There is growing interest in integration of sustainability into business planning decisions under a sustainable development framework. Environmental accounting methodologies for collection, measurement, and disclosure of financial and environmental impacts of strategic and operational managerial decisions are developed and utilized by business entities worldwide for effective management of both organizational and operational environmental protection policies. At the operational level, while extant literature has primarily focused on managerial decision making under different voluntary and regulatory emission pricing schemes, the intersection of economic (monetary) and environmental impact (non-monetary/physical) dimensions of sustainable development goals has received scant attention. This paper examines the intersection of the environmental and economic goals of sustainable development initiatives of a focal firm, which is engaged in the primary activities of production and/or transportation and storage of a single product within a forward supply chain. This paper assumes the presence of a responsive “green market ” through modeling of consumer awareness and response induced by the firms’ environmental footprint disclosures. Through quantitative modeling approach, normative conclusions are derived on the compatibility of economic and environmental goals of sustainable development initiative. The results indicate the presence of convergence, divergence, and avoidance decision zones in balancing the environmental and economical goals of the firm’s sustainable development for production and storage efficiency. The paper explicitly establishes the boundaries of the operational zones within the domain of the firm’s environmental reduction and operational efficiency efforts. The results demonstrate that the efficacy of voluntary or regulated emission reduction targets depends on the firm’s existing environmental and operational cost structures, and hence emission reduction targets must be well planned to avoid adverse environmental impact or operational inefficiencies. Furthermore, it is demonstrated that in a green responsive market, there may exist critical emission reduction thresholds below which the economic and environmental benefits of sustainable development initiatives diverge.

Introduction

More companies world-wide are incorporating sustainability into their strategic and operational goals and business planning decisions. According to CDP North America, Inc. (2016) globally over 1200 companies either are currently using or plan to apply an internal proxy carbon price in their business decisions for assessing the financial impact of environmental emissions in company’s operation and supply chain, making emission a factor of production, assessing sustainability initiatives for financial and environmental viability, allocating resources toward lower emission activities, research and development investment prioritization, and mitigation of risk from future emission pricing regulations. The list of over 100 North American corporations, across different business sectors, that have embedded carbon pricing in their decision processes include General Motors (Consumer Discretionary), Colgate-Palmolive (Consumer Staples), Exxon-Mobil (Energy), BNY Mellon (Financial), Allergan (Healthcare), General Electric (Industrials), Microsoft Corporation (Information Technology), and Eastman Chemical (Materials). The growing trend in integration of sustainability in corporate decision making and embedding carbon price to quantify financial and environmental impact of firm’s activities is also supported by research and development of financial and managerial environmental accounting and protocols for collection and measurement of scope 1 and scope 2 emissions at organizational and product levels and the economic and environmental performance of the firm (Stechemesser and Guenther (2012) and Tsai et al. (2012)). Cornin et al. (2011), Chabowski and Gonzales-Pardon (2011), Kleindorfer, Kaylan, and Van Wassenhove (2005), Corbett and Kliendorfer (2001), Seuring and Muller (2008), Seuring (2013), Ashby, Leat, and Hudson-Smith (2012),Jaehn (2016) provide recent surveys on sustainability related literature in strategy, management, marketing, and operations, indicating a proliferation of both academic and practitioner research in this area over the past two decades.