with messy problems and solutions
that aim to change practices
through systemic learning using
a collaborative approach. While
the study was very short, one year,
it enabled the opportunity for
several companies to in?uence
their supply chains and to explore
the challenges of building
collaborative partnerships.
60
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62
ARIES Australian Research Institute in Education for Sustainability.
Action
research
Action research aims to involve practitioners as co-researchers of their own practice, to improve
a situation of concern and to innovate practice. It views change as the desired outcome, and can
empower individuals and build capacity to bring about ongoing systemic change. In this way,
action research can generate transformation for sustainability.
A collaborative approach that bridges action and research, action research is often represented
as a four-phase cyclical process: plan formation, action, outcome observation and re?ection.
Through critical enquiry and the cyclical process of evaluating and validating the research
?ndings, action research builds rigor into the process of developing grounded theories for
improving practice.
Action learning Action learning is a process designed to build the capacity of an individual using critical
re?ection and assessment. The outcome is improved practice by learning from re?ection on
action and sharing experiences with others.
Action learning is a collaborative process where participants develop an action plan, implement
the plan, and critically re?ect on their actions, and learn through sharing experiences. A
facilitator or mentor assists the participants through the action learning process. Action
learning is often used in bringing a group of people together to critically re?ect on and improve
professional knowledge and practice.
AMT Automatic manual transmission.
CIA Concrete Institute of Australia.
CNG Compressed natural gas.
CSA Critical systems analysis.
Critical
re?ection
Critical re?ection is an ongoing process of questioning assumptions and considering one’s own
experience of applying knowledge in practice. It can reveal cultural expectations, social norms
and political structures. This deeper understanding can identify opportunities for change and
improved practice.
Critical systems
thinking
Critical systems thinking requires people to think critically about their assumptions and
interests. It asks individuals to consider the impacts of the solution(s) on the external and
internal environment, and vice versa.
DEWHA Australian Government Department of the Environment, Water, Heritage and the Arts.
DC Distribution centre.
DPD Diesel particulate diffuser.
GL OS S AR Y AND ACR ONY MS
63
Education for
sustainability
(EfS)
Education for sustainability seeks to develop the knowledge, skills, values and attitudes
necessary to adapt and make changes that are more sustainable. Education for sustainability
examines both the content and context of the learning, and the learning process itself to build
individual and organisational capability for sustainability, which is a dynamic concept.
Some core tenets of education for sustainability are:
imagining a better future: envisioning or futures thinking •
systemic thinking •
critically re?ective thinking •
participation in decision-making •
partnerships for change. •
EGR Exhaust gas recirculation.
ETS Emissions trading scheme.
GF Goodman Fielder.
GHG Greenhouse gases.
GMO Genetically modi?ed organism.
GRI Global reporting initiative.
IP Intellectual property.
KPI Key performance indicator.
LCA Life cycle analysis.
LPG Liqui?ed petroleum gas.
SCM Supplementary cementitious material.
SCR Select catalytic reduction.
Supply chain A ‘network of facilities and distribution channels that encompasses the procurement of
materials, production and assembly, and delivery of product or service to the customer’ (OECD
2001, p 2).
Supply chain
management
The process of planning, implementing and controlling the operations of the supply chain.
SME Small and medium sized enterprises.
Value chain The value adding activities that an organisation provides to support the ef?cient operation of
the supply chain and deliver maximum value as perceived by the customer. These can include
infrastructure management, human resources, research and development, sales and marketing.
© Commonwealth of Australia [2009]
ISBN 978-1-74138-328-7
This work is copyright. Apart from any use as permitted under the Copyright Act 1968, all other
rights are reserved. Information contained in the publication may be copied or reproduced for
study, research, information or non-commercial educational purposes, provided the source
is fully acknowledged.
DISCLAIMER:
The views and opinions expressed in this publication are those of the authors and do not
necessarily re?ect those of the Australian Government or the Minister for the Environment,
Heritage and the Arts or the Minister for Climate Change and Water.
While reasonable efforts have been made to ensure that the contents of this publication
are factually correct, the Commonwealth does not accept responsibility for the accuracy or
completeness of the contents, and shall not be liable for any loss or damage that may be
occasioned directly or indirectly through the use of, or reliance on, the contents of this publication.
doc_275998863.pdf
It presents a learning-based approach as an effective way of engaging members of the supply chain, working with 'messy problems' (those that are complex, hard to define and involve many people and issues), and embedding change in policies and practice.
S US TAI NAB I L I T Y I N S UP P LY CHAI NS
Us i n g s y s t e ms t h i n k i n g t o
wo r k t o wa r d s s u s t a i n a b i l i t y
i n c o r p o r a t i o n s a n d t h e i r
s u p p l y c h a i n s
i
SUSTAINABILITY IN SUPPLY CHAINS
Using systems thinking to work towards sustainability in corporations and their supply chains
Alice Woodhead*, Janelle Thomas** and Jeremy Mah**
March 2009
*Link Strategy Pty Ltd **Australian Research Institute in Education for Sustainability (ARIES)
The Australian Research Institute in Education for Sustainability under commission from the
The Australian Government Department of the Environment, Water, Heritage and the Arts
PROGRAM CONTACTS:
Prof Suzanne Benn
The Australian Research Institute in Education for Sustainability (ARIES)
www.aries.mq.edu.au
E: [email protected]
Dr Alice Woodhead
Link Strategy.
www.linkstrategy.com.au
E: [email protected]
Key words: supply chains, corporate sustainability, collaboration, multiple stakeholders, systemic
thinking, transformational projects, learning, education.
Citation: Woodhead, A, Thomas, J and Mah, J (2009) Sustainability in Supply Chains. Link Strategy
and the Australian Research Institute in Education for Sustainability for the Australian Government
Department of the Environment, Water, Heritage and the Arts, Canberra, Australia.
ii
KEY PARTICIPANTS
(Listed alphabetically
by organisation name)
Bovis Lend Lease
Anita Mitchell, Head of
Sustainability – Asia Paci?c
Genevieve Scarfe, Sustainable
Development Consultant
Goodman Fielder
Mike Searles, National Sustainability
Manager, Corporate Division
Georg Meisch, National Logistics
Manager, Bakery Division
Don Ball, Logistics Project Manager,
Bakery Division,
Kylie Kindred, Customer Relationship
Manager, Commercial Division,
Louise Wood, National Logistics
Manager
Dan Schiebaan, Environmental
Manager
NSW Landcom
Matthew Napper, Environment
Manager
Stockland
Chewy Chang, Sustainability Project
Manager – Development Division
Mimi Vu, Procurement Manager
KEY CONTRIBUTORS
AMP Capital Investors
Nick Edgerton, Research Analyst,
Sustainable Alpha Funds
Australian Government
Department of the Environment,
Water, Heritage and the Arts
Tony Marker, Director, Building
Energy Ef?ciency and Sustainability
Chris Baker, Acting Branch Head,
Energy Futures Branch
Jeanette Schwarz, Director,
Technology Futures Team
Boral
Nathan Barrell, National Planning
and Corporations, Development
Manager
Cement Concrete and
Aggregates Australia
Samia Guirguis, Manager, Research
and Technical Services
Cement Australia
Bruce Hunter, National
Corporations Development
Manager, Marketing & Sales
Cemex
Graeme Reid, Sales and Marketing
Manager
Scott Carter, National Environment
Manager
City of Sydney
Ben Pechey, Specialist Planner
Concrete Institute of Australia
Ben Cosson, Project Manager,
Technical Services
Delta Electricity
Peter Coombes, Manager
Sustainability
Peter Reed, Asset Manager,
External Plant
Green Building Council
Hal Dobbins, National Technical
Manager, Certi?cation
Hanson
Jeremy Smith, General Manager
Corporations Development
HBM Group
Craig Heidrich, CEO, Ash
Development Association of Australia
& Australasian Slag Association
Independent Cement and Lime
James Howard, Marketing Manager
Kellogg
Matthew McGinness,
Environmental Manager
Venkata, Subramanyan, Customer
and Logistics Services Manager
Macquarie Generation
Wayne Enks, Asset Manager,
Bayswater Power Station
NSW Department of Environment
and Climate Change
Rod Clare, Corporations
Partnerships, Building Products NSW
ORIX
Mark Willington, Business
Development Manager, Commercial
Vehicles
Ian Leggatt, Operations Executive,
Commercial Vehicles
iii
ACK NOWL E DGE ME NT S
We wish to acknowledge the support of the ARIES partners
and contributors. In addition to those acknowledged under key
participants, there were many other employees in participant
corporations who contributed time and ideas. We would also
like to record our appreciation to the following companies
who provided input: ARUP, Bakers Delight, Clarendon, Linfox,
JL Pierce, Green Fleet Systems International, Investa, Hino, Isuzu,
OES CNG, OSMU Technology, Richard Crook Construction and
Toll Holdings.
We are grateful to David Morrissey, CSR Sydney, who
established the projects with the participant corporations.
Expert advice was received from Prof. John Gattorna, Macquarie
Graduate School of Management, and from the Systemic
Development Associates: Bruce McKenzie and Prof. Roger
Packham, the University of Western Sydney.
Prof Daniella Tilbury, then ARIES Director, initiated this program
of research and obtained funding for its implementation.
1
CONT E NT S
E X E CUT I V E S UMMAR Y 2
1 . I NT R ODUCT I ON 5
High uncertainty and high risk issues 5
What is a sustainable supply chain? 7
About the Sustainability in Supply Chains Program 7
2 . CUR R E NT T HI NK I NG AND L I T E R AT UR E 1 1
Sustainability is a dynamic concept 12
About supply chain management 13
Organisational change in complex social systems 16
Learning for sustainability 19
3 . L E AR NI NG T O T HI NK S Y S T E MI CAL LY 2 3
What is critical systems thinking? 23
How to think systemically and critically 24
4 . CAS E S T UDI E S 3 1
Sustainable concrete supply chain 32
Sustainability in food distribution systems 43
5 . E X P L OR I NG T HE CHAL L E NGE S OF WOR K I NG S Y S T E MI CAL LY 5 2
6 . T HE S I GNI F I CANCE OF T HI S P R OJ E CT 5 7
R E F E R E NCE S 6 0
GL OS S AR Y AND ACR ONY MS 6 2
2
E X E CUT I V E S UMMAR Y
It presents a learning-based
approach as an effective way
of engaging members of the
supply chain, working with ‘messy
problems’ (those that are complex,
hard to de?ne and involve many
people and issues), and embedding
change in policies and practice.
Managing sustainability and supply
chains is a report by Link Strategy
and the Australian Research Institute
in Education for Sustainability.
The program was funded by the
Australian Government Department
of the Environment, Water, Heritage
and the Arts, and supported by
Macquarie University. Foundation
participants were Bovis Lend
Lease, Stockland and Landcom
(the construction and built
environment sector), and Goodman
Fielder (food manufacturing and
distribution). Over 20 corporations,
from SMEs to multinationals,
were involved in the project.
The report is for CEOs, managers,
educators and staff within industry
and government who seek to
integrate sustainability into their
vision, culture and practices. The
report’s methods, discussion, case
studies and insights are based on
a critical systems approach. The
report will be helpful in providing
guidance on the drivers (the why),
the process of change (the how) and
the actions required (the what) to
achieve sustainability outcomes.
The critical systems approach to
complex problems can be used in
any circumstance where no one
individual or group can create
change without the cooperation
of other parties. Sustainability and
supply chain problems and solutions
frequently fall into the domain of
high uncertainty and high risk issues
where the outcomes from a course
of action cannot be predicted; and
indeed, even de?ning the problems
can be dif?cult.
The construction sector project
focused on sustainable concrete
as an important, persistent
problem that no single company or
partnership in a construction supply
chain could ?x. It involved:
Multi-stakeholder engagement •
– identifying the stakeholders
(developers, construction ?rms,
suppliers and competitors)
and engaging the range of
perspectives on an issue
Institutional change – identifying •
persistent problems and systemic
constraints to implementation
of new technology, products
or improving practices,
and considering ways
to overcome them
Policy and practice change •
– developing policies and
processes for improving
information and management.
This report explores
a systems-based
learning approach
taken by a group of
corporations in two
sectors to improve
the sustainability of
their products and
services, including how
to respond to scarce
resources and evolving
climate change policies.
3
The food sector project examined
a feasibility pilot to reduce
greenhouse emissions in fuel use,
by reviewing options to improve
fuel ef?ciency in a short-haul bakery
distribution network. The focus of
this project was on:
Clarifying values and priorities – •
managers explored their values
and the strategic importance
and impact of sustainability on
their business and stakeholders,
including employees, customers
and investors
Research and development – •
reviewing current and emerging
alternative fuel options in
commercial vehicles
Innovation – the feasibility of •
implementation and exploring
how to operationalise cutting-
edge vehicle technology in the
bakery division
Monitoring – diagnosis of •
current and new processes with
the objective of developing
monitoring programs and
key performance indicators
for emerging legislation e.g.
greenhouse gas.
KEY FINDINGS
The key ?nding of this supply chain
project are:
1. The critical systems approach to
complex sustainability issues can be
used in any circumstance where no
single individual or group can create
change without the cooperation
of other parties. Bene?ts of a
systems approach include increased
knowledge of corporate and
supply chain operations, holistic
and systemic thinking about
risks and uncertainty, increased
capacity for decision-making about
sustainability options and more
targeted and effective responses to
issues.
2. Supply chain sustainability
initiatives require multi-disciplinary,
intra- and inter-divisional, and inter-
organisational cooperation. The
case studies revealed the need for
stronger collaboration throughout
the supply chain, with a greater
emphasis on working systemically
with suppliers and stakeholders.
Collaboration creates new networks,
business opportunities and research
partnerships
3. To effectively build the capacity
of individuals and organisations
towards more sustainable supply
chains, it is essential to understand
the diversity of stakeholder
perspectives and sustainability
challenges; the complexity of
the system and the options for
in?uencing change.
4. Learning and organisational
change takes time and involves
new skills. People need time to
make sense of new ideas and ways
of doing business. Facilitation and
support from senior management
are essential for maintaining
momentum and focus.
5. The drivers of change in the area
of sustainability are diverse. They
include competition and access to
resources, public concern about
environmental and social impacts,
brand credibility, and a desire to
be green and responsible. Some
problems were too dif?cult for the
participants to tackle within the
scope of this program. Managing
logistics in several participants’
supply chains was considered
imperative for reducing transport
costs and increasing effectiveness,
but exploring changes to logistics
requires a longer time frame,
extensive collaboration, and
commitment to share knowledge
among a broad range of
stakeholders.
4
The bene?ts of learning
about sustainability in a
multi-disciplinary group using
a systems approach include:
more holistic, systemic thinking •
about risks and uncertainty
improved capacity to de?ne •
and prioritise sustainable supply
chain problems
increased knowledge of •
corporate and supply
chain operations which
improves decision-making
about sustainability
options and trade-offs
increased capacity for decision •
making about options for
verifying sustainable credentials
of products and services,
reducing waste and improving
energy ef?ciency
more comprehensive strategy •
and policy development for
in?uencing systemic change
towards a corporate culture
that encourages sustainable
management practices.
This report discusses sustainability
in the context of corporate
sustainability and supply chains.
We joined corporations on their
journey towards developing
sustainable products and services,
and explored with them the options
for responding to scarce resources
and evolving climate change
policies. There are currently limited
resources available for corporations
to develop these skills.
RECOMMENDATIONS
To encourage corporations to
become more sustainable, this
report recommends:
support be provided by •
government concerning
appropriate leadership and
management strategies and
policies for complex situations.
This will enable corporations to
respond more systemically, and
therefore more effectively, to
climate change issues.
learning material is developed •
about how to establish
collaborative multi-stakeholder
forums and management
practices to in?uence
sustainability performance
throughout supply chains using
systemic learning processes.
This study provides a systems-based
learning approach for corporations
to address their sustainability
management and research needs
with supply chain partners. The
learnings from the case studies
also provide unique insights
and ideas for other corporations
and government agencies who
are considering how to respond
to emerging climate change
challenges, risks and opportunities.
E X E CUT I V E S UMMAR Y ( CONTI NUED)
5
Corporations have transformed the
world’s resources and shaped the
physical and social world in which we
live (Dunphy et al 2007). Gradually
over the last century, awareness
about the negative impacts of these
activities on the natural environment
and the limits of the world’s
resources has increased. In response,
sustainability strategies have been
developed and incorporated into
many public and private sector
visions, policies and management
practices (Delaney and Woodhead
2007). The drivers of change in the
area of sustainability are diverse.
They include competition and access
to resources, public concern about
environmental and social impacts,
brand credibility, and a desire to be
green and responsible.
While addressing sustainability
issues is often dif?cult, complex, and
beyond daily business practices, the
Garnaut (June 2008) and Stern (2006)
reviews on the economics of climate
change both emphasised the cost
of doing nothing. This report,
Managing Sustainability and Supply
Chains, discusses sustainability
in the context of corporate
sustainability and supply chains. We
joined corporations on their journey
towards developing sustainable
products and services, and we
discuss how these corporations
thought about responding to scarce
resources and evolving climate
change policies.
We discuss sustainability
in the context of corporate
sustainability and supply
chains, with a focus on the
human and organisational
dimensions.
