Technological Forecasting & Social Change: Aref Agahei Hervani, Joseph Sarkis, Marilyn M. Helms

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Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

Contents lists available at ScienceDirect

Technological Forecasting & Social Change


journal homepage: www.elsevier.com/locate/techfore

Environmental goods valuations for social sustainability: A conceptual


framework
Aref Agahei Hervania, Joseph Sarkisb, Marilyn M. Helmsc,⁎
a
Armstrong State University, 11935 Abercorn Street, Savannah, GA, United States
b
Foisie School of Business, Wooster Polytechnic University, 100 Institute Road, Worcester, MA 01609-2280, United States
c
Ann and C. Lamar Wright School of Business, Dalton State College, 650 College Drive, Dalton, GA 30720, United States

A R T I C L E I N F O A B S T R A C T

Keywords: There is growing interest in the environmental impact of organizational activities. This exploratory study in-
Environmental goods valuation troduces the need to integrate economic market and non-market valuations for social sustainability in organi-
Supply chain management zations. While organizations have not reached this integration, the potential to help in development and the
Reverse logistics introduction of social sustainability is significant. The methodology includes an extensive research into eco-
Social sustainability
nomic market and non-market valuation literature for social sustainability. This paper integrates a new approach
to the current academic literature highlighting social aspects of sustainability within the supply chain and
specifically in reverse logistics. The literature review led to the development of a framework guiding and sim-
plifying these efforts. Practical situations of environmental goods valuations of social sustainability in reverse
logistics are provided as an illustration. Using organizational supply chains and reverse logistics as an example,
the application of various tools is presented using an environmental goods valuation framework. The integration
of these topics aid researchers, policy makers, and practitioners. The findings make a contribution to the stra-
tegic organizational justification, performance measurement and sustainability literature by further integrating
environmental goods valuation tools, models, theory and practices. The paper includes the development of
propositions to be addressed in future research.

1. Introduction Sustainability information for valuation purposes is difficult to at-


tain because of various complexities, including subjective personal and
Over time, corporate executives and ordinary consumers alike have cultural influences, intangible and poorly defined contexts, and a lack
grown more concerned about general sustainability and the environ- of understanding of or experience with social sustainability dimensions
ment (Staub et al., 2016). Therefore, organizations are faced with in- (Beske and Seuring, 2014; Johansson, 2016; Joung et al., 2013).
corporating environmental or social sustainability decisions both However, it remains that inputs and results must be measured or as-
globally as well as along their supply chains (Zhu et al., 2012; Marshall sessed to guide further business decisions toward social sustainability
et al., 2015). These practices are a culmination of various social, cul- performance and to integrate them into business and supply chain
tural, political, technological and economic forces causing organiza- practices (Elzen and Wieczorek, 2005; Wiengarten and Longoni, 2015).
tions to rethink how business is conducted and assessed. Unfortunately Overall, research has seen limited investigation validating programs
for organizations, the decisions regarding these practices and policies, and investments to enhance organizational and supply chain social
especially those that require significant resources and investments, are sustainability (Spence and Rinaldi, 2014; Martínez et al., 2014; Cho
not always easy to justify (Tachizawa and Yew Wong, 2014; Varsei et al., 2015). Tools exist to help with strategic and subjective evalua-
et al., 2014; Wang, 2015). Most corporate evaluation and valuation tions of sustainability dimensions in organizations and their supply
methods for assessing the impact of social sustainability focus on fi- chains (Bai and Sarkis, 2014; Bai et al., 2012; Clift and Wright, 2000),
nancial or market measures using accounting systems to provide fi- but there is much to learn from other fields of study to strengthen the
nancial data. Corporate data is not well established for yielding in- organizational strategic justification and forecasting tool set. The eco-
formation on social dimensions. When organizations consider their nomics literature provides substantial groundwork and tools available
supply chain's social sustainability, identifying important attributes and for environmental valuations that may be applicable to organizational
determining their valuation is an important exercise. and supply chain social sustainability activities, both for internal


Corresponding author.
E-mail addresses: [email protected] (A.A. Hervani), [email protected] (J. Sarkis), [email protected] (M.M. Helms).

http://dx.doi.org/10.1016/j.techfore.2017.07.015
Received 20 April 2016; Received in revised form 29 June 2017; Accepted 13 July 2017
0040-1625/ © 2017 Elsevier Inc. All rights reserved.

Please cite this article as: Hervani, A.A., Technological Forecasting & Social Change (2017), http://dx.doi.org/10.1016/j.techfore.2017.07.015
A.A. Hervani et al. Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

organizational activities and across the broader supply chain players 2. The business case for social sustainability in organizations and
and actions. environmental goods valuations
Environmental goods valuation1 research is a source of rich eco-
nomic and environmental literature that aids in the corporate valuation Making the business case for sustainability is not an insurmountable
of social sustainability. Bringing these broader macro-economic and task. Significant research and literature has shown that organizations
micro-economic theories and developments to the supply chain and can “do well by doing good” (Eichholtz et al., 2010; Eriksson and
operational level of organizational decisions is a novel and potentially Svensson, 2015; Gualandris et al., 2014). Unfortunately, this aphorism
practical theoretical advancement for an organization's supply chain is not always easy to achieve or put into practice because most orga-
sustainability and strategic justification. nizational justification tools, approaches, and business cases focus on
Brandenburg and Seuring (2010) agree an initial concern is to build financial, quantitative, and tangible measures (Symons and Lamberton,
a business case for social sustainability in organizations and further 2014; Burritt and Schaltegger, 2014; Schaltegger, 2010: Lake et al.,
assert the issue demands more attention in the literature. While some 2014) as previously noted. Factors including image and reputation,
work has been completed to make a business case and strategic justi- contribution to society, building community relationships, social sta-
fication of environmental sustainability in supply chains, a gap remains bility, and other non-quantitative measures are difficult for organiza-
in the academic literature in investigating social sustainability evalua- tions to integrate into their business case development portfolio (Soosay
tion and justifying from an organizational perspective, in supply chains, et al., 2012; Wang, 2015).
especially in the reverse logistics domain (Brandenburg et al., 2014). Efforts to integrate these qualitative and macro-level factors have
The application of market and non-market valuations to complex utilized various multiple criteria decision tools (Govindan et al.,
organizational supply chains is an important activity for considering 2015a,b). Some models utilize general methodological frameworks for
social sustainability. Although there are numerous locations in orga- making these business cases (Govindan et al., 2015a,b; Labuschagne
nizational supply chains for applying the environmental goods valua- et al., 2005a,b; Labuschagne and Brent, 2005; Ocampo and Clark, 2015;
tion framework and techniques, we have chosen reverse logistics as a Afsordegan et al., 2015; and Lin et al., 2015). Many tools do not utilize
case study application to model. This application of the environmental or closely link to the broader environmental goods valuation ap-
goods valuation framework is an important consideration for most or- proaches, providing a somewhat incomplete profile of social sustain-
ganizations investing in reverse logistics processes need business and/ ability. There is an opportunity to utilize experience and research from
or environmental reasons for ‘close-the-loop’. While reverse logistics these environmental goods valuation approaches, which have pre-
can be evaluated from a social sustainability perspective, it has rarely viously only been applied to broader environmental issues at the
been evaluated using this perspective (Sarkis et al., 2010b). However, it community or national level. These valuation approaches may provide
remains that inputs and results must be measured or assessed to guide a means for addressing the lack of consideration of social sustainability
further business decisions toward social sustainability performance and in supply chains and within organizations.
to integrate them into business and supply chain practices (Elzen and
Wieczorek, 2005; Wiengarten and Longoni, 2015). 2.1. Social sustainability dimensions
The structure of this research provides a broad overview of non-
market goods valuation approaches and tools that can be applied to the Sustainability includes economic, environmental, and social di-
organizational supply chain and the discipline of operations manage- mensions that comprise the triple bottom line of an organization. These
ment with respect to sustainability. Next, the research describes how include environmental and social responsibility criteria, measured
these macro-level environmentally-oriented environmental goods va- quantitatively, to judge the overall performance of a company. General
luation approaches can be applied to evaluate social sustainability di- agreement is that implementing and managing economic, social and
mensions in individual organizations. The research introduces these environmental efforts of business sustainability should be connected in
various dimensions of environmental goods valuation in a framework a balanced and comprehensive way (Svensson and Wagner, 2015). Yet
with examples. Finally, practical applications of these environmental effectively, for business case purposes, economic factors typically su-
goods valuation dimensions are implemented within the context of the persede the social and environmental, with social sustainability re-
reverse logistics supply chain. The results of the reverse logistics case maining the least integrated measure (Symons and Lamberton, 2014).
show these methods validate the potential use of the broad, policy- While it is important to consider social sustainability, it is challen-
based economic models and environmental goods valuation approaches ging to address. Unlike environmental or economic dimensions, there
in organizations and supply chains as well as expanding their applica- are more cultural and intangible characteristics present in the social
tion from the environmental and economic realms to the social sus- sustainability dimension, making the assessment more conducive for
tainability dimensions. indirect and intangible evaluations (Varsei et al., 2014). How compa-
This research provides both a contribution to theory and practice. nies approach social sustainability may be supportive of such broader
Using the example of reverse logistics, we have provided an example of tools. Much of the research as well as public pressure concerning sus-
environmental goods valuations for social sustainability. For example, tainability focuses on the effects of business and organizational activity
practitioners may be able to use our proposed decision tree to help on the physical environment (Pfeffer, 2010), but companies and their
guide them in methodology selection. Researchers are also provided practices affect the human and social environment more often than the
with a set of propositions for further study leading to theory develop- physical environment. There are both direct and indirect effects of or-
ment. This research will further knowledge in valuing social sustain- ganizations concerning decisions about people, human health, social
ability within organizations. systems, and mortality. Yet social sustainability has received limited
coverage by sustainability researchers, especially with respect to the
organization's supply chain (Brandenburg et al., 2014; Seuring and
Müller, 2008).
Labuschagne et al. (2005a) proposed a framework of social sus-
tainability criteria relevant to projects over their entire life cycle and
1
Economists define the value of a market good by how much a consumer directly pays included: (1) Internal Human Resources, (2) External Populations, (3)
for a good or service. Non-market resources provide outputs or services which are not
Stakeholder Participation, and (4) Macro-Social Performance issues.
easily bought or sold directly to individuals. The value of a non-market good or servi-
ce—one which is not regularly bought and sold—cannot be observed from a market price.
However, we believe that the life cycle management methodologies of
Economists have developed various valuation techniques to address non-market goods Labuschagne et al. (2005a) do not efficiently address the objectives of
valuation. Major techniques are reviewed in this paper. sustainable development, especially in developing countries and agree

