Sustainability development for supply chain management in U.S. petroleum industry by DEA environmental assessment

Environmental assessment and protection are important concerns in modern business. Consumers are interested in environmental protection. They avoid purchasing products from dirt-imaged companies even if their prices are much less than the ones produced by green-imaged companies. The green image is very important for business survivability in our global market. A business concern associated with the green image is how to attain corporate sustainability where companies can attain both economic success and pollution prevention in their operations. There is tradeoff between economic prosperity and environmental concern. To attain a high level of corporate sustainability, companies need to measure the current performance in terms of their operational and environmental achievements. This study proposes a use of Data Envelopment Analysis (DEA) for such assessment. The proposed DEA assessment provides corporate leaders and managers with not only the measure of corporate sustainability but also information regarding how to invest for technology innovation for abatement of undesirable outputs (e.g., CO2). As an application, this study utilizes the proposed approach to measure the corporate sustainability of petroleum firms in the United States. The petroleum industry is functionally separated into integrated and independent companies. The integrated companies, referred to as “Major”, have their large supply chains for both “upstream” (e.g., exploration, development and production of crude oil or natural gas) and “downstream” (e.g., oil tankers, refineries, storages and retails). Meanwhile, the independent companies focus upon the upstream function, but not the downstream, in their business operations. The empirical comparison between the two groups of petroleum firms identifies that the integrated companies outperform the independent companies because a large supply chain incorporated into the former group provides them with both a scale merit in their operations and an opportunity to obtain consumer's opinions on their business operations. Thus, the large supply chain system, covering business functions for upstream and downstream, enhances corporate sustainability in the U.S. petroleum industry. It is easily envisioned that the empirical findings discussed in this study are useful in preparing business strategy and industrial policy for the petroleum industry of not only the United States but also other nations involved in oil and gas production.