Evaluating supply line sustainability and business environmental risk

This paper introduces the concept of using sustainability as a fundamental measure of supply line risk and hence business continuity risk for companies. A novel approach that integrates the Sustainability Target Method (STM) and Economic Input-Output Life Cycle Analysis (EIO-LCA) has been developed to evaluate supply line sustainability and business environmental risk. The objective is to assess sustainability and risk associated with various classifications of supply line commodities. The EIO-LCA tool is used to quantify the environmental impact or 'footprint' for fifteen industry sectors that contribute to the United Technologies Corporation (UTC) supply line, specifically the immediate sectors from which production parts are obtained. Each commodity sector consists of one or more SIC codes, which can be cross referenced to Commerce Sector and NASIC designations. The STM links environmental impact with economic value by uniquely defining Resource Productivity (RP) and Eco-Efficiency (EE). In essence, it requires that the economic value of products and services be proportionally not less than the environmental burden they cause. This provides EE = 100% as a practical sustainability target for individual businesses that will lead to a sustainable economy. The STM is used to evaluate commodity sectors for risk by deriving the risk-adjusted sector Eco-Efficiency, EE_R. This relates naturally to EE and provides a target threshold for risk that is analogous to the sustainability target, allowing unique insight into the relationship of sustainability and business risk.