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A.A. Hervani et al. Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

that social aspects are rarely considered, while environmental factors Pearce (2002) argues that the two main contributions of environ-
are typically only addressed by means of environmental impact as- mental economics to the economic policy community have been the
sessments. inclusion of environmental valuation in welfare analysis and the
Similarly, Carter and Jennings (2000) considered the environment, methods by which to perform these valuations. These methods are di-
ethics, diversity, human rights, safety, and philanthropy or community vided into revealed preference and stated preference approaches and
in their study of the purchasing function's contribution to the socially have been subject of many studies in environmental policy analysis
responsible management of supply chains. But, we have identified (Anderson, 1989; Huber and Ruitenbeek, 1997; Foster and Mourato,
several common barriers to Carter and Jennings (2000) model: the 2002; Lusk and Coble, 2005; Farber et al., 2006; Bhat, 2008a,b; Anzani
difficulty in coordinating activities and objectives of internal functions et al., 2010; Foster, 2011; Liu et al., 2012; Chae et al., 2012; Hensher
or members of the supply chain; resistance by either employees or et al., 2013; Hanewinkel et al., 2013; Naik, 2014; Merlo et al., 2015).
supply chain members such as suppliers or direct customers; and the
lack of availability of a product or service that can also act as a barrier. 2.3. Application of environmental goods evaluation by organizations and
Panapanaan et al. (2003) identified a corporate social responsibility policymakers
model that included the main stakeholders along with bad experiences,
business relations, and customers' demands. However, we found two This environmental goods valuation focuses on how the discipline of
limitations in Panapanaan et al.'s (2003) corporate social responsibility environmental economics evaluates and assesses environmental issues
model: companies do not include corporate social responsibility criteria and concerns, recognizing the difficulties in directly, quantitatively
in their requirements, so no CSR information is ever obtained from their measuring them (Barbier et al., 2011; Bockstael et al., 2000; Johansson,
suppliers; it is difficult for a firm to check the entire supply chain; and 2016). It is these environmental goods valuation methods that are
knowing the source of the suppliers' products from developing countries proposed as potential applications to social sustainability valuation in
are more difficult to identify. the for-profit corporate arena, particularly for assessing social respon-
Thorpe and Prakash-Mani (2003) linked sustainability factors to the sibility at the less examined but equally important supply chain level.
business success factors including governance and stakeholder en- One method to complete an environmental goods valuation analysis
gagement, environmental process improvement, and environmental begins with market failure or the result of an inefficient market con-
products and services and their research further included three socio- dition. Economics has modeled environmental problems or market
economic development factors of local economic growth, community failures using the theory of public goods or the theory of externalities.
development, and human resource management. They conclude that in In economics, inefficiency of the competitive equilibrium arises when
some transiting market economies, organizations, have difficulties in external costs to society of a degraded environment are ignored (i.e.,
quantifying the benefits or gains obtained from environmental im- contaminated water supplies caused by refined petroleum production,
provements or sustainable growth. emission of toxic pollutant into the atmosphere caused by coal-power
Thus, these existing models of social sustainability do consider both plants, or agricultural crop production and corresponding water con-
internal employee stakeholders and external stakeholders and popula- tamination).
tions and also include measures of business success or social perfor- Costs of degradation are considered external to the market exchange
mance. These social sustainability factors will be utilized as a starting and often are not factored into private market decisions. An efficient
point in developing a framework for environmental goods valuation solution to the problem is achieved through government intervention as
integration in this research. regulatory pressures or voluntarily through green supply chain man-
agement operation by organizations, for example. One general solution
2.2. Theoretical foundation for environmental goods valuation to externalities, including those affecting the environment, is to inter-
nalize the externality. That is, to force the market participants to absorb
Environmental goods are not traded in markets and valuation of the external costs or benefits. The incremental benefits for example
environmental goods require the use of a technique that enables a re- (i.e., avoided expenditures) are the reduction in health, ecological, and
searcher to identify the link that exist between market goods and en- property damages associated with an environmental policy initiative.
vironmental goods and then utilize this link in evaluating the welfare The total value of environmental quality can be assessed with use-
changes that are associated with changes in environmental quality. The values and non-use values. Use-values include “direct use,” “indirect
most popular way to obtain the value of public goods have been elicited use,” and “option value.” Direct use values are the benefits derived from
by the use of survey methods enabling the researcher to obtain con- physical use or access to an environmental good. They may be obtained
sumer's maximum willingness to pay for a public good. Willingness to from aesthetic values such as preserving scenic views or by benefiting
pay is the maximum amount of income a person would pay in exchange from enhanced water purity. It is important to note, individuals pay for
for an improvement in circumstances and conversely willingness to environmental assets or amenities either directly or indirectly.
accept is the minimum income a person would accept for a decline in Individuals pay directly when they travel to see a site or support an
circumstances. The theoretical framework upon which environmental organization promoting nature preservation or conservation efforts and
valuation is founded is based on consumer welfare theory. Consumer they pay indirectly when they are willing to pay higher prices for
surplus was first defined as the residual difference between the value of properties located in less polluted areas or purchase bottled water or
a consumption bundle to the consumer and the amount which that water purifying filters. Option values represent a willingness to pay for
consumer actually paid for it (Marshall, 1930). resource preservation over and above any expected consumer benefit
Hicks (1943) proposed four measures of a consumer's welfare that an individual would receive from the future use of a resource
change: compensating variation, compensating surplus, equivalent (Barrick and Beazley, 1990; De Groot, 1992).
variation, and equivalent surplus. The “equivalent” measures are de- Non-use value is the benefit received from the continuance of en-
fined as the amount of compensation, paid or received, which would vironmental goods, or the benefit generated today by knowing that a
bring the consumer to the “subsequent” welfare level “if the change did resource exists even if no on-site use is anticipated. Non-use values
not take place” (Bockstael and Freeman, 2005). The “compensating” include existence values and bequest values. For existence value, an in-
measures are defined as the amount of compensation paid or received, dividual derives satisfaction simply from knowing that a resource (an
which would keep the consumer at the “initial” welfare level "after the animal species or pristine wilderness area) continues to exist. Bequest
change had taken place." Several authors have utilized these measures value is the benefit individuals' gain from the preservation of the re-
to estimate consumer surplus (Brookshire et al., 1980; Currie et al., source for use by their heirs (James and Gillespie, 1997; Loomis, 1989;
1971; Horowitz and McConnell, 2002; Mitchell and Carson, 1989). McConnell, 1983).

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A.A. Hervani et al. Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

Total Economic Value (TEV)

TEV = Use Value + Non-Use Value


Following are two common techniques utilized to estimate an
individual’s willingness to pay for environmental goods.

Behavioral Linkage Approach Physical Linkage Approach

Non-Market Valuation Methods Market-based Valuation Methods

Revealed Preference Stated Preference Avoided Cost


Approach Approach Method

Contingent
Valuation (CV) Cost-of-Illness
Averting
Expenditure

Contingent
Choice Methods
Expenditure
Hedonic Pricing Approach
Method (HP)
Calibrated &
Conjoint
Analysis
Damage
Random Utility Assessment
Model Model
Discrete Choice
Method

Travel Cost Referendums Productivity


Model (TCM) Method Method

Fig. 1. Environmental goods valuation techniques for environmental benefits measurement.

