Sustainable Supply Chain Management: A Cross-Disciplinary Analysis of Environmental Economics and Corporate Strategy

Abstract

Sustainable Supply Chain Management (SSCM) has emerged as a critical domain at the intersection of environmental economics and corporate strategy. Traditional supply chains were designed primarily to minimize cost and maximize efficiency; today, they must also internalize environmental externalities, manage climate and resource risks, and respond to evolving stakeholder expectations. This paper offers a cross-disciplinary analysis of SSCM by integrating core concepts from environmental economics, such as externalities, public goods, and optimal resource use, with strategic management perspectives on competitive advantage, value creation, and firm capabilities. Drawing on key books in environmental economics and supply chain management, the paper develops an integrated conceptual framework for sustainable value creation along the supply chain. A brief qualitative methodology section explains the use of conceptual synthesis and illustrative case studies. The discussion analyses how instruments like carbon pricing, life-cycle costing, and extended producer responsibility intersect with strategic tools such as the value chain, resource-based view, and dynamic capabilities to reshape supply chain design and governance. Case studies of Unilever, Walmart, Patagonia, and Toyota demonstrate how leading firms leverage SSCM to reduce environmental impacts while pursuing strategic benefits, and also highlight persistent challenges and trade-offs. The paper concludes that integrating environmental economic logic into corporate strategy is no longer peripheral but central to building resilient, competitive, and future-ready supply chains.

Introduction

Supply chains are essential to the global economy, traditionally optimized for cost, quality, speed, and flexibility. However, environmental pressures such as climate change, biodiversity loss, and resource scarcity have made sustainability a strategic imperative. Environmental economics highlights how unpriced externalities—like emissions, deforestation, and water use—create social costs that are often ignored by firms, while corporate strategy emphasizes aligning unique capabilities and activities for competitive advantage. Sustainable Supply Chain Management (SSCM) integrates these perspectives by internalizing ecological costs and leveraging them to create economic, environmental, and social value simultaneously.

SSCM involves redesigning supply chains with circularity, low-carbon logistics, sustainable sourcing, and product stewardship. Tools like life-cycle assessment, carbon accounting, supplier scorecards, and science-based targets help firms measure and manage impacts, while governance mechanisms ensure incentives are aligned across supplier tiers. Strategic capabilities such as traceability, multi-stakeholder collaboration, and dynamic adaptation are crucial for embedding sustainability into core operations.

Illustrative cases show how leading firms implement SSCM:

• Unilever achieves deforestation-free supply chains by internalizing externalities and enhancing brand equity.

• Walmart’s Project Gigaton reduces Scope 3 emissions through supplier collaboration and efficiency improvements.

• Patagonia integrates environmental responsibility deeply into products and consumer engagement, building loyalty and differentiation.

• Toyota links lean, Just-in-Time production with circular and low-carbon practices, reducing waste and preparing for sustainable mobility.

Conclusion

This paper has argued that Sustainable Supply Chain Management can only be fully understood-and effectively implemented - by integrating environmental economics with corporate strategy. Environmental economics clarifies why supply chains generate environmental and social harms in the first place: externalities, public goods, and common-pool resource problems manifest along globally dispersed networks of suppliers and intermediaries. It also offers tools-carbon pricing, life-cycle valuation, extended producer responsibility-that can realign private incentives with social and ecological goals. Corporate strategy, by contrast, explains how firms can respond to these forces in ways that generate durable competitive advantage. Porter’s value chain, Hart’s sustainability-driven capabilities, and the broader strategy literature show that reconfiguring supply chains for sustainability is not merely a cost or constraint. It is also an opportunity to innovate products and processes, open new markets, protect brand equity, and build resilience against regulatory and physical risks. The literature on SSCM, exemplified by Sarkis and by Seuring and Müller, demonstrates that triple bottom line performance is now an expectation rather than a niche aspiration. SSCM requires firms to extend responsibility beyond their factory gates, to manage upstream and downstream impacts, and to collaborate with diverse actors-suppliers, customers, NGOs, and policymakers. Case studies of Unilever, Walmart, Patagonia, and Toyota illustrate that leading firms are already experimenting with deforestation-free sourcing, gigaton-scale emissions reductions, deep environmental responsibility, and lean-green production systems. These examples show both the potential of SSCM and the challenges of scale, traceability, trade-offs, and evolving stakeholder expectations. Looking ahead, stronger carbon pricing regimes, stricter due-diligence laws, digital traceability, and rising climate risks will intensify the pressure on firms to integrate environmental economic logic into their supply chain strategies. Companies that build robust SSCM capabilities, combining economic rigor, ecological awareness, and strategic foresight—are likely to be better positioned to thrive in a carbon-constrained, resource-scarce, and stakeholder-sensitive world.

References

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Copyright

Copyright © 2025 Dr. N. Kowsalya, Ms. S. Priyadharshini, Kavimozhi M, Ganesh S. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.