Posted: June 19th, 2021
A business enterprise’s primary aim is to generate revenue and sustain continuous profitability. This primary purpose for business existence is fulfilled by a wide range of business process and operations, such as: sales; customer service; manufacturing; transportation; purchasing; research and development; strategy implementation, human resource management, to name but a few (Harrison and van Hoek, 2008). These components construct a company’s supply-chain, which is the string of components that contribute to the generation of value for customers and the respective acquisition of finances (Johnston and Clark, 2005).
Supply-chain management can be perceived as a business infrastructure which connects business units and processes. This is the reason why, the discipline is substantially complex due to the multi-stakeholder environment which it is surrounded by (Croom et. al., 2000). Moreover, as business companies are currently operating in globalized economies, which increase the dynamism to which they are exposed, supply-chains can be also identified to be challenged by a wide range of contextual complexities (McDaniel, 2000).
A traditional supply chain connects the suppliers, manufacturers, distributors, retailers and consumers together by control of the information, logistics and capital flows (Huang, P.S. et al, 2009). It begins from procurement of raw materials and ends with distribution of products / services to the consumers. It is not only the financial chain, the material chain and the information chain that connect the suppliers, the manufacturers and the consumers together, but also a value chain. Because the value of material increases during the processing, packaging, and transportation process, the enterprises benefits from it (Lu, L.Y. et al, 2007).
There are four primary elements from which ‘green’ supply-chain management is comprised. These elements are known in the academic literature as upstream; downstream; internal supply-chain management; and logistics and transportation (Penfield, 2009; Harrison and van Hoek, 2008). Each of these elements respond the different ‘green’ considerations, such as: recycling; vendor management; waste reduction; product purchasing; source of raw materials; design; transportation; inventory control and many more. However, it needs to be underlined that these ‘green’ components of a supply-chain cannot be managed in isolation as a separate entity. If a company adopts ‘green’ thinking it needs to restructure its supply chain from its core in order to successfully utilize the concept (McDaniel, 2000).
It is important to note that ‘green’ supply-chain management is not only the adoption of environmentally considerate operations but is also fundamentally valuable to the overall business efficiency. In other words, companies are likely to gain greater efficiency in the use of resources they manage; they will be more successful in the generation of profit as they will more capable of managing their costs (Kala, 2008). In addition, the efficiency which these companies can reach through the implementation of ‘green’ thinking is likely to predispose to efficiency along the value chain – partners and vendors are likely to benefit as companies can integrate good practices within their operations and thus share their experience with other parties within their supply-chain (Simchi-Levi et al., 2003).
Apart from the improvement of internal operations, companies can also benefit from ‘green’ behaviour within their front-end processes. Companies can stimulate greater product and service diversification. Consumers are more interested in the environmental impact which their purchasing and therefore they are growing in awareness of the environmental impact which product usage and disposal create (Friedman, 2008). Moreover, the implementation of ‘green’ thinking is likely to predispose to the adoption of new methods of work, innovative processes and technologies.
In this respect, the present topic can be identified to be of substantial importance to business organizations which are focused on sustaining long-term competitiveness within a challenging external context. This is the reason why, the knowledge of the discipline can be proposed to stimulate progress in this field which not only will be beneficial to the particular organization which implement ‘green’ strategy but to consumers and the society as a whole. The author of the dissertation aims at exploring the topic of ‘green’ supply-chain management (GSCM) – identifying past performance of organisations, outlining present improvements and suggesting future developments of the concept. This research aim is outlined by clear research boundaries; it focuses on GSCM in specific and explores the topic from its introduction to its possible further progress (Bell, 2005).
In this research we will discuss green supply chain management (GSCM), its attributes and the green supply chain practices being implemented by responsible firms. An effort has been made in order to identify the limits of the sustainable supply chain management (SSCM) and green supply chain management (GSCM). It is important to note that SSCM is broader term whereas the GSCM is a subset of it. Both are different in terms of definition, role and characteristics.
Sustainability is the capacity to endure; which has strategic perspective and will shape the future of global business. The society needs sustainable behaviour which ensures environmental balance. According to (Corbett and Klassen, 2006) sustainability opens another source of for improvements that are required with short-term investment.
One of the most contemporary issues which have significant global-scale importance is the global environmental sustainability. At present, it can be recognised that the global natural sustainability is facing certain risks which are primarily resulted by business organization and their inability to manage their resources efficiently (BG, 2010). Some of the direct and indirect consequences can be proposed to be associated to increase waste disposal; water and air pollution; increased carbon footprint; threats for the wildlife sustainability. In this respect, business supply-chain management is seen as one of the predominant factors in the management and preservation of the global environmental sustainability (IEA, 2009).
The sustainable development requires the inclusion of socio-economic elements and their dependency in long and short-term (Gibson, 2006). Improving sustainability and offering the required service level, has increased the reliability of green and waste management practices.
Environmental issues are considered an integral part of the broad framework of sustainability. The World Commission on Economic Development describes a sustainable business as one “that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WECD, 1987). (Elkingon, 1998) has discussed that WECD definition captures the three interrelated dimensions (social, environmental and economic) of the triple-bottom-line framework, which has gained rapid recognition and will be discussed in later stage of the dissertation. Sustainability means that business activities should be able to protect the environment or minimize its impacts on the society and humanity and serve the society. Following the growing stream of research on environmental issues in supply chain management (Linton et al., 2007), the focus is on the environmental sustainability. (Zhu and Sarkis, 2004) describe these from supply chain perspective and referred to as green supply chain management.
Environment and climate changes are becoming a sensitive issue and are getting attention as never before (Intergovernmental Panel on Climate Change, 2007). Business organisations have more responsibility to carry out business activities resulting in minimum environmental damage [(McWilliams and Siegel, 2000), and (Strandberg, 2002)]. (Srivastava 2007) and (Zhu et al., 2005) have described green supply chain issues as a feature and how business organisations can enforce their suppliers to adopt and improve environmental performance. The example of green supply chain practices include reducing waste, reduced packaging, assessing suppliers on their environmental performance, development of more environment friendly products and reducing carbon emission.
The global corporations now are adopting green practices throughout the supply chain in collaboration with all stakeholders to attain sustainability. However, it is a challenging task that each organisation facing (supplychainbrain.com). In this research the author has tried his level best to cover some major challenges, which were found during the research.
The following challenges are to be seen for achieving sustainability:
Population Growth: It is a core challenge to sustainability. There were 1.75 billion people on the planet in 1910; today there are 7 billion and by 2050, the estimated population would be touching 9 billion (IBM, 2010).
Resource Depletion: The luxury lifestyle, and growing no. of products has resulted in scarcity of the natural resources. Most of the population has not taken notice of the ‘collateral damage’, and the resources are being vanished at an alarming rate. (IBM, 2010)
Unaccountable growth and consumption: The unsighted factor of human activities are appearing as ugly figures like emission of GHG from fossil fuel use over last 50 years or so. It is estimated that 2% of GDP (?28 billion annually in the UK), to counter climate change, is dwarfed by estimates of the economic damage in prospect (for example the figures of $20 billion annually by 2100 by the German Institute for Economic Research (DIW) (IBM, 2010).