The World Commission on
Environment and Development
(1987) in their report, Our Common
Future, de?nes sustainable
development as development that
meets the needs of the present
without compromising the ability
of future generations to meet their
own needs. While there seems to be
general agreement on sustainability
in its theoretical sense, agreement
on what is supposed to last, who
decides, or how to prioritise and
balance trade-offs, is constantly
negotiated among corporations and
governments (Woodhead et al 2006).
HIGH UNCERTAINTY
AND HIGH RISK ISSUES
Sustainability and supply chain
problems and solutions frequently
fall into the domain of high
uncertainty and high risk issues
where the outcomes from a course
of action cannot be predicted.
These problems are complex and
messy to work with. Complex
because they involve many
stakeholders, issues, locations,
management practices and
technologies. Messy because the
problems are ill structured. That is,
the problem is often complicated
and dif?cult to de?ne because each
individual has a different perception
of the problem and the solution,
based on their own reality and
their position in the supply chain.
Cause and effect relationships are
therefore only apparent with the
bene?t of hindsight.
Messy problems are usually
systemic, so the ?aws and perverse
outcomes of policies and practices
may have been hidden for years,
and as such they require a multi-
disciplinary, multi-layered approach.
For example, a rating system may
incentivise a recycled resource,
whilst failing to account for other
factors such as local availability
and transport impacts. Figure 1
shows a simple model of a supply
chain, with systems interactions,
in?uences and policy tools. Each
corporation has numerous sub-
systems of specialist knowledge and
processes, the sum of which makes
up the supply chain system, which
itself is a part of other systems.
1 . I NT R ODUCT I ON
6
The process of critical
systems thinking requires
that people, when
searching for solutions to
problems, consider the
interactions between the
solution(s) and the external
and internal environment.
The concept, critical systems
thinking, acknowledges the
limitations of traditional scienti?c
inquiry in dealing with the complex
reality of social institutions
interacting with natural phenomena
(Flood and Romm 1996). Traditional
inquiry breaks an issue down into
manageable units. This approach
can yield valuable insights, but
does not lend itself to situations
that are interconnected, complex
and dynamic. It doesn’t reveal the
richness of the social interactions
among numerous events and actors
over time that form the behaviour of
a complex system.
The process of critical systems
thinking requires that people,
when searching for solutions to
problems, consider the interactions
between the solution(s) and a
range of factors in the external
and internal environment. Systemic
thinking is therefore appropriate for
sustainability problems, or messy
problems, such as climate change,
that involve the perspectives of
various actors operating in different
systems at different scales (Röling
2000) (e.g. invoicing is a sub-system
of the product sales system).
1 . I NT R ODUCT I ON
This Link Strategy systems diagram shows a supply
chain (represented by the black line) connecting
suppliers (the small red circles) which are all part
of a larger system (the large red circle). Each
system and sub-system has social, environmental
and economic elements (indicated by the icons).
The red and black arrows show the potential
points in a system where one-way and two-way
interactions occur between different systems.
Each organisation has a range of tools (the
spanners) for managing internal and external issues
(sales, audits, certi?cation, training and so forth).
Figure 1 Supply chain interactions and boundaries
Thinking
systems
7
Every individual and
corporation in the supply
chain differs in the way
they value, perceive and
de?ne social, economic
and environmental issues.
WHAT IS A SUSTAINABLE
SUPPLY CHAIN?
A working de?nition of a sustainable
supply chain (Seuring et al, 2008)
is ‘the management of material
and information ?ows as well as
cooperation among companies
along the supply chain while taking
goals from all three dimensions
of sustainable development, i.e.
economic, environmental and social,
and stakeholder requirements into
account’.
Supply chains are a source of:
opportunity – effective •
logistics and quality control
can improve resource use
ef?ciency and pro?tability
risk – because products •
and services can expose
corporations to sustainability
issues that other corporations
have limited control over
uncertainty – global issues such •
as climate change have multiple
unknown consequences.
The Sustainability in Supply Chains
program addressed some of these
challenges. Participant corporations
thought about ways to include
sustainability parameters into
their operations and supply chain
management. The likely impacts of
change in both the short and longer
term, who would be impacted and
the tangible and intangible bene?ts
were also considered.
Every individual and corporation
in the supply chain differs in the
way they value, perceive and
de?ne social, economic and
environmental issues. Each link
in the supply chain provides
different services and processes
and employs skilled professionals
appropriate to each operation.
Therefore the way these issues are
de?ned and acted upon differs, as
does how risk and mutual bene?t
is perceived by people. Mutual
bene?t was de?ned as more than
?nancial gains or improved quality
control, for it to be considered
sustainable. It became apparent
that change towards sustainable
practices requires establishing
and maintaining collaborative
partnerships. This requires:
de?ning mutual bene?ts •
understanding how con?ict •
and the exercise of power
in?uences capacity and
resistance to change
aligning the short-term (low •
hanging fruit) with a long-term
view (dif?cult, messy problems)
multiple intervention points and •
a range of policies, regulations,
education, incentives, standards,
and research and development.
ABOUT THE
SUSTAINABILITY
IN SUPPLY CHAINS
PROGRAM
This program, Sustainability in
Supply Chains, was funded by the
Australian Government Department
of the Environment Water, Heritage
and the Arts (DEWHA), and
supported by Macquarie University.
The intention was organisational
change towards sustainability
in corporations and their supply
chain operations. Understanding
the factors that in?uence learning
and change in corporate decision-
making towards sustainable
outcomes is important to DEWHA
and a key focus under the Australian
Government’s National Action
Plan for Environmental Education
and Caring for Our Future: The
Australian Government’s Strategy
for the UN Decade of Education for
Sustainable Development, a more
recent document setting out policy
directions and priorities.
The objective was to enhance corporations’ sustainability
thinking, strategies and management of supply chains via
learning-based change and systems thinking.
8
The recommendation to address
sustainability in supply chains
came from corporate participants
in an earlier Industry Sustainability
Project conducted by the Australian
Research Institute in Education for
Sustainability (ARIES). Education for
sustainability and action learning
can provide a basis for adaptive
change management. One of
the principles of education for
sustainability is systemic thinking.
Given the systemic emphasis of
this program, Link Strategy, a
consultancy that specialises in
systemic thinking, was invited to
lead the systemic enquiry.
The objective was to enhance
supply chain corporations’ thinking
and operations for sustainability
via learning-based change.
The research approach was
monitored and its effectiveness
evaluated by the research team
(ARIES and Link Strategy).
The expected outcomes of the
Sustainability in Supply Chains
program were:
Participant corporations •
enhance the sustainability
performance of their supply
chain management by improving
policies, procurement standards
and practices.
Supply chain companies •
introduce or improve
sustainability in their activities,
such as improved product design,
production, packaging, life cycle
management, resource use, waste
management and transport.
Demonstrated progress •
in culture change towards
sustainability in supply chain
corporations e.g. through
increased engagement and
changes in relationships,
practices and ways of
approaching supply chain issues.
Potential created for indirect •
and longer term sustainability
impacts through: the in?uence
of sectoral clusters on extended
supply chain networks, ongoing
learning relationships, or
program results being scaled up
or transferred to other contexts.
Monitoring of program activities, •
evaluation of intermediate
indicators of progress towards
sustainable outcomes, and
assessment of program impacts
and success factors.
Learning resources created that •
document Program/Project
outcomes, such as reports,
case studies, and an overview
of useful tools and models, and
promotion of these ?ndings.
Two sectors, construction
and food, engaged in
supply chain projects.
Participant corporations
and projects
Prominent corporations in the
Australian industry sector were
invited to participate. Participants
needed to demonstrate that
they were receptive to making
sustainability improvements
and could exert a signi?cant
effect through their supply chain
position, in?uence and reach. Each
participant corporation was asked to
nominate sustainability changes to
speci?c aspects of their supply chain
system (e.g. product line, resource
use, transport, waste management,
site locations, a particular
production focus or a subset of their
procurement relationships) and
involve approximately 3–5 of their
supply chain member corporations.
Two sectors, food and construction,
participated in the program. People
in the foundation corporations had
titles that were environmental or
sustainability managers. After initial
consultation with the ARIES research
team, they facilitated introductions
and meetings with key people in
their corporation and with potential
9
partner corporations in their supply
chain. The research team also
broadened the scope of participant
corporations once the project issues
began to emerge.
Kellogg, Bakers Delight and Investa
engaged in initial meetings and
explored options for projects.
Foundation corporations that
established ongoing projects were
Goodman Fielder (food sector),
Stockland, Bovis Lend Lease and
Landcom (construction sector).
The project teams engaged in
envisioning and critical systems
thinking to explore the range of
conditions and plausible outcomes
within their corporations, and in
their supply chains.
The focus of the construction
project was sustainable concrete
in the built environment. Beyond
the immediate issues, logistics,
waste, emissions trading, embodied
energy, energy ef?ciency and
resource considerations, there was
broader debate. What impacts do
concrete production, infrastructure
and buildings have on human health
and community wellbeing, what
are the cities of the future going to
look like and what infrastructure will
society require? In a similar vein the
food sector project incorporated
big picture issues into their analysis
of alternative fuels. For example,
were bio-fuels an acceptable source
of fuel for a food manufacturer
considering food security and
competition for commodities;
the drought and their role as a
responsible corporate citizen?
These projects led to the
exploration of a variety of supply
chain collaborations. DEWHA
contributed expertise, particularly
on greenhouse gas impacts, to
both project teams. ORIX became a
key partner with Goodman Fielder,
and ORIX in turn invited several
alternative vehicle manufacturing
corporations. The construction
companies agreed to work
together because the complexity
of the concrete supply chain
necessitates a collaborative effort.
Representation was invited from
concrete and cement suppliers,
the ?nancial and governance
sector, associations and the energy
sector. Participant organisations
included Boral, Hanson, Cemex,
Independent Cement, Cement
Australia, Macquarie Generation,
Delta Electricity, AMP, Green
Building Council, Concrete Institute
of Australia, Concrete Cement and
Aggregates Australia, HBM Group,
DEWHA, NSW Department of
Environment and Climate Change,
and Sydney City Council.
Research team
ARIES established the program
and provided research direction,
program coordination, and
monitoring and evaluation.
The approach drew upon an
action research methodology
and principles of education
for sustainability, particularly
envisioning an alternative future,
collaboration, critical re?ection and
systemic thinking.
CSR Sydney was involved in the
program start-up, with establishing
program objectives, identifying
sectors of interest, recruiting
foundation participants, facilitating
initial scoping and envisioning
sessions, and establishing project
objectives and supply chain
considerations.
Link Strategy Pty Ltd facilitated
program implementation and
led the principal Critical Systems
Analysis (CSA). This included
facilitating and guiding the
methodological approach to
systemic enquiry, semi-structured
interviews, focus groups, ongoing
communication with participants
and supply chain partners and
reporting.
10
Expert knowledge
As a catalyst in the Participants’
change process, occasional
project input or participation
was also sought from external
change agents. These agents were
subject matter experts, industry
or government representatives,
or experienced sustainability
practitioners.
In addition to the primary data
gathered during project activities
with participants, the report
draws on a range of scienti?c
literature, discussion papers and
the popular media to provide
insights into the range of
perspectives on these issues.
About this document –
contents and how to read it
The uncertainty of evolving
climate change policies, along
with the emergent status of
corporate sustainability thinking
provided the program team with
challenging dilemmas about how
to best in?uence and embed
sustainability thinking within the
participants’ corporations and in
their supply chains. The report is
structured to enable the reader
to build an understanding of the
complexity and scope of the issues
within the Sustainability in Supply
Chain program and attempts
to identify where and how the
research team most in?uenced
the participants’ systems.
In this report we outline the
sustainability in supply chains
program. The report has four major
sections which cover: (1) current
thinking and literature on supply
chains and sustainability, learning
and knowledge management; (2)
the systems thinking approach; (3)
the case studies; and ?nally (4)
our re?ections on the process
and the outcomes.
11
Increasing uncertainty in the global
environment is changing the very
nature of risk, so that management
now needs to consider a far wider
range of issues to operate in
tomorrow’s markets. The decision
process, organisational culture,
and the social and organisational
dimensions of change are all
important considerations in this
transition process. These are brie?y
discussed along with the ARIES
learning model.
When considering the present and
the future, a historical perspective
is important to identify longer term
in?uences and emerging patterns.
For example, prior to the agricultural
and industrial revolutions, most
energy for production came
from the sun, wind, water mills or
biomass fuels. One hundred and
?fty years of industrialisation has
seen the development of systems
and products that rely on non-
renewable energy resources (Clift
2006). Widespread assumptions that
suf?cient resources exist to supply
continuous economic growth and
that markets give adequate signals
for innovation to overcome any
resource shortages are now being
seriously tested, most notably water,
oil and greenhouse gas emissions.
Leading corporations are now
exploring how to in?uence and
change this cumulative legacy of
business practices, assumptions and
professional disciplines. They have
re-examined their corporate policies
and are working on strategies
for simultaneously achieving
revenue growth, operational
ef?ciency and sustainability.
This report explores issues of
developing an organisation’s
capacity to respond effectively by
adapting to emerging issues. This
means extending traditional growth
and operational foci to include
the social, environmental and
governance dimensions in decision
making and strategic thinking at
all levels of the corporate system.
We contest that there are many
intangible, long-term bene?ts to
organisations and supply chain
partners from becoming more
sustainable, and that there is a
need for greater awareness of these
bene?ts. According to UNESCO
(2005), ‘the larger corporations,
especially manufacturers, are
reaping huge ?nancial bene?ts from
training measures introduced to
address energy, water and waste
management issues. Addressing
other environmental, social and
human resources issues are proving
to be rewarding.’
Whilst advocating a three-
pillars de?nition of sustainability
(environmental, social and
economic), our process focuses
on the human and organisational
dimension. Understanding the social
and governance systems is a vehicle
for in?uencing business strategy and
2 . CUR R E NT T HI NK I NG AND L I T E R AT UR E
This chapter establishes
the context and need
for the Sustainability in
Supply Chains program.
It introduces sustainability
and supply chain
concepts, messy problems
and a learning-based
systemic approach.
There are long-term bene?ts of incorporating sustainability
thinking into business strategy, policy and management practices.
12
operational procedures (Dunphy et
al 2007). In this chapter we introduce
concepts relevant to exploring
sustainability in supply chains and
systemic learning for enabling
organisational change, collaboration
and learning with reference to the
construction and food projects
undertaken as part of this program.
A complex system is a
system composed of
many parts that interact
in non-linear manner.
SUSTAINABILITY IS A
DYNAMIC CONCEPT
Governments and corporations
are continually exposed to
new technologies, regulations,
market threats and opportunities,
management practices and
natural phenomena. Sustainability
strategies and policies are
attempting to recognise,
understand and in?uence the links
among environmental, social and
governance factors and ?nancial
performance. The dimensions of
sustainability, as pointed out by
Parker (2005), exceed the traditional
legal boundary of a corporation,
requiring consideration of external
factors, such as input and output
dependencies in the supply
chain, community and labour
relationships, ethics and people’s
values. Corporate sustainability is
therefore constantly evolving at the
con?uence of science and society.
CEOs, managers and employees
who are involved in sustainability
policy now have to deal with – and
manage – uncertainty, complexity,
indeterminacy, surprise, ambiguity
and ignorance. The word complex
literally means ‘composed of
interlaced parts’. A system is
de?ned as ‘a set of interacting or
interdependent entities, real or
abstract, forming an integrated
whole’. A complex system is a
network of systems (such as a supply
chain), with each system functioning
more or less independently, yet
interdependently. A complex social
system is a networked system of
actors, that is, people who are
capable of autonomous choice.
A key challenge for managers is how
to examine the range of plausible
future pathways of combined social,
environmental and business systems
under these conditions. Further
compounding this complexity is the
high degree of variability between
individual levels of knowledge about
sustainability. In the participant
projects, establishing mutual
understanding and compatible
visions of the future emerged as a
key determinant of the success of
the supply chain collaboration.
Discussions about the why of
sustainability and how it relates to
speci?c situations therefore provide
the basis for establishing common
knowledge and developing a shared
vision of supply chain management.
Some issues that can be expected
to challenge and shape thinking
about sustainability in supply chains
(Delaney and Woodhead 2007) are:
ethics, societal values and •
intellectual property con?icts
around future research –
nanotechnology, genetically
modi?ed organisms (GMO),
bio-technology and
nuclear science
complexity, resilience theory and •
systems thinking for developing
understanding about climatic
change and other ‘massive’
issues such as global poverty,
multinational corporations
and energy
emissions trading schemes •
and new valuations of
ecological and societal
services to establish incentives
and market mechanisms
resource scarcity, drought and •
environmental impacts, e.g.
the Murray Darling Basin
emerging economies, wealth •
creation and distribution in
these economies, such as
China and India.
13
ABOUT SUPPLY
CHAIN MANAGEMENT
Supply chains are purposeful
networks of operations that enable
the production and movement
of goods from raw commodity to
?nished goods, but their effective
operation is underpinned by human
relationships. At each stage in the
network of operations, people make
choices about which packaging,
equipment, waste disposal, energy
source, and so forth, provide the
best outcome. For example, a bottle
of orange juice can be a blend of
oranges from up to seven global
origins, to ensure a consistent
?avour for the consumer. An OECD
report (2002, p 2), de?ned a supply
chain as a ‘network of facilities
and distribution channels that
encompasses the procurement
of materials, production and
assembly, and delivery of product
or service to the customer’. Supply
chain management is the process
of planning, implementing and
controlling the operations of
the supply chain. This includes
the movement and storage of
raw materials, operations, and
all activities that are required to
process goods from origin to
consumption. The value chain refers
to the value adding activities that
an organisation provides to support
the ef?cient operation of the supply
chain and deliver maximum value for
the customer. These activities can
include infrastructure management,
human resources, research and
development, sales and marketing.
