Complexities and advantages of a green supply chain
Organisations are facing increasing challenges to balance business performance with environmental issues and these challenges have created a new area of green supply chain management, says Ron Basu.
If industry is seen as a complex web of buying, making, selling and delivering, then the opportunities for environmental considerations when brought into play in supply chain management could not only provide sustainable environmental measures but also be beneficial to both organisations and individual consumers.
Environmental regulations are also changing the way supply chains are designed and managed. The problem is that the sheer number of regulations, other influences such as changing consumer sentiment, and the complexity of global trade, makes it difficult for companies to decide exactly how they should respond to these pressures.
Not surprisingly, there are instances in recent history where the performance of manufacturing businesses was drastically affected due to negligence in environment and safety standards. A failure in product safety which caused deformed 'thalidomide children' is still haunting the manufacturers.
The gas explosion of 1984 in Bhopal, India, which killed over 1000 people, permanently damaged the business of the manufacturers. On a global scale industrial pollution is the main contributor to the so called 'greenhouse' effect and global warming.
Whatever the scientific evidence, or lack of evidence is, a sufficient number of people (as evidenced by 180 countries signing the Kyoto treaty) mean that no organisation can in the long term hope to avoid legislation and regulations designed to honour the spirit of the treaty.
The environment and safety are not just social or political issues; they are vital ingredients contributing to the performance of an organisation. These rising environmental pressures and social expectations can be turned to commercial advantage if a strategic approach is taken to develop a "green" supply chain.
The strategic approach of green supply chain involves complex longer term considerations involving not just industry but sustainable environment protection.
A supply chain can be complex, with environmental issues occurring at the second and third-tier supplier levels. Green supply chain concepts manage environmental impacts where they occur, ideally before they occur.
Green initiatives by manufacturers and suppliers
It is reasonable to state that manufacturing industries are major players in environment issues. But when the issues relate to safety, whether for products or workplaces, they apply seriously to both manufacturing and service organisations. Lack of safety in the product or in the workplace will inevitably cost money and lost production time.
Green initiatives by governments and non-profit organisations
Environment protection is going in cycles without showing a continuous improvement. Since the 1970s the environment was a political hot potato but as we became accustomed to the issues, and without doubt some issues were overstated, (for example it was widely said in the 1970s that oil would run out by 2000, and we all remember the nonsense that was the Y2K).
But now since the Kyoto Treaty of 1997, influenced by pressure groups such as Friends of the Earth, and well publicized activities of Greenpeace, environment issues are again at the forefront. The scientific evidence of global warming produced by scientists (e.g. of the Royal Society) has seriously created a sense of urgency in governments, including the USA, and non-profit organisations worldwide.
Green initiatives by Retailers
Global retail giants Wal-Mart and Carrefour and other supermarkets all over the world are responding to the pressures on packaging waste reduction and other environmental issues of green supply chain.
The media reports since 2006 are loaded with announcements on 'greening the supply chain' from large retail groups. Wal-Mart unveiled its packaging scorecard to major suppliers such as Proctor & Gamble, Unilever and Nestle to cut packaging. Wal-Mart targets that the scheme will reduce packaging across its global supply chain by 5% by 2013.
ASDA supermarket, a subsidiary of Wal-Mart in the UK, claimed , as an example, that by taking pizzas out of cardboard boxes saved 747 tonnes of cardboard in a year. Similar 'green initiatives' are proactively promoted by UK retailers including Marks & Spencer's, Tesco and Sainsbury's.
There has been stronger emphasis to introduce organic and bio products. The example of 'Carrefour Bio Coffee' illustrates that by promoting unbranded 500g/ 1kg coffee in bags as 'organic coffee to support fair trading' in 1997 sales increased by 80% in 4 years.
Green initiatives by consumers
Consumers have both power and responsibility to enhance the activities and effectiveness of the green supply chain. It is the consumer who pays for the end product or service and it is consumer who ultimately suffers or benefits from the impact on the environment.
In conclusion, it is beyond dispute that there are commercial and sustainable benefits in applying 3Rs (reduce, reuse and recycle) by all stakeholders to work towards a sustainable green supply chain.
Dr Ron Basu is the founder of the consulting company, Performance Excellence Limited, Visiting Professor at SKEMA Business School and Visiting Fellow at Henley Business School