Collaboration: Collaboration is of critical importance for business growth and sustainability – it needs to be practiced with a diverse range of stakeholders in order for companies to be able to take advantage of multiple business areas, such as: information sharing; resource capabilities; physical infrastructures; transportation; delivery; and customers’ interactions (IBM, 2010).
1.1.1. Definition and Background of Green supply chain management (GSCM):
Green supply chain management (GSCM) has many variations in its definition and terminology. Following is the list of different definitions:
Supply and demand sustainability in corporate social responsibility networks (Cruz and Matsypura, 2009; Kovacs, 2004; cited in Eltayeb, 2010)
Supply chain environmental management (Sharfman et al., 2009; cited in Eltayeb, 2010)
Environmental purchasing (Carter et al., 2000; Zsidisin and Siferd, 2001; cited in Eltayeb, 2010)
Sustainable supply chains (Linton et al., 2007; Bai and Sarkis, 2010a; cited in Eltayeb, 2010).
However the term GSCM will be used throughout the dissertation
Even though GSCM is a concept which was developed to promote the preservation of the environment and the enhancement of processes, its focus has turned in recent years to maintaining their competitive advantage in the market as many companies have started using more efficient processes, more environmentally friendly materials and more effective resource allocation, in order to be able to compete in the market. Every company has to demonstrate similar goals (Spicer and Johnson, 2004). Accordingly, it can be assumed that GSCM issues are important not only to companies and the environment but also to internal and external stakeholders. Finally, implementing GSCM can have a positive influence on a business as a whole since those efficient operations have a direct impact on every company’s short and long term strategy, brand value and reputation on the market (Min and Gelle, 2001).
In this research we have identified a few key areas where adoption of green practices are being incorporated by the global firms to attain goals of meeting rapid regulatory change due to environmental issues, achieve sustainability, and overcome future challenges.
1.2 Aims and Objectives:
i) Identify future green supply chain challenges faced by enterprises;
ii) Examine the role of other stakeholders like EPA(UK), EU, UNEP etc.
iii) Discuss green supply chain future challenges and issues / forces affecting it
Though (Srivastava 2007), has discussed many important issues regarding the current state and practices in GSCM, future policies and directions have not been addressed so far, though many researchers have done valuable work to specify the current environmental issues faced by the organisations.
The most important point in understanding the GSCM is about environment friendly products, which have less weight, and are easy to move either side of the supply chain (i.e. from manufacturers to the customers or reverse logistics).The quantity of Co2 emission is almost uncontrollable while the economies are facing recession and the need of industrialisation is creeping up. Many organisations still believe that going for green practices could be end up in high costs which might prevent their products or services getting a competitive advantage over the competitors. But according to (Wilkerson 2005) it is a business value driver which is adopted by the organisations who have good business sense as it results in higher profits as highlighted by (Zhu and Geng, 2001) who have done a thorough research on green purchasing, ecology and ecosystems.
According to (Srivastava 2007) the GSCM practices cannot be examined separately unless the environmental concepts are taken into consideration. (Zhu and Sarkis 2004) have discussed the range of green supply chain issues such as green purchasing, integrated supply chains and flows from manufacturer to customer or vice versa (reverse logistics).
1.3. ISO 14001 and the Green Supply Chain Management:
ISO 14001 is a standard set by the ISO, which measures environmental performance of facilities that adopt the EMS standard. ISO 14001-certified facilities are more likely to implement GSCM practices and thus assess suppliers’ environmental activities when taking purchasing decisions. The connection between ISO 14001 and GSCM practices is very important. But, this standard does not bound businesses to assess the environmental impacts of their decisions. However ISO 14001 certified organisations are successful in implementing GSCM practices which results in lower cost and competitiveness. This suggests that organisations which are more successful in implementing GSCM practices, indirectly bound their suppliers to reduce their own environmental impacts.
Business’s environmental impacts arise from inputs that generate waste during production process, storage, distribution, use, and final disposal. This affects the final product, production waste, and its disposal in the end. Facilities that purchase supplies from a certified supplier also acquire waste from each supplier, no matter how smartly they produce. GSCM practices minimize environmental risks, which arise from buying material from non certified suppliers. This way, organisations enhance their environmental performance with regulators and the public image is made transparent.
ISO 14001 strongly supports GSCM practices adoption, and results in cost effectiveness for the organisation. It is important to note that both (GSCM and ISO 14001) depend on a continuous improvement model. ISO 14001 bounds organizations to reduce the environment impact continually. In a similar fashion, GSCM practices enforce to reduce the environmental impact of the suppliers products to minimize final product impacts on the environment. The continuity process is essential to maintain ISO 14001 standards, which are helpful for GSCM practices, because they aim to enhance environmental performance. In addition both require organizations to minimise their inventory level in order to avoid waste generation.
ISO 14001 certified organisation play an important role in pollution prevention, and invest heavily for employees training in order to going green all the way (in the Wal-Mart case study discussed in chapter 4). Enhancing employees’ sense of environmental protection, not only in production but also in their operations, generates knowledge towards GSCM practices. Therefore, ISO 14001 presents a framework that adequately supports GSCM decisions of organsations.
1.4. Dissertation Overview
The main aim of the dissertation is to explore ‘Green’ Supply-chain management – in an evolutionary manner through past, present and future perspective. The research question can be divided into a number of smaller questions to be addressed by the author, such as: why was ‘green’ supply-chain management adopted in the past; what is the current situation in the field; what are the likely future developments associated with the concept likely to be?
These questions provide a research boundary to contribute to a narrow research focus which is very important in the development of a credible and reliable piece of research (Saunders et al., 2003). In the research process, the author has also specifically focused on exploring the topic within the context of developed and developing economies to provide diverse perspectives on the future needs for the adoption of ‘green’ supply-chain management.
Apart from the clearly defined research variables, research questions and sub-questions, the research process is guided through the implementation of dissertation chapters which can be presented as follows:
Chapter one, is the Introduction to the dissertation, and includes an overview of basic concepts like sustainability and triple-bottom-line, followed by the aims and objectives of the research, exhibiting the author’s understanding of the purpose of the research and potential outcomes.
Chapter 2, presents a Literature Review. This chapter focuses on the academic knowledge around the topic of ‘green supply-chain management. In order to adequately address the research question a clear strategy is applied within the Literature Review section. The author starts from the general and broad knowledge on the topic which is subsequently narrowed down to ‘green’ supply-chain management and the implications for the future developments of the concept.
Chapter 3 is the Research Methodology which explains the research approaches and strategies which are adopted to facilitate the author’s addressing of the set research questions. The Research Methodology is an essential component of the dissertation development and research credibility – it explains the research assumptions and techniques implemented which reveal the adequateness of the adopted methodology.