Distribution of
economic bene?ts
Identifying the distribution of
economic bene?ts (who gains,
and by how much) and where in the
supply chain most value is added
(as perceived by the customer or
by society) can provide insights
into the challenges of in?uencing
the system. Clift (2006) discusses
how identifying economic traits in
a supply chain shows a
“highly skewed distribution,
with primary resource industries
apparently responsible for major
environmental impacts but
achieving limited added economic
value and with the later stages of
the supply chain, including retailing,
characterised by high added value
with much less environmental
impact; in other words, global trade
can act to export unsustainability
from the consuming country to
countries whose economies are
dominated by primary industries.”
Control over supply chain
management has moved
downstream (towards the retail
end). Historically supply chains were
manufacturer-dominated. However,
for example in the food sector, what
emerged in the 1980s was a highly
competitive retailer section, where
‘the retailer is king’ (AEGIS 2001).
Broadly speaking, food retailers
have three drivers for managing
their supply chains:
the desire to cut costs •
concern about regulation, •
that is, increasing compliance
to reduce risk
productivity ef?ciency. •
There naturally evolved a strong
emphasis on technology to help
manage transport logistics and
trace products through supply
chains. To date, these models
have improved ef?ciency by
removing redundant costs
from production systems.
Future supply chains
and collaboration
New factors in?uencing supply
chain thinking (Capgemini 2008)
are the increasing ?ow of goods,
new technology, resource scarcity,
emissions trading, and changing
patterns of consumer purchasing.
The literature on supply chain
management has primarily focused
on optimising the value chain.
There is limited writing on the
inherent social complexity of
collaboration among corporations
in supply chains, although it is
frequently noted as a key enabler
of operational effectiveness.
14
The Capgemini report, Future
Supply Chain 2016, sees the future
supply chain as a collaborative
model where information sharing,
collaborative warehousing and
collaborative logistics de?ne industry
or geographical sectors. However,
developing effective collaboration
and networks of knowledge-sharing
among diverse and frequently
competitive private and public
agencies is a messy problem.
Construction supply chains, for
example, involve hundreds of
different companies supplying
materials, components and a wide
range of construction services
(Dainty et al, 2001). Within a single
construction corporation, the
structure of the supply chain and
the position of the developer in the
supply chain can differ markedly
between corporate divisions and
even between different projects.
Fundamental structural issues have
constrained collaboration within
the sector, according to Briscoe and
Dainty (2005), who make these points:
Limited integration across •
different tiers compared to
other industrial supply chains,
which are more ef?cient
and closely integrated.
Relationships characterised •
by adversarial practices and
disjointed supply relationships.
‘Commonly, construction
clients appear to distrust
their main contractors, who
in turn maintain an arms
length relationship with their
subcontractors and suppliers.’
Construction projects have •
de?ned time frames with
teams existing for the life
of the project. ‘Projects are
treated as a series of sequential
and predominantly separate
operations where the individual
players have very little stake in
the long-term success of the
resulting building or structure
and no commitment to it.’
Vested interest and lack of desire •
to build trust among supply
chain partners have thwarted
attempts to extend partnering
and collaborative working.
‘Reliance on a fragmented and •
largely subcontracted workforce
has increased the complexity
of this supply network and
delimited opportunities for
process integration.’
Bene?ts of a collaborative supply
chain approach are often cited
as reduced costs and improved
quality control. Other less
quantitative bene?ts are innovation,
transparency, knowledge generation,
information ?ow and increased
capacity to manage emerging risks
rapidly and holistically (Gattorna
2007, Woodhead et al 2006). A recent
Global Reporting Initiative study
(Small, Smart and Sustainable, 2008)
focused on de?ning the added
value of sustainability reporting in
supply chains. Their initial results
indicate that a supply chain focus in
a sustainability report, while initially
challenging and complex, enhanced
the reputation, competitive
advantage and improved internal
processes and leadership on
sustainability issues.
Thorpe et al (2003) argue that long-
term strategic partnerships are the
key to providing better outcomes,
but believe the temporary nature of
one-off projects is a major challenge.
In these circumstances, the ?ow
of information, management of
relationships in all supply chain
sectors to build a level of trust, and
strategic management are critical
for providing a level of continuity
and a prerequisite for performance
improvement (Graham and Hardaker
1998, cited in Thorpe).
Gattorna (2007, p 233) addresses
collaboration with a ‘dynamic
alignment’ framework that aligns the
culture and leadership styles with
the dominant buying behaviour of
each buyer market segment. The
objective of Gattorna’s dynamic
alignment model is to build
15
knowledge and coordination to
give a supply chain a competitive
advantage over competing supply
chains. This refocuses the source
of competitive strategy, beyond
a single corporation or top-down
management of a supply chain.
Vachon and Klassen (2008) found
that environmental management
in supply chains had not been
strategically linked to organisational
performance. Woodhead et al (2006)
noted the failure of corporations
to move from a competitive to a
collaborative model was inhibiting
the effective management of
sustainability imperatives.
These authors found that value
in collaboration comes from
inter-organisational learning that
can develop new skills, improve
operations, services and products
and increase transparency and
veri?cation of sustainable products
and services. Competition within a
supply chain can inhibit sustainable
practices and business pro?tability.
Improving trust and transparency
Improving supply chain collaboration
is deeply connected with the push
to improve transparency. The
Global Reporting Initiative (GRI)
sustainability reporting program is a
key driver, as is consumer backlash
against greenwash and demands for
veri?cation of the sustainability of
products. Sustainability standards
and procurement policies for
product and service provision are
rapidly developing in most industry
sectors, for example, the Green
Building Council’s rating system for
Green Buildings, Carbon labelling,
Fair Trade, FSC, Better Sugar
Initiative and so forth.
Value in collaboration comes
from inter-organisational
learning that can develop
new skills, improve
operations, services and
products and increase
transparency and veri?cation
of sustainable products
and services.
Procurement policies are most
appropriate for tangible ‘?nished’
product categories that have routine
supply and manufacturing processes.
This allows repeat volume buyers to
specify in contracts what they wish
to purchase based on sustainability
criteria. Examples include packaged
coffee and tea, paper products, and
building items such as bath tubs
and taps. Effective management
and certi?cation of procurement
policies for sustainability criteria
require a commitment to monitoring
and veri?cation of supplier
systems. However, assuming that a
procurement policy will negate all
sustainability risks or suit all types
of products is naïve, and fails to
acknowledge the complexity of
some products.
Products that have less consistency
or that are customised for each
job, e.g. concrete, require a more
holistic approach to sustainability.
These more complicated products
have multiple inputs, design and
operational considerations that
can vary at several points along
the supply chain. For example,
‘sustainable concrete’ involves a
complex set of operational decisions
and input variables that includes
logistics, raw materials, durability,
longevity and energy ef?ciency of
the building or infrastructure. This is
discussed further in the Sustainable
Concrete case study.
Fundamental to developing
sustainability standards and policies
are collaborative relationships
with suppliers that involve more
parties and considerations than the
traditional market-based, buyer-to-
seller relationship. Unfortunately,
as Burch and Lawrence (2004)
noted, most of the participants in
a supply chain want it both ways:
they want to exercise market and
supply chain power to extract
value from upstream suppliers,
but deny their own downstream
buyers from exercising the same
market and supply chain power
to extract value for themselves.
Assuming control of purchasing using procurement policies
can be a recipe for failure in a complex situation that requires
a holistic and comprehensive approach.
16
Hence the importance of
understanding where in the supply
chain rent is being extracted;
building knowledge about the
broader, long-term bene?ts
of collaborative efforts; and
de?ning what mutual bene?ts
can be established that achieve
sustainable outcomes.
ORGANISATIONAL
CHANGE IN COMPLEX
SOCIAL SYSTEMS
Organisations are complex social
systems with numerous sub-systems.
Supply chains are even more
complex; they represent interactions
within and between corporations and
multiple social sub-systems. Figure
2 shows an abstract representation
of system interactions, where
each oval represents a different
system (such as an individual, a
business unit, a corporation, an
association, or an industry). There
are practical limits to anyone’s ability
to perceive multiple dimensions
of systems. The ‘rule of thumb’ is
that three levels of interactions
(i.e. your own system, plus one
system up and one level down) can
be considered at any one time.
Frequently, communication between
sub-systems within corporations
is weak. People in each sub-
system tend to have considerable
knowledge about their own activities
and vertical lines of control, but
horizontal interactions are limited.
This is because current systems
don’t require interactions; for
example, the marketing manager
has not traditionally worked with the
environmental manager. Horizontal
interactions are increasing by
necessity. Using the same example,
in the mid sections of the supply
chain, purchasing and marketing
people are ?nding that they need
information from sustainability
managers (pers.com, NSW
Department of Environment and
Climate Change) in order to respond
to procurement and contract
requirements from downstream in
the supply chain. While some of this
information can be derived from
current certi?cation and assurances
processes, there is also a need for
holistic thinking across all divisions of
the corporation.
The decision process under
uncertain conditions
Decisions made in isolation
of systemic in?uences in the
operational environment can
undermine the sustainability and
credibility of initiatives. For example,
if a corporation is progressing a
sustainability policy to develop a
six-star green building while ignoring
its purchasing of supplies that may
have had child labour input, the
greening of the corporate brand
will have limited credibility and it
may be vulnerable to media reports
of ‘green washing’. A strategically
aligned whole-of-system approach
is therefore crucial for the long-term
credibility of the corporate brand.
Figure 2 Systems and sub-systems
Thinking
systems
17
Just providing decision makers with
more information about sustainability
issues is not enough. Firstly, there
is not a simple, causal relationship
between “more information” and
“better decisions”, nor between
purchasing intent and purchasing
behaviour. Secondly, decisions in
situations of low uncertainty and
low risk are the conventional basis
for reductionist sciences such as
engineering and “Management
By Analysis” (Mintzberg, 2004);
but, when decisions have high
uncertainty and risk, post normal
science thinking is pertinent (see
Figure 3). This is because these
types of decisions stem from messy,
ill-structured problems, where the
full range of cause and effects is
dif?cult to de?ne. A more holistic,
systemic approach provides a better
understanding of the complexity
of the problem, the scope of
information available, and the range
of risk, opportunities and solutions.
Risk (Knight (1964 cited in Mayumi
and Giampietro 2006) “represents
a situation in which the distribution
of the outcome in a group of
instances is known either a priori or
from statistics. While uncertainty
represents a situation in which it is
impossible to form a reliable group
of instances because the situation
is to a high degree unique.” In
other words, the outcomes can’t be
predicted, they emerge after the
event. Sustainability issues frequently
fall into the domain of high
uncertainty and high risk problems.
There tends to be a lack of clear
criteria to guide decisions about
sustainability because when different
systems interact, the response of a
system to a changed policy can be
unpredictable. Knight (1964 cited
in Mayumi and Giampietro 2006)
discusses four sources of uncertainty
that are inherent in complex issues:
“perception uncertainty due to •
two main problems: we cannot
perceive the present as it is; and
we cannot perceive and represent
the present in its totality
anticipation uncertainty due to •
the fact that we have to infer the
future from the present without
being able to obtain a high
degree of dependability from
our models
effect uncertainty due to the •
fact that we cannot know all
the consequences of our own
actions in the future
implementation uncertainty •
due to the fact that any
policy formulation cannot
be implemented in the
precise form in which it was
imagined and chosen”.
Figure 3 Post normal science (Clift 2005)
Low
Applied
science
Professional
consultancy
Post-normal
science
System uncertainty High
High
D
e
c
i
s
i
o
n
s
t
a
k
e
s
Sustainability issues frequently fall into the domain of high uncertainty and high
risk problems. Sustainability decisions tend to lack clear criteria because behaviour
is not usually predictable when different systems interact.
When decisions have high uncertainty
and risk post normal thinking is
relevant. Post normal thinking is
about the science of how to work with
imperfections, and is most relevant
where the problem is complex and
uncertain and therefore requires
multiple perspectives and multiple
interventions of the system.
18
Even if change has become the
norm, as Brunnhubera et al (2004)
note, many decision makers still
dismiss uncertainties and plan as
if there is only one possible future.
Brunnhubera et al concluded that
decision makers who were able to
work proactively with uncertainties
would be the successful ones.
However, we are not good at
reasoning with uncertainty.
These realisations have led some
companies to look more closely
at systems thinking and scenarios
that include more than one future
and focus on experiential learning.
Senge et al (2008) stated that the
corporation that can capture these
sustainability principles will ‘shape
the future of their industry’.
Cultural in?uence on change
A key attribute of successful
collaborative relationships is the
culture of the organisation and
industry. Culture refers to shared
assumptions, beliefs, values, norms
and actions as well as artifacts
and language patterns. Every
corporation has its own unique
culture even though it may not have
consciously tried to create it. Rather
it will have developed unconsciously,
based on the values of the founders
or core people who build and/or
direct that corporation. Values and
leadership are core tenets of culture.
While an observer may perceive
some cultural characteristics to be
in?exible, culture is not static and a
range of drivers can in?uence the
development of culture in people,
organisations and even countries.
In the context of a particular
industry sector, organisational
culture stems from experiences
and assumptions about the basis
of power and in?uence, what
motivates people, how people
think and learn, and how change
occurs. Industries are a collection
of corporations with common
interests that are usually members
of professional and product-based
associations. The organisational
culture of an industry association
can have a considerable in?uence
on the members, and vice versa.
Organisations are complex
social systems with
numerous sub-systems.
Achieving organisational
change takes time because
people are often not aware
of the need for a strategic
shift in thinking.
Cultural assumptions enable
and constrain corporations
Although most corporations realise
that they have a culture, few have
a comprehensive understanding
about the implications of their
culture on the ability of their sector
to become more sustainable.
Cultural assumptions both enable
and constrain what corporations
are able to do. Understanding the
different cultural values by assessing
the organisations’ culture (e.g. a
power culture involves a powerful
central character or group who
controls all actions) can enable
a corporation to move forward
beyond entrenched positions and
reconcile divergent perspectives.
Schein (1999) discusses the
importance of culture stating that:
decisions made without •
awareness of the operative
cultural forces may have
unanticipated or undesirable
consequences
the extent to which culture •
contributes to an corporation
as either an asset or a liability
is underestimated
culture is an explanatory •
construct underlying numerous
organisation phenomena.
19
Differences of opinion within an
industry sector can lead to con?ict
within and between associations,
which in turn may have a negative
impact on the capacity of the
corporations to change practices
by creating hurdles in any of the
four areas identi?ed by Kim and
Mauborgne (2005) (see Figure 4).
These organisational hurdles need
to be understood to effectively
incite change by both CEO and staff.
However, the Kim and Mauborgne
review of corporate transformations
found that the hardest battle was
making people aware of the need
for a strategic shift.
We have now established some
background to working with messy
problems, the complexity of supply
chains and sustainability. Climate
change and other sustainability
issues represent signi?cant cultural
and management challenges and
responding to them requires new
thinking and ?exible decision
making processes. The next section
introduces the principles behind
the learning methods used in this
program.
LEARNING FOR
SUSTAINABILITY
This section describes the
learning concept that informed
the Sustainability in Supply Chains
program and participants’ projects.
Learning for change
As a conceptual framework for
working with corporations on
developing thinking and learning
about sustainability, experiential
learning and critical thinking
formed the theoretical basis of
this program. The research team
worked with groups on change
projects that tackled current
sustainability problems.
Figure 4 Adaptation of the Four Organisational Hurdles to strategy execution
Cognitive Hurdle
An organisation wedded
to the status quo
Motivated Hurdle
Unmotivated staff
Resource Hurdle
Limited resource
Source: Blue Ocean Strategy.
Kim & Mauborgne 2005 p151.
Political Hurdle
Opposition from powerful
vested interests
Transformational projects must establish an environment where learning can occur
in a comfortable, creative atmosphere. This enables ideas for solutions to emerge.
20
The learning-based change
process included facilitated forums
and occasional communication
(see project case studies for
more detail). Through these
projects the participants
reviewed broader corporate
issues and instigated change.
The basic premise of facilitation
theory is that learning will occur
by establishing an atmosphere in
which learners feel comfortable
to consider new ideas and are not
threatened by external factors (Laird
1985). Whilst its importance is clear,
this theory can be challenging to
apply when attempting to bring
about systemic change in a complex
environment where vested interests
and power inequalities exist. The
action learning approach required
the research team to be co-learners
in an emergent (unpredictable)
process. Simultaneously, they were
responsible for leading the program
towards its expected outcomes.
The importance of education and
learning for achieving change
towards sustainable practices has
been frequently noted. For example:
‘Professional skills and knowledge
of sustainable development should
be improved continuously and,
consequently, be part of the lifelong
learning of individuals including
those in sectors such as public
administration, the private sector,
industry, transport and agriculture.
The development of new knowledge
and the need to introduce new
skills in order to give more speci?c
substance to the concept of
sustainable development will remain
a constant need, as many areas of
expertise are constantly developing.’
(UNECE 2005a, p 10)
Turning information into action
requires a person to develop
their capacity for independent
thinking and decision making.
However, while gaining knowledge
is a precursor to action, it
does not guarantee change.
