Environment Management System
And
Green Supply Chain Management
Supply chain management:
The supply chain encompasses all activities associated with the flow and
transformation of goods from raw materials (extraction), through the end user,
as well as associated information flows. Material and information flow both up
and down the supply chain.
Green supply chain management:
Green supply refers to the way in which innovations in supply chain
management and industrial purchasing may be considered in the context of the
environment”.“Environmental supply chain management consists of the
purchasing function’s involvement in activities that include reduction,
recycling, reuse and the substitution of materials.
Environmental supply chain management consists of the purchasing function’s
involvement in activities that include reduction, recycling, reuse and the
substitution of materials.
The term ‘supply chain’ describes the network of suppliers, distributors and
consumers. It also includes transportation between the supplier and the
consumer, as well as the final consumer…the environmental effects of the
researching developing, manufacturing, storing, transporting, and using a
product, as well as disposing of the product waste, must be considered.”
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Green Supply chain Practise:
From a strategic organizational perspective, and issue of debate,
decentralization versus centralization of corporate procurement is becoming a
concern. One of the considerations here has to do with whether a strategic
environmental policy can be better maintained throughout an organization with
decentralized purchasing decision making. With empowerment, from total
quality management programs, further defusing throughout organizations, and
especially the purchasing function, various philosophies may be less
homogeneous. Monitoring green product procurement becomes more complex
in a decentralized environment. Yet, a decentralized decision environment may
also present greater opportunity for purchasers to find and build relationships
with geographically closer vendors. This close proximity makes transportation
more efficient and less costly, and may make monitoring and auditing of
supplier activities more effective. In addition, multinational conglomerates who
have a broad product family and many subdivisions may find it more feasible to
allow divisions to determine their own supplier and purchasing environmental
requirements. This is true at Philips Electronics where their medical systems
division has separate supplier programs than their semiconductor division, for
example. Yet, within this decentralization, not all divisions included supplier
impact programs.
Another issue in purchasing, and seems to be a central one, is the
selection of materials or vendors. One of the requirements in this area is to
determine what is, and what isn’t, green. For example, the decision to purchase
materials that are less toxic versus those that may mean more energy efficiency
cannot easily be determined. To help address this some tools based on life cycle
analysis (LCA) and design for the environment (DFE) have been developed.
Yet, even LCA is still a very imperfect tool and model. Subjectivity and
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judgement play a large role. The issue is here is whether purchasing managers
are motivated and capable of evaluating and selecting environmentally
preferable materials and vendors. This issue also brings us to a major area of
investigation related to green purchasing at a strategic and operational level of
analysis, vendor selection.
Vendor selection:
The supplier selection tools have been grouped into five sets of tools: 1. The
cateorical method; 2. The weighted point method; 3. The matrix approach; 4.
The vendor profile analysis (VPA) method; and 5. Analytical Hierarchy Process
(AHP) based approaches.
In-bound logistics:
One of the issues in delivery (and production) is the use of just-in-time
(JIT) practice. This practice is meant to reduce inventory, thus eliminating costs
and waste. For example, less storage and warehouse space is needed. This
practice reduces the necessary overhead and resource consumption needed to
manage this inventory. Thus, JIT seems to be an environmentally sound
practice, yet when considered on the whole, the environmental savings can be
deceptive. For example, the major method to lessen the amount of inventory is
to deliver and produce in small batches. These smaller batches mean more
deliveries, thus raising fuel consumption and traffic congestion. Investigation of
these tradeoff’s are necessary. But some of these issues are mitigated with such
practices as on-site suppliers or those that are in close proximity for JIT reasons.
Another factor related to JIT and supplier management is that fewer suppliers
are usually used in a JIT environment. This means better forecasting and fuller
loads could be planned. Of course this delivery approach will be dependent on
demand levels and characteristics.
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One is freight consolidation. Waiting for freight to become a full load
may lead to longer lead times but may yield savings and be environmentally
preferable. Another issue is mode selection. Some transport modes like rail and
barge use less energy or use energy more efficiently than other modes like road
haulage and air cargo. In this case, flexibility, timing and speed are tradeoffs to
cost and environmental factors. The transport mode decision determines which
transport option to use and often affects traffic congestion and air pollution both
directly and indirectly. Carrier selection, a part of supplier selection, is an
important in-bound logistics decision. Transportation is important to all
industries. As an example, the Chemical Manufacturers Association cited
Roadway Express, a major carrier, as a responsive care partner in hauling
chemicals.
Production:
A principle topic that has evolved within this area is total quality environmental
management (TQEM)
Empowerment And Employee Involvement:
Empowerment means allowing workers to attain responsibility for decision
making. An issue here is whether employees are capable of making
environmental decisions.