Chapter 4 presents case studies of how global firms are turning towards green practices (green logistics, green operations, innovation of environmental protection products). Only 3 cases have been selected for providing solid foundation in support of the authors’ research direction.
Chapter 5 includes discussion which synthesizes the information presented in the Literature Review. This chapter not only answers the set research questions but also provides recommendations for future research on the topic.
Chapter 6 discusses the role of government and international agencies (like SEPA, EA (UK), EU) in implementation of GSCM practices to achieve sustainability in the future, regulatory changes and control.
Finally chapter 7 presents some concluding remarks followed by references and bibliography section and appendices.
Green supply chain management or GSCM is a concept that can be found in academic literature under both supply chain management and environmental management. Not everyone defines the concept in the same way and while for some GSCM means ‘green’ purchasing, for others the meaning encompasses more fields, such as manufacturing processes, consumers and external suppliers (Zhu and Sarkis, 2004).
The author that has contributed the most on the development of the concept and its meaning is Srivastava (2007). He identifies GSCM as a process where ‘green’ thinking and supply chain management are interconnected. This includes integrating the ‘green’ element into the whole product lifecycle inventing, designing, manufacturing, distributing, and reusing the product. This definition encompasses all the concepts and constructs that have been developed on the topic by other academics.
One of the concepts that have been identified as a vital feature to the promotion of GSCM is product design. This has been recognized in operations and supply chain management literature as well as in the context of environmental research (Krajewskiet al., 2007). If a company designs a product in such a way that all materials are environmentally friendly, then this will decrease the threat that current manufacturing poses on the environment (Azzone, and Bertle, 1994). Preventing air pollution, water contamination, resource preservation and waste management would benefit the environment and also all levels of the value chain (Arena et al., 2003). In this way promoting ‘green’ product design will contribute towards a more efficient supply chain where the materials used for the product will encourage a better occupational health and product lifecycle (Baily et al., 2008).
The other important concept that needs to be discussed is ‘green’ manufacturing. This process is recognized by Srivastava (2007) and includes the product’s production, re-use or recycling, waste management and inventory control. If companies focus on making their manufacturing ‘green’, then they will manage to contribute to maintaining good environmental sustainability and manufacturing effectiveness. All products will be reused or recycled for further use and waste will reduced to the minimum (Slack et al., 2007).
Accordingly, the academic literature has divided the concept into 3 categories: the first one is the importance of GSCM, the second one is the significance of ‘green’ design; and the third one is the meaning of ‘green’ manufacturing. Generally the academic literature is focused on the vital role for the increase of organizations’ profitability and the promotion of environmental sustainability (Banfield, 1999).
2.1. GSCM Importance:
In the last 20 years, many scholars have recognized that GSCM is one of the most important factors in promoting the production of better quality products which will be easier to be recycled. (Porter and van de Linde, 1995) argue that this will also lead to the improvement of resource management as a whole. There are other scholars who categorize the benefits of GSCM as proactive, reactive and value- seeking (Van Hoek, 1999). Those categories also represent methods which companies use in order to implement the ‘green’ element into their supply chain management.
The proactive approach is where the management decides to spend additional investment in using products or materials that are 100% recyclable. The area where most attention is paid to environmentally friendly products is the manufacturing of end goods (Keiser et al., 2001). The reactive approach can be found where companies act in such a way as to promote environmental sustainability. If a company labels their products then this would represent a direct contribution to the reduction of waste and an indirect contribution to the preservation of a green environment (Baily et al., 2008). (Van Hoek, 1999) defines the value-seeking approach as one which focuses on implementing environment friendly manufacturing processes. Such processes include the inclusion of ‘green’ procurement or ISO certification (Boone and Ganeshan, 2002).
The importance of GSCM has developed the global business organisations’ interest in other elements put forward by academics, such as: compliance with ‘green’ regulations; ‘green’ purchasing; implementation of scales to measure ‘green’ performance; development of ‘green’ practices (Zhu and Geng, 2001). All those are crucial green issues that need to be considered in addition to the following: procurement management, initial stages of product development, packaging, supply chain partnerships, etc. (Hui, 2001).
Moreover, Zhu and Sakris (2004) have revealed that GSCM is likely to lead to closer working relationship between companies and their operations which will further lead to a more globalised ‘green’ thinking and more efficient supply chain processes. Businesses can come closer to a more united and effective corporate social responsibility and accountability, more efficient market performance and more global environmental sustainability.
2.2. Significance of ‘green’ design
As mentioned above, the importance of GSCM as a whole is accompanied by the significance of one particular element of its concept- ‘green’ design. Without the latter ‘green’ thinking would not be entirely implemented in the supply chain.
Companies are not always aware of the importance of such an element in their processes and this is what leads to them not implementing a more environmentally friendly product lifecycle. The two concepts that need to be explained are life-cycle assessment (LCA) and environmentally conscious design (ECD). If those two approaches are understood and used by businesses then they will allow the implementation of a product design that brings environmentally compatible products (Maduet al., 2002).
2.2.1 Life Cycle Assessment (LCA):
The life- cycle assessment measures a product’s environmental effect on consumers’ health and safety. It evaluates whether the end product will harm the environment and to what degree. However, this approach is related not only to the final product but to the whole life- cycle which leads to the end goods (Christopher, 2003). This life cycle encompasses: choice of raw materials; purchasing; manufacturing; logistics; recycling; re-use; and waste control, etc. Therefore, this is a more general and wide approach in comparison with the one which will be discussed below (Krikkeet al., 2003).
Life cycle assessment is a tool that evaluates environmental impacts of a product throughout a product life (i.e. from raw material acquisition to its final disposal). In other words it is from cradle to grave ISO 14040 (1997). A recent trend towards alternative production process includes LCA in comparing waste management strategies (Berkhout and Howes, 1997).
2.2.2 Eco-design (ECD):
ECD is defined as the process of implementing solid ‘green’ practices which will become an integral part of the business. This term needs to be differentiated from practices which include the random replacement of components with ‘green’ particles (Sarkis and Cordeiro, 2001). Environmentally conscious design might include processes such as reduction of waste and design for product reusability (Guide and van Wassenhove, 2001).
Eco-design refers to actions taken during product development aim at minimizing a product’s environmental impact during its whole life cycle – from acquiring materials, to manufacturing, use and ultimately to its final disposal – without compromising other essential product criteria such as performance and cost (Johansson, 2002). It is prime initiative because it integrates environmental aspects into product design process, entire flow of the product in the supply chain. It is vital because the most environmental impacts arise from the production, consumption and disposal of the product are direct consequences of decisions made at the design stage (Handfield et al., 2001). At the design stage of a product, its function and process are defined appropriately, and raw materials / components, supplies and ingredients are selected. That determines the power which will be consumed to create it and the waste generated afterwards. The basic eco-design consists of the following steps:
Design for minimum use of hazardous materials such as lead, mercury, chromium and cadmium (Zsidisin and Siferd, 2001).
Reuse is a design that facilitates reuse of a product or component of it with or without minimal treatment of the used product (Sarkis, 1998).
