Supply chain sustainability risk and assessment

Abstract

Risk on the supply chain from various sustainability-related factors has increasingly become relevant to companies in many industries. There however still lacks a comprehensive method to quantitatively evaluate supply chain sustainability risk taking into account the triple bottom line of sustainability (economic, social, and environmental). This study develops a framework to evaluate supply chain sustainability risk by measuring supply chain-wide operational risk, social risk, and environmental risk to form an aggregate metric. A set of indicators readily available in literature are used to represent various aspects of supply chain sustainability risk. Risk assessment space and materiality analysis are then used to prioritize resource allocation among supply chain stages from two distinct perspectives for mitigating supply chain sustainability risk. Two case studies are provided to demonstrate the application of the developed framework, representing two main types of supply chain structure. The apparel industry example represents the deep-structure supply chain driven by relatively simple products, while the automotive industry example represents the broad-structure supply chain driven by more complex products. While the case studies focus on industry-level assessment for demonstration purpose, the developed framework can be flexibly applied to evaluate supply chain sustainability risk for specific companies in any industry.