Supply Chain Strategies and Carbon Intensity: The Roles of Process Leanness, Diversification Strategy, and Outsourcing

Abstract

Using firm-level data from the U.S. manufacturing industry, this paper examines the relationship among inventory leanness, structural strategies for supply chains, and the carbon intensities of a firm and its suppliers. We formulate hypotheses on and empirically test whether this internal characteristic (inventory leanness) and these two structural strategies can influence the intensities of firm-level and supply chain environmental impacts. We examine inventory leanness because it not only reflects a manufacturer’s operational efficiency but also markedly influences manufacturers’ financial performance. We also focus on two closely related structural strategies (outsourcing and product diversification) that can influence the scope and ownership of the supply chain process, resulting in changes in emission allocation and, more importantly, how resources are utilized and shared in a firm. Based on multi-year carbon inventory data from U.S. manufacturing firms, we find that manufacturers with greater inventory leanness and a parsimonious process structure (i.e., a high level of outsourcing but low product diversification) tend to attain lower firm-level and supply chain carbon intensities.