The impact of leanness on supply chain sustainability: examining the role of sustainability control systems

• DOI: https://doi.org/10.1108/CG-06-2020-0217
• Date: 13 January 2021
• Published date: 13 January 2021
• Pages: 410-432
• Subject Matter: Strategy,Corporate governance
• Author: Hasitha Dinithi Rupasinghe,Chaminda Wijethilake

The impact of leanness on supply chain

sustainability: examining the role of

sustainability control systems

Hasitha Dinithi Rupasinghe and Chaminda Wijethilake

Abstract

Purpose –An alignment betweenfinancial and operational measures is an essential element to capture

the lean productivityimprovements enabling supply chain sustainability.With the aim of supporting small

and medium-sizedenterprises (SMEs) in addressing corporatesustainability challenges,this study aims

to examinethe impact of leanness on supply chainsustainability, and the moderatingrole of sustainability

controlsystems (SCS) on the relationship betweenleanness and supply chain sustainability.

Design/methodology/approach –Drawing on lean manufacturingand the levers of control framework,

survey data was collected from 106 manufacturing SMEs in Sri Lanka. Moderated multiple regression

analysiswas used to test the proposed hypotheses.

Findings –The study finds that lean manufacturing practices, such as just-in-time deliveries, quality

management,environmental management and employeeinvolvement show a significant positiveimpact

on supply chain sustainability. As proposed, the interactive use of SCS shows a significant, positive

moderating impact on the relationship between employee involvement and social supply chain

sustainability. The diagnostic use of SCS negatively moderates the relationships between just-in-time

deliveries and economic supply chain sustainability, and environmental management and economic

supply chain sustainability. However, both interactive and diagnostic uses of SCS do not show any

significant moderating impact between lean manufacturing and environmental supply chain

sustainability.

Research limitations/implications –The following limitations should be taken into account in

interpretingthe results and implications of this study. Firstly,the study refers to supply chain sustainability

as environmental,social and economic sustainability.As these concepts represent broaderperspectives

of sustainability,and no consensus on how to measure has yetbeen agreed, future studies may focus on

other variables that might capture different perspectives of supply chain sustainability. Secondy, future

researchers may further extend the role of SCS (including all four control systems –belief, boundary,

interactive and diagnostic) in examining the impact of leanness on supply chain sustainability. Thirdly,

this study has considered a sample of manufacturing SMEs in the Western province in Sri Lanka. The

results should be carefully generalised to other manufacturing organisations in Sri Lanka and beyond.

Finally, futurestudies may also investigate the impact of leannesson supply chain sustainability by using

alternativemethodologies, such as multiplecase studies.

Originality/value –SMEs are more likely to focus on diagnostic control systems with the aim of

promoting economic supplychain sustainability. However, the findings revealthat manufacturing SMEs

in the developingcountry context lack strong SCS to enablesupply chain sustainability.

Keywords Management control systems, SMEs, Lean manufacturing, Leanness,

Supply chain sustainability, Sustainability control systems

Paper type Research paper

1. Introduction

Addressing sustainability issues arising from unprecedented human and environmental

system changes is one of the biggest challenges that contemporary society has struggled

with thus far (Ajmal et al., 2018;Hussain et al.,2018;Bastas and Liyanage, 2019;de Haan-

Hasitha Dinithi Rupasinghe

is based at the Faculty of

Graduate Studies, General

Sir John Kotelawala

Defence University,

Ratmalana, Sri Lanka.

Chaminda Wijethilake is

based at the Essex

Business School, University

of Essex, Colchester, UK.

Received 27 February 2020

Revised 28 November 2020

Accepted 29 November 2020

PAGE 410 jCORPORATE GOVERNANCE jVOL. 21 NO. 3 2021, pp. 410-432, ©Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-06-2020-0217

Hoek et al.,2020;Aray et al.,2020;Wijethilake and Upadhaya, 2020). Growing stakeholder

concerns over unsustainable manufacturing practices have forced businesses to integrate

sustainability strategies within their supply chains (Carter and Washispack, 2018;Bellisario

and Pavlov, 2018;Huo et al.,2019;Kusi-Sarpong et al.,2019;de Haan-Hoek et al.,2020).