Demanufacturing:
The principles of demanufacturing are also of importance within
production portion of the green supply chain. Demanufacturing includes
disassembly, remanufacturing, and material recovery principles.
Closed loop:
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Closed-loop manufacturing is one of the internal measures that can be
used to improve the environmental performance of the internal supply chain.
The philosophy of zero-emissions (similar to zero-defects of many TQM
programs) is what drives closed-loop manufacturing practice. Closed-loop
manufacturing is a process of producing products with no negative
environmental impact. Currently, much of the emphasis on closed-loop
manufacturing is on development of supporting technology. This internal loop
helps to lessen some waste streams that flow from the production function, but
may require additional energy and resources to function and maintain. As part
of the source-reduction philosophy closed-loop manufacturing. A related issue
to the zero-emissions philosophy is substitutability, which has become much
more popular with design for the environment linkages. For example,
substitutes for environmentally toxic materials such as solvents with aqueous
solution for processes and powders paint for liquid paint are examples of using
substitutes to reduce and eliminate emissions. The determination of life cycle
impacts of these substitutes is still a problematic proposition. The investigation
of managing in this environment seems to be almost non-existent. From a
research perspective this is one of the more technology and tool driven
functions of the green supply chain.
Out-bound logistics:
Warehousing and delivery packaging design are two important issues in
outbound (and inbound) logistics and distribution. Standardized reusable
containers, good warehouse layouts, easy information access all cut storage and
retrieval movements and save on operating costs and are environmentally more
sound. Freight consolidation functions and “breakbulk” operations carried out in
warehouses also have the potential of utilizing transport capacity more
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efficiently, thus minimizing the environmental impact of the out bound
transport system.
Packaging has been a very sensitive issue among European manufacturers and
consumers. The presence of packaging take-back laws has caused many
organizations to rethink the design of their product’s packaging as well as how
to manage the packaging delivery and logistics, once it is used. One controversy
that seems to be growing in the packaging area is whether single use packaging
is more environmentally sound than reusable packaging. For example, the
Association for Beverage Cartons and the Environment has reported no specific
benefit for using either type of packaging, after 15 studies were undertaken
(Reeves, 1998). Part of the difficulty in determining which part of this debate is
correct, is the poor development of LCA.
Reverse logistics:
Reverse logistics incorporates the return of materials, components and products
back into the “forward logistics” chain.
Reverse logistics operations include the following major steps: collection,
separation, densification or disassembly, transitional processing , delivery and
integration. The operational emphasis is dependent on the type of material or
component that flows in the reverse logistics
channel. For example, disassembly will be required for copy machines, whereas
plastic bottles would require densification.
Some of the practical issues facing reverse logistics have been: 1) Most logistics
systems are ill-equipped to handle product movement in a reverse channel. (2)
Reverse distribution costs may be up to nine times higher than moving the same
product from producer to consumer. (3) Returned goods often cannot be
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transported, stored and/or handled in the same manner as in the forward
channel.
EMS:
An EMS consists of a collection of internal policies, assessments, plans and
implementation actions affecting the entire organization and its relationships
with the natural environment.
Companys image:
Organizations that adopt EMSs, regardless of their form, can benefit from
improving their regulatory compliance, which in turn can enhance their corporate
image and increase profits. For example, Federal Foam Technologies, Inc., a
Minnesota-based company, adopted an EMS and certified it to ISO 14001. By
relying on its EMS structure, the firm reduced its annual landfill use by 40
percent, and decreased its associated disposal costs and liability risks. EMSs also
have been associated with improved manufacturing efficiency, customer
satisfaction, and new access to markets. To the extent that EMSs improve an
organization’s environmental performance, they also may increase its economic
gains through enhanced operational efficiencies.
Capabilities of gsm:
There are numerous capabilities required to adopt an EMS that reduce
the cost of adoption, and facilitate the implementation process. For instance,
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EMS adoption requires that an organization encourage its employees to work
together, sharing their knowledge of the organization’s internal operations in
order to minimize impact to the natural environment. It also requires an
organization-wide commitment to continually improve the organization’s
environmental impacts and extensive knowledge and monitoring of
organizational resources, constraints, production capabilities and processes
(ISO, 2001). Because their focus is on continual improvement, EMSs encourage
enterprises to rely on lean production practices that promote reductions in input
use, which are important for minimizing impacts to the natural environment.