The environmental goods valuation methods as outlined in Fig. 1, market-based and non-market-based valuation techniques. These two
use various valuation approaches or non-market and market based approaches are capable of developing and integrating intangible as well
techniques for arriving at economic value for use and non-use values. as tangible valuations for environmental benefits. Use and non-use
The use and non-use value of the environmental goods and services that values that individuals place on environmental resources are measured
can be measured by the use of non-market goods valuation techniques through techniques that use either physical or behavioral linkages
are described in detail below. (Mitchell and Carson, 1989). The physical linkage method is a “dose-
The literature on the factors that underlie use and non-use value is response model” and enables an analyst to obtain changed use and
extensive. The concept of non-use value originated from Weisbrod welfare by establishing relationships with physical causes. By ex-
(1964) and Krutilla (1967). Bishop and Heberlein (1979) later con- amining the relationship between levels of pollution and the physical
cluded that non-use value could be motivated by sympathy for and damage effect, for example, analysts determine a physical damage
empathy with people and animals, environmental linkages, feelings of function, assign prices, and estimate the economic value of the damage
environmental responsibility, and bequest goals. that actually accrued. The economic impact of global warming and
There are two approaches to estimate the use and the non-use ozone depletion can be measured using dose-response methods.
components of the total economic value of environmental resources: The behavioral linkage method, as its name implies, focuses on

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behavior and welfare changes. Behavioral changes may either be re- valuation techniques under the behavioral linkage approaches include
vealed or stated and the changes may be directly or indirectly linked to revealed preference and stated preference methods. Revealed preference
the environmental resources being valued. The non-market valuation methods are based on market behavior and provide only use value es-
techniques use the behavioral linkage approach to measure environ- timates, whereas the stated preference methods are based on interviews
mental benefits, while the market valuation techniques are primarily and provide use and non-use values estimates.
viewed from the physical linkage approach. Fig. 1 provides a summary Revealed preference methods, an indirect estimation, include: the
of market and non-market valuation techniques for measuring the en- hedonic price method (Kahn, 1998; Brown and Mendelsohn, 1984;
vironmental benefits important to this research. Garrod and Willis, 1992; Merlo et al., 2015); the travel cost method
(Birol et al., 2006; Chae et al., 2012; Randall, 1994); the averting ex-
2.4. Environmental goods valuation methods penditure (or preventive expenditure method) (Abdalla et al., 1992;
Courant and Porter, 1981; Maciosek et al., 2015); and random utility
Economists typically rely on direct observable market interactions models (Peterson et al., 1983; Bhat, 2008a,b; Hensher et al., 2013).
to place monetary values on goods and services. Markets enable econ- Hedonic pricing uses guidelines that assume price is determined by in-
omists to measure an individual's willingness to pay to preserve en- ternal characteristics of the good being sold and external factors af-
vironmental services and consumers reveal their preferences through fecting it. The hedonic method uses the estimated price of an en-
the choices they make in allocating scarce resources among competing vironmental attribute to value a policy-driven improvement that
alternatives. Market-based methods use the physical linkage approach directly affects the estimated price. One limitations of the hedonic
which employ dose-response or exposure response functions. There are pricing method is that it requires vast amounts of data on variables and
a number of market-based methods of environmental valuation in- lack of data availability can prevent reliable estimates (Smith and
cluding: expenditure approaches (Bell, 1997; Naik, 2014); productivity Kaoru, 1990). The travel cost method is used to estimate the value of
methods (Anderson, 1989; Cartier and Ruitenbeek, 1999; Hanewinkel recreational benefits derived from an ecosystem and assumes the value
et al., 2013), cost-of-illness methods (Cropper, 1981a,b; Gupta, 2008); of the site, or its recreational services and is a function of individual's
defensive expenditures (Dupont and Jahan, 2012; Farber et al., 2006); willingness to pay to travel to the site. The disadvantage of the travel
avoided cost methods (Bockstael et al., 2000; Huber and Ruitenbeek, cost model is that it is limited to recreational values and requires
1997; Notaro and Paletto, 2012); and damage assessment approaches complex statistical analysis (Smith and Kaoru, 1990; Stynes and
(Anzani et al., 2010; MacDonald et al., 2002a,b). These techniques have Donnelly, 1987).
been used mostly in public sector analysis and public policy decision The averting expenditure method estimates benefits by the change in
making, and may have limited applicability in corporate setting. spending on goods that are substitutes for a cleaner environment (for
The expenditure approach measures the cost of creating benefits or example, individuals purchasing bottled water). A disadvantage of the
reducing losses while the productivity method estimates economic va- averting expenditure method is that it is argued to be an arbitrary va-
lues for ecosystem products and services contributing to the production luation of natural resources that may bear little relationship to the true
of commercially marketed goods. A productivity method example social value. The resource replacement cost method requires data on
might assess the effect of water quality on the output productivity of the costs to restore, rehabilitate, or replace injured or lost resources and
irrigated agricultural crops or the costs of purifying municipal drinking resource services (Milne, 1991). The random utility model is a model of
water. The economic benefits of improved water quality can be mea- consumer choice in which the consumer is assumed to have perfect
sured by the increased revenues from greater agricultural output or the discrimination between goods or activities to maximize utility and is
decreased costs of providing clean drinking water. used to estimate benefits for specific characteristics, or quality changes
A limitation of this approach is that evaluating consumer surplus of sites, rather than for the site as a whole. A disadvantage of the
requires data of market transactions for varying prices and quantities, random utility model is that the researcher may be unaware of all of the
and the prices of related goods and information on personal income. factors that are taken into account when the final decisions are made of
People's expenditures on resources would be an inappropriate measure a particular site to visit (Randall, 2002).
of willingness to pay because it omits the consumer's surplus from the Stated preference methods use hypothetical markets to extract va-
overall valuation (Milne, 1991). Cost-of-illness estimates for morbidity luations to measure benefits and include contingent valuation
are based on the concept that an individual would be willing to pay at (Cummings et al., 1986; Kolstad et al., 1999); contingent choice (Foster,
least as much as the cost of treating an illness rather than contracting 2011); discrete choice (Haab and McConnell, 2002; Hanley et al.,
the illness. Cost of illness methods include both medical expenditures 1998); referendums (Foster and Mourato, 2002); calibrated and con-
and lost earnings. The limitations of the cost of illness method are that joint analysis (Cameron and Englin, 1997; Louviere, 1988); and choice
there are no guarantees that purification or replacement costs are what experiments. Contingent valuation methods use surveys to elicit re-
consumers are actually willing to pay (Pearce and Markandyra, 1989). sponses regarding customers' willingness to pay for environmental
Avoided cost methods calculate the economic value of benefits an quality based on hypothetical market conditions and can be applied to a
ecosystem provides that would not exist without the ecosystem in place, variety of environmental goods to assess existence value as well as user
and therefore, would represent an added cost to society if this en- value. The limitations of the contingent valuation method are that re-
vironmental service no longer existed (Bockstael et al., 2000; Randall, sults are highly sensitive to design of choice scenarios and how surveys
2002). Limitations of this approach are that the estimates provide an are conducted (Whittington, 1998).
upper-bound value for the particular services they address; the services Contingent choice asks respondents to state a preference between one
cannot be valued at more than the cost of avoiding the need or repla- group of environmental services or characteristics, at a given price or
cing the service with a perfect substitute (Randall, 2002). The damage cost to the individual, and another group of environmental character-
assessment model is similar to the avoided cost method and calculates a istics at a different price or cost. There are a variety of formats for
damage function to measure the environmental and social costs of al- applying contingent choice methods, including: contingent ranking;
terations to the natural environment. The limitations of damage as- contingent/conjoint rating; choice experiments; paired comparisons or
sessment model are that it provides only rough indicator of ecosystem rating. It is the environmental goods valuation technique most applied
value and it is often difficult to relate damages to changes in ecosystem at policy-level studies (Philcox, 2007). Discrete choice uses models in
(Milne, 1991). which the good or alternative chosen by the consumer is available only
Using environmental goods valuation methods, researchers and in discrete or integer units. Referendums use a survey method in which
practitioners alike can obtain a consumer's willingness to pay for en- the respondent is asked to respond ‘yes’ or ‘no’ to a hypothetical tra-
vironmental goods and estimate a demand function. Non-market-based deoff between some level of environmental good or service and

