Electronic products, in particular, illustrate the issues with the sustainability of current business practices. According to the EPA, the United States generated 3.14 million tons of electronic waste (e-waste) in 2013. About 40 percent of e-waste is recycled, with the remainder trashed in landfills or incinerators.³ Of the e-waste eventually recycled, some are shipped to developing countries for processing, although estimates vary between a mere 0.13 percent (International Trade Commission) and 10–40 percent (United Nations). This overseas shipment of e-waste is a gray legal area, as international treaties prohibit shipment of toxic waste across countries (and electronic waste is considered toxic, due to significant amounts of lead, mercury, cadmium, and other chemicals). Consumers typically replace their cell phones in the United States every two years (a standard contract with wireless carriers). In 2012, 140 million cell phones were thrown away, ending up in landfills in the United States, although there is a significant growth in the second-hand smartphone market.⁴ These statistics have not been ignored by policy makers, who have been and are devising take-back legislation for electronic waste (e-waste), which holds manufacturers responsible for collection and environmentally responsible recycling of electronic products post-consumer use; this is a topic of Chapter 2 in this book.

Global warming has prompted some countries to devise legislations targeted at reducing the level of greenhouse gas emissions. The European Union Emission Trading Scheme (EU ETS) was the first large greenhouse gas emissions trade scheme in the world, established in 2005, and it regulates more than 10,000 installations with a net heat excess of 20MW in the energy and some industrial sectors that are heavy emitters of CO₂ (such as cement, steel, paper and pulp, aluminum, and chemicals) collectively responsible for close to 50 percent of the EU’s CO₂ emissions. The government (each member state in the EU, such as Germany) issues each heavy emitter a number of emission allowances (allowing it to emit a certain amount of CO₂ per year); these facilities can then buy and sell these allowances in a market place. This provides incentives for these facilities to reduce their CO₂ emissions, due to its market-based economic value. The amount of allowances issued by the government determines the economic value of CO₂, and consequently the resulting levels of CO₂ actually emitted. As a historical note, this type of legislation, known as cap-and-trade, has also been implemented in the United States to decrease the amount of SO₂ emissions, in order to mitigate the problem of acid rain. Thus, firms under direct regulation of CO₂ in the EU must track their emissions. However, it is likely that cap-and-trade (or another type of legislation such as a carbon tax) will spread around the world, including in the United States. Many firms also view lower carbon emissions as a sign of higher efficiency in their processes, since energy consumption is directly correlated with carbon emissions. Efficiency means lower costs, and as a result, proactive firms take steps toward tracking and reducing their CO₂ emissions. Carbon footprinting is addressed in Chapter 3.

Another trend in environmental sustainability concerns labels associated with green products or facilities. For example, Walmart’s concern for the sustainability of fisheries (and hence its future supply of fish) led it to target 100 percent of its farmed and wild seafood to be Marine Stewardship Council (MSC) certified; in 2017, this figure was in excess of 90 percent in the United States⁵ Green buildings provide savings in energy consumption (through smart appliances, use of natural light and smart lighting), and water consumption (through rainwater capture and water-efficient fixtures), although a significant portion of green building savings, which are used to justify such investments, come in the form of enhanced worker productivity.⁶ The Certification of green buildings via the Leadership in Energy and Environmental Design (LEED) rating system, promoted by the U.S. Green Building Council is being adopted rapidly: The number of LEED certified buildings grew from 11 in late 2000 to 1000 in late 2005 to 37,300 in 2017.⁷ As an example, the Empire State Building was retrofitted, reaching energy consumption savings of 38 percent, and awarded Gold LEED Certification in September of 2011. More details on LEED Certification are discussed in Chapter 4, and sourcing green products is addressed in Chapter 8.

Another way to put this is—a sustainable operation considers the triple bottom line when carrying out its decisions: economic (profit), social (people), and environmental (planet). When Walmart made its decision to source 100 percent of its wild seafood MSC certified, it considered the triple bottom line: economic (since fish caught in a sustainable manner guarantees Walmart’s future supply and consequently future revenues), social (since fish caught in a sustainable manner guarantees the livelihood of fish farmers for future years), and environmental (since fish caught in a sustainable manner avoids the depletion of fisheries). In this book, we will focus primarily on the economic and environmental aspects of sustainability, although Chapter 9 is dedicated exclusively to the social aspect of sustainability. There are several reasons for this focus:

Closed-loop supply chains are a key aspect of environmental sustainability; we introduce this topic next.

As an example of CLSC, consider the supply chain for diesel engines and parts for Cummins (Figure 1.1). Figure 1.1 depicts representative flows in this supply chain; the flows are differentiated between forward and reverse flows. Forward flows consist of new parts and/or engines, and reverse flows consist of used parts and/or engines, and remanufactured parts or engines. Remanufacturing (or refurbishing) is the process of restoring a used product (i.e., post-consumer use) to a common operating and esthetic standard. For a diesel engine or module, remanufacturing consists of six different steps: (i) full disassembly, (ii) cleaning of each part (often through multiple sequential techniques), (iii) making a disposition decision for each part (keep for remanufacturing or dispose the part for materials recycling), (iv) remanufacturing (value-added work that restores functionality and appearance similar to a new part), (v) re-assembly, and (vi) testing.

New engines are produced and assembled from new parts, some of which originate from Cummins’ suppliers, who also supply the firm’s distribution center with spare parts. New engines are shipped to a main distribution center, from where they are then shipped to several regional distribution centers (not depicted in Figure 1.1), and from there to over 3,000 dealers in North America. Customers buy new (or remanufactured) diesel engines or engine modules. They receive a dollar credit from returning the old engine or modul...