While traditional supply chain management practices focus largely on economic and

financial performance, sustainable supply chain practices focus on effectively managing

supply chain functions to facilitate stakeholder well-being, minimise negative environmental

impact and, in turn, enhance corporate sustainability performance (Bastas and Liyanage,

2019;Kusi-Sarpong et al.,2019). Organisations with a proactive sustainability approach

tend to implement management best practices, such as lean manufacturing, as a means of

responding to growing sustainability challenges (Wijethilake et al., 2017). However, senior

management often face unprecedented challenges to achieve supply chain sustainability

through leanness because of lack of management control systems (MCS) [1] that support

sustainable operations (Balkau, and Sonnemann, 2010;Nawanir et al., 2020a,2020b;de

Haan-Hoek et al., 2020). Regardless of the enormous contribution made by small and

medium-sized enterprises (SMEs) to the environmental, social and economic development,

little is known about how these enterprises manage their lean manufacturing practices

(Sajan et al.,2017). The aim of this study is to examine the moderating role of sustainability

control systems (SCS) on the relationship between leanness and supplychain sustainability

in SMEs.

Lean manufacturing has been well recognised as a productivity enhancement strategy

through waste elimination, inventory control, capacity enhancement, continuous

improvement and operational performance (Huo et al.,2019;Kaufmann, 2020;Nawanir

et al., 2020a,2020b). Despite the potential benefits deriving from lean manufacturing,

organisations often struggle to implement lean strategies (Netland and Aspelund, 2014;

Netland et al., 2015;Nawanir et al., 2020b). To be effective, senior management should

approach lean strategies from a holistic perspective instead of as an isolated operation

(Fullerton et al., 2014,2013). Yet, a growing number of studies highlight that organisational

failure to integrate operational and financial functions substantially undermines the

predicted operational achievements (Li et al., 2012;Fullerton et al.,2014;Netland et al.,

2015), and leads to resistance in implementinglean manufacturing strategies (Meade et al.,

2010;Nawanir et al., 2020b). Fullerton et al. (2014, p. 425) emphasise that “it is not enough

for operations management to implement a well-executed lean manufacturing strategy.

Instead, operations management must work with accountants to ensure that the underlying

financial control data are aligned with lean manufacturing initiatives”. The alignment

between financial and operational measures is an essential ingredient to capture lean

productivity improvements (Li et al., 2012). Fullerton et al. (2014, p. 414) further highlight

that “operations and accounting personnel must partner with each other to ensure that lean

MAP [management accountingpractices] are strategically integrated into the lean culture”.

As a supportive internal system, the role of MCS is imperative in facilitating lean operations

as they provide critical financial and cost information imperative for decision-making

(Fullerton et al.,2014,2013;Netland et al.,2015). More specifically, the extent to which

MCS are aligned with operational strategies will foster thesuccessful implementation of lean

manufacturing strategies (Liker, 2004;Kennedy and Widener, 2008;Anand et al.,2009;

Bititci et al., 2011;Fullerton et al.,2013;Netland et al., 2015). However, the role of MCS in

lean manufacturing has been criticised for its traditional nature of standard and rigid control

practices which tend to hinder the smooth functioning of lean operations (Cooper and

Maskell, 2008;Maskell et al.,2012;Tillema and van der Steen, 2015). For instance, Maskell

et al. (2012, p. 2) comment that traditional accounting “systems do not work for companies

pursuing lean [...]; indeed they are activelyharmful”. Nevertheless, the role of accounting in

implementing lean manufacturing strategies is essential as cost information plays a

significant role in strategic decision-making. It is within this context that Maskell (2000,

p. 46) argues “the financial community [needs] to contribute to the implementation of lean

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