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something else of value. logistics' social sustainability dimensions can be evaluated using these
Calibrated and conjoint analysis is used to determine how individuals various non-market goods valuation approaches. First, we present a
value features that comprise a good or service and can be used to de- brief background of reverse logistics.
termine the values attributed to different dimensions of an environ-
mental resource. Choice experiments estimate economic values for an 4. The case of reverse logistics
ecosystem or environmental service by asking individuals to make
tradeoffs among sets of ecosystem or environmental services or char- Applying market and non-market valuations to an entire organiza-
acteristics. Choice experiments do not directly ask for willingness to pay tional supply chain with its ensuing complexity is a monumental task
but this is inferred from tradeoffs that include cost as an attribute. The but one that is indeed important for the future consideration of social
limitations of contingent choice methods are that respondents may find sustainability in supply chains. As shown in Table 1, there are many
it difficult to evaluate certain trade-offs if they are unfamiliar with the areas in organizations and supply chain for applying the environmental
process. Contingent choice methods require more sophisticated statis- goods valuation framework and techniques. Reverse logistics was
tical techniques to estimate willingness to pay (Alpizar et al., 2003). chosen to use as an example application case study.
The use of these various environmental goods valuation methods to The researchers selected reverse logistics to model uses of en-
analyze environmental degradation has been extensively researched vironmental goods valuation framework. Reverse logistics is a growing
throughout the last several decades (Pharm et al., 1999; Kontogianni concern to most organizations for business or environmental reasons to
et al., 2001; Lusk and Coble, 2005; and Liu et al., 2012). However, a ‘close-the-loop’. While reverse logistics can be evaluated from a social
very limited number of studies have utilized environmental goods va- sustainability perspective, it has rarely been evaluated using this per-
luation methods to evaluate benefits that accrue to organizations from spective (Sarkis et al., 2010b). Yet, the reverse logistics processes of
sustainable practices. These few studies have examined the sustainable handling, reclaiming and disassembling products for reuse at the end of
production practices and determinant factors of green supply chain their life cycle as well as managing the disposition of returned products
management of Chinese companies (Liu et al., 2012); integrating sta- for value recovery (repackaging) or disposal is a growing area of profit
keholder analysis in indirect valuation of environmental assets and concern to manufacturers. As in the forward manufacturing process
(Kontogianni et al., 2001); estimates of consumers' willingness to pay from creating goods and delivering them to the end user, similar op-
for pork produced without sub-therapeutic antibiotics (Lusk et al., erations are included in reverse logistics and often include ware-
2006); and the value of pharmacy services (Pharm et al., 1999) which housing, inventory control, storage, retrieval, transportation, and dis-
all used contingent valuation methods at the organizational level. Most tribution.
of the applications are non-environmental, although some social aspects Organizations tend to focus on upstream and downstream processes
of sustainability have been included. Overall, there is a precedent for for social sustainability and have seldom considered reverse logistics
organizational applications of environmental goods valuation methods. from a social sustainability perspective and performance measurements
If an organization can identify social costs of its operation, by using for green supply chain management as a whole are only in development
environmental goods valuation methods, a value for internalizing ex- (Hervani et al., 2005). Thus, there is a need to raise awareness and
ternalities can be determined. improve focus on managing the social sustainability and incorporating
social sustainability into reverse logistics (Ramos et al., 2014;
3. A social sustainability and non-market goods valuation Srivastava, 2007; Van Hoek, 1999). Whether organizations implement
framework reverse logistics alone or outsource reverse logistics, academic and
practitioner literature is emerging and this research will further
In this research, the authors arrived at a classification framework as knowledge in this area.
shown in Table 1 by integrating the social sustainability dimensions and Practitioners note a number of differences between forward and
non-market goods valuation techniques. By using the environmental reverse logistics. In particular, forecasting in reverse logistics is more
goods valuations in this grid format, it is possible to present the qua- difficult due to returns uncertainties. Returned product quality is not
litative results and identify opportunities for evaluation along various uniform and product packaging may be damaged making repackaging
social sustainability measures, highlighting the usefulness of these and refurbishment necessary. With damaged returns, there is a differ-
methods versus other techniques. ence in the book value of the items. The disposition is unclear and so is
This table is organized by sustainability focus areas representing the the destination and routing of returned items. Pricing is dependent on
rows, including internal human resources measures, external popula- many issues, but, unlike forward logistics, speed is often not a priority
tion measures, stakeholder participation measures, and finally the in reverse logistics. Reverse costs are less directly visible and the
broadest social sustainability dimensions for macro-social issues and management of inventory is not consistent. Product life-cycle, nego-
measures, as shown in a template in Table 1. The columns of the fra- tiations, and marketing is complicated since the process is less visible
mework include the revealed preferences, stated preferences and finally and transparent (Rogers, 2015). However, innovation in reverse logis-
the physical linkage environmental goods valuation categories. tics is emerging and futurists predict technology-embedded products
This framework can be used to identify and clarify the organiza- will alert their users how best to dispose of them at the end of their
tional and supply chain practices within each cell. Specifically, this useful life (Schumpeter, 2015).
research considers the case of reverse logistics and how reverse Within reverse logistics, products may be returned at several stages
of their life cycle. These stages include (1) commercial or viable for re-
Table 1
sale with minimal re-packaging and shipment (i.e., returns from on-line
A social sustainability and environmental goods valuation framework. merchants), (2) repairable for re-sale as a refurbished product or re-
turned to the original purchaser or a new user (i.e., a remanufactured
Social sustainability Environmental goods valuation approach computer with a new mother-board), (3) end-of-use (for the product
dimension
itself but not for the components, e.g. recycled car tires to be made into
Revealed Stated Physical
preference preference linkage park benches), or (4) end-of-life returns (where there may be reuse from
reclamation of critical components or materials along with other dis-
Internal human resources posal of non-viable components or materials such as recycled batteries
External population
for their components) (DeBrito and Dekker, 2004; Hervani and Helms,
Stakeholder participation
Macro-social issues 2006; Presley et al., 2007).
Each type of return requires a separate reverse logistics chain and