Similarly, organizations that have expertise with GSCM have developed their
knowledge-based competencies by guaranteeing the environmental quality of
incoming goods. Like EMSs, GSCM practices require organizations to have
strong inventory control systems. These systems reduce redundant stock
materials and unnecessary inputs in the production process . Organizations that
rely on these systems manage materials, productive capacity and other
organizational information . The skills required to adopt GSCM therefore are
complementary to the capabilities required for the successful adoption of EMSs
inasmuch as both systems encourage enterprises to reduce input use and decrease
waste associated with input choices, which are important for minimizing
impacts to the natural environment
External pressure:
Other reasons why EMS and GSCM may be considered complementary
management practices relate to the institutional pressures that encourage their
adoption. Institutional pressures persuade organizations to undertake similar
strategic actions to increase their external legitimization Legitimate businesses
are those whose actions are seen or presumed to be desirable or appropriate
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within some socially constructed system of norms, values, beliefs and
definitions. Applied to the decision to adopt an EMS and GSCM practices, the
external pressures an organization endures to implement one practice may be
similar in that they arise from regulators, markets and communities.
Regulatory pressures often are associated with an organization’s
decisions to adopt an EMS and utilize GSCM practices. These pressures arise
from threats of noncompliance penalties and fine and requirements to publicly
disclose information about toxic chemical releases. For instance, regulatory
changes in automotive paints have pressed car manufacturers to require their
suppliers to reduce their use of regulated chemicals in the production process.
Additionally, pressures from regulators may encourage organizations to adopt
proactive environmental practices in an effort to form collaborative
relationships explore more non regulatory ways in which government can
encourage greater environmental improvements. These less coercive forms of
regulatory pressure are becoming increasingly relevant as governments expand
their programs that encourage EMS adoption and GSCM practices. In adopting
EMSs and relying on GSCM practices, organizations may be able to
communicate more effectively to government that they are committed to
improving their environmental performance.
In addition to regulatory pressures, market pressures may influence an
organization’s decision to adopt EMSs and rely on GSCM practices. Over the
last ten years, market actors have been placing greater pressures on
organizations to consider their impacts to the natural environment. Overall 15
percent of U.S. consumers routinely pay more for green products, and another
15 percent seek green products if they do not cost more. While these findings
suggest that markets are creating opportunities for environmentally friendly
organizations, the majority of consumers still are not influenced by a company’s
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proactive environmental practices. However, these same customers may be
persuaded to change their purchasing decisions if a company violates
environmental laws or emits high levels of toxins. As a consequence, EMS and
GSCM adoption may provide a vehicle for organizations to “signal” to market
participants that their environmental strategies adhere to or exceed generally
accepted environmental standards. Doing so may lead to greater acceptance of
the organization’s strategic approach and insulate organizations from
competitors’ criticisms. EMS and GSCM adoption also may help organizations
develop an environmentally conscious reputation. Such a reputation may invite
patronage from consumers and generate opportunities for business with other
organizations that value these principles. Finally, organizations are subject to
pressures from the community that include environmental groups, community
groups, the media, labor unions and industry associations. Each of these groups
can marshal public support for or against an organization’s environmental
performance. EMS and GSCM adoption may be one way for organizations to
indicate to community stakeholders that their environmental management
practices are sound. Doing so is increasingly important because community
stakeholders often do not distinguish between an organization’s environmental
practices and the practices of its suppliers.
In sum, EMSs and GSCM practices may be complementary because
organizations that adopt them possess comparable internal competencies and
endure similar institutional pressures. For these reasons, we hypothesize that
EMS adopters are more likely to utilize GSCM practices.
SYSTEM AND EMERGING ISSUES
A number of issues that encompass the green supply chain or that are
common across the supply chain are now presented. Within these issues are a
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set of emerging organizational topics and fields that may have direct impact on
the green supply chain.
Small Companies and the Green Supply Chain
One of the more difficult, and probably most important, groups to
incorporate into the supply chain are the small companies. In an academic
survey of 135 companies found smaller companies attached less importance to
management of environmental issues when compared to larger firms (greater
than $1 billion). A study of manufacturers that convincing small companies to
become involved in green purchasing was a major barrier for these
manufacturers. And in a general study of corporate performance and
environmental consciousness, found that larger companies are more inclined to
be environmentally conscious.
In an investigation of industrial co-location and inter-firm networking’s
influence on economies in environmental management reviews that these
strategies can help small organizations gain environmental savings. Such
savings manifest themselves in the form of less expensive environmental
management infrastructure and services; accelerated and less expensive
information flows; decreased incidence and intensity of land-use conflicts; and
an enhanced ability on the part of the public sector to enforce environmental
regulations. Thus, close and inter-firm networks could be a way to help small
organizations become more effective environmental partners. The use of eco-
industrial parks and government sponsored waste exchange programs as
techniques to aid the linkage between small and large companies . Knowing
that there is a difference between large and small companies in their
involvement and acceptance of green supply chain principles is one issue for
investigation. Another, more important issue is determining requirements and
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practices that would help small manufacturers become more involved in this
process.