Recycling is a feature of the design that facilitates disassembly of the waste product, parting it according to the material, and reprocessing of the material (Lin et al., 2001).
Remanufacturing feature facilitates actions like repair and refurbishment aiming at returning the product to the new or better than new condition (Beamon, 1999).
Resource efficiency, aims reduction of materials and power consumption of a product during use, in addition to promoting the use of renewable energy (APO, 2004).
It refers to measures taken during product development and the purpose to do that is to minimize the harmful impact of the product during its whole life cycle. According to (Johansson, 2002) from materials requirement to its final product and its’ final disposal – without compromising of performance and cost. ECD is identified as one of the green supply chain initiative (other initiatives are discussed in later part of the dissertation), due to the fact that it integrates environmental aspects into the product design process, considering the flow throughout the green supply chain.
(Sim V.R and Stuart C., 2007) proposed ecological design is to reduce environmentally negative impacts through incorporating itself with living progressions. The designing focuses on the ecological balance between human and nature, and fully take environmental effects into account to minimize damage in the whole designing process.
For example, for automobile industry, green design is the 3R(Reduce, Recycle and Reuse), which is not only to reduce resource and energy consumption, emissions, and also to make products and components easily classified, recovery and recycling and reuse.
(Liu, ZF et al. 2000) proposed Green designing approach includes two types:
a) Modular design:
Based on the analysis of different functions or different specifications, products can be divided into a series of modules to meet different needs by combining different modules form various products. Modular design can solve the contradiction between product specifications, product design and manufacture cycle, and production costs, but also upgrading of products, improve product quality, easy maintain and recovery, thus strengthen the competitiveness of their products.
b) Loop design:
Loop design, known as design for recovering and recycling, fully considers the possibility of recovery the components and materials, the value of recovery, recycling methods during the designing process, in order to utilize energy and resources fully and effectively, and minimize environmental pollution.
Study shows that about 70%-80% of the product performance is determined in the design stage. However, the design usually cost only 10% of the total cost. Therefore, is should give full consideration to the ecological and environmental impacts in the design stage of products. So the designs can minimum energy consumption and environmental pollution.
Dividing the supply chain in different processes can contribute not only to analyze where the ‘green’ thinking needs to be implemented or where it can be improved but can also improve the performance of commercial organizations (Arena et al., 2003). In other words, once an organization maps clearly its processes, and understands well what is needed for an end product to be made in the most efficient and environmentally friendly manner, then it will be able to eliminate any processes that are ineffective, time consuming or useless. Those processes can be replaced by operations provided by formed partnerships within the supply chain (Emmett and Crocker, 2008).
Finally, this formation of supply partnerships can positively affect the implementation of new and innovative processes, products and services. Knowledge sharing is the key to innovation so the mutual sharing of businesses’ might lead to the development of new ideas and, accordingly, the growth of the businesses (Tiddet al., 2005).
2.3. Importance of ‘green’ manufacturing
One of the most important elements of GSCM is ‘green’ operations which include ‘green’ manufacturing and ‘green’ remanufacturing. In order for a company to adopt a ‘green’ operational approach, it has to be able to manage its resources efficiently and reduce its energy consumption to the minimum. Accordingly, this can only be achieved through creating an effective recycling system (Krikkeet al., 2003).
For a successful recycling system to be implemented, a company needs to think about several crucial elements: working and using products that are recyclable entirely or most parts of the product are and establishing a system through which used products can be collected and returned to the manufacturing unit or to another waste management site (Lee et al., 1995). Therefore, the key process to a successful recycling is logistics.
The integration of the process of recycling in the supply chain of a business is called remanufacturing and refers to product recovery through reuse or recycling (Hoshino et al., 1995). However, it is argued that although integrating product remanufacturing in a supply chain helps the preservation of the environment and has a good social element; it is a complex and slow process which needs to be implemented only if this would be commercially viable to be integrated (Dekker et al., 2004; Durpas, 2008; Emmet and Crocker, 2008). The process should be an economically efficient and feasible process and should not negatively influence the production of goods and the profitability of the business (Johnson and Wang, 1995).
Additionally, it has been acknowledged by (Sundin and Bras, 2005) that the logistic process in product recovery which is a process also known as reverse logistics (RL) is a much more complex process than the usual logistics. The implementation of such a process might affect the whole production life cycle and increase the cost of the units produced (Farahani, 2009). Additionally, reverse logistics requires the integration of another process which is product disassembly (Friedman, 2008; Gattorana, 1998; Gubman, 2006). It involves the separation of the recovered products which requires an increase in the volume of used resources, such as energy, machinery, work force and time consumption (WIPO, 2003).
When the disassembling of product components is finished there are two choice that can be made by the manufacturer: either to melt the elements, therefore recycle the whole product and then use the substance for a new product; or use the old components for the manufacturing of new ones (Schischkeet al., 2005). However, in both cases the end products cannot be of the same quality as the original products as recycled materials differ from original ones (Hardisty, 2010; Hart and Milstein, 2003; Kaiser et al., 2001). Even though operational costs are cut through recycling and reuse of components, no one can track how old the components are whether they have not been reused too many times (Dekker et al., 2004). Therefore, companies have to be very careful when reusing parts as this might result in faulty products and unhappy customers (Khiewnavawongsa and Schmidt, 2008).
If such a situation occurs and a customer returns a product, it is advisable for companies to implement an inspection process through which manufacturers can establish which components are to be recycled and which are still suitable for reuse but has simply been put in a faulty product. However, the implementation of such a process will incur additional expenses for the company and will require extra labor force (Broome, 2002; Krikkeet al., 2003; Lee et al., 1995).
Finally , the additional allocation of resources is only one of the disadvantages of recycling materials. Other disadvantages come from the fact that to recover already used products requires additional process, such as: logistics, storage, inspection and allocation (Leftwichet al., 2004). Therefore, because the process of remanufacturing affects inventory maintenance and control, companies should integrate the process for inventory control of manufacturing and remanufacturing. This way they will prevent the incurrence of additional expenses and resources (Dekker et al., 2004).
However, if a company cannot afford to recycle their own products, in order to sustain ‘green’ manufacturing, they can create a partnership with a company or companies who already have all the processes and remanufacturing capacity in place (Richter and Weber, 2001). This will simplify their processes, reduce their cost bring manufacturing efficiency (Lummuset al., 2006
2.3.1 Reverse Logistics (RL):
Reverse Logistics (RL)is an integral part of the remanufacturing process which is why it requires additional explanation. RL are divided into three stages:
Product collection is the first stage. There are two possible ways of collecting products: by locating and collecting them manually; or by encouraging customers to return their disposed goods. For the latter to be achieved the company has to really understand its consumers and develop such initiatives as to make it quick and simple for products to be disposed and returned to the manufacturer (Maduet al., 2002; Srivastava, 2007).
Product inspection is the second step. This process encompasses the assessment of the quality of the disposed goods and disassembling those components that can be recycled or reused. Once again, there are two possible ways of achieving that: by inspecting the products when collected or at a later stage after they are delivered to the recycling site (Maduet al., 2002).