Knowledge is not acquired
from one source. Lundvall and
Johnson (1994) discuss knowledge
in a multi-faceted context:
Know what: refers to knowledge •
about facts (i.e. ability to assess
alternative fuel options for
commercial vehicles).
Know why: refers to knowledge •
about principles and laws in
nature, human kind and society
(i.e. the source of ground water
and its source of recharge).
Know how: refers to skills (i.e. •
ability to operate a computer).
Know who: involves the social •
ability to cooperate and
communicate (i.e. working
in groups and collaborating
towards agreed outcomes).
Clearly, achieving social change is a
complex process and it takes time.
Studies related to the motivational
elements of behaviour have stressed
that ‘the decision to act in a certain
way is affected by a “balancing”
or weighing of a number of
in?uences’ (Beedell and Rehan
1999). These include environmental,
physical and commercial factors,
policy environment, support
structures and education in
addition to the personality and
motivation of the individual.
21
The ARIES learning model
There is international consensus
that sustainability requires an
ongoing process of learning
(UNECE 2005b), which supports
adaptive governance and
leadership for sustainability
thinking in corporations. Core
to ARIES’ model for learning-
based change are envisioning
alternative futures, participation
and partnership, critically re?ective
thinking, systemic practice and
iterative learning through social
interactions. Critical thinking and
systemic practice helps a group of
people to better understand and
make sense of a complex issue
and the world around it so that
they can act more effectively.
Fundamental to the ARIES approach
is embedding learning-based
change within organisations to
work towards a shared vision of
the future. An action learning
methodology provides a basis for
continual learning and adaptive
management to respond more
effectively to emerging issues of
sustainability. Learning processes
in an inter-organisational
setting enable ‘“collaborative”
continuous improvement’ in
the supply networks of the
Extended Manufacturing
Enterprise (Middel et al 2005).
The process:
PROBLEM: Start with re?ection
on the current situation, and
jointly diagnose the issue that the
participants have in common.
PLAN: Envision an alternative
future. With that shared vision in
mind, participants develop a plan
of critically informed action to
innovate in the area of concern.
Figure 5 represents the
action research phases
(plan, act, observe,
re?ect, then learn and
communicate) and
iterative cycles in this
ARIES program. The
diagram also includes
the phases of monitoring
and evaluation (plan,
collect data, monitor
outcomes, evaluate
and communicate).
Cycle 1 Cycle 2
Project management
Cycle 3
LEARN &
communicate
ACT
& collect
data
OBSERVE
& monitor
outcomes
PLAN
LEARN
ACT
REVISE
PLAN
REFLECT
OBSERVE
ACT
REVISE
PLAN
REFLECT
OBSERVE
ACTION
REFLECT
& evaluate
LEARN
ARIES action research cycles
PROBLEM
22
ACT: Implement the plans. Engage
stakeholders in envisioning an
outcome that differs from business
as usual, in developing collaborative
partnerships, and in critically
re?ective, systemic practice.
Collect information (baseline •
data, information from activities
undertaken, and responses and
indicators of change).
OBSERVE: actions and associated
responses, products and outcomes.
Monitor the results and •
continue to collect information
on processes, experiences
and outcomes (including both
successes and failures).
REFLECT: on these observations.
Evaluate the actions undertaken
and the responses of the system
(are there indications that the
activities are improving the situation
of concern, in line with the vision?).
Critically examine your assumptions
and expectations.
Evaluate the evidence. Does •
it support your conclusions?
Compare different sources
of data. Are they consistent?
This may involve a search for
additional information, diverse
perspectives or relevant sources
of expertise.
LEARN: from experience, and
through sharing insights in meetings
and discussing assumptions (e.g.
about power or control, or about
expected results from a particular
course of action).
REVISE: plans and practices based
on observed responses, insights and
shared learnings. The adjusted plans
are implemented and the cycle of
learning in action is repeated.
In practice the phases are not neatly
sequential or as clearly de?ned as
the cycles above portray, but this
model provides a useful structure
for the process of learning tied with
more effective action. An action
learning approach to systemic
practice on complex sustainability
issues can provide a basis for
informed, ?exible adaptive thinking
for managing messy problems.
By holding a vision of a more
sustainable outcome and applying
critical systemic thinking to the
situation, the ARIES approach
sought to identify the barriers
and levers to change, within and
between organisations.
CHAPTER SUMMARY
This chapter established the
context and background to
the Sustainability in Supply
Chains program. In the next
chapter we introduce critical
systems analysis as a method
that provides the analytical
construction for understanding
the complexity of supply chains
using transitional projects.
23
Thinking systemically provides
people with the understanding
to respond more effectively to
uncertainty and risk because they
are more aware of the local and
global environments that they
operate within (Bawden 2007).
It encourages individuals to think
about an issue, holistically, while
also ?nding solutions for speci?c
problems. The project therefore
becomes a transformational
process whereby stakeholders
experience, think, act and plan
together in an ongoing cycle
of learning and re?ection.
This chapter discusses the critical
systems approach used to work
with the participant corporations.
It describes how to create conditions
for (micro/macro) change by
establishing mutual understanding
and de?ning shared bene?ts to
support ongoing collaboration and
transformation in supply chains.
WHAT IS CRITICAL
SYSTEMS THINKING?
Critical systems thinking has three
commitments (Schecter 1991 and
Flood and Jackson 1991a cited in
Midgley 2000, p10). They are:
‘Critical awareness – examining •
and re-examining taken-for-
granted assumptions, along
with the conditions that give
rise to them.
Emancipation – ensuring •
that research is focused on
“improvement”, de?ned
temporarily and locally, taking
issues of power (which may affect
the de?nition) into account.
Methodological pluralism – •
using a variety of research
methods in a theoretically
coherent manner, becoming
aware of their strengths and
weaknesses, to address a
corresponding variety of issues.’
Critical systems thinking
requires people to think
critically about their
assumptions and interests.
It asks individuals to
consider the impacts of the
solution(s) on the external
and internal environment,
and vice versa.
The process of critical systems
analysis requires that people,
when searching for solutions to
problems, consider the impacts of
the solution on the external and
internal environment, and vice versa.
Individuals think critically about
their own assumptions and interests,
and when they re?ect on this as a
team, they look beyond ‘business
as usual’. This is because the range
of potential impacts cannot be
understood without an appreciation
of the individual as part of a system.
This involves developing self-
awareness and an understanding
of the role of the actors; including
facilitators, the participants and
other stakeholders. By building
an understanding of these
relationships and dimensions of
power, along with the organisational
culture, environment and external
in?uences, the project team can
then optimise the positive impacts
and reduce the negative impacts of
any intervention.
Solutions emerge
spontaneously under
the right conditions
Fundamental to critical systems
thinking is the concept of
emergence. It is a key attribute
of complex systems. Mihata
cited in Seel (2000) described
emergence as ‘the process by
which patterns or global-level
structures arise from interactive
local-level processes’. This evolving
structure of patterns, according
to Seel, is unpredictable because
it comes as a result of interactions
between agents in the system.
3 . L E AR NI NG T O T HI NK S Y S T E MI CAL LY
24
When enough connectivity happens
between systems (if, for example,
dialogue occurs between two
companies in a supply chain, or two
sections in a company interact on
a project), emergence can occur
spontaneously. Seel’s conclusion
was that we ‘should move away
from trying to change corporations
and instead to look at how we
might help them become ready
for change – to move to a state of
self-organised criticality’. Viewed
from an individual perspective
and explored as a group, this
means achieving a level of self-
awareness and trust so that people
can con?dently collaborate, and
think holistically and systemically
when solving messy problems
and attempting to transform the
corporation and the supply chains.
About messy problems
Messy problems are hard-to-de?ne
problems that have many systemic
causes and effects. No one
individual holds the solution, and
quick ?xes can produce unintended
results. Past successes aren’t a
reliable guide because the ‘solution’
to a messy problem is only obvious
with the bene?t of hindsight.
Therefore processes to engage
multiple actors in jointly diagnosing
problems and exploring responses
are essential because:
each individual will have a •
different perspective on the
problem de?nition and solutions
the problem de?nition and •
solutions constantly evolve and
take new forms throughout
the project time frame and
afterwards.
Key challenges when working with
messy problems are:
differing stakeholder and •
societal expectations, and
unquestioned assumptions
misaligned policies and •
incentives can lead to
unexpected outcomes
political in?uence, vested •
interest and lobby groups.
Using transformational projects
and learning materials to
stimulate thinking
Learning materials such as supply
chain diagrams, systems models and
issues matrices can guide people
through the process and stimulate
discussion. Learning materials need
continual re?nement based on
participant input and feedback.
These learning tools are key to
framing conversations and building
shared understanding among the
participants, and will act as useful
tools for the participants to employ
in other areas of their corporations
beyond the project’s completion.
HOW TO THINK
SYSTEMICALLY
AND CRITICALLY
The following provides an outline
of the critical analysis process
as adapted for the supply chain
program. Each sector participated
in a transformational project that
was de?ned in the ?rst stage of the
analysis. Transformational projects
focus on changing a current state to
a desired future state. Each sector
engaged their supply chain partners
in discussion about the projects.
The three main phases are:
Create conditions •
for collaboration and
systemic thinking.
Critically analyse supply chain •
and transformational projects.
Capture emergent strategies •
and policies.
Messy problems are hard to de?ne problems
that have many systemic causes and effects.
25
The ?rst step in a critical systems
analysis (CSA) is to build shared
knowledge about the organisation as
a system and the organisation as part
of a larger system. The next step is
to gain an understanding of the key
people’s knowledge and perspectives
and to de?ne the key stakeholders.
Once this process has commenced
(it is ongoing), a shared vision of an
alternate future can be developed or
re?ned. The vision also needs to include
speci?c goals and strategies, such as,
to reduce greenhouse gas emissions
by incorporating alternate fuels into
the delivery systems and increasing
awareness of energy ef?ciency initiatives.
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Discuss your organisation’s operations and identify the full range of sustainability issues
that are or could have an impact:
1. Share information on the environment in which your system is operating:
e.g. local, regional and global pressures from the natural environment; the economy, ?nance, •
regulations and markets; technology and media; society, politics and culture.
2. De?ne core stakeholders in your corporation who in?uence or are affected by the issue, and identify
key actors to be involved in the project. A diversity of professional perspectives is needed.
3. Identify the culture, including sources of power and the in?uence of key stakeholders.
4. Identify relevant information resources (e.g. internal sustainability and procurement reports
and policies).
5. Discuss with the group:
perceptions about and knowledge of sustainability •
people’s in?uence and levels of support •
perceptions of risk, sensitivities and politics. •
6. Develop a shared vision for an alternative future, at a given future point in time.
7. Imagine placing yourself in the future vision, look backwards and identify the actions that improved
the issue.
8. Discuss these potential actions, get commitment and develop objectives and expected outcomes.
Sustainability issues frequently fall into the domain of high uncertainty and
high risk problems. Sustainability decisions tend to lack clear criteria because
behaviour is not usually predictable when different systems interact.
PHASE 1: CREATE CONDITIONS FOR COLLABORATIONS
Thinking
systems
Environment -
Define external factors
(local and global) affecting
your system but over which
you have no control
26
The next step is to undertake a critical
analysis into the parts (sub-systems)
that make up the whole (the system) of
the corporation. This enquiry should
focus on systems and sub-systems that
are directly and indirectly associated
with the issue. This analysis includes
the participation of the supply chain
partners. When engaging other supply
chain corporations, it is important to
explore the potential mutual bene?ts
– for the corporations. There may not
be any, in which case it becomes very
dif?cult to sustain the collaborative
effort. In this situation, the issue may
need to be rede?ned to include the
interests of the core stakeholders.
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Considering the issue of shared interest:
1. De?ne systems and sub-systems within these systems: i.e. the logistics division and distribution
centre(s), and how these sections relate to the overall organisation’s structure.
2. Explore the pressures on the systems and sub-systems: i.e. what external and internal forces
are in?uencing the operations, such as scarcity of resources. Identify corporate/societal areas
of systemic operational failure and misaligned policies or con?icting incentives.
3. De?ne the internal environments within which the system operates.
4. De?ne the boundaries around the sub-systems and systems of interest: i.e. what sections
does the logistics network interact with and who is responsible for these interactions?
De?ne people/corporate levels of in?uence and control over these systems/sub-systems. •
Discuss the direct or indirect in?uence that external systems have – •
e.g. supply chain stakeholders.
5. Draw diagrams of system process, operations and stakeholders, (see examples in case studies).
The bene?t lies in the shared understanding that arises from the process of doing •
this as a group.
CREATE CONDITIONS FOR SYSTEMIC THINKING
Thinking
systems
Boundaries -
Define the boundaries
of your systems and
sub-systems?
27
Pressure
Environmental,
social and
economic impacts
State
Current
practices
Strategy
Actions towards
the best way
forward
Response
Better
practices
In Phase 1, participants developed
an understanding about their
system and sub-systems. In Phase
2 the objective is to extend the
enquiry with supply chain partners
using a mutually agreed problem as
the basis for dialogue and action.
An adaptation of the OECD’s
Pressure State Response (PSR)
model (see below) was provided as
a framework for the enquiry in the
focus groups. Strategy/action
was added to the PSR model to
emphasise the importance of
strategic alignment to change for
achieving better practices, the
Response. The elements of the
model are described thus:
Pressure • – the environmental,
social or economic impacts
(i.e. high CO2 emissions
from cement, concrete and
construction operations, and
fuel used for food distribution).
State • – the current practices
that are contributing to these
pressures (i.e. the production
of concrete and the utilisation
of concrete in buildings and
infrastructure).
Response • – the better
practices (i.e. that produce
lower carbon in product and
associated operations).
Strategy • (or actions) that
enable these better practices
to occur, informed by a
systemic understanding.
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s
With supply chain partners:
1. Explore potential bene?ts of collaboration. Discuss initial analysis and the scope of the
sustainability issue and options for improving sustainability management and outcomes.
2. Expand critical analysis to include supply chain systems and sub-systems. Together, revise
stakeholders, environment de?nition, boundary analysis and vision statement.
3. De?ne projects and agree the boundaries of the project, the key team and the systems
and sub-systems for critical analysis.
PHASE 2: CRITICAL ANALYSIS OF SUPPLY CHAIN
28
Transformational projects focus on changing a current state to a desired
future state. Core groups work across corporate sectors and supply chains to
share knowledge, analyse problems and ?nd solutions. The two applications
of critical systems thinking as applied in the program are noted here.
P
r
o
j
e
c
t
w
i
t
h
a
n
R
&
D
f
o
c
u
s
1. Explore technology options with suppliers, scientists and other experts and
users as appropriate, using PSR model.
2. Critical analysis: challenge assumptions and technology/ process options.
3. Document analysis and key assumptions.
Refer to food case where the project had strong leadership from one company downstream
(near the retail end) and collaborative support from suppliers further upstream in the supply chain.
P
r
o
j
e
c
t
w
i
t
h
a
m
u
l
t
i
-
s
t
a
k
e
h
o
l
d
e
r
a
n
a
l
y
s
i
s
f
o
c
u
s
1. Re-de?ne the problem with broader audience using Pressure State Response model
and other analysis of systems that were developed with the key participants.
2. Engage supply chain stakeholders in dialogue about project issues, challenges
and vision for future outcomes.
3. Document outcomes and communicate to stakeholders for feedback.
Refer to construction case where the project reached the supply chains of several leading
companies and involved a range of suppliers and stakeholders.
TRANSFORMATIONAL PROJECTS
29
By Phase 3, the participants have
begun developing their internal
and supply chain teams and
enhancing their understanding of
the operational systems, the supply
chain, the key external stakeholders
and how the transformational
project interfaces with these systems
and the broader environment.
Emergent problems and solutions
identi?ed during Phases 1 and 2
form the basis of this re?ective,
strategic phase. Working out what
can be in?uenced and where
(see diagram below), and how to
empower enablers and manage
blockers is crucial for achieving
short-term project transformations
and effective ongoing collaborative
activities. Opportunities may include
developing interdisciplinary expert
groups, extending collaborations,
new technology, information
sheets about sustainability issues,
procurement and sustainability
policies and so forth.
PHASE 3: EMERGENT STRATEGIES AND POLICIES
Thinking
systems
Influence -
Define what you can
influence and how?
E
m
e
r
g
e
n
t
s
t
r
a
t
e
g
i
e
s
a
n
d
p
o
l
i
c
i
e
s
1. Review transformation projects with participants and develop strategies/tactics and
sustainability policies. De?ne what you can in?uence, and how. De?ne which policies
need to be changed or developed.
2. Develop recommended practices/standards/procurement policies to improve the sustainable
management of products and supply chain processes including transport, logistics and waste.
3. Review strategies to consult/inform senior management and embed sustainability policies
into business strategy.
4. Create strategies to in?uence key external stakeholders and the supply chain system
to improve sustainability outcomes.
30
Thinking
systems
Aligning policies -
Review and develop energy and waste
strategy and align with corporate
sustainability policies and supply
chain procurement
Diagnosis
Where is energy
being used?
Where is waste
going?
Measure
and Monitor
Define KPIs
and reporting
systems
Technology
Define new
technology and
innovation
opportunities
Facilities
Plan and
implement
infrastructure
upgrades
Communicate
CSR, decision
support and
knowledge
management
Policy
Review/
develop/align
sustainability, CSR,
procurement
policies
Review
Ongoing
review and
reflection with
interdisciplinary
teams
E
m
b
e
d
d
i
n
g
l
e
a
r
n
i
n
g
a
n
d
c
o
m
m
u
n
i
c
a
t
i
o
n
o
u
t
c
o
m
e
s
1. Review the effectiveness of the projects and the collaboration. Consider the vision,
re?ect on the successes and failures. Discuss the process with the sustainability team
and review options for other sustainability issues.
