Value Chain; Sustainability One way the value chain can be helpful is to provide a basis for a company to determine the full cost of its product or service, over the entire value chain. Often companies tend to focus only on manufacturing costs and ignore the upstream (design and testing, etc.) and downstream (marketing, distribution, etc.) costs of the product or service. Full value-chain analysis of this type is useful to the consumer as well as the manufacturer. For example, a product might be inexpensive to buy, but the operating costs may be higher than expected. Lockhart et al. ( Strategic Finance, January 2011) illustrate this example with the case of a company, CleanTech, which provides a cleaning service to owners of large storage tanks that often contain hazardous liquids such as fuel oil or toxic chemicals. CleanTech is considering the purchase of a new system for cleaning tanks that is somewhat more expensive than its current equipment, but one which could reduce both operating costs and the amount of environmentally harmful waste product that must be disposed of after the cleaning process is complete.
Required:
1. What is the role of the value chain in CleanTech’s purchase decision?
2. In its analysis, how should CleanTech include the disposal of the environmentally harmful waste product?
3. Consider how CleanTech might use a balanced scorecard with a sustainability perspective and what the measures in this sustainability scorecard might include. Give two or three examples of possible sustainability measures.
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