Finally, the product recovery is the third stage required for a successful remanufacturing process. As this has been already covered above, the only thing that needs to be mentioned here is that this process should be implemented only if the opportunity cost for the remanufacturing is less than the same for manufacturing (Harrison and van Hoek, 2008).
As explained above, It primarily focuses on the returned products, materials or goods from the point of sales or consumption for recycling, reuse and remanufacturing, repair, refurbishing or disposal of the products and material in the supply chain (Carter and Ellram, 1998], [Alvarez-Gil et al., 2007], and [Stock, 1998], cited in Eltayeb et al., 2010). It includes the logistics operations of transportation and inventory management, but its focus is to get product back from the customers rather than deliver the product to customer ([Goldsby and Stank, 2000], Mollenkopf and Closs, 2005], cited in Eltayeb et al., 2010). Used or end of life products returned for possibly three main purposes ([Beamon, 1999], and [Wells and Seitz, 2005], cited in Eltayed, 2010):
1) Reuse: It is the process of collecting used products from the field and distributing or selling them used. The value of the product is changed, without additional processing.
2) Remanufacturing: In this activity used products are collected from the field, assessing its condition and replacing the defective or obsolete component with new or refurbished parts. The identity and functionality of the product is retained.
3)Recycling: is the process of collecting used products, disassembling, separating into different materials, and processing into recycled products, components, and materials. The identity and functionality of the original item is lost.
Product recycling is essential to the global environmental sustainability. It is a process which needs to be coordinated by a closed-loop supply chain management. Closed-loop supply chain management is essential to the management of products at the end of their product lifecycles – when they are disposed. In this respect, companies need to be able to obtain these products and recycle them which are conducted also through the use of reverse logistics (Srivastava, 2007).
2.3.2 Waste Management:
The last element that requires particular attention is waste management. The concept is also known as lean production which refers to the process of reducing waste. If this can be achieved the whole manufacturing process can become more efficient which will result in increase of profits (Keizen).
Waste management can also be achieved in two ways. The first approach that a company can take is to manage the waste which has occurred from consumers’ consumption. The second one is by integrating such characteristics into the product as to promote environmental sustainability (Dahlgaardet al., 1998).
Therefore, by implementing ‘green’ design into GSCM, the produced products will be environmentally friendly and their components will be fully recycled. This would make waste management a much easier and more successful process. However, if companies are not able to create recyclable goods and, thus, reduce waste production, then the whole product life cycle will fail to be ‘green’, regardless of how efficient their logistics processes are (Srivastava, 2007).
2.4. Sustainable Supply Chain Management:
The idea of a sustainable supply chain is to reduce cost while helping the environment. Sustainability is a key for companies to reduce cost. It is all about environment but also equates financial, long term leadership with long term vision, highly sight from investors and a good public image. Whereas green supply chain management is about environment friendly innovation, new ways of smart packaging, reducing waste (resulting less weight on containers) and can be defined as ‘ the process of using environment friendly inputs and transforming these inputs through change agent whose by products can improve or be recycled within the existing environment.’
2.4.1. Constituents of a sustainable supply chain:
Supply chains are complex and interconnected, while many organisations have enhanced their performance by greening their operations. However, addressing the overall change still is a challenge. What constitutes a sustainable supply chainSome of them are as follows:
Raw material from sustainable sources
Re-use and recycling of product waste and packaging
Renewable energy source to power the manufacturing and delivery of goods
Consumers make choice about products they buy, by using and dispose of them.
Organisations collaboration must ensure that every asset is fully utilized, duplication of efforts must be eliminated
Data, knowledge and technology share levels must be well defined
New and environment friendly products brought to the market in a sustainable way.
2.5. Green Supply Chain Management and the environment:
It is a fact that a customer buying a product is only concerned with the products, the attached offers, services and the environment. Most of the customers don’t even have a thought about its environmental affects afterwards. The product design and its disposal capability is the key to environmental issues. Therefore the supply chains are turning to be green through green operations / logistics. It is important to realize that turning green results in supply chain cost reduction, trusted supplier relationship with the manufacturers, credibility, transparency , better public image and finally more environmental, social, economical and innovative products.(Beamon 1999) has defined GSCM as “the extension of the traditional supply chain to include activities that aims at minimizing environmental impacts of a product throughout its entire life cycle, such as green design, resource saving, harmful material reduction and product recycle or reuse”. The objective of green supply chain is to minimize negative environmental impacts and waste of valuable resources (energy, materials, product) from the extraction of raw materials up to final use and disposal of products (Hervani et al., 2005).
Natural environment has been a challenging issue to business organisations in recent times. Business operations, such as sourcing, manufacturing and logistics are labelled guilty for most of the environmental problems (Beamon, 1999). Consequently, business operations are subject to increasing pressure and scrutiny from various stakeholders inside and outside organisation such as government agencies, workers, and not for profit groups (Sarkis, 2006). This is above increasing demand of customers and environmental societies for more environmental friendly products. The huge pressure push firms to consider environmental impacts while doing their business. Green becomes a common practice to depict the environment friendly image of products, processes, systems and technologies, and the way business is conducted (Vachon and Klassen, 2006).
The GSCM field has been growing enormously in recent years. It is important to understand the term supply chain and its relationship with the natural environment. An industry’s supply chain impacts on the environment stem from inputs that increase waste during product storage, transportation, processing use or disposal. The inputs affect a final producer’s products, production waste and disposal. In a supply chain every purchase (physical products) input from a specific supplier also acquire waste from each end up to the end of a supply chain. Our purpose of GSCM, therefore is to avoid environmental risks from less environmentally conscious supplier. By reducing these risks, manufacturers may improve their environmental reputation with regulators, civil society and other stakeholders.
For example a number of companies have worked with the supplier to eliminate unnecessary packaging and reduce hazardous material quantities. In fact some companies are significantly improving both their environmental profile and profit margin by taking a strategic approach to purchasing. They demand their suppliers (and supplier’s supplier) to evaluate and lower environmental cost.
The concept of green supply chain emerges primarily by performing environmental management practices in the context of supply chains ([Sarkis, 2006] and [Walton et al., 1998]). Environmental management represents requirements of how organisations care about the natural environment and minimize the negative environmental effects of their entire operations ([Klassen and McLaughlin, 1996] and [Welford, 2000]). Environmental management values depict policies, procedures and audit protocols for controlling operations that create waste or emissions (Matthews, 2003). These values transformed to standards for Environmental Management Systems (EMS) such as British Standard for EMS BS7750 (1994), the EU eco-management and audit scheme (1993), and the international standard ISO 14000 (Bansal and Clelland, 2004). These standards are developed to provide a framework to implement EMS for the organisations (Netherwood, 1996). Green supply chain concept assumes full responsibility of a firm towards its products from the extraction of raw materials up to final use and disposal of products (Hart, 1995).