2. Build ongoing collaborative partnerships by interdisciplinary sustainability teams.
3. Develop effective communication, learning and training materials.
Developing representative diagrams
is essential when working with
complex systems, especially complex
social systems where every individual
has unique perspectives on the
system. Facilitated discussion using
diagrams helps people to discuss
their role, values, perspectives and
the risks and challenges in their
section, and see the interconnections
and interdependencies. Diagrams
were useful as a visual prompt for
building understanding of systems
boundaries, the levers and barriers
and the in?uence of people. They
provided a basis for discussion
about how and where to most
effectively in?uence the systems
and, in the latter stage of the
enquiry, which policy tools (R&D,
education, incentives, standards
and regulations) could be used
to in?uence the system. How
adaptations of this process were
applied and adapted is discussed in
the next chapter on case studies.
SUMMARY
31
This chapter discusses two
transitional projects: the application
of critical systems analysis; and the
outcomes, the implementation of
the sustainability policies and the
change processes. Both projects
featured a ‘walk the supply chain’
approach, with the aim of extending
participants’ knowledge and
experiences of other parts of the
supply chain. In the construction
sector this happened through
dialogue at multi-stakeholder focus
groups, whereas in the food sector
we visited a distribution centre
and a bakery, inspected trucks and
literally walked that section of the
supply chain.
The construction sector project
focused on sustainable concrete
and incorporated:
multi-stakeholder •
analysis – identifying the
stakeholders and the range
of perspectives on an issue
institutional change – •
identifying persistent problems
and systemic constraints
to implementation of new
technology, products or
improving practices
incremental change – •
developing policies and
processes for improving
management and information.
The food sector project reviewed
options to improve fuel ef?ciency.
The focus was on:
research and development – •
reviewing current and emerging
alternative fuel options in
commercial vehicles
innovation – the feasibility of •
implementation and exploring
how to operationalise cutting
edge vehicle technology in the
bakery division
monitoring – diagnosis of •
current and new processes with
the objective of developing
monitoring programs and KPIs
for emerging legislation, e.g.
greenhouse gas (GHG).
4 . CAS E S T UDI E S
32
S US TAI NAB L E CONCR E T E
S UP P LY CHAI N
With the accelerating pace of globalisation
and increasing emphasis on sustainability, it
was inevitable that those in the construction
sector increased their focus on reducing
carbon in buildings. Global trends indicate
that Australian government legislation and
market pressure will eventually require
developers to build zero-carbon buildings.
Cement accounts for 5% of the world’s CO
2
1
.
Cement, when combined with aggregates,
water, chemicals and energy makes concrete.
Concrete provides excellent thermal mass,
has durability, can last for over 100 years
and can be recycled. Therefore effective
building design can contribute signi?cantly
to a building’s energy ef?ciency and longevity,
which means a building’s lifetime carbon
footprint can be reduced.
Given the complexity of this problem, the
foundation companies, Bovis Lend Lease,
Stockland and Landcom, recognised the need
to collaborate. Over 20 companies from the
concrete supply chain became involved.
This case study facilitates
discussion on using critical systems
analysis with multi-stakeholders
to understand options for
procuring sustainable concrete.
Learning objectives:
1 >
Understand the diversity of
perspectives in the concrete
supply chain
2 >
Work with multiple stakeholders
using CSA and developing
systemic thinking
3 >
Build ongoing dialogue and
making sense of complex issues
4 >
Work with the barriers
to change in the concrete
supply chain
5 >
Explore critical systems analysis
for developing corporate
sustainability policy and strategy.
1 Australian Cement Industry Sustainability Report 2007
33
BACKGROUND
Three companies – Bovis Lend
Lease, Stockland and Landcom
– were invited to participate
in the Sustainability in Supply
Chains program. Bovis Lend
Lease is an Australian-based
global project management and
construction company; Stockland
is one of Australia’s largest
diversi?ed property groups. Both
companies provide a range of
expertise, including construction
management, project and program
management, design management,
design engineering, procurement
and facilities management.
Landcom is a state-owned
corporation and a development
arm of the New South Wales
Government. Landcom’s primary
focus is planning and developing
residential and commercial
properties in NSW.
All three companies identi?ed
the carbon impact of the use of
concrete in construction as an
intractable, messy problem that
no one organisation by itself
could address. It was agreed that
collaboration was needed and
independent facilitation would be
important to bring stakeholders
together.
The sustainable concrete
supply chain project required
time, insight and input from a
wide range of industry players,
including developers, engineers
and architects, builders, cement
and concrete manufacturers and
associations, power stations,
industry standards organisations
and the ?nancial sector. The team
conducted extensive interviews and
systemic analysis of the concrete
supply chain – ?rst identifying the
key stakeholders, then the changes
required and the barriers. We
explored why more sustainable
practices were not happening and
who had the power and in?uence.
A sense of powerlessness and
inertia existed, mainly due to the
complexity and interconnectedness
of the concrete production process.
So we invited a group of industry
stakeholders to come together in
March 2008. The intention was to
establish mutual understanding of
the barriers and incentives towards
a more sustainable construction
sector. The participants included
some of the nation’s top concrete
and cement companies, joined
by leaders from several of the
industry’s raw material suppliers,
associations and government
agencies. For a day they worked
their way through the issues in the
concrete supply chain and, in the
end, they agreed on ways each
sector could contribute to the
sustainability of the supply chain.
PARTICIPATING SUPPLY
CHAIN COMPANIES:
Cement and Concrete
Boral
Cement Australia
Cemex
Hanson
Independent Cement and Lime
Associations
Ash Development Association
of Australia & Australasian
Slag Association
Cement Concrete and
Aggregates Australia
Concrete Institute of Australia
Green Building Council
Energy
Delta Electricity
Macquarie Generation
Finance
AMP
Government
Australian Government
Department of the Environment,
Water, Heritage and the Arts
NSW Department
of Environment and
Climate Change
City of Sydney
34
CRITICAL SYSTEMS
ANALYSIS
Between June 2007 and August
2008 exploratory meetings
were held with the construction
companies and associated
concrete supply chain agencies.
The objective was to develop
understanding of the diversity of
perspectives in the supply chain
along with the:
impact of policies, including •
unintended consequences
role that each stakeholder can •
play in implementing change
potential levers and •
barriers for change.
Initial enquiry found that the
construction companies wanted
facilitated discussion that built on
their knowledge of the barriers
and opportunities for increasing
the use of sustainable concrete
in the construction sector. They
also wanted to understand how
sustainable was sustainable
concrete, and under what conditions.
For example, what were the options
for reducing embodied energy
and increasing energy ef?ciency?
Sustainable concrete is a messy
problem because there are many
drivers, complex in?uences and
perverse policy outcomes due to:
a complex range of contractual •
relationships
a complicated product with •
numerous inputs, uses and
speci?cations
many vested interests, •
entrenched positions
and lobby groups
a wide range of opportunities •
and barriers to in?uence
decision making processes
perceptions of high risk in •
relation to certain applications
of sustainable concrete
a culture of long hours •
and tight deadlines.
Supply chain issues are
particularly complex due to the
many stakeholders involved. To
in?uence the system requires
an understanding of the social,
institutional and policy processes,
as well as the production and
operational systems.
An adaptation of the OECD’s
Pressure State Response model
(see Chapter 3) was provided
as a framework for the dialogue
and analysis. Putting the ‘system
at the table’ (a supply chain or
inter-disciplinary group) is a
powerful and effective approach
to breaking down barriers and
building common knowledge.
WHAT IS CONCRETE
MADE FROM?
Concrete is a combination of
cement and materials that when
combined with water can be
poured into virtually any form.
It hardens into a strong, durable
material that is predominant in
building and construction.
The materials in concrete can
include many combinations
of coarse aggregate (crushed
rock or gravel), ?ne aggregate
(sand), chemical admixtures
(used for mix enhancement),
special additives, water and
supplementary cementitious
materials (SCMs) and
cement. The production of
Portland cement involves
a chemical reaction that
produces CO
2
. SCMs can be
substituted in some cases
to reduce the CO
2
impact.
35
Members of the concrete supply
chain gathered for a one-day focus
group in Sydney on 19 March 2008.
The objective of the session was to
build a broader understanding of
the range of perspectives and to
jointly develop plans and initiatives
for a more sustainable concrete
supply chain. The participants were
seated at tables of 7–8 people each
with representatives from sectors
of the concrete supply chain.
Groups alternated between small
and whole-of-forum discussion.
‘Thought starter’ talks identi?ed
key issues in the sector and helped
to start discussion around the
following areas:
Understanding the production •
of sustainable concrete.
Exploring project •
management, procurement
and sustainability drivers.
Understanding the current •
standards, incentives
and regulations.
Systemic, messy problems
often have complex drivers,
numerous in?uences
and interdependencies.
Systemic solutions require
a collaborative approach
with a shared vision and
mutual bene?ts.
No single person or entity
can control the issue or
determine its outcome.
A diversity of perspectives
is needed to make sense
of the issue.
WHY USE
SUSTAINABLE
CONCRETE?
Reducing the carbon footprint
of a building (the volume of
greenhouse gases expressed
in equivalent units of CO
2
)
is becoming an increasingly
important driver for builders
and developers. One way
to achieve this is to improve
the ef?cient use of energy in
operation during the life of a
building. Another is to reduce
the embodied energy in the
materials and construction of a
building; particularly concrete.
36
PRESSURE: WHY
SUSTAINABLE CONCRETE
IS IMPORTANT
From the developer and
construction companies’
perspective, reducing the levels of
embodied energy (the energy used
in production) in the production of
concrete and the use of concrete
in buildings, and increasing the
information about concrete
purchasing options are the key
drivers for change. The inability
of the companies’ sustainability
managers to in?uence decision
making in the concrete supply chain
was a key driver for this project.
Issues putting pressure on the
sector to increase its focus on
sustainable concrete are:
increasing demands by clients •
and tenants for ‘green’ buildings
limited speci?cation of •
sustainable concrete by
architects and engineers
(speci?ers)
project Directors lack the •
incentives or knowledge to
critique concrete procurement
speci?cations
limited information on how to •
specify sustainable concrete
and to support the range of
sustainability issues
lack of sustainable concrete •
products to provide speci?ers
with options.
The sum result was low awareness of
opportunities, optimum applications
and bene?ts of sustainable concrete.
With the prospect of an emissions
trading scheme, stakeholders
expressed the view that the sector
will have to change its production
practices and develop knowledge
and practices about how to be
more sustainable. The foundation
participants held a vision of
responsible business practice that
could cut GHG emissions in excess
of that required by the new ETS.
CURRENT STATE
OF THE CONCRETE
SUPPLY CHAIN
A systemic enquiry of the concrete
supply chain systems, links and
boundaries is shown in Figure 6. This
diagram was developed after initial
discussion with the key participants.
It was used during meetings to
discuss the roles of the supply
chain stakeholders, to help them
explore from their perspective at
their point in the system their risks,
uncertainty, in?uence and control.
The diagrams and other learning
materials were adapted as new
knowledge emerged. There are
numerous interactions and a range
of relationships among customers,
developers, construction companies,
speci?ers and builders in this supply
chain, which the diagram sought to
generalise into a working model.
Hence it was referred to as a ‘generic
sustainable concrete model of
stakeholders and processes’. For
example, architects and/or engineers
and project directors can be in-house
or outsourced, and this can vary
from project to project, or between
different arms of a given corporation.
THE STAKEHOLDERS
The key stakeholders in this
supply chain are clients and
tenants, developers, construction
companies, concrete and cement
suppliers and contractors, raw
material suppliers, builders,
associations and building standards
corporations. The context is the use
of concrete in the construction of
the built environment. Participants
described the cultural context
as very market-oriented and
pressured. The key elements are
productivity and competitiveness.
Project managers received ?nancial
incentives for projects delivered on
time and on budget.
The boundaries of the system
analysis for this project extended
from the developers through to
building construction (represented
by the grey background in the
diagram below). Key sub-systems
included: transport and logistics;
supplementary cementitious
materials (SCMs); concrete and
cement production; building
policies and standards agencies;
speci?ers; and environmental and
social systems.
37
The focus group discussion
provided insights into the
perspectives and issues in the
concrete supply chain. While not a
key group in the concrete supply
chain, the ?nancial sector and
building tenants provide leadership
within the construction sector.
Financial institutions are facing
increasing demands to ensure
that their funds have sustainable
investments and the practices
used in construction support
their investment principles. These
institutions can provide leverage
for change in corporations; e.g.
through dialogue with CEOs about
corporate performance against
world’s best ‘sustainable’ practices.
Concrete and cement suppliers are
a key group. The exact speci?cation
for the use of concrete in buildings
is highly contextual, i.e. concrete
speci?cations are dependent on
the particular building and site
location. Factors that in?uence the
use of concrete include design and
engineering speci?cations: e.g.
strength and setting time; location
(distance from concrete silos and
resources); timing/scheduling and
availability of materials and logistics;
and structural function of the
building element.
Figure 6 Sustainable concrete model of stakeholders and processes
Client
Contractor
Builders
Concrete
suppliers
Manufacturing
process
LCA Embodied
energy, Waste
Cement
suppliers
Customer /
tenant
Concrete,
Cement Slag,
Fly Ash Assoc.
Customer
Relations
Manager
Architects
Engineers
Project
Director /
Manager
Bovis Lend
Lease
Stockland
Landcom
Sustainable and
SC procurement
policy
Market segment,
budget, design
optimisation,
availability
Standards
Australia
Sustainable
concrete
NSW State
BASIX
Residential Regulatory
Developer Specifiers Buildings/Suppliers Building Land
Construction / Sustainable concrete supply chain: Generic model
Design
optimisation
Supplementary
cementitious
materials
GBC
Green Star
Commercial Incentives
38
MATERIALS AND
RESOURCES
There are large quantities of
supplementary cementitious
materials (SCMs) available that are
presently under-utilised in some
regions of Australia, such as New
South Wales.
SCMs are currently viewed as a
commoditised waste product
rather than a specialist product.
Considerable potential exists
to increase the use of SCMs in
concrete and in new building
products. Other important factors in
the availability and sustainable use
of SCMs in concrete and building
products include:
availability of water and materials •
uneven distribution of SCMs •
in Australia, the associated
transport distance, economic
and carbon costs
existing contractual •
arrangements that restrict
the capacity of SCM suppliers
(e.g. power stations that
produce ?y ash) to develop the
market to its full potential.
The concrete suppliers have
infrastructure constraints on their
capacity to utilise SCMs in concrete
mixes. Their current capacity is
highly location dependent – mainly
driven by the number of silos on
site. Increasing silo infrastructure
would enable the concrete sector to
provide a greater range of concrete
blends. High silo infrastructure
costs, space and council planning
requirements are major restrictions
to this development.
Performance speci?cations of built
structures are also an important
factor in the use of concrete. Some
participants expressed concern
about the emphasis on SCMs as the
principal vehicle to create a more
sustainable concrete product.
Over-reliance on rating systems to
provide incentives to use SCMs,
without considering the context
for their use, does not necessarily
achieve more sustainable outcomes.
For example, speci?ed concrete
mixes that ‘prescribe’ SCMs as part
of a percentage of replacement
materials may produce unintended
outcomes. Longer curing times
of SCMs can affect concrete
pour cycles, which in turn may
result in subcontractors charging
builders extra. To compensate,
additional cement may be used
to reduce curing times, which
is counter-productive.
SUPPLEMENTARY
CEMENTITIOUS
MATERIALS (SCMS).
Fly ash, ground granulated blast
furnace slag, or other pozzolanic
materials are collectively
referred to as supplementary
cementitious materials (SCMs).
SCMs can be
included in concrete, •
either as an ingredient
added at batching, or as a
component of a blended
cement, or both.
added during batching •
along with Portland cement.
added to concretes made •
with blended cements.
The advantage of using
SCMs and other recycled
materials is that it reduces
the embodied energy.
Source
City of Sydney
www.cement.org/
tech/faq_scms.asp
39
Other alternatives exist to reduce
carbon footprints, such as design
optimisation to reduce the amount
of concrete required and the
use of post-tensioned slabs.
Developers and construction
companies have speci?c criteria
for the supply of some other
building products (such as certi?ed
timber products) to ensure their
‘sustainable’ credentials. However,
which supplier provides the
concrete for a particular project
is largely determined by proximity
(the weight and curing time of
concrete makes logistics and
transport important). This means the
companies are unable to manage
this supply chain in the conventional
manner – they can’t work with a
preferred supplier to an agreed
standard. They have been unable to
implement consistent sustainable
concrete product standards across
the range of suppliers.
Whole-of-supply-chain thinking
introduces systems considerations.
Design optimisation needs a
‘cradle to grave’ view that includes
GHG emitted from mining and
production processes through
to end-of-life disposal or reuse.
Improvements to the operational
energy ef?ciency of a building that
draws on non-renewable energy
sources by itself won’t reduce the
volume of GHG in the atmosphere.
Developing a shared
understanding of a supply
chain system can support
more effective decisions
and solutions to messy
problems.