6
A.A. Hervani et al. Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

may be determined by legislation or mandated recycling, obsolescence washing machines has been studied using life cycle assessments for four
risk, environmental control, cost, efficiency or responsiveness (Le Blanc decision making support tools, for example (Park et al., 2006). Research
et al., 2004). As product life cycles shorten and new designs and pro- is primarily adapting both principles and techniques from life cycle
ducts quickly replace others in the marketplace, the volume of products analysis to assess the environmental impact along the supply chain and
suitable for reverse logistics reclamation has increased (DeBrito and particularly for reverse logistics activities (Browne et al., 2005; Rizet
Dekker, 2004; Presley et al., 2007). Reverse logistics programs have et al., 2012).
been used to recover assets that would otherwise be lost and the area is As an example, in Brazil, the National Solid Waste Policy (estab-
an important dimension of green logistics. Value is reclaimed through lished by Law No. 12305 on December, 23rd, 2010) regulates the dis-
returns from end users and with the growth of on-line retailing, reverse posal of post-consumer waste and requires both manufacturers and
logistics can save organizations significant costs. Reverse logistics aids importers participate in reverse logistics programs. The implementation
companies in reducing waste and improving profits (Cojocariu, 2013; is not yet defined but the guidelines focus on sustainability of reverse
Jack et al., 2010). But, sometimes economic dimensions may not be as logistics. An area of particular emphasis is the recycling of waste
easily identified and relying on broader, indirect benefits are necessary, electrical and electronics equipment which requires producers and
particularly with issues such as social sustainability benefits and costs. importer associations to submit reverse logistics plans. Souza et al.,
While literature on reverse logistics is growing, there is a dearth of (2015) notes that such implementation will be the shared responsibility
literature applying the social sustainability perspective to reverse lo- of producers, importers, retailers and distributors with broader re-
gistics practices. The majority of academic reverse logistics research in sponsibilities of the government and other partners in the reverse lo-
both economics and operations management has centered almost solely gistics e-waste management. Studies (see Keramitsoglou and
on business dimensions (Presley et al., 2007). Empirical studies have Tsagarakis, 2013; Araújo et al., 2012; Cucchiella et al., 2015;
focused on ways to make these reverse logistics paths more efficient or Georgiadis and Besiou, 2010, and de Oliveira et al., 4) have proposed
effective for recycling (Rubio et al., 2008). Other research has explored models for the estimation of potential generation of electrical waste and
ways to create new reverse logistics paths to reclaim and return the electronic equipment in Brazil along with sustainability assessments
recycled content for reuse or reprocessing by manufacturers (Cline and prioritization of e-waste management options for the country.
et al., 2015). As an organizational strategy, reverse logistics can de-
celerate or prevent environmental degradation as well as impact social 4.2. Making the business case for reverse logistics
issues beyond environmental concerns alone (Sarkis et al., 2010a,b).
Issues from an ethical and socially responsible indirect viewpoint, Evaluating reverse logistics costs and benefits is necessary to make a
however, are important to consider and can provide a more accurate case for organizations to adopt the practices. Costs include designing
picture of the overall costs and benefits of reverse logistics especially systems and infrastructures to collect and store recycled goods as well
with organizations adopting triple-bottom-line program evaluations. as build facilities for sorting and separating materials for reprocessing.
Other costs include the transportation and logistics for reclaiming and
4.1. Literature examples of reverse logistics reprocessing returned products. Benefits include recovering assets that
would be lost as well as saving money on warehousing, reclamation,
Most of these ideas are only in the conceptual stage and the aca- and finding new life for recycled materials and perhaps extending the
demic literature on social sustainability has, as yet, provided few ex- lifecycle for goods. Implementation of internal reverse logistics pro-
amples to document the results from identifying non-market goods grams often involves significant allocations of initial capital and/or
valuation in reverse logistics. Ahi and Searcy (2015) found metrics used resources for the construction of reclamation and redistribution facil-
in the literature on green supply chain management and sustainability ities and purchasing of recycling equipment (Presley et al., 2007). De-
supply chain management could be grouped into five categories of termination of third party reverse logistics providers requires a sig-
quality, air emissions, greenhouse gas emissions, energy use and energy nificant business case and justification analysis. Part of this justification
consumption. In their research, Ahi and Searcy (2015) studied 445 would mean considering how reverse logistics cost or benefits social
articles published up to the end of the year 2012 found over one-third sustainability (Sarkis et al., 2010a,b). For this reason, reverse logistics
of the identified 2555 unique metrics were classified as “cross-cutting was selected as a supply chain activity with potential for evaluating
metrics” or addressing more than one key characteristic of sustainable from a social sustainability perspective.
supply chain management. Given that environmental goods valuations methods can measure
Mani et al. (2015) studied two Indian manufacturing companies proxy values for individual's willingness to pay to preserve the en-
operating in oil and gas and tire manufacturing industries and from vironment, it can be utilized to evaluate organizational activities from
their comparative case studies found various social sustainability an environmental perspective. These methods can evaluate non-tan-
practices of the two companies. Fernando and Saththasivam (2017) gible as well as tangible valuations of environmental benefits. Social
agree that for today's sustainable and economic world, supply chains sustainability has these characteristics, especially the difficulty in
must achieve environmental performance as well as social performance. evaluating from a non-tangible perspective, which makes the use of
Interestingly, much of the recent literature has attempted to explore the environmental goods valuation even more valuable for organizational
literature and organize it into reviews or frameworks for future research justification and evaluation (Sarkis et al., 2013).
agendas (Abidi et al., 2017; Dubey et al., 2017; Fahimnia et al., 2015; The social sustainability implications of reverse logistics derive from
Govindan et al., 2015a,b; Müller and Stölzle, 2016; Yang et al., 2016; a number of perspectives. Reverse logistics may improve social issues
Yawar and Seuring, 2015). facing society. Reducing the demand for primary materials extraction,
Currently the issue of returned products is a growing and important will result in less pollution in developing areas. Because recycling is a
part of research focusing on reverse logistics practices along with their very manual process low skilled, less developed areas may benefit from
economic and environmental aspects (Mesjasz-Lech, 2012). Research the job creation. With less production and more recycling, pollution
has documented environmental aspects of end-of-life returned products effects may be fewer. Environmental improvement can benefit public
handling, including lifecycle-based methods of assessment health and human security. Other social issues that may be influenced
(Ehrenberger and Friedrich, 2013; Starostka-Patyk and Nitkiewicz, due to reverse logistics include: economic security (assured basic in-
2014; WRAP, 2010) and other options at the end-of-product-life in- come), food security (physical and economic access to food), health
cluding remanufacturing (Du and Evans, 2008) or recycling (van der security (relative freedom from disease and infection), environmental
Harst et al., 2016). The issue of determining and measuring environ- security (access to sanitary water supply, clean air and a non-degraded
mental and economic outcomes end-of-life scenarios for returned land system), personal security (security from physical violence and

7
A.A. Hervani et al. Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

threats), and community security (security of cultural integrity), poli- underemployed populations.
tical security (protection of basic human rights and freedoms). An organization can address on-going health and safety practices
Organizations must evaluate the greening or social sustainability of within their reverse logistics operations and demonstrate how cost to
business and to do this, they should consider social dimensions that are consumers can be lowered by improving worker health. An organiza-
part of their reverse logistics planning. Reverse logistics can prepare tion can use the averting expenditure method to quantify the value in-
organizations for pending regulations and laws and enhance a compa- dividuals place on the reverse logistics operations of an organization
ny's reputation as a socially responsible corporation. Such emphasis where employees engaged in reverse logistics jobs are equally as safe as
may allow an organization to have a strategic, competitive advantage other employees in forward logistics jobs (Harrington, 1998; Abrahams
over rivals. Choosing processes that reduce pollution, reduce packaging et al., 2000). Within reverse logistics, risks and health and safety as-
and consider product disassembly are important to many stakeholders pects may be negative. For example, reverse logistics requires dis-
and shareholders alike. Thus, the business case for reverse logistics can assembly of returned products, sometimes these products contain ha-
be more nuanced, especially with respect to social sustainability con- zardous substances that may not be visible. The valuation of the
cerns. aversion method could help organizations make investments to mini-
mize this exposure to hazardous substances in reverse logistics opera-
5. An environmental goods evaluation framework applied to tions. The use of the cost of illness method enables organizations to
reverse logistics social sustainability quantify the value of the safety and health outcomes of specific reverse
logistics operations such as protecting employees from hazardous waste
As previously noted, several models and variables for mapping so- encounters (Harrington, 1998; Abrahams et al., 2000; Birol et al.,
cial sustainability have been proposed. Although other categorizations 2006).
could be used, Labuschagne et al. (2005a,b) major categorization of An organization can measure values employees place on their jobs
social sustainability impact indicators were selected as the basis for the and desirable workplaces based on reverse logistics strategic and op-
organization for this initial framework. It provides a logical, flexible, erational activities and dimensions. For example, determine the value
and comprehensive set of dimensions. Our framework, as outlined in of incorporating reverse logistics into an organization may occur by
Table 1 and populated in Table 2, includes social sustainable dimen- assessing would employees choose one organization over another be-
sions as rows and environmental goods valuation categories as columns. cause of reverse logistics activities. This assessment can be viewed as an
By considering the main social sustainability dimensions of internal employee's willingness to pay. Willingness to pay can be estimated
human resources, external population, stakeholder and participation, using the discrete choice method (Harrington, 1998; Abrahams et al.,
and macro-social issues and measures, it is possible to identify various 2000).
reverse logistics valuation opportunities using environmental goods Relatedly, an organization providing flexible working arrangements
valuation approaches. Table 2 further incorporates the most pervasive within its reverse logistics operations may employ calibrated and con-
environmental goods valuation methods for classification, represented joint analysis to measure the importance to employees and the value
in the columns: revealed preference and stated preference, the physical they would place on activity flexibility in monetary terms (Foster and
linkage approaches. Mourato, 2002). Reverse logistics activities may add additional work
An organization can identify the social cost of its reverse logistics requirements, but these may add to choices and multitasking that can
operations using non-market goods valuation methods. These valuation improve employee morale. Contingent valuation methods are useful for
methods will help an organization internalize some of the externalities, eliciting monetary values employees place on an organization providing
from both a benefits and costs perspective. Environmental goods va- on-going employment compensation, maybe due to this additional
luation methods allow organizations to better capture the social sus- flexibility and multiskilling of workers, within their reverse logistics
tainability values consumers and other external players place on the operations.
many aspects of reverse logistics operations. Examples of how organi- The introduction and improvement of reverse logistics activities,
zations can value social sustainability within a reverse logistics opera- through research and development efforts, may garner greater pro-
tional and strategic context are summarized in Table 2. The various ductivity and value added from returned and collected end-of-life ma-
reverse logistics examples and how they might be assessed by the en- terial. The productivity method, can help organizations estimate the
vironmental goods valuations are the headings for each social sustain- monetary value consumers or industrial partners offering a social good,
ability dimensions. Examples are now discussed beginning with general place on the productivity gain and value added from such programs
categories of internal human resources. As previously noted, most of the (Bell, 1997; Cartier and Ruitenbeek, 1999).
discussions in the literature are from a policy perspective and not re-
lated to actual examples in firms. Examples within the framework and 5.2. External population environmental goods valuation
discussion are our own examples because actual cases of implementa-
tion of social sustainability do not exist in the research literature. It The averting expenditure method estimates benefits the external po-
seems these ideas are more advanced and are currently leading the pulation receives from goods with recycled content made possible from
industry implementation. We are forecasting the future and advocating reverse logistics waste conversion streams. An organization addresses
needed social change. supporting community projects with its reverse logistics operation and
how its donations improve community security and safety, saving in-
5.1. Internal human resources environmental goods valuation dividual outlays to reduce such risks. The averting expenditure method
can estimate social benefits by the change in spending on goods that are
For the internal human resources, social sustainability dimension, substitutes for a cleaner environment (Abrahams et al., 2000; Maciosek
reverse logistics valuation can be measured by “non-use” or “use” va- et al., 2015).
lues. Individuals have both types of values for environmental goods, If an organization addresses on-going housing issues within the
which in this case are non-market social sustainability internal human scope of their reverse logistics operations, the value of properties in the
resources aspects. Their willingness to pay for these goods can be vicinity will improve and not deteriorate. The organization can assess
measured via the use of market and non-market based techniques. the value individuals place on this community improvement activity in
As an example, reverse logistics processes can generate lower skilled monetary terms. The hedonic pricing method would be appropriate as
jobs that may benefit lower income, less educated workers. A random hedonic pricing uses guidelines that price is determined both by in-
utility model can quantify the values individuals place on these reverse ternal characteristics of the good being sold and the external factors
logistics positions that provide additional jobs for unemployed and affecting it (Bartik, 1988; Merlo et al., 2015; Taylor, 2003).