2.5.1. Green Purchasing:
This initiative includes activities that aim to make sure that purchased items have mandatory environmental characteristics such as reusability, recyclability, and absence of hazardous materials ([Bowen et al., 2001], [Carter and Carter, 1998], [Hervani et al., 2005], [Min and Galle, 2001], [Rao, 2002], [Walton et al., 1998] and [Zhu et al., 2007]).
It is an environmentally-conscious purchasing procedure which ensures, that purchased products meet environmental attributes set by the buyer, such as reducing sources of waste, promoting recycling, reuse, resource reduction, and substitution of materials ([Carter et al., 1998], and [Min and Galle, 2001]). Green purchasing means that it should reflect the issue of sustainability for purchasing of materials as well as cost effectiveness, without compromising quality of the items bought and the delivery as desired (Lambert and Cooper, 2000). (Hammer, 2006) described basic green purchasing functionalities as follows:
Mandatory requirements: buyers demand, material must have specified green attributes such as recycling features or reusability.
Component restriction: buyers specify that purchased products must not contain environmentally undesirable attributes such as lead, CFCs or plastic foam in packaging materials.
Labelling: buyers require disclosure of the environmental or safety attributes of purchased product content. Such disclosure can be done using green seals and indicators of relative environmental impact such as scientific certification system offered by various commercial organisations.
Information: buyers send questionnaires to suppliers asking them to provide information about their environmental aspect, activities, and management systems.
Environmental Practices: buying firms demand their suppliers to adopt and maintain an environmental management system (EMS) in accordance with regulatory compliance.
Certification: buyers require suppliers to have an EMS that is certified as fully compliant with one of the recognised international standards such as the British Standard 7750 (BS 7750), ISO 14001 from the International Organisation for Standardisation (ISO), and the European Union Eco-Management and Audit Scheme (EMAS).
Audit requirement: buyers audit suppliers to determine their level of compliance with environmental requirements.
Green purchasing deals mainly with environmental friendly products. It is the entry point of the materials for an organisation, placed in an advantageous position to play a key role in the greening of products and activities ([Carter et al., 1998] and [Preuss, 2001]). However, incorporating environmental considerations in purchasing activity may be resulted in complications to the process because it must consider the supplier’s environmental aspects, costing, lead-time, quality and flexibility (Handfield et al., 2002).
2.6. Strategic GSCM partnerships
The development of strategic supply-chain partnerships is essential to company’s adoption of GSCM. Close collaboration with partners within a business supply-chain is likely to contribute to the better utilization of resource exploitation and management of raw materials along the value chain – from purchasing raw materials to the development of final products (Krajewskiet al., 2007). Moreover, the establishment of close collaboration between supply-chain parties is also likely to contribute to the improvement of suppliers’ trust. This can be beneficial to the process of knowledge-sharing and innovation development as integrative parts to process of GSCM adoption (Linde, 1995; Tiddet al., 2005).
2.7. Manufacturing efficiency
Focusing on product characteristics is important part of the adoption of GSCM but still insufficient. Companies need to sustain a focus on their operations and how they can improve their efficiency. In other words, business organisations need to be capable of managing and exploiting their resources in an efficient manner (Broome, 2002). In order to achieve such efficiency companies can employ lean manufacturing as a process of eliminating errors and improving product and process quality (Simchi-Levi et al., 2003).
As lean manufacturing improves business efficiency by eliminating manufacturing errors and product defects, therefore it can be concluded that lean manufacturing is key to the adoption of ‘green’ supply-chain management. Lean manufacturing improves the efficiency of resource exploitation and thus companies which manage their operation through lean thinking do not end up wasting resources (Dahlgaardet al., 1998). Moreover, lean manufacturing is highly dependent on consumers’ demand; it is a reactionary approach to manufacturing which means that no over-production is generated to result in waste and inventory spoilage (Richter and Weber, 2001).
2.8. Product lifecycle management
Product lifecycle management is another essential aspect of the management of a ‘green’ supply-chain. This process is essential to the ability of business organisations to retrieve and remanufacture products at the end of their lifecycle. In this respect company not only do need to have channels to obtain these products but they also need to construct the products by the use of ‘green’ designing strategies (Sarkis and Cordeiro, 2001). Companies should focus on producing products that not only possess recyclable components but are easy to be assembled and dissembled. This also contributed to the process efficiency and speed of operations of disposed products.
It should be underlined that the process of product life cycle management is complex and requires significant understanding and awareness. This is the reason why, many small business organisations may be proposed to lack the resources to implement it and manage closed-loop and reverse logistics (Madyet al., 2002). However, it should be also pointed out that small and medium-sized enterprises are more flexible and they may better keep track on their production quantities and who obtains them. This is the reason why, despite the complexities, product life cycle management can be still practiced by different types of companies at a variable extend and level of proficiency but will still contribute to companies’ greater product responsibility and accountability (Sundin and Bras, 2005).
2.9. GSCM – Futuristic Overview
The adoption of a ‘green’ supply-chain management is a complex initiative which requires the consideration and involvement of multiple stakeholders. In this respect, the future development and implementation of the discipline is likely to involve a wide supply-chain involvement of multiple stakeholders, such as: customers; suppliers; vendors; partners; manufacturers; logistic services; raw material providers, to name some of the main components. Once these parties are involved in a synchronized relationship the logical outcome would be for them to collaborate in a continuous manner – sharing facilities, resources, networks, expenditures, etc.
The partnering between these multiple stakeholders may vary but one of the main relationships will be established around the mutual use and exploitation of resources, such as: shared warehouses, transportation networks, raw materials, facilities and equipment. This will increase the consolidation of different supply-chain elements and improve business efficiency. This is also likely to have positive impacts on business profitability as companies are expected to reach economies of scale and scope through sharing similar facilities for the production of large volumes of products. In this respect, future supply-chains can be seen as beneficial to business companies, the environmental sustainability and society’s wellbeing.
Collaborative supply-chain management is likely to result in better exploitation of resources and increased capabilities of companies to make noticeable contribution to environmental and social issues. In other words, co-operative efforts will provide companies with the opportunity for mutual investment in joint environmental projects. Harnessing ‘green’ energy may be an expensive commitment for a single company but affordable investment for a network of organisations. This is the reason why, the future ‘green’ supply-chain is likely to be led by industrial innovation; not only because closed-loop networks of suppliers will have better financial positioning to invest but also because they will be able to share diverse knowledge and creative perspectives which can be synthesized in actionable solutions and progress.
2.10. The need of Green Supply chains
The adoption of ‘green’ supply-chain management can be recommended to be achieved through the adoption of approaches, such as: development of strategic supply-chain partnerships; product recycling; manufacturing efficiency; company-wide involvement; and product lifecycle management. At present consumers are more interested in environmental sustainability, this tendency push companies adopting ‘green’ thinking within their operations (Mintel, 2010a). It is evident that ‘green’ thinking is a key promoter of sustainable competitiveness in a globalised society.