CHALLENGES
Speci?cations for concrete need
to support sustainable outcomes
through the more effective use
of SCMs in a) building design
optimisation; b) performance
speci?cations for the % of SCMs
in different applications; and
c) improved time and logistics
management to reduce waste.
Key challenges are:
How to increase the speci?cation •
of SCMs to reduce the
embodied GHGs in the built
environment. There is currently
limited speci?cation of SCMs
by engineers. Pressure from
developers and construction
companies for the fast
laying of concrete does not
support the use of SCMs as
they take longer to cure.
How to balance sustainability •
tradeoffs – reducing GHG from
embodied energy vs energy
ef?ciency during the operational
life of a building. For example,
concrete provides insulation
bene?ts that are closely aligned
with concrete mass and effective
building design: i.e. concrete
can signi?cantly improve energy
ef?ciency by reducing the need
for air conditioning and heating.
For this reason, attempts to
reduce the use of concrete
could adversely impact on the
energy ef?ciency, durability and
longevity during the operational
life of the building.
How inef?cient practices such as •
a lack of quality control, over-
ordering of product, and rigid
timing/scheduling of deliveries
can lead to considerable
concrete and energy waste.
For example, currently twice
the number of trucks are used
to meet morning deadlines than
would otherwise be required
if deliveries could be spread
evenly throughout the day.
Note: participants indicated
that attempts by the concrete
industry to manage logistics
and scheduling with clients have
achieved limited success so far.
40
POLICY TOOLS AND
MEASUREMENT
Depending on the position of the
organisation in the supply chain,
there are different drivers, trade
offs and barriers. People also have a
range of incentives and constraints
to achieving outcomes. These
contextual issues need to be taken
into account when considering the
policy tools for sustainable concrete.
The Green Star rating system is a
building standard for commercial
‘green buildings’. There is limited
incentive for their increased use of
SCMs due to the small allocation
of points. It was argued that a
higher point allocation would help
to address this issue. However,
a key question is whether SCM
rating criteria create better
sustainability outcomes. The
limitations to the current rating
system were discussed. For
example, the rating system does
not accommodate embodied
energy or energy ef?ciency design
considerations for concrete.
The Green Building Council is
planning to review the rating
criteria and will consider how to
ensure that point allocations do
not create unintended impacts
on the sustainable performance
of the building. Addressing
the issues raised above may
take up to three years.
When searching for
solutions to problems,
consider the impacts of the
solution on the external and
internal environment. Align
policies with sustainability
vision, strategies and
corporate culture.
The Life Cycle Analysis (LCA) of a
product within the supply chain
is needed to fully understand
the embodied GHG and other
resources used to produce the
product. Currently, LCA tools are
fairly simplistic. LCA tools are not
currently recommended state
practice, nor are they consistent
between states. An LCA can be
information intensive and costly
to conduct, and is limited to a
de?ned product in a point in time,
so allowance needs to be made
for parameters that change. There
are numerous mixes of cement
and concrete and a large variety of
input materials available. It’s also
uncertain whether the results of an
LCA will align with the incentives
of a future ETS. In assessing the
impact and longevity of a building,
an LCA needs to inform not just
the decision of what to build, but
how to build. This would include a
focus on optimal design upfront: a)
to extend the life of a building; and
b) to provide decision support on
whether to refurbish or rebuild an
existing structure.
CO
2
from products is undervalued
and the ETS will help to solve
this issue by placing a price on
carbon. Over time, carbon pricing
will become an integral part of
incentives, regulations and other
market and legislative instruments.
The Australian Government
Department of the Environment,
Water, Heritage and the Arts
(DEWHA) has started dialogue
with the Building Products
Innovation Council (BPIC) to
develop a nationally consistent
approach to carbon accounting
in the built form. The scope of
the ETS in measuring carbon
performance may include design,
material, utility and construction/
operations considerations. A carbon
accounting methodology will need
to determine where in the supply
chain the transaction costs reside
for existing and new products (e.g.
the trade of ‘packets of emissions’).
Considerations include: the
equitable distribution of bene?ts
from carbon savings; who would
bear the costs of an ETS; and
at what point would a carbon
price translate into change.
Participants expressed a need for
The process of de?ning the problem and
solutions constantly evolves and can take new
forms throughout the project and afterwards.
41
communication/education to enable
decision-makers in the supply
chain to interpret these signals
and respond with product and
design choices that reduce carbon.
Irrespective of a national carbon
accounting scheme, participant
construction companies expressed
the need to proactively reduce CO2
emissions as a moral imperative.
THE WAY FORWARD,
THE RESPONSE
Corporations within the
construction sector need to
demonstrate leadership in order
to build momentum for change.
The culture of ‘fast turn around’
in this sector limits the ability of
staff to engage in sustainable
initiatives. Senior management
can provide support by allocating
time and resources, incentives and
performance KPI for their staff to
drive sustainability outcomes.
Participants indicated that there is
a need for stronger collaboration
throughout the concrete supply
chain and consistent messages,
policies and incentives for
stakeholders. To build the capacity
of people and organisations to
better understand the issues,
and effectively work towards a
sustainable concrete supply chain,
the recommendations were:
Develop a range of •
communication and education
material on the use of
sustainable concrete products
and processes for a broad range
of stakeholders across the supply
chain, such as project managers,
speci?ers, suppliers, etc.
Improve decision-making •
support tools such as
LCA, design, product and
performance optimisation
tools to enable more informed
decision-making at all levels of
the supply chain.
Develop incentives, standards •
and best practice performance
speci?cations that provide
assurance of the sustainable
credentials of products, a
consistent message, and
market drivers that do not lead
to unintended/unsustainable
outcomes.
Develop contracts and •
procurement policies
that encourage the use of
sustainable concrete and
support green building criteria.
Encourage leadership and •
cultures within corporations that
support sustainability practices
in the concrete supply chain.
There are extensive knowledge
gaps within and across the supply
chain about sustainability in the
supply of concrete. This lack of
knowledge and awareness often
drives behaviour and practice that
produce unsustainable outcomes.
Questions raised included:
What is the impact of different •
concrete mixes?
What are the links to other issues •
within the supply chain such as
water, waste and logistics?
What does a ‘green building’ •
actually mean?
More industry-wide and
stakeholder-speci?c information is
needed to help support decision-
making (e.g. case studies about
the trade-offs between embodied
energy and energy ef?ciency).
This type of information will
enable stakeholders to make more
informed decisions about the
options for sustainable design and
the use of construction materials,
and how to most effectively achieve
sustainable outcomes.
42
REFLECTIONS
ON THE PROJECT
The ‘walk the supply chain’
approach at the focus group and
during meetings, using diagrams
and critical system analysis learning
tools, broadened participants’
knowledge and understanding of
other parts of the supply chain.
Below are comments recorded by
the participants on review forms
after the focus group:
‘Positive development of our •
understanding of other areas of
the supply chain – get feedback
from downstream members on
their view of your sections.’
‘Write up results and circulate, •
hold another meeting, ongoing
collaboration.’
‘Very informative and insightful. •
It helped me to understand
the key factors and drivers into
sustainable concrete.’
‘Good to meet the participants •
and hear their concerns.’
‘… challenge to convey •
complexity of issues across
in?uencers – speci?ers.’
‘Increased awareness and •
collaboration between various
sectors [are] important.’
Sustainable concrete is a complex
issue and a messy problem. When
working with so many stakeholders
from different disciplines and
sections of the supply chain, there
are major challenges. A collective
response to make sense of complex
issues that have persistent, systemic
barriers to change can generate
simple communication material.
Fact sheets, when written in a
credible style with relevant, useful
information, can help build shared
knowledge and can become a
tool for leveraging change. One
outcome from this project is the
development of a Sustainable
Concrete Fact Sheet. The Concrete
Institute of Australia (CIA) is taking a
leading role and is working with its
members and participants from the
construction project.
Participants indicated that ongoing
discussion in the form of a follow-up
focus group or small working groups
to review the ?ndings and explore
next steps would be helpful. An
extensive set of recommendations
for future research and policy
development was formulated during
the focus groups and interviews.
These recommendations provided
incentive for the CIA to develop
its own research and development
forum and the fact sheet.
43
S US TAI NAB I L I T Y I N F OOD
DI S T R I B UT I ON S Y S T E MS
In 2007 recognition of the potential
consequences of climate change and
emissions trading systems (ETS) heightened
awareness of the crucial role of effective
supply chain delivery systems in Australia.
As a food manufacturer and distributor,
Goodman Fielder was aware of growing
market competition and rising prices for grain
as input for both fuel and food. Advances
in alternative fuels, gas, electric and hybrid
electric vehicles (HEV) technologies
appeared to be showing promise for
reducing GHG and fuel consumption.
This study discusses a collaboration
among Goodman Fielder, ORIX and truck
manufacturers to reduce greenhouse gases
from food distribution networks.
This case study facilitates discussion
on using critical systems analysis with
emerging research and innovation to
understand options for distribution
networks and alternative fuels and
vehicle transport.
Learning objectives:
1 >
Explore the challenges faced by
GF in the baking supply chain.
2 >
Examine measures taken
by GF and ORIX to address
these challenges.
3 >
Describe the systemic enquiry
process as applied to this project.
4 >
Discuss the rationale behind
GF sustainability strategies.
44
BACKGROUND
Goodman Fielder (GF) is an
Australian/Asia-Paci?c company
that has expanded greatly through
takeovers of small niche brands.
They manufacture and distribute
a wide range of food products –
fresh bread, frozen pastries and
dairy products, requiring a range
of storage systems. The range
of variables includes delivery
schedules and locations, traf?c
regulations (e.g. routes for large
trucks); storage and freighting
requirements for different products
(e.g. heavy oils versus voluminous
bread products, refrigeration
needs); and variable shelf life (from
one day for fresh bread to months
for frozen pastry). Their truck
delivery systems re?ect this diversity
of frozen, refrigerated and fresh
products. Manufacturing plants and
distribution centres are dispersed
throughout Australia and the
Asia-Paci?c region.
GF has shifted its corporate focus
from environmental compliance
to improved ef?ciencies, and is
now addressing issues such as
climate change (e.g. measuring
GHG footprint of supply chain
logistics). GF is planning its ?rst
sustainability report – internally in
2008, and publicly available in 2009.
A primary in?uence on this shift
in focus has been the perspective
at the executive board level, with
awareness of external drivers
such as carbon pricing; consumer,
shareholder and investor values; and
employee attraction and retention.
The senior management of GF
has demonstrated leadership by
canvassing potential sustainability
projects (including links between
food and health) that went beyond
its own corporate boundary. Senior
management nominated the right
people to lead the project and
ensured they had adequate support
and resources.
THE PARTICIPANTS
The GF supply chain project
required time, insight and input
from a wide range of GF staff
and industry players. GF had
representation from staff in the
bakery, commercial and corporate
divisions, including specialists in
supply chains, logistics, marketing,
customer relations, environmental
and sustainability management.
This meant that divisions, which
had previously seen each other
as separate businesses under
the one corporate banner,
came together and learnt about
each other’s operations.
GF invited ORIX to participate once
it became evident that alternative
truck bodies, engines and fuels
were key initiatives to reduce GHGs.
ORIX lease commercial vehicles to
the bakery division. ORIX in turn
invited specialist alternative fuel
and technology suppliers to present
their products to the project
team. These companies were:
Green Fleet Systems International;
Clear Sky Solutions; OES CNG;
HINO (subsidiary of Toyota); and
ISUZU. The Australian Government
Department of the Environment,
Water, Heritage and the Arts also
provided expertise in GHG policy
and measurement for alternate
fuel vehicles.
CRITICAL SYSTEMS
ANALYSIS
Between November 2007 and
May 2008 workshops were held
with GF and supply chain partners.
GF’s vision for the project had
this objective: to reduce the
GHG footprint of distribution and
develop a model of the change
process that can help to further
improve the sustainability of its
supply chain activities. The initial
meetings with GF aimed to build
mutual understanding about:
sustainability •
the culture and operational •
environment
boundaries of the systems •
and the sub-systems
potential stakeholders •
perceptions of risk, •
barriers, challenges and
systemic problems.
45
Establishing the range
of mutual bene?ts is
essential for effective and
ongoing collaboration. The
bene?ts need to connect
the stakeholders and the
sustainability vision. As new
parties join the project and
understanding evolves, the
vision and mutual bene?ts
should be revisited.
After several months of exploring
potential projects, and discussing
project options with some suppliers
and customers, GF corporate,
commercial and bakery divisions
identi?ed two areas to focus on to
improve the GHG footprint of its
supply chain performance:
their short- and long-haul •
trucking ?eet
transport logistics between •
distribution centres.
The key objective was to explore
opportunities to reduce GHG per
unit of product delivered, through
such options as fuel ef?ciencies,
substitute fuels or new engines.
This case focuses on the baking
division’s analysis of alternatives for
its light-weight, short-haul vehicles.
PRESSURE: WHY
ALTERNATIVE FUELS AND
GHG AND THE BAKERY
DELIVERY SYSTEM?
In GF, the bakery division has
the largest ?nancial investment
in distribution. The main drivers
in?uencing GF are:
Reduce exposure to increasing •
fuel costs by improving logistics.
Maintain current product •
pricing, given the likelihood of
substantial increases in both fuel
and food commodity resources.
Anticipate compliance to •
emerging regulations –
emissions trading scheme (ETS),
which will provide strong cost
incentives to reduce energy use
and GHG.
Do the right thing – GF •
developed a corporate
sustainability strategy that
requires futures thinking and
actions to be aligned with
improving the sustainability of GF.
Expectations of carbon content •
labelling, and emerging
demands for information
about a product’s GHG.
CURRENT STATE:
WALKING THE GF BAKERY
DELIVERY SYSTEM
The context to serve as a case study
in this project was the delivery of
bread in the Sydney metropolitan
region. The baking delivery system is
a ‘spider web’ from the distribution
centre to large and small retailers
with ?xed routes and low variability
in load size and orders.
Specify your system
boundary and determine
what the project group can
control or in?uence, and
how. If something affects
your project but you can’t
in?uence it, then monitor it.
The boundaries of the system
were de?ned as from GF bakery
distribution centre to retail
distribution centres. Key sub-
systems included: transport and
logistics; the bakery; depot; trucks;
transit; logistics; and environmental
and social systems. The main
stakeholders in the alternative fuel
project were GF permanent staff
and contractors, ORIX, suppliers,
customers and the retail sector.
46
GF’s Ermington Distribution Centre
(DC) is the largest stand-alone DC
in NSW with half a million deliveries
of fresh bakery products per day.
Products are delivered from the
Moorebank Bakery which services
the whole of Sydney. Deliveries from
Ermington cover Bondi, the city,
the north shore and the northern
beaches. Contractors are paid by
commission on cents per unit sold.
This is a strong incentive to reduce
per unit delivery costs through
improved ef?ciencies. A software
package called Transit schedules
distribution according to the most
ef?cient routes and vehicle type.
Inputs include satellite information,
roadmaps, peak traf?c times, vehicle
size, etc. This provides a platform
for building an ef?ciencies analysis.
Figure 7 shows the initial discussion
points for starting a CSA into the
Ermington sub-systems.
Scan for issues that
currently impact the
supply chain systems.
Potential impacts of
interventions (micro and
macro) include societal
and environmental issues.
In a systemic enquiry into whole-
of-supply-chain sustainability,
participants scan for issues that
currently impact the system.
Potential impacts of making
changes to the system should
also be considered. Some issues
considered during multi-disciplinary
discussions during the project were:
Regulations are likely to become •
more stringent, and carbon-
intensive fuels will become more
expensive. Commonwealth
Government mandated
GHG reporting is currently
under development and it is
anticipated that ETS will be
introduced in 2010. Information
on GHG emissions may need to
Figure 7 Ermington DC analysis
Morebank
Bakery
Monitoring: Define data for
KPIs: Energy, Waste, OH&S...
Diagnosis: Define energy use
and where waste is going
Trucked to
Ermington
Current Energy:
Energy saving opportunities:
Trucks – Hybrid/Electric/Gas
Depot – Solar/batteries
Optimise truck design
Reduce wasted space
Optimise delivery routes/loads (requires customer collaboration)
Diesel? Electricity – lights and computers
Source: NSW grid
Diesel?
Bread
scanned
Customer
orders allocated
Trucked, CBD,
eastern and
northern Sydney
GF / Ermington Depot: Current supply chain
47
be communicated along a supply
chain. Transport fuels are also
included in a mandatory federal
energy ef?ciency program.
Potential future impacts on GF
of evolving sustainability and
climate policy, government
incentives and regulations, local
and international market drivers
were considered.
Vehicle design optimisation •
opportunities included the
weight-carrying capacity of
vehicles, the options to redesign
vehicles, chassis, and the
number of wheels. Operations
and maintenance of vehicles
would be required but at no
additional cost to GF. Some
changes may require OH&S
training for drivers. Operational
procedures would be provided
by suppliers and managed by
ORIX as part of the leasing
arrangement. Maintenance costs
are included in the lease. It was
anticipated that the commercial
leasing arrangements with
ORIX would incur no immediate
additional costs to GF.
Options to reduce the distances •
travelled or the frequency of
deliveries involved trade-offs.
Opportunities to improve the
logistics required discussion with
retailers whose contracts can
constrain ef?ciency options by
specifying such things as delivery
times, the choice of engines and
truck body sizes. Travel distances
may increase if GF depots are
consolidated or if fuel locations
are changed (compressed natural
gas (CNG) depot option). Can
the empty space be reduced and
load capacity increased within
current weight restrictions?
