Managing Paradoxical Trade-Offs: Sustainability and Diversification Strategies of Supply Managers

Abstract

This paper investigates how practicing supply managers evaluate the paradoxical trade-offs of environmental and social sustainability relative to cost and supply diversification. Although sustainable business practices are important, firms often struggle to translate these goals into actions. As sourcing decisions are key to sustainable supply chains, we investigate how managers make trade-offs in supplier selection. We completed a discrete choice experiment with 217 experienced professionals, with realistic levels based on observed supplier evaluations. We show how these practicing supply managers value and trade-off between location diversification, environmental sustainability, and social sustainability. We found that managers resisted selecting new suppliers with worse sustainability profiles and were willing to incur slightly higher costs for suppliers with better environmental and social performance. These results were stronger for managers at lower levels of the firm. Managers also valued environmental performance more than social performance, and lower-level managers were more likely to view these as substitutes. Specific to risk management, supply managers were willing to pay more for increased geographic diversification of the suppliers, even if adding diversification resulted in poorer environmental performance. However, they were reluctant to add new suppliers within the same country unless doing so also improved environmental performance. Understanding how practicing supply chain professionals value and trade-off competing priorities when selecting suppliers can help companies manage risk and improve environmental and social sustainability.