Governmental Roles in the Green Supply Chain
“Do state and federal regulations significantly influence green purchasing
efforts?” The results from their survey of purchasing managers is, yes. In this
case, superfund and liability issues play the largest role. The reason for this is
that government agencies seeking “deep” pockets may find “potentially
responsible parties” throughout the supply chain for superfund based penalties.
These issues have greatly influenced how major organizations select and
purchase products, a great variety of factors come into play when considering
regulatory compliance: the processes being operated, the markets the
organization sells into, the countries where the organization is based, the
geographical and geological setting of the premises . The reaction to these
regulations are only one example. Other governmental regulations that have
influenced supply chain practices have already been mentioned, including take-
back and packaging laws in European countries.
One regulatory scheme that has been quite controversial are government
supported ecolabeling regulations (EU Ecolabel for the European union, but
various countries have their own specific labeling schemes such as Blue Angel
and Green Dot in Germany or Ecomark in Japan) for various industries. These
regulatory schemes may have some potential for aiding buyers identify
organizations, materials and products that are green, thus lessening the need for
certification of suppliers, etc. These labeling systems are meant to help
consumers identify environmentally preferable products. Some countries have
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looked at these proposals as de-facto environmental policy setting tools . Yet,
the development of industry or even product certification for eco-labeling
purposes is difficult due to the subjectivity of much of the criteria. There have
been calls on both sides of the environmental fence (industry and NGO’s) for
revising and making these eco-label systems more effective, or simply
eliminating them
These command-and-control governmental measures (some may argue
that eco-labeling is less of a comman-and-control regulatory mechanism) have
been giving leeway to more cooperative voluntary measures set up by various
government levels. For example, governments have also used procurement as an
instrument of environmental policy. These government green purchasing
initiatives have occurred at all levels of government. The basic idea is that by
purchasing large quantities and selecting preferred suppliers, the government
could shift product markets to favor one product type over another. Thus, by
government purchases providing an earlier and larger market for green
products, it allows firms to lower costs through scale economies and learning-
by-doing. This concept is a subset of use of procurement as an industrial policy
setting mechanism . This method of policy setting for further development of
green products was evaluated, economicallyand found this policy setting
mechanism for green product development to be weak. The issue of whether
explicit regulatory mechanisms work better or are more effective than market
development through purchasing mechanisms to increase green product markets
is something that needs to be further investigated.
Integral and Emerging Issues
As can be seen, much of the research completed on green supply chain
management has been narrowly focused on one functional area or another. A
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complete and integrative evaluation and monitoring of performance is required.
A systems perspective does not seem to permeate this type of literature.
Industrial ecology, falls into similar problems. Yet, an integrative study can
become complex and difficult to complete. Additional factors and issues can be
integrated. How to make sense of all this and the attempt to develop theory to
explain various managerial phenomena is a difficult proposition. Reductionist
scientific approaches may not be the best way to study this topic. One way of
looking at some of the issues is too consider and evaluate integral issues that
permeate throughout the supply chain. A few of these are now listed with their
related concerns and studies. These issues can be grouped into strategic and
operational levels of analysis (with some overlap). The more strategically
oriented issues include: industry differences, evolving organizational forms,
linkage to environmental strategy, and the relationship between organizational
performance and green supply chains. Operationally oriented issues include:
performance measurement, third party certification, product life cycles, and life
cycle assessment.
Industry Diferences
The investigation of industry differences in green supply chain practices
is also an issue that has been observed in each of the functions. Industrial
differences in organizations incorporate environmental strategy. Part of the
reason is that they share the same external stakeholders that put pressure on
them. One of the difficulties of extending this type of analysis to green supply
chain research is the heterogeneity of suppliers and customers in the supply
chain. That is, it is difficult to only have a supply chain made up of chemical
industry companies, for example. The influences of NGO’s , professional
organizations and other stakeholders on green supply chain management
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practice may also be investigated, when industrial characteristics are to be
evaluated.
Evolving Organizational Forms
Part of organizational supply chain formation will be effected by the
“new” organizational forms defined as networked or virtual organizations have
implications for green supply chains. These network organizations have the
goal of forming on an ad-hoc basis to meet a specific market need and
dissolving after their formation after the market need has been met. In a case
study of a networked entrepreneurial company and sustainability , the “broker”,
Walden Paddlers Inc. used a “decision guide of environmental responsibility”.