Societal attitudes towards fuels •
were also considered important.
What are the community/
consumer perceptions of petrol?
Community considers this fuel to
be a major contributor to climate
change. Community perceptions
are likely to continue to drive
consumers away from petroleum
fuels towards more alternative
fuels. Bio-fuels were not
considered a viable alternative
fuel. GF is a food manufacturer
and there is growing concern
about the impact of using food
for fuel on global food supplies.
Any electric vehicles drawing on
coal-generated electricity along
Australia’s east coast would emit
more GHGs than traditional
fuels, according to one
participant. Was it possible to
put solar panels on factory roofs
to charge the solar batteries for
the electric vehicles?
Figure 8 shows the alternatives
identi?ed for further review.
Suppliers were invited to
provide detailed information
on alternative vehicle and fuel
options. This included the
advantages and disadvantages
of each option in relation to the
upcoming ETS and the broader
context of climate change.
Figure 8 Alternate vehicle fuel options
Manufacturing/
Bakeries
Electric
Truck
Hybrid
Diagnosis
Gas
DC Transport Retail DSD
Diesel
Truck
Traffic
routing
Review
# scenarios
Large, medium
small customer
CONSUMERS
Alternative fuel options
48
DEWHA also participated and made
these points during a forum with
ORIX, GF and the gas suppliers:
It is a myth or an assumption •
that alternative fuels must be
better. The new generation
diesel engines made to
European standards (Euro IV)
are a lot cleaner and emit less
GHG. At the heavy-vehicle end
of the market there is no current
evidence that there are better
alternatives to diesel.
In some cases, attempts to •
decrease CO
2
can increase
emissions of CH
4
(methane).
Currently it is dif?cult to measure
CH
4
and NOx as the equipment
is not available in Australia.
Engine tests conducted overseas
may not be a reliable guide
to emissions under Australian
conditions.
Hybridisation is a key enabling •
system for going forward,
but battery cost, life, space
taken on truck and weight are
constraining issues.
A decision support matrix
helps to consider the range
of perspectives. There were
differing views on what the
important factors were for
making a decision.
The suppliers informed the group
about the range of issues to
be considered when looking at
alternative fuels. General points
made by suppliers included the
importance of driver skills (a 10%
difference in fuel consumption);
collaborative opportunities (six-
month free trials for new hybrid
electric vehicles); and how
government assistance is needed to
install fuel depot infrastructure for
CNG (a low GHG fuel option which
has advantages for Australia). Simply
upgrading the vehicle ?eet with new
automatic/manual transmissions
(AMT) would result in economic
and environmental bene?ts from
lower diesel consumption. AMT
helps to take the ‘bad driver’ out of
the equation – this in turn reduces
maintenance costs and fuel use.
There were differing views on what
the important factors were for
making a decision. The government
focused on GHGs; whereas
suppliers were also concerned
about particulate matter and air
quality. Suppliers emphasised
cost savings. Some suppliers
lacked knowledge about climate
change implications and emissions
trading; others had high awareness
but their initiatives to develop
technologies that emitted less
GHG were hampered by the lack of
vehicle testing facilities and speci?c
information to guide their activities.
Some frustration was expressed
that government tests had a limited
range of applications.
The decision support matrix
below is a useful tool for scoping
the options. Data in the matrix
and notes captures some of the
discussion about options during
project meetings. The accuracy of
this data hasn’t been veri?ed.
49
TABLE 1 ALTERNATIVE FUEL DECISION MATRIX
PETROLEUM-
DIESEL
ELECTRICITY GAS LPG GAS-CNG HYBRID ELECTRIC
VEHICLES
+
P
o
s
i
t
i
v
e
s
Conventional
fuel currently
used. Supply
infrastructure in
place.
Can extend with
biofuels but lack
of consistency
in product.
New generation
of diesel
engines are
much cleaner.
Battery power can
mean zero emission
by vehicle. Good for
back-to-base runs.
Probable lower
running cost. Low
maintenance cost.
Introduced in Europe
but not currently
available in Australia.
LPG infrastructure
in place. Readily
available and good
supply in Australia.
Lower price – no tax
on LPG. Lower fuel
running cost and
maintenance. Zero
emissions.
Add-on LPG kits
– if breakdowns,
turn back to diesel
automatically.
Australian pricing of
CNG currently not
in?uenced by world
prices. Lower fuel
running cost and
maintenance. No tax.
Zero emissions.
Helps to break the
reliance on petrol/
oil and sources fuel
in Australia. Good
supply.
Lower GHG.
New lightweight
trucks available for
collaborative trial.
Lower fuel running
costs. Hybrid
vehicles gaining
support from
government for
GHG bene?ts,
lower emissions.
Good for the stop/
start nature of the
baking delivery
operations.
-
N
e
g
a
t
i
v
e
s
High emissions
especially CO
2
.
Limited crude
oil supply
with demand
increasing and
price forecast
to increase.
Less resilience if
dependent on
one fuel supply.
New technology, in
development stage.
Batteries heavy and
bulky. Limited vehicle
options. Australian
compliance is
required.
Larger upfront capital
costs. Re-charge
through domestic
main. GHG impact
when using coal-?red
power stations.
May only be feasible
with solar panels &
inverters/batteries.
Battery life & cost
of replacement.
Potential rapid
depreciation
of investment
(resale value).
Infrastructure cost
for refueling. If 100%
LPG, short runs or
sacri?ce load space
to carry gas. Larger
upfront vehicle costs.
Maintenance
issues. No warranty
insurance from
diesel engine
manufacturers with
retro?tted systems.
Low resale value
of vehicle.
LPG still emits GHGs.
If 100% CNG, distance
of runs limited
to within fuelling
station. Substantial
upfront capital costs
for establishing
infrastructure for
refuelling ($0.25million
per station).
Larger upfront
vehicle costs.
Maintenance issues.
No insurance from
engine manufactures
with add-on systems.
No secondary market
for CNG trucks
(related to lack of
fuelling infrastructure).
Option: use after-
market kit and convert
back to diesel.
New technology
in development
stage for
lightweight
commercial
vehicles.
Larger upfront
capital costs,
not cost neutral,
capital and
operational
expense high.
No market history,
presumed low
resale value.
50
TABLE 1 ALTERNATIVE FUEL DECISION MATRIX (continued)
PETROLEUM-
DIESEL
ELECTRICITY GAS LPG GAS-CNG HYBRID ELECTRIC
VEHICLES
RISK
S
h
o
r
t
t
e
r
m
LOW-MEDIUM HIGH MEDIUM HIGH HIGH
L
o
n
g
t
e
r
m
HIGH MEDIUM-HIGH LOW MEDIUM MEDIUM
TIME FRAME
Current Longer term –
dependent on
technology and
infrastructure costs.
Short term. LPG
dual fuel add-on (life
expectancy six years)
is available now.
Longer term
– possible for
collaborative fuel
depot. Dependent
on infrastructure and
technology.
Medium term –
dependent on
infrastructure and
technology.
Technical notes on fuel options
The LPG and CNG systems were
available as dual-fuel add-on
for diesel engines, Dual Phase
Induction Systems. Suppliers
claimed that adding LPG or
CNG to diesel engines helps to
reduce CO
2
by reducing diesel
consumption. In addition to
running the engine, diesel also
acts as an engine lubricant and a
solvent to help keep the engine
clean. Therefore, the balance of
gas to diesel has tradeoffs with
engine ef?ciency, maintenance
and fuel economy. LPG and CNG
also have GHG impacts. CNG has
the lowest GHG impact but there
are few fuel stations.
Hybrid vehicles use either Exhaust
Gas Recirculation (EGR) or
Select Catalytic Reduction (SCR)
technology. The EGR + Diesel
Particulate Diffuser (DPD) achieves
Euro 4 standard (the highest). DPD
is a ceramic ?lter that collects
and incinerates particulates. EGR
and DPD vehicles can potentially
achieve up to 30% reduction in
fuel use and 25% reduction in
GHG emissions. Some vehicles use
EGR + DPD + Variable Geometry
System (VGS) turbo chargers, with
potential to reduce particulates by
81.25% and NOx by 30%.
NB: Particulates in the exhaust
are an air-quality not a GHG
issue. Suppliers urged the need
to also understand the impact of
particulates on air quality. The
relationship between particulates
and climate change surfaced, but
wasn’t addressed.
51
INITIAL OUTCOMES
FROM THE PROJECT
There was uncertainty about how
alternative fuel regulations would
evolve. Changes in alternative
fuel policies in relation to CNG
infrastructure, hybrid and electric
vehicle tariffs could substantially
alter the economics of the vehicle.
Financial data from ORIX indicated
the cost of leasing hybrid trucks was
substantially higher than leasing
the new diesel vehicles with AMT.
The problem was the uncertainty
around the re-sale value of these
vehicles in three years and the
additional costs such as battery
and inverter maintenance. The
batteries are expensive and battery
life is unknown. There is currently no
market for hybrid vehicles, whereas
diesel vehicles have an established
re-sale market.
Sustainability issues cannot be
viewed in isolation of ?nancial
considerations, where substantial
investment is required. The risk
would be perceived as being
too high if there isn’t reasonable
certainty about the costs. The
information does not build a
strong enough case to justify a
substantial investment in gas,
electric or hybrid vehicles.
While this presented a setback for
the project team, they remained
optimistic about improving the
sustainability of the vehicle ?eet.
Without having consulted a diverse
range of stakeholders, GF may
have pursued a ‘quick win’ using an
alternative fuel under a mistaken
impression about its environmental
credentials. One of the outcomes
from the discussion was the
opportunity to work with ORIX and
ISUZU on a collaborative six-month
trial using a new hybrid diesel-
electric truck. GF staff will monitor
the performance of the hybrid and
build a better understanding of the
operational implications of this new
technology. The trial progress will
be communicated to GF staff and
will be used to raise awareness of
the sustainability opportunities and
challenges in the trucking ?eet.
Sustainability issues
in isolation of ?nancial
considerations will not
convince the Board to make
substantive investment.
Some additional improvements
occurred at GF. The GF team
engaged a wide range of
employees, including people
from marketing, logistics, supply
chain management, customer
relations and sales in considering
a number of potential projects.
Some project initiatives were
explored but were delayed, for
example, by an imminent change in
suppliers, or the inability to obtain
the information that was needed.
Improving logistics management
is also a key initiative, but progress
on this area was slow due to data
limitations and the complexity
of the logistics network. There is
also a need to collaborate with
the retail sectors, but building
these collaborative partnerships
appeared to be challenging.
GF developed more systemic
interactions and alignment between
strategy and sustainability options,
within its own corporation and
with organisations along its supply
chain. GF instigated the supply
chain collaboration with ORIX,
which in turn invited its suppliers to
become involved in the project. GF
kept senior management informed
and consistently demonstrated
openness to broader systemic
issues and the need for new ways
of thinking and collaborating. They
also provided valuable feedback
on the constraints of their business
and industry sector. As discussed
in Chapter 2, it is imperative that
corporations engage in active
discussions about sustainability and
their values and roles in society as
well as the business world.
Alignment of strategies and policies in collaboration with suppliers
enables more sustainable practices in the supply chain.
52
This chapter provides a critical
examination of the systemic activities
of the participants and the research
team. This discussion includes
observations from participants
outside of the core projects.
Working systemically and
collaboratively on sustainability
problems can be perceived as
a challenge to the culture of
‘business as usual’ by employees.
Corporations are starting to
associate a business value with
sustainability, especially where
emerging markets and regulations
are now placing ?nancial values on
aspects of corporate sustainability
(e.g. putting a price on greenhouse
gas emissions). Employees and
managers generally have de?nite
lines of authority, accountability and
roles to perform. Critical re?ection
and systemic practice requires
employees and senior management
to examine their assumptions,
expand their responsibilities, and
form inter-disciplinary networks
to share knowledge, and explore
uncertainties and systemic
drivers. This departs from normal
business roles and challenges the
expectation that a management
decision or a new policy will
in?uence a given issue.
There was considerable enthusiasm
for the projects and the majority of
participants and experts consistently
demonstrated a commitment
to prioritise time and resources.
The critical systems framework
was re-visited throughout the
conversations. The supply chain
diagrams formed an ongoing basis
for analysis and discussion. Given
the very short time frame of most
meetings (usually one–two hour
meetings), it provided a ?exible
framework and a useful tool for quick
introduction to new stakeholders,
issues and problems.
While outcomes will continue to
evolve and the full in?uence of
the projects is dif?cult to assess,
there were immediate tangible
outcomes: a fact sheet is under
development; new interactions
and supply chain networks;
new research collaborations;
procurement policies; greater
knowledge of systems thinking and
sustainability as a business strategy;
and understanding of the supply
chain. The value of this capacity
building was frequently noted, as
were the challenges and bene?ts
of working collaboratively across
corporate and professional silos.
There were many comments about
the bene?ts of interdisciplinary
discussion and the importance of
a neutral facilitator when engaging
the supply chain in discussions.
5 . E X P L OR I NG T HE CHAL L E NGE S
OF WOR K I NG S Y S T E MI CAL LY
The challenges of
collaboration were
discussed at various
times during the food
and construction
sector projects:
> How to build
collaboration with
the retail sector?
> How to build
collaboration
with suppliers?
> What is the mutual
bene?t for these
parties?
> How do you maintain
a collaborative
relationship among
suppliers?
53
It is important to note that the
systems enquiry processes used
with these participants cannot be
exactly replicated, as the facilitator
must respond to the unique needs
and challenges of each corporation.
The model and discussion in this
report are intended to offer an
insight to the experience, and
offer some process guidelines
that can be adapted. The critical
systems approach as applied in
the Sustainability in Supply Chains
program aimed to:
build a shared understanding of •
the problems, the systems and
sub-systems, the boundaries and
the environment within which
companies operate
extend the project team learning •
about the supply chain
de?ne the risks and •
opportunities in the supply chain
operating environments
understand the impact of •
culture and policies, including
incentives, standards, and
regulations on the operation of
companies and the impacts of
misaligned policies
watch for solutions, develop ways •
forward and in?uence future
decision making processes
develop capacity to think •
systemically and collaborate
with supply chain partners
to implement more effective
responses to issues of
sustainability.
The critical systems approach
used a range of analytical and
learning techniques including
qualitative interviews, systems
enquiry with diagrams and
envisioning exercises, expert
knowledge and multi-stakeholder
focus groups. Experts, policy and
communication documentation
also formed part of the process of
informing the participants about
the broader issues. The process was
underpinned by a monitoring and
evaluation program that required
participants to provide feedback
throughout the life of their project.
Key insights from the process
include:
ENGAGING SUPPLY
CHAINS
Initially, there was limited supply
chain engagement. Despite
proposing their own project
focus that would involve other
organisations in a collaborative
project to address an issue of
sustainability that cut across
their supply chain network, many
participating organisations (or
their supply chain partners) proved
hesitant to engage more than one
other supply chain participant and
to extend the engagement beyond
one internal representative. In
some corporations, supply chain
engagement was very limited and
there was resistance to engaging
internal people. Reasons were
not all clear, but there are some
indications that participants:
need tangible bene?ts (or •
con?dence in the process and
facilitation) before they will
engage other supply chain
stakeholders
have concerns about the •
power and in?uence of other
organisations (in?uence of
large organisations on smaller
organisations) and the unknowns
of collaboration
54
lack experience, knowledge and •
skill to work on sustainability
across the supply chain. Some
participants did not have the
con?dence to engage other
corporate divisions, senior
management and supply
chain companies. An absence
of collaboration reinforces
perceived limits to responsibility
and business-as-usual
practices that don’t support
cross-divisional initiatives
are coping with rapid •
commercial and market
developments. Supplier
relationships can change quickly
and frequently have both
competition and cooperation.
Uncertainty leads to risk aversion
such as a reluctance to share
information, particularly if that
information might have a value
under new markets, such as an
emissions trading scheme.
PERSPECTIVES AND
KNOWLEDGE OF
SUSTAINABILITY
Knowledge of sustainability was
highly variable among participants
and new participants joined
regularly. Consequently there
was a constant need to re-assess
the levels of understanding of
sustainability and knowledge of the
ARIES project during the meetings.
Conversations about
sustainability issues in
supply chains would not
normally occur as part of
everyday business.
The project leaders predominantly
came from an Environmental
Manager background. Their training
focuses on reducing risk by meeting
environmental regulations. In
general they were unfamiliar with
the human and organisational
dimensions of sustainability,
innovating beyond compliance,
or strategic opportunities to
incorporate sustainability into
the business model or work
throughout the supply chain.
Logistics, marketing and customer
relations people are not focused on
sustainability, so there is need for
cross-pollination of knowledge and
practices.
Few business people come
from a discipline or a working
background that prepares them
for the breadth of topics in a
sustainability role. Strategic thinking
about sustainability and business
alignment across divisions is
therefore essential. Developing a
shared or compatible vision can
provide a basis for working and
learning together. It’s important
to create a learning environment
in which participants interact
to co-create a comprehensive
understanding of an issue, even if
they’re individually expected to be
the expert in their day-to-day role.
EMBEDDING NETWORKS
Participants indicated that they do
not usually communicate across the
corporate silos or with supply chain
corporations (except supply chain
specialists and buyers). All agreed
that ‘sustainability’ conversations
about supply chain processes would
not normally occur. The role of the
neutral facilitation was essential.