In this context, the United Kingdom is one of the countries which is applying significant efforts to improving its environmental sustainability although presently challenged to sustain upstream and downstream ‘green’ supply-chain management which not only does predispose to environmental contamination but also to business inefficiency. In this respect, one of the primary research findings which can be outlined is that business organisations which comprise the work of multiple internal and external parties need to focus on improving their supply-chain management by incorporating ‘green’ approaches to performing their business operations.
As revealed by the most recent 2010 statistics on the energy consumption and greenhouse emission of the UK in figure 2, the greenhouse gas emissions per unit of output have been decreasing. It is important to note that transportation, communication and agriculture are the sectors which result in the highest levels of greenhouse emissions but are decreasing.
Figure 2 ONS (2010)
Furthermore, environment deficiency can result in the depletion of natural resources, the United Kingdom is recognised to be continuously depleting its available resources which results in greater scarcity and consumption expenditures. The following figure 3 confirms by outlining the reduced number of oil resources available for exploitation by the country:
Figure 3 ONS (2010)
Based on these findings, it can be concluded that the country is on the right track of improving its environmental responsiveness and sustainability.
It is important to note that business organisations should not perceive GSCM as only beneficial to the global environment but also as a source of competitiveness. By adopting ‘green’ operations, companies can attract more customers by differentiating themselves from competitors. Moreover, companies can engage their customers in a large community and thus gain greater insight on their purchasing needs.
For example, many business retailers in the UK, such as: Tesco; Sainsbury’s and Marks and Spencer focus on the promotion of their environmental sustainability by engaging local and international communities (Environmental Leader, 2010). This is another proof of the powerful effects which GSCM can have on business organizations. Furthermore, ‘green’ supply-chain management also leads to better supply-chain partnerships, greater efficiency and optimization of resources – companies gain greater flexibility and are more capable of tackling diverse external challenges (Simpson and Samson, 2008).
Some of the countries which will need to play key role in the adoption of GSCM practices can be identified to be current emerging economies such as Brazil, Russia, India and China (known as BRIC economies). Many studies show a substantial proportion of the resource consumption is generated by OECD (Organisation for Economic Co-operation and Development) countries.
Another interesting indicator of the environmental impact which global economies have, can be identified in figure 4. Based on these findings, developed OECD economies sustain a large amount of CO2 emissions but it is comparatively balanced and controlled over a period of almost forty years. Contrary to these indicators are developing economies where the upward trends are significantly steeper especially as it is in the case of China. Though the country is doing valuable efforts to reduce the emissions, but due to fierce competition it is hard to manage its emissions level.
It is important to note that consumption of the valuable resources is major reason for the emissions of green house gases and not the production. The figure 5 clearly indicates the regional CO2 emissions (1973 – 2008) and compares the changes over time.
Figure5 IEA (2010)
The above charts represent some very interesting results on the emission of CO2 by international countries. The OECD community is seen to have reduced its emission which can be proposed to be the result of greater operational efficiency and the implementation of ‘green’ strategies by leading companies. As it was already presented, large retailers in the United Kingdom as Tesco, Sainsbury’s and M&S have reduced the environmental impact they have by introducing environmental innovation within their supply-chains. This positive result is however disturbed by the carbon emissions of China which rose by some 17%.
There are number of key findings which can be identified in this section of the dissertation. One, the developed economies are responsible for their negative environmental activities due to fast growing industrialization. Whereas emerging economies are seen as the future environmental threats. For example, China is the world’s largest consumer of resources which has been reflected to the country’s CO2 emission and waste generation. This is the reason why, GSCM is certainly an essential discipline to be considered in the management of supply-chains.
One of the most important components of every dissertation is the research methodology which the writer employed for addressing the set research question. A research methodology can be also explained as the dissertation backbone which co-ordinates the process of one’s reaching adequate research findings. In this respect, the author aims at employing a credible research framework to addressing the set research question and therefore Saunders et al., (2003) are used as references for that purpose. The author has employed a credible research process model which is known as the research process ‘onion’. This framework contains all components necessary for the appropriate research development.
3.1. Research Philosophy
The research philosophy of a dissertation can be explained as the author’s perception of the way knowledge was constructed and information was implemented. In other words, as knowledge is influenced by multiple parties and contexts, therefore there are different knowledge perspectives which can be identified and can be employed in the research process [(Saunders et al., 2003), and (Gill and Johnson, 1997)]. In this respect, present dissertation is influenced by the research philosophy of interpretivisim. As the author understands that knowledge is a subjective phenomenon and it can be interpreted differently within the contexts to which it is applied.
3.2. Research Approach
In addition to the research philosophy, another important component to the dissertation development process is the implementation of a relevant research approach. In the present case, the author has utilized the deductive research approach. As the dissertation is an exploratory piece of research therefore the deductive approach will contribute to the researcher’s ability to synthesis abundant existing knowledge in specific research findings to address the set research question (Easterby-Smith et al., 2002; Hussey and Hussey, 1997).
It should be underlined that the research methodology literature does not identify or insist on right or wrong approaches – it all depends on the particular topic, researcher’s resources; intentions and capabilities. This is the reason why, the employment of the deductive research approach can be suggested to be suitable as it would be incorporated in the research of abundant academic literature on the broad topic of sustainable supply chain and ‘green’ supply-chains (Bell, 2005; Saunders et al., 2003).
3.3. Research Strategy
The research strategy is another fundamental component to the development of a credible piece of research. Based on the academic literature there is a wide range of research strategies which can be employed for the purpose of research development and dissertation writing, such as: questionnaire; interview; experiment; grounded theory; action research; ethnography; case study analysis, to name some of the few primary strategies that can be used (Bell, 2005; Robson, 2002).
In the present case, the researcher adopts a strategy which is primarily based on secondary research. In other words, the abundant knowledge on the topic will be explored and synthesizes for the production of meaningful findings. Moreover, the study would not only be restricted to the academic literature but would also focus on extracting findings from non-academic sources of information, such as: news; commercial reports; white papers; bulletins; government statistics, all that can be characterized as applicable and credible for the purpose of the analysis.
3.4. Time Horizons
There are two types of time horizons which are proposed by scholars in the academic literature, such as: longitudinal and cross-sectional (Saunders et al., 2003). The longitudinal time horizon as it can be proposed from the name focuses on the exploration of variables over a long period of time. This time horizon is usually recognised in studies which focus on identifying how a particular variable changes over a particular time period which is specifically suitable to experiments (Sapford and Jupp, 1996).
The purpose of the present dissertation is not to explore any changes over a period of time and therefore the time horizon applied can be identified as cross-section. Moreover, the cross-sectional characteristics of the time horizon applied to the present study are also stimulated by the multiple areas explored by the researcher. It should be underlined, however, that although the researcher would not explore any changes of the research variables over a period of time the transformation of the discipline from past to present will be assessed.
3.5. Research Credibility
The credibility of the dissertation can be proposed to be the product of the relevance and reliability of the research findings. In this respect, in order for the author to achieve reliable research findings a clear research framework needs to be imposed. In other words, the author employed research boundaries to guide the research process and sustain the focus on the topic of ‘green’ supply-chain management (GSCM). This is of fundamental importance as often large research projects may shift the research emphasis due to the abundant knowledge explored.