The network organization (other than the broker) includes the designer, two
manufacturers, two plastics suppliers, a packaging and a shipping company.
The environmental and economic success of this network company was the
strong leadership of the entrepreneur, the use of simple goals and measures,
and the consistent application of the decision guide. The companies involved
were all small companies. According to the authors the application of this
concept to existing, larger companies may not be as easy. The environmental
measures focused primarily on reduction and recycling.
How to form such an organization such that environmental liabilities are
minimized, is an issue. These organizations are meant to form and dissolve
rapidly. Responsibility for any environmentally malignant behavior by the
company or its members may provide unforeseen liabilities and consequences,
with responsibilities of this behavior difficult to trace. Having an initial
environmental strategy, which drove the formation and operations of this
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organization, is not usually one of the concerns of forming these types of
organizations. Also, in this case study, “win-win” opportunities did seem to
exist, but these opportunities may be fewer and fewer as the organization
matures. How to maintain and build on these practices for environmental and
economic sustainability is another issue.
The structure and organizational form of the supply chain is also an issue
mentioned as a possible areas of study. Some questions related to these issues
include: Will these network organizations better environmental performance?
What about issues of power relationships, how can this hurt or aid improving
environmental performance of the supply chain? Are long-term relationships
espoused by the latest supply and partner management literature better than the
short-term relationships supported by network organization theory, within the
context of green supply chain management? What cultural issues support or
bind corporate environmental performance? Are there differences in national
and regional cultures that may cause organizations to support green supply
chains?
Linkage to Environmental Strategy
It has been argued that corporate environmental programs work best
when they are part of a strategic program and vision , when dealing with supply
chains, with various tiers of suppliers to many possible levels of customers, the
supply chain (in general) and the environmental supply chain (in particular) are
only as good as their weakest links, especially in terms of closing the supply
chain loop. The influence of varying corporate environmental strategies and
where they exist on the environmental strategy and behavior spectrum .
Performance Measurement
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Related to strategic corporate performance relationships are the
consideration of operational performance measurements for green supply
chains. Performance measurements have been developed for purposes of
managing the various elements of the supply chain. Many of these measures are
time and cost based . The use of performance measures will be used for
managing each of the functions and elements. The short-term focus of these
measures will make it difficult from a greening perspective. In fact, there is
even a goal to go beyond simple greening measures to sustainability
performance measures, incorporating other socially oriented factors. One size
fits all, in terms of performance measurement, is not [Link]
into monitoring what works and what doesn’t is still missing.
Third Party Certification
As we have mentioned, third party certification, is one approach for
enabling green supply chain development. For example, ISO 14000-like
guidelines are one set of guidelines to aid in this area. A point out that to
become ISO 14001 certified, it would not be necessary “for an organization to:
· Request information from the supplier or contractor about activities
performed, chemicals used, waste generated, potential releases to the
atmosphere, and other actual or potential environmental aspects and impacts
experienced by them.
· Impose its own EMS on suppliers and contractors.
· Visit a supplier site to ensure that applicable legal requirements are being
met.
ISO 14000 currently has some limitations in this area. Whereas, IS0 9000
standards (for quality) mention external relationships with customers and
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suppliers, these relationship issues are not explicitly mentioned in the ISO 14001
standards.
Product Life Cycles
Another issue that arises for the overall green supply chain management
system, is the they dynamic nature of the product life cycle and it’s implications
on the various practices and their emphasis. It has been argued that the
organizational emphasis on which functions it develops and supports in the
green supply chain is dependent on the product’s (and industry’s) marketing life
cycle. That is, whether the product is in the early innovation stages or later
maturity or decline stages may influence whether the organization is putting
more emphasis on the procurement stage (selecting appropriate vendors) or on
reverse logistics (enough products and material exist for efficient reverse
logistics channels). Thus, the issue here is that organizations planning for long-
term green supply chains need to be aware of the necessary requirements for
strengthening the supply chain as it matures.
Life Cycle Assessment
The issue of LCA looms large in each of the functions. The lack of
appropriate life cycle analysis tools makes the appropriate decision on product
and material selection, supplier selection, production technology, delivery
mechanism, transportation selection, etc. all difficult to determine. How well
decisions perform environmentally, either practically or for research
measurement purposes, all require effective life cycle assessment
measurements. Yet, suppliers and organizations find LCA is one of the most
problematic aspects of managing the supply chain. For example, in a survey of
suppliers, Lucent technology , one of the most difficult issues was in the
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definition of LCA. Managing the overall supply chain without agreed upon
LCA measures will require more art than science.