8
Table 2
Environmental goods valuation framework applied to reverse logistics (RL).

Internal human resources measures


A.A. Hervani et al.

Behavioral linkage approach Physical linkage approach

Non-market valuation methods Market-based valuation methods

Revealed preference methods Stated preference approach

Can RL recycling jobs that are prevalent in Europe be Are companies and jobs more desirable in workplaces Is sufficient labor available and in time, quantity, and
implemented in the US to provide more jobs to given a RL mission and strategic focus? Will employees training to manage fluctuations in RL waste streams?
unemployed and underemployed populations? choose one organization over another because of the (Productivity Method)
(Random Utility Model) types of RL jobs? (Discrete Choice Method) The organization provides on-going Research and
The organization addresses on-going health and safety Is there indirect goodwill and marketing possibilities Development with its RL operation that can lead to
practices with its RL operation that can lower cost by from the employees working in RL operations? greater productivity and value added. How important is
eliminating further actions to lower the health risk. (Contingent Choice Model) this if the organization can estimate this productivity
How important is this to you if the organization can Are there volatile labor swings in RL jobs? Repetitive gain and what value is placed on this activity of the
estimate the expenses that you may incur as a result of motion and injury issues? Do workers prefer less organization in monetary terms? (Productivity
lack of these practices? (Averting Expenditure). strenuous/repetitive jobs? (Contingent Choice Model) Method)
Will employees in RL jobs be as safe as in forward The organization provides on-going flexible working What is the safety and health outcomes of specific RL
logistics jobs? (Averting Expenditure). arrangements with its RL operation that provides operations involving employees (i.e., Hazardous waste
flexibility in working hours. How important is this and encounters)? (Cost of Illness Method)
what value is placed on this activity in monetary terms?
(Calibrated and Conjoint Analysis)
How much will consumers be willing to pay for an RL
environment that can help improve equity and reduce
discrimination? (Contingent Choice Models)
What will be the additional value associated with having

9
various RL practices in place from an employee benefit
perspective? (Contingent Valuation Method)
Assume that current living wages from implementing RL
in poor areas can be accrued by future generations. What
is the value of RL jobs for future generations?
(Contingent Choice Models)
The organization provides on-going employment
compensation with its RL operation that may provide
compensation when employees are out-of-work due to
injury or sickness. How important is this to you and what
kind of value would you place on this activity of the
organization in monetary terms? (Contingent Valuation
Method)

External population measures

Behavioral linkage approach Physical linkage approach

Non-market valuation methods Market-based valuation methods

Revealed preference methods Stated preference approach

Are customers and the external population willing to pay more for goods Do customers ask for recycled content in the products they purchase? Are What is the value of RL jobs and the generation of additional jobs in poverty
with recycled content due to RL waste conversion streams? (Averting consumers effected by the improved resources that result from RL? stricken areas? (Productivity Method)
Expenditure Method) (Contingent Valuation Method) The organization addresses on-going Regulatory and Public Services with its RL
The organization addresses on-going Supporting Community Projects The organization provides on-going Human Capital with its RL operation operation and these activities stop accidental spillages or leakages in the RL and
with its RL operation. How do its donations and support help to which improves education and health of the workers and the community. How reclamation process that ultimately would cause health problems and possible
improve a community's security and safety and allow expenditures if important is this and how would one value this service? (Contingent damage to ecosystem. How important is this that organization's RL operations
Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

(continued on next page)


Table 2 (continued)

External population measures

Behavioral linkage approach Physical linkage approach


A.A. Hervani et al.

Non-market valuation methods Market-based valuation methods

Revealed preference methods Stated preference approach

they were undertaken to reduce risks to safety? (Averting Valuation Method) avoids costs to community from altered ecosystem? (Cost of Illness Method)
Expenditure Method). How important is giving social communities the option of incorporating What is the value of safer water brought about as a result of reduced disposal in
The organization addresses on-going housing issues with its RL additional RL or forward logistics opportunities related to RL? (Contingent landfills due to an organization's RL operations? How important is this if the
operation and undertakes actions that ensure the value of housing Choice Model) organization can estimate the avoided costs incurred to community and inform
properties in the vicinity of the organization's operation will improve The organization addresses on-going health issues with its RL operation. How individuals of the damage costs? What value would one place on this activity of
and not deteriorate. What valuation would you place on this its RL operation reduce the flow of waste disposal and divert waste from the organization in monetary terms? (Avoided Cost Method)
organizational activity in monetary terms? (Hedonic Price) landfills, reducing contaminated run-offs which in turn lowers risks of being How many jobs has RL generated in other regions, and what is the number and
How much would communities be willing to invest in new exposed to certain toxins? How important is this to you and would you value of these jobs to a new location? (Productivity Method)
infrastructures for RL versus other factors? (Random Utility Model) consider a trade off with more consumption of recycled goods? (Choice
Experiment)
Is it possible for RL to provide jobs for differently-abled populations that
would give back to society? And provide much needed jobs (and often money)
an outlet and community service as well? (Calibrated and Conjoint
Analysis)
RL activities in the countryside that are not managed by an organization,
versus those that are. What is the dose-response of integrating RL? (Calibrated
and Conjoint Analysis)

Stakeholder participation measures

10
Behavioral linkage approach Physical linkage approach

Non-market valuation methods Market-based valuation methods

Revealed preference methods Stated preference approach

Do consumers and the general population of stakeholders in the community prefer Are architects, designers and specifiers calling for recycled content? Do individuals Does the presence of RL activities clean up streams, avert
recycled content? (Random Utility Method) and society prefer buildings that meet LEEDS certification, for example? (Discrete waste, and overall avoid costs that would otherwise be in
The organization provides on-going Collective Audience with its RL operation and Choice Method) society? (Expenditure Approach)
provides awareness to its community in regard to its product stewardship and the Do consumers prefer that RL aids in decelerating and preventing environmental The organization provides on-going Stakeholder
environmentally friendly image that will ultimately lead to greater competitiveness degradation? (Contingent Valuation Method) Engagement with its RL operation. How do RL activities
and organization's profitability. How important is this and what kind of value is placed The organization provides on-going stakeholder empowerment with its RL operation help to maintaining the benefits of the ecosystem and
on this activity of the organization in monetary terms? (Random Utility Method) and how these activities lead to greater awareness and participation among the avoid additional costs to society, if the environment no
How much would a community pay for an RL structure for a company and the constituents in the community in supporting RL operation that its goal is preserve the longer existed? (Expenditure Approach).
products associated with it? (Hedonic Pricing Method) ecosystem and reduce health hazards. How important is this and what value is placed Does the information provided by stakeholders help in
The organization provides on-going Selected Audience with its RL operation and on this activity of the organization in monetary terms? (Contingent Valuation RL valuation? (Avoided Cost Method)
addresses the benefits of its RL activities and how these activities have improved the Method) Do risk reductions averted cost from RL practices aid
property values of the surrounding community in the vicinity of its operation. How Using stakeholders to apply contingent valuation approach for RL in their communities reduce wastes? (Avoided Cost Method)
important is it that the organization's RL have added to the value of properties in the communities and businesses. Are wastes and energy minimized in the RL streams?
community? (Hedonic Pricing Method) Contingent Choice Model)
Are environments and resources available to future generations because of RL
activities? (Contingent Choice Model)
Considering stakeholder empowerment, are community's future values improved from
the presence of RL? (Referendum Method)
Gather multiple stakeholder input into expectations of costs and risks after the
implementation of an RL infrastructure. (Discrete Choice Method)
Technological Forecasting & Social Change xxx (xxxx) xxx–xxx
Macro-social issues and measures

Behavioral linkage approach Physical linkage approach

Non-market valuation methods Market-based valuation methods


A.A. Hervani et al.