Facilitation helped to overcome
constraints to collaboration such
as time pressures, contractual
obligations, regulations and risks
that collaborative projects could
be perceived as anti-competitive.
Participants were highly
appreciative of the opportunity
to build these relationships and
to have these conversations, they
could see the immediate value and
that they were essential for the
future to break out of short-term
business-as-usual habits.
55
SHARED
UNDERSTANDING,
ASSUMPTIONS AND
INFLUENCE
Facilitation, voluntary participation
and a shared vision are all crucial
for participants to practise critical
systems thinking to explore the
roles of different systems (e.g.
individuals, business units or
organisations) and make explicit
the power relationships, leadership
and in?uence at different levels
of the system. The willingness of
all core participants to engage
in critical re?ection of one’s
assumptions, own role and impact
on the situation (constraining or
creating opportunities for change)
was important. For example, Bovis
Lend Lease provided a high level
of leadership and understanding of
sustainability. They played a pivotal
role in the project by:
perceiving the need for •
collaboration in a complex
challenge and proposing the
project
providing crucial information •
that built a rich picture of the
concrete supply chain
acting as advocates for •
the other participants.
Bovis Lend Lease argued that climate
change needs business leadership
to exceed the proposed GHG
reductions under the proposed ETS.
The opportunity to observe the
culture within this corporation also
served as a good case study for how
participants in this sector engage in
conversation about complex issues.
Entrenched values and behaviour
can reinforce institutional inertia
to change irrespective of senior
leadership for the change.
Developing the capacity and culture
to critically examine one’s own
role and assumptions, and discuss
expectations, roles and in?uence in
a systemic group can reveal roles,
power and politics that co-create
barriers or levers to change. The
act of sharing this information in a
group can threaten an individual’s
expert role. If they sense a loss of
control and in?uence, they may
become resistant or cause delays.
In one case, a senior executive
withdrew support from the
participation of employees in the
project, claiming that they weren’t
capable of systemic thinking.
MUTUAL BENEFIT AND
COLLABORATION
The program highlighted the
importance of establishing mutual
bene?t (‘what’s in it for me?’)
among stakeholder corporations
that in?uence the sustainability
problem. The mutual bene?ts
(or the mutual problems) should
be signi?cant enough to warrant
senior management support from
each organisation, and should
strategically align with corporate
priorities. It should offer more
than just ?nancial gains, and can
include tangible and intangible
sustainability gains, such as
improved staff morale or corporate
reputation.
Mutual bene?t also in?uences
the perceived advantages and
disadvantages of collaboration
among stakeholders within and
across supply chains. Successful
collaboration that alters current
business practices needs
participants to have compatible
visions that ?t their business
strategies.
In construction, the importance of •
transport and logistics operations
restricts any single company from
supplying the concrete needs
of a developer and construction
company. No system of standards
or ratings addresses the diversity
of sustainability issues involved
in the concrete supply chain.
Solutions to systemic messy
problems require collaboration to
build shared understanding of the
problems and potential solutions.
For example, the construction
companies jointly identi?ed that
industry inertia resulted from
a lack of incentives to obtain
information and increase the use
of the more sustainable concrete
products that were available.
It is essential to obtain senior-level understanding and active support
upfront. This helps to ensure commitment, strategic ?t and adequate
resourcing to avoid burnout in the champions.
56
One of the food companies •
?rst had to understand its
own interest and potential
risks before approaching
large retailer clients about a
collaborative project.
The need to establish mutual
bene?t and revise it during the
project became apparent. For
example, the mutual bene?t
amongst the construction
participants was less tangible,
more distributed and had longer
lead times than it did for the food
companies. As a result, it wasn’t
championed internally by senior
management and the enthusiasm
for the process was not as strong.
The bene?ts need to be clear to
senior management for participants
to have the direction and support to
actively engage with sustainability.
The participants also need to
see the bene?ts in the critical
systems and action learning
approach. That is, recognise that
a linear decision-making process
that assumes control over messy
problems is likely to fail and can
produce unintended consequences.
Understanding this helps to increase
the participants’ enthusiasm for
collaboration and willingness to
attend meetings, be open to new
ideas, think critically, implement
the change actions identi?ed and
become champions within their
corporations and with suppliers.
Systemic practice engages a range
of stakeholders because multiple
perspectives offer richer insights,
yet increased diversity brings with
it more agendas and different
interests. Judgment should be
exercised regarding the extent of
collaboration, and caution not to
assume that the mutual bene?t
for an individual or one group of
stakeholders applies to a larger
group. A reason underlying the
need for change in one project
generated some controversy
among supply chain members
whose business agenda didn’t
align with that reason and who
rejected its validity. This highlights
the importance, in creating the
conditions for collaboration (see
Learning to Think Systemically), of
identifying sources of in?uence,
power and levels of support.
Participants share perceptions of
risk, sensitivities and politics before
they surface unexpectedly.
BUILDING NEW
NETWORKS AND
RELATIONSHIPS
The participants built new networks
within their own corporations
and with a range of supply chain
members across their supply chains.
They acknowledged the need to
build trans-disciplinary relationships
because of the complexity and
diversity of sustainability issues.
These new sustainability teams
provided the participants with a
better understanding of how their
corporation operates, the range
of perspectives on the issue, and
the barriers and challenges to
organisational change.
It is also essential to obtain senior
level understanding and active
support upfront. This senior
management support helps ensure
commitment, strategic ?t and
adequate resourcing for the project
to avoid burnout in the champions
and to nominate other participants
in addition to the project leader.
This becomes particularly important
when an individual has competing
demands, and in situations of rapid
staff turnover.
CHAPTER SUMMARY
The diversity and complexity of
stakeholders and issues provided
the research and project teams
with challenging dilemmas about
how to best in?uence the systems,
and how to capture the outcomes.
Supply chains are complex, con?ict-
prone systems and embedding
sustainability principles within
these operations is providing new
challenges to people, and corporate
structures and mindset. In the
previous chapter we discussed two
supply chain projects, one with a
focus on technological research
and the other on multi-stakeholder
dialogue. Both were attempting
to work with messy, ill-structured
problems and explore solutions that
require systemic changes.
The program highlighted the importance for establishing mutual bene?t
or ‘what’s in it for me?’.
Where mutual bene?t was not clearly established the process and the
relationships needed to drive the change tended to ?ounder.
57
Chapters 1 and 2 introduced
the Sustainability in Supply
Chains program concepts and
the background to this research.
The approach was outlined in
Chapter 3. Chapter 4 discussed the
case studies, providing practical
examples of how the systems
approach was used and Chapter 5
discussed the factors that emerged
from these transformation activities.
This chapter discusses some
further ?ndings and insights from
the Sustainability in Supply Chains
program and projects.
TRANSITIONING TO A
SUSTAINABLE FUTURE
The overriding objective for the
program was to achieve general
sustainability gains in supply
chain companies and operations
via learning-based change. The
philosophy of the process behind
the Sustainability in Supply Chains
program was that change and
learning occur most effectively when
participants are actively engaged in
the change process of transitioning
to a more sustainable future.
The complexity of sustainability
challenges necessitates a learning-
based approach. Further, when
participants experience the full
range of issues and develop their
own strategies for in?uencing the
change process they take greater
ownership of the issue. Learning
is fundamental to the adaptive
management skills to cope with the
dynamic nature of sustainability.
Because the problems of
sustainability in supply chains
are too remote, too big and too
complicated and therefore dif?cult
to de?ne, each individual has a
different perception of the problem
based on their reality. Critical
systems analysis was proposed as
the methodology to account for
this diversity, while also facilitating
change with people and with the
entire supply chain system. The
aim was to develop a sustainability-
focused project team that:
acknowledges uncertainty and •
the multiple issues encompassed
in sustainability thinking
is ?exible enough to respond •
to the broader demands of the
sustainability agenda
developed their capacity •
to think and act sustainably
and accept the diversity
of responses required.
Ultimately some level of agreement
was reached about the actions
required to in?uence the supply
chain to create a desired future
state. The enquiry developed
a broad appreciation of the
various factors that in?uence the
participants’ ability to effectively
6 . T HE S I GNI F I CANCE OF T HI S P R OJ E CT
“How an organization
can effectively evaluate
its many options and
focus its sustainability
commitment (i.e.
investments) where
they will produce the
greatest measurable
impact within the
context of an often pre-
de?ned procurement
capital plan, remains a
noteworthy challenge
impacting the most well
intentioned groups.”
Intertek
Sustainability Solutions
President Andre Raghu
58
engage in processes of change
for sustainability. The critical
systems approach enabled a
more detailed understanding of
individual roles, perceptions of risk
and uncertainty, and power and
control among the participants
and their supply chain members.
THE VALUE OF SYSTEMIC
COLLABORATION
Observations suggest that ongoing
bene?ts from a collaborative supply
chain approach to solving messy
problems are:
Joint initiatives improve •
knowledge about problems
and overall operations by
developing knowledge about
processes and imperatives at
all points in the supply chain.
This will reduce the exposure
to increased costs through the
reduction in the use of energy
and other resources such as
packaging, water and waste.
Building understanding of the •
sustainability criteria positioned
collaborating corporations for
ETS and engaged them in a
process of thinking about how
to reduce their exposure to ETS
and manage other emerging
issues, e.g. embodied energy,
energy ef?ciency, carbon
labelling and food miles.
Collaborative work has the •
potential to improve all parties’
sustainability credibility
through the development of
systems that demonstrate
the sustainable credentials of
products. New products and
processes often emerge from
conversations and analysis of
broader supply chain issues.
BUILDING A CULTURE
OF CHANGE TOWARDS
SUSTAINABILITY
To achieve effective learning
and cultural change towards
sustainability in organisations and
their supply chains, it is critical to:
ascertain the participants’ •
level of understanding of
sustainability issues and
challenge assumptions
align the sustainability initiatives •
with the business model
establish an ongoing multi- •
disciplinary team for driving
sustainability initiatives.
Building partnerships and
constructive working teams
takes time. To avoid loss of
momentum due to the challenges
of implementing transformational
projects it is important to
realistically appraise the pressures
of the operational environments,
and time required to make change
happen and for learning to occur.
Where change is occurring in
conditions of certainty – that is,
history, trends and facts provide
more con?dence in outcomes –
trust in buyer/seller relationships is
less important. Where change and
decisions are occurring in situations
of high risk and uncertainty,
trust and establishing mutual
bene?t between supply chain
stakeholders is more important.
In these circumstances advice is
often sought from trusted advisors.
However, these advisors are
often not equipped to deal with
the complexity of sustainability
problems and solutions. Leaders
need to draw on inter-disciplinary,
multi-stakeholder sources of
information and develop skills for
strategic decision making within
emergent, uncertain environments
such as supply chains. For example,
some participants had a very low
awareness of sustainability – no
knowledge of fundamental issues,
corporate social responsibility,
sustainability reporting frameworks
and so forth. Others took
sustainability as an extension of
environmental regulation and
regard it as a GHG measurement
process, yet others understand the
broader context but seek advice
on how to think systemically, to
in?uence the culture and the
decision making processes in their
organisations.
59
There were indications that a sense
of ‘powerlessness’ exists within
some people, that this type of
thinking is too complex, exceeds
their role, and the system doesn’t
facilitate this type of dialogue.
The limited project time frame
was also a contributing factor.
Building shared understanding and
knowledge about how to engage
sustainably with supply chain
participants, who do not normally
communicate, takes time and
external facilitation. Collaborative,
transitional projects need to be
sensitive to:
the complex networks of •
information sources used by
corporations and industry
associations
the diversity of stakeholders •
in each industry sector, the
‘green’ fringe, the ‘industry
leaders’, the ‘laggards’, the
lobby groups and the minority
gender and ethnic groups
the diversity of relationships •
and potential tiers of
resistance to change
the value systems – such as •
individualism, management
control, and IP ownership
future positioning and •
opportunities for embedding
sustainability in corporate
supply chains.
The projects established network
interactions and common goals
that have the potential to in?uence
long-term learning and outcomes
in the participant corporations.
The Sustainability in Supply Chains
program indicates that when
participants have unambiguous
information about agreed, practical
industry solutions, and they can
see the ‘win-win’ from collaborating
with a supply chain partner, they are
likely to positively embrace changes
to work practices, providing that:
con?ict of interests can be •
negotiated
sense of control is not •
threatened (i.e. it does not place
their systems at risk)
it does not involve major •
expense and time
people are supported through •
the process
the corporation and government •
provide leadership, support and
consistent messages to support
the vision.
SUMMARY
The Sustainability in Supply
Chains program ?ndings have
been presented at several forums.
For example, the supply chain
diagrams were used as a reference
point by presenters at a Concrete
Research Forum and the focus
group summary was provided
as background reading and the
outcomes were used as guidelines.
The ?ndings of this ARIES program
correlate with those of an action
research project for collaborative
improvement in European supply
networks (Middel et al 2005 p. 377).
Those researchers found that there
was a need for organisations ‘to
understand each other’s positions
and to create a shared sense
of direction’; create a learning
environment to communicate
information; generate trust and
commitment; use tools and frequent
workshops; and have a facilitated
learning process. These authors
drew a similar conclusion: ‘Action
learning has provided a useful
methodology for the development
of a capacity for learning as part
of the collaborative improvement
process’. (p 378).
The supply chain program has
wider implications because it deals
with messy problems and solutions
that aim to change practices
through systemic learning using
a collaborative approach. While
the study was very short, one year,
it enabled the opportunity for
several companies to in?uence
their supply chains and to explore
the challenges of building
collaborative partnerships.
60
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ARIES Australian Research Institute in Education for Sustainability.
Action
research
Action research aims to involve practitioners as co-researchers of their own practice, to improve
a situation of concern and to innovate practice. It views change as the desired outcome, and can
empower individuals and build capacity to bring about ongoing systemic change. In this way,
action research can generate transformation for sustainability.
A collaborative approach that bridges action and research, action research is often represented
as a four-phase cyclical process: plan formation, action, outcome observation and re?ection.
Through critical enquiry and the cyclical process of evaluating and validating the research
?ndings, action research builds rigor into the process of developing grounded theories for
improving practice.
Action learning Action learning is a process designed to build the capacity of an individual using critical
re?ection and assessment. The outcome is improved practice by learning from re?ection on
action and sharing experiences with others.
Action learning is a collaborative process where participants develop an action plan, implement
the plan, and critically re?ect on their actions, and learn through sharing experiences. A
facilitator or mentor assists the participants through the action learning process. Action
learning is often used in bringing a group of people together to critically re?ect on and improve
professional knowledge and practice.
AMT Automatic manual transmission.
CIA Concrete Institute of Australia.
CNG Compressed natural gas.
CSA Critical systems analysis.
Critical
re?ection
Critical re?ection is an ongoing process of questioning assumptions and considering one’s own
experience of applying knowledge in practice. It can reveal cultural expectations, social norms
and political structures. This deeper understanding can identify opportunities for change and
improved practice.
Critical systems
thinking
Critical systems thinking requires people to think critically about their assumptions and
interests. It asks individuals to consider the impacts of the solution(s) on the external and
internal environment, and vice versa.
DEWHA Australian Government Department of the Environment, Water, Heritage and the Arts.
DC Distribution centre.
DPD Diesel particulate diffuser.
GL OS S AR Y AND ACR ONY MS
63
Education for
sustainability
(EfS)
Education for sustainability seeks to develop the knowledge, skills, values and attitudes
necessary to adapt and make changes that are more sustainable. Education for sustainability
examines both the content and context of the learning, and the learning process itself to build
individual and organisational capability for sustainability, which is a dynamic concept.
Some core tenets of education for sustainability are:
imagining a better future: envisioning or futures thinking •
systemic thinking •
critically re?ective thinking •
participation in decision-making •
partnerships for change. •
EGR Exhaust gas recirculation.
ETS Emissions trading scheme.
GF Goodman Fielder.
GHG Greenhouse gases.
GMO Genetically modi?ed organism.
GRI Global reporting initiative.
IP Intellectual property.
KPI Key performance indicator.
LCA Life cycle analysis.
LPG Liqui?ed petroleum gas.
SCM Supplementary cementitious material.
SCR Select catalytic reduction.
Supply chain A ‘network of facilities and distribution channels that encompasses the procurement of
materials, production and assembly, and delivery of product or service to the customer’ (OECD
2001, p 2).
Supply chain
management
The process of planning, implementing and controlling the operations of the supply chain.
SME Small and medium sized enterprises.
Value chain The value adding activities that an organisation provides to support the ef?cient operation of
the supply chain and deliver maximum value as perceived by the customer. These can include
infrastructure management, human resources, research and development, sales and marketing.
© Commonwealth of Australia [2009]
ISBN 978-1-74138-328-7
This work is copyright. Apart from any use as permitted under the Copyright Act 1968, all other
rights are reserved. Information contained in the publication may be copied or reproduced for
study, research, information or non-commercial educational purposes, provided the source
is fully acknowledged.
DISCLAIMER:
The views and opinions expressed in this publication are those of the authors and do not
necessarily re?ect those of the Australian Government or the Minister for the Environment,
Heritage and the Arts or the Minister for Climate Change and Water.
While reasonable efforts have been made to ensure that the contents of this publication
are factually correct, the Commonwealth does not accept responsibility for the accuracy or
completeness of the contents, and shall not be liable for any loss or damage that may be
occasioned directly or indirectly through the use of, or reliance on, the contents of this publication.
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