The research boundaries of the dissertation are established by the use of specific research variables, such as: sustainable supply chain, and ‘green’ supply-chain management; past, present and future developments (what will be structure of future supply chain in near future?); emerging economies (India, Brazil, South Africa, Russia); developed countries (UK, USA, EU) etc. These variables contribute to the research process sustainability – addressing the initially set research question.
In addition, to the clear research structure, the author also contributed to the research credibility by focusing on credible academic sources of information. These sources are also accompanied by the use of non-academic sources which aim at improving the contemporary and up-to-date value of the research.
Finally the credibility of the research is aided by the researcher’s discussion with various parties (including supervisor, colleagues, and industry professionals) who have certain knowledge on the topic. There guidance and advice was highly contributory to the establishment of a clear research framework and objectives.
3.6. Research Limitations
The present dissertation is carefully developed by the use of credible research methods and analysis. However, there are certain limitations which can be identified. One of the primary limitations can e associated to the use of academic literature. Although, the researcher focused entirely on the use of scholarly reviewed sources, there are some weaknesses which can be recognised in this use. It is important to note that English is not authors’ first language every effort has been made to clarify the issue and address the definitions at his level best. In other words, as every researcher employs certain subjectivism and contextual perceptions within its analysis therefore there is certain level of subjectivism embedded in the overall academic literature which indirectly affects the current study (Bell, 2005).
Apart from the embedded subjectivism in the academic literature which is transferred to the current piece of research another weakness which can be identified is associated to the compliance with university standards and expectations. The university has provided the author with valuable sources of insight and support but due to stringent deadlines, the topic complexity, formats and other academic expectations the author was restricted to employ other research methods, such as: primary research; questionnaire; action research, etc.
3.7. Ethical Considerations
Ethical considerations need to be employed with the development of every research study. However, as in the present case the author did not employ any primary research therefore the ethical considerations which need to be perceived are limited. The author do not have to take care of data protection or respondents’ confidentiality as there was no primary research involved.
This section introduces some case studies of global trading firms who have adopted green supply chain management practices to achieve sustainability / competitive advantage in global markets.
4.1. Case I:
IKEA is the international home furnishing leader retailer. Founded in 1943, since then it has grown internationally. Today, it is the worlds’ top furniture manufacturer / retailer, with9,500 products of household, accessories and offices are available in all the IKEA stores. The company has 18 outlets in the UK to date which are expected to be increased by end of 2011.
It has responded to the challenge of sustainability, and has spotted business potential in providing sustainable solutions. Its’ concern on environment protection push them to make better use of raw materials and energy. This keeps cost down and helps the company to reach its green targets.
Figure 7 – IKEA sustainability
Sustainability and environmental protection are the prime goal of the business. It has a new vision towards a sustainability plan to 2015 and will consider its social, economical and environmental issues to achieve competitive advantage over its competitors.
IKEA’s uses SWOT analysis to achieve its objective of sustainability. It is a strategic planning tool which helps the business to focus on key issues.
Figure 8 – SWOT analysis
An organisation can create opportunities and face threats by making the most of its strengths and tackle its weaknesses. Strengths include a company’s expertise, and are aspect of the business that adds value to its products or services. IKEA’s strength include:
a strong global brand which attracts key consumer groups. It promises the same quality and range worldwide
a strong concept – based on offering a wide range of well designed, functional products at low prices
a ‘democratic design’ – reaching on ideal balance between function, quality, design and price. Its ‘Cost Consciousness’ means that low prices are taken into account when each product is designed from the outset.
These strengths enable IKEA attract new and retain its customers at its full potential.The opportunities that company takes advantage through its sustainability programme are:
a growing demand for greener products
a growing demand for low priced products. Financial climate awareness results in consumers trading down from expensive stores
demand for reduced water usage and lower the carbon footprints to improve image of the company in the public.
IKEA has a number of areas of focus to its work with sustainability, each of which it supports in various ways:
Sustainable use of scarce resources – It aims for zero waste
Reduction in carbon footprint – IKEA aims to minimize energy use, and use more renewable energy, and aims to cut down of business flights by 60% by 2015.
Developing social responsibility –this activity includes support charities such as the World Wildlife Fund (WWF), UNICEF and Save the Children.
IKEA is well aware of its weaknesses, and strongly focused to manage them. It helps to set higher objectives and implement new strategies to achieve sustainability. The possible weaknesses are global scale business, low cost with high quality products, and government regulations.
IKEA addresses to its internal and external challenges by using its strengths and tackling its weaknesses. Its operations demonstrate its environmental posture. For example, smart packaging and design means more load on containers, which means fewer delivery journeys. That results in reducing its carbon footprint. It aspires to go afar profitability and reputation. It is intent to becoming a leading example in developing a sustainable business.
4.2. Case II:
Going Green, all the way
Wal-Mart, one of the world’s largest retail / department store industry, has competitive advantage over its competitors due to its effective and efficient distribution system. With 14 sustainable value networks, the network structure and making their supply chain ‘going green’ is the strategy which positively impacted Wal-Mart’s growth, distribution techniques and corporate identity. The sustainability has transformed the company into an eco-friendly powerhouse. Emphasising the visibility through the sharing of information with its suppliers the company reframed its strategy to the low cost operator and low cost leader by focusing on logistics and distribution. Green logistics means implementing a transparent system that can independently monitor overseas suppliers to make sure to comply with social and environmental standards set by the company. It was revealed that improving fuel mileage efficiency in the trucking fleet by one mile per gallon would save more than $52 million per year. (The Times, 2010)
In late 2005, the company announced its major goals, the Wal-Mart would:
Be supplied 100percent by renewable energy in the very near future
Create zero waste
Sell products that sustain its resources and the environment
Increase fuel efficiency in Wal-Mart’s truck fleet by 25% over three years and doubling within 10 year
Reduce green house gases (GHG) by 20% in 7 years
Reduce energy use at stores by 30% in 7 years
Cut solid waste by 25% in 3 years (in USA)
Buy refrigerated vehicles (trucks), with diesel-electric and a power unit that will keep cargo cold without the engine running, it will result in saving nearly $75 million in fuel costs and eradicate an estimated 400,000 tons of CO2 pollution in a year
Buying / selling 12 weeks’ worth of Restrictions on Hazardous Substances (RoHS) compliant computers from Toshiba
Though it looks very long and hard to achieve goals for a company to accomplish, each of these are attainable and place Wal-Mart in a great competitive position for the future.
4.2.1. Sustainable value networks
While Wal-Mart is building value added networks of government agencies, non profits, employees and suppliers to ‘green’ its supply chains, the company is using a network approach to lower overall carbon and environment footprint in order to increase profitability while increasing margins. Below is the list of Wal-Mart’s sustainable value networks and how the company plans to accomplish their three main goals.
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