Revealed preference methods Stated preference approach

The organization provides on-going legislation with its RL operations and how its RL Are there social incentives for de-manufacturing and Is the damage to the environment and nature reduced from RL activities? (Damage
activities comply with sustainable growth, preserving the natural setting of the reclamation? Can this be a strategic advantage for Assessment Model)
ecosystem and attract travelers and tourism that benefits the community. How organizations and enhance their macro-level standing in The organization provides on-going trading opportunities with its RL operation. How
important is it that the organization's compliance with legislation promotes tourism for the region? (Calibrated and Conjoint Analysis) its activities create benefits to the community in increased jobs and spending. How
natural sites? (Travel Cost Method) Is there more trade with less developed and/or important is it if the organization can estimate the value added as a result of its trading
What is the benefit of having your products collected through an RL system versus resource-poor countries from RL activities? (Calibrated opportunities? (Productivity Method).
landfill costs or customers returning the product to a site? (Averting Expenditure and Conjoint Analysis). What is the environmental damage compared to productivity improvements from
Method) Have competitive advantages and/or industry clusters collecting and other RL activities? (Expenditure Approach).
Are international/global partners involved in RL and is the supply chain growing in resulted from successful RL initiatives? (Contingent The organization provides on-going enforcement with its RL operation. Its activities
members and scope? (Referendum Method) Valuation Method) lessen the burden of enforcement expenses by regulatory entities, therefore reducing
Is the larger community satisfied with the RL waste reductions? (Referendum Do consumers prefer products that are easier to the tax burden on community. How important is it that the organization' estimates
Method) disassemble for RL recycling? Do consumers prefer costs the community would incur in the absence of compliance with regulatory
Do “greener” cities attract more residents, visitors, end economic growth due to RL? longer product lifecycles that result from recycling? agencies? (Damage Cost Method)
(Travel Cost Method) (Discrete Choice Method) The organization provides on-going economic welfare with its RL operation. Its
activities achieve social and environmental sustainability and help economic growth
followed by increased spending and job creation. How important is this that an
organization's RL operation improves individual welfare? (Productivity Method)
What is the additional value of RL regulations to future generations because of reuse of
materials? (Expenditure Approach)
What is the valuation and utility of a company's activities that develop corporate and
regional trading opportunities because of RL capabilities? (Productivity Method)

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A.A. Hervani et al. Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

Contingent valuation uses surveys to elicit responses regarding cus- many non-market goods valuation approaches (Bhat, 2008a,b).
tomers' willingness to pay for environmental quality based on hy- Organizations can assess how stakeholder empowerment activities
pothetical market conditions and can be applied to a variety of en- lead to greater awareness and participation among constituents sup-
vironmental goods to assess existence value as well as user value. porting reverse logistics operations, especially for ecosystem preserva-
Contingent valuation can measure the worth individuals place on orga- tion and health hazard reductions, using contingent valuation (Johnston
nizations that promote recycling as part of their reverse logistics op- et al., 2002; Willis and Garrod, 1993). Another use of the contingent
eration (Carson and Hanemann, 2005; Johnston et al., 2002; Willis and valuation for reverse logistics and stakeholders could be determining
Garrod, 1993). Organizations might poll customers and community preferences for reverse logistics in decelerating and preventing en-
members to assess how they are affected by the improved resources and vironmental degradation, although alternatively they could be asked
systems resulting from reverse logistics and recycled content in the how they feel about reverse logistics contributing to environmental
organization's products. degradation (Johnston et al., 2002).
Reverse logistics facilities can be based in distressed regions due to Organizations could estimate the willingness of individuals to pay
labor needs and pools. An organization can provide on-going human for such reverse logistics operation. Contingent Choice Models can be
capital improvements from its reverse logistics operation in poorer re- utilized to obtain an individual's willingness to pay for the environ-
gions, improving education and health of employees and community. ments and resources preserved for future generations because of an
Contingent valuation can be employed in these situations. Contingent organization's reverse logistics activities (Louviere et al., 2000; Foster,
choice approaches of contingent valuation ask individuals to state a 2011). Referendum Methods allow organizations to measure the im-
preference between two groups of developments or non-developments portance of stakeholder empowerment and improved future value for
at different prices to value the alternatives (Louviere et al., 2000; communities resulting from reverse logistics operations (Foster and
Foster, 2011). Using the Contingent Choice Model, organizations can Mourato, 2002; Nunes and Schokkaert, 2003).
estimate the values individuals place on reverse logistics operations An expenditure approach can determine the costs of benefit creation
from a community development perspective. or of loss reduction. It can be utilized by organizations to estimate
Choice experiments can estimate economic values for tradeoffs willingness to pay for the presence of reverse logistics activities that
among various ecosystems or environmental services by individuals clean streams, avert waste, or avoid costs to society (Abrahams et al.,
(Braga and Starmer, 2005). The use of choice experiments would be 2000; Naik, 2014). The expenditure approach can be utilized to aid on-
appropriate if an organization is concerned with community health is- going stakeholder engagement associated with reverse logistics operation.
sues in reverse logistics operations. For example, reverse logistics op- The measures of reverse logistics activities maintain the benefits of the
erations may reduce flows of waste disposal and divert waste from ecosystem and avoid additional costs to society should the environment
landfills, reducing contaminated run-offs, which lower individual and no longer exist, can be estimated. The avoided cost method can de-
community risk of exposure to toxins. An organization may provide termine the economic value associated with stakeholders benefiting
ongoing improved resources from reverse logistics, the value of reverse from knowledge gained (to avoid their own personal social and en-
logistics jobs, and generation of new jobs in poverty-stricken areas. The vironmental costs) and involved in determining ecosystem and social
productivity method is appropriate to estimate economic values for benefits from organizational reverse logistics activities (Bockstael et al.,
ecosystem products or services contributing to the production of com- 2000; Notaro and Paletto, 2012; Randall, 2002)). The information
mercially-marketed goods from reverse logistics systems, and the socio- provided by stakeholders can aid in reverse logistics valuation and the
economic benefits they provide (Bell, 1997; Loomis and Larson, 1994). risk reduction or averted cost from reverse logistics practices that aid
If an organization addresses on-going regulatory and public services communities in reducing wastes, are useful computations.
within its reverse logistics operations, the activities that help prevent
spillages or leakages in the reclamation process that could cause health 5.4. Macro-social issues measures
problems and possible damage to ecosystem can be valued. The cost-of-
illness method estimates values for morbidity based on the concept that For macro-social issues, the environmental goods valuation methods
an individual would be willing to pay at least as much as the cost of enable organizations to determine the importance of reverse logistics
treating an illness as the cost of contracting the illness. The cost of illness operations that focus on on-going economic welfare improvement ac-
method can be utilized to estimate the individual's willingness to pay for tivities. Because an organization may be introducing reverse logistics to
the organization's reverse logistics operation which avoids costs to the comply with regulations, it may be supporting sustainable growth,
community from altered ecosystems (Harrington and Portney, 1987; preserving the natural ecosystem, and can attract travel and tourism to
Gupta, 2008). benefit the larger community. These are social benefits to the broader
The avoided cost method calculates the value of an ecosystem's society and they can be measured. The previous examples provided
benefits and represents an added cost to society if environmental ser- evidence for individuals and direct beneficiaries (stakeholders) of re-
vice no longer existed (Bockstael et al., 2000; Notaro and Paletto, 2012; verse logistics operations. This grouping focuses on broader society,
Randall, 2002). For example, socially, the avoided cost method allows some of these items were mentioned indirectly in previous examples
organizations to measure the value of safer water resulting from re- under other categories.
duced landfill disposals made possible from reverse logistics operations. The travel cost method estimates the value of recreational benefits
derived from ecosystems based on how far consumers would travel
5.3. Stakeholder and participation environmental goods valuation (Bergstrom et al., 2004; Birol et al., 2006; Chae et al., 2012). This ap-
proach can be utilized by organizations to assess if reverse logistics
The presence of reverse logistics activities provides an on-going compliance promotes broader tourism or even jobs for a region and
collective audience or awareness to a community of an organization's how far employees, outside laborers will travel for jobs in the region.
product stewardship and environmentally-friendly image. This value Thus, as an economic development tool from improving environmental
could lead to greater competitiveness and profitability. Random utility and economic performance of a region to attract visitors or economic
determination is useful in measuring the monetary value individuals or labor growth can be evaluated. Reverse logistics programs thus can be
stakeholders place on the activities of the organization (Kaoru et al., justified at an organizational level for this reason, but can also be ap-
1995; Bhat, 2008a,b; Hensher et al., 2013). The Random utility method plicable for regional policy makers.
can measure if consumers and the general population prefer recycled Since the averting expenditure method estimates benefits by the
content derived from reverse logistics processes. Involving stakeholders change in spending on goods that are substitutes for a cleaner en-
in this evaluation is, in itself, a process but also an outcome of applying vironment (Abrahams et al., 2000; Maciosek et al., 2015), it can be

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A.A. Hervani et al. Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

utilized to estimate the values individuals place on the benefit they proposed in this research, or others, would require different tools,
derive from having products collected through a reverse logistics re- identifying the dimension to value is extremely important. The next
clamation system versus paying landfill tipping fees or incurring the decision is to determine whether a market or non-market-based meth-
cost of returns. odology would be appropriate. There are many reasons, for this ranging
The referendum method enables organizations to obtain individuals' from data and tool support availability to comfort with the chosen
willingness to pay for reverse logistics when the larger community is modeling approach. If a non-market based method is selected, a further
satisfied with waste reductions (Foster and Mourato, 2002; Nunes and refinement on the use of revealed or stated preference methods is next
Schokkaert, 2003). Calibrated and conjoint analysis determines how in- identified. Recommended methods are then provided. These methods
dividuals' value features of a product (Foster and Mourato, 2002). It can are built from our initial discussions and reverse logistics examples
determine the values attributed to dimensions of a social benefit, for provided in the case presented. Further investigation and delineation of
example of the contribution to the overall social welfare of reverse lo- this decision tree from a practical perspective are needed. However,
gistics, social incentives from re-manufacturing and reclamation may such a decision tree can serve as a user interface structure for accessing
fall within this category. This measurement can be a strategic ad- models within a decision support system.
vantage for organizations and enhance their macro-level standing in the
region. 6.2. Theoretical propositions
The use of the productivity method can address the organization's on-
going trading opportunities with its reverse logistics operation where From the review of the literature, evaluation of various environ-
these activities create benefits to the community in increased jobs and mental goods valuation techniques, the case of reverse logistics, in-
local spending (Bell, 1997; Cartier and Ruitenbeek, 1999; Hanewinkel formation from the summary tables and the decision tree developed, we
et al., 2013). Alternatively, a damage assessment model calculates a da- present the following major research propositions.
mage function measuring environmental and social costs of alterations
Proposition 1. Environmental goods valuations, using market and non-
to the natural environment (Anzani et al., 2010; MacDonald et al.,
market valuation approaches, can be applied to social sustainability
2002a). It is recommended when an organization's reverse logistics
valuation for corporate and supply chain level decisions
activities reduce damage to the environment or contribute to social
measures that can reduce societal damage (e.g. reducing poverty or loss Proposition 2. Environmental goods valuations method selection will
of jobs when reverse logistics is adopted in a community and region by depend on the social sustainability dimension to be valued.
both private and public entities). The expenditure approach can estimate
Proposition 3. Internal social sustainability dimensions may require
values individuals place on reverse logistics activities resulting in pro-
different selection of environmental goods valuations choices for
ductivity improvements from recycling collection. If an organization
valuation than other social sustainability dimensions
provides on-going enforcement of all reverse logistics operations and
the activities lessen the burden of enforcement expenses by regulatory Proposition 4. Contingent choice, discrete choice, calibrated and
entities, the tax burden to the community is reduced. By using the da- conjoint, and contingent valuation models can be applied across the
mage cost method, organizations can estimate the costs the community spectrum of social sustainability dimensions.
would incur if organizations did not comply with regulatory agencies.
Proposition 5. The travel cost method and the hedonic pricing method
The assessment would rate the importance area consumers place on
can utilize willingness to pay estimations to value social sustainability
compliance.
dimensions.
Overall, many non-market goods valuation approaches can be ap-
plied throughout the reverse logistics process from a social dimension Proposition 6. The productivity method is widely applicable to value a
perspective. Whether they are internal or external dimensions, organi- number of social sustainability dimensions.
zational or societal benefits, the tools can be applied. Our examples in
Proposition 7. Individual level analysis can be aggregated to
this section above as well as in Table 2, provide a more comprehensive
effectively value social sustainability including the use of cost-of-
view of resources available for companies to value and justify a business
illness or avoided cost from diverted wastes due to greening of supply
case for supply chain and reverse logistics sustainability aspects. This
chains and other corporate greening activities.
approach can move beyond the case for reverse logistics and be applied
to other areas and activities within an organization. These propositions set the stage for further research in identifying
whether the initial findings based on current literature and model
6. Managerial and Research Implications characteristics are accurate.

A number of managerial and research implications can be derived 7. Discussion and conclusions
from this research. The literature review provides some guidelines for
managers who wish to investigate applying the tools and the example of There are few financial benefits that may exist in the short run for
reverse logistics illustrated use of the valuation approaches to support a organizations adopting reverse logistics activities and computing fi-
social dimension perspective. A selection decision tree to guide man- nancial benefits are difficult. Results may be negative as organizations
agers is introduced and research propositions are identified from the create new, expensive infrastructures for recycling or develop new
previous discussion and to help further guide research in this field are educational programs for end-user or consumer recycling. But, the
discussed below. strategic and intangible, non-market benefits, may be substantial,
especially from environmental and social sustainability dimensions
6.1. A decision tree for valuation tools selection (Presley et al., 2007; Elzen and Wieczorek, 2005; Wiengarten and
Longoni, 2015). Therefore, there is a need for methods to help more
Fig. 2 presents a basic decision tree that, based on the initial find- holistically evaluate the impact and value of reverse logistics activities
ings in this study, can guide managers and researchers in identifying from an organizational perspective.
which environmental goods valuation approach could be most appro- Using environmental goods, economic valuations may allow orga-
priate for a given decision. The decision tree provides a step by step nizations to quantify results from qualitative improvements. The qua-
approach which first determines whether an organization requires va- litative nature of the reporting in no way detracts from the reverse
luation of an organization's social sustainability activities. logistics initiatives, but provides a broader impact of the scope and
Given that the social sustainability dimension, whether those benefit of the activities. Making the business case at the organizational

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A.A. Hervani et al. Technological Forecasting & Social Change xxx (xxxx) xxx–xxx

Fig. 2. Decision tree for organizational selection of valuation approach.

level for reverse logistics and its social sustainability perspectives can environment at large. This approach provides important information
be greatly enhanced through using these tools that have long existed in for corporate environmental and sustainability reports and is an alter-
the environmental economics literature and often applied at the macro native method of assessing corporate social responsibility success in
or broader policy level. reverse logistics and beyond.
While most sustainability measures that attempt to quantify reverse This framework its exploratory. Future research is needed in a
logistics, benefits have been almost exclusively financial, with few en- number of key areas including exploring adaptations to incorporate
vironmental benefits evaluations included, this research proposes al- economic non-market goods evaluation in reverse logistics and other
ternative tools for organizations to use in evaluating their reverse lo- organizational areas in a variety of industries. Research and cases from
gistics operations from a social sustainability perspective. Examples of a variety of industries and organizations that explore the framework,
the four social sustainability dimensions (1. internal human resources, challenges in justifying and documenting the non-financial and broader
2. external population, 3. stakeholders, and 4. macro-social issues) and impact, and ways to implement the social sustainability environmental
non-market goods valuation approach provides guidance for organiza- goods evaluation process will be important. Qualitative and quantita-
tions in their implementation and justification of reverse logistics ac- tive data gathered via survey methodology will help test and prove
tivities to internal and external stakeholders, stockholders, and to guide these proposed propositions.
organizational strategic initiatives for reverse logistics and social sus- Additional studies can extend and apply these tools to validate and
tainability. refine these methods for supply chain and organizational analysis. In
This study postulates that organizations, by adopting environmental applied studies, external stakeholders in the macro-environment could
goods valuation measurement can make better decisions in achieving be surveyed indicating satisfaction levels with these non-market goods
economic and social sustainability for their supply chains, and in this measures and the short-term and long-term benefits of additional re-
case, their reverse logistics programs because they now have tools to porting. Satisfaction and validity of the qualitative (over financial
measure variables that were not available before. The propositions we measures) should be studied. Involvement by industry groups, trade
have developed can aid in advancing the current academic literature. associations, and business organizations is needed to disseminate these
The proposed framework enables organizations to identify tools and measures and to further foster transfer of knowledge from the academic
examples to measure various benefits that may accrue through non- community into local production, manufacturing and service arenas
market methods. These methods capture values consumers and others and to disseminate the information and justify its importance and va-
might place on the social aspects of an organization's reverse logistics lidity to practitioners.
activities. A research extension is indeed important because there are For data collection, internal and external populations should be
no case studies of applying market and non-market valuation techni- included particularly the community along with organization members.
ques to social sustainability within an organization's supply chains. Initial research designs will be exploratory rather than conclusive but
the authors suggest both primary and secondary data be analyzed but
yield to the expertise of the involved social science and business re-
8. Areas for Future Research
searchers. A variety of research and data collection and analysis ap-
proaches is needed and will be dependent on the researchers them-
Our proposed propositions can be evaluated and estimated in a
selves. In fact, a variety of models and techniques may be necessary to
number of ways. With global growth of reverse logistics, measures and
describe phenomena. Future research too may consider methodological
justifications of success must be adapted to an organization's reverse
appropriacy and relevance to this emerging field of study.
logistics life-cycle stages. Benefits of the environmental goods valuation
Finally, case studies examining the longitudinal impact of
approach are important to organizations, stakeholders, society, and the

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chains: a systematic literature review. Supply Chain Manag. Int. J. 19 (5), 643. strategic management, new venture creation, and quality management.
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