Green Supply Chain Management

Abstract

Green supply chain management (GSCM) focuses on developing and implementing tools, strategies, and techniques required for sustainable and environmentally friendly supply chain systems. Fundamental to this system are reverse logic systems, product life-cycle analysis, measuring carbon footprint, and other practices aimed at creating sustainable and green supply systems, from beginning to end of the supply chain. Although critics argue that implementing these systems may prove financially onerous to smaller companies, GSCM has gained greater importance in the first decades of the twenty-first century, as more firms require their providers and operators implement best environmental practices.

Overview

Supply chain management refers to the entire process of moving products and services from suppliers and manufacturers to the end consumer, as well as all related activities. In conventional business practices, there are various systems of conventional supply chain management, such as total quality management and lean management. While most modern systems constantly seek to eliminate waste and be as efficient as possible, green supply management focuses on both eliminating waste and implementing environmentally friendly practices from beginning to end of the supply chain.

Heightened environmental awareness led to the coinage of term "green" to stand for all things related to environmental consciousness and its related practices. Green certifications now exist across industries and fields, vouching for the green-certified firm's adherence to best environment-friendly practices. Among these certifications are Leadership in Energy and Environmental Design (LEED) for buildings, USDA Certified Organic for the food industry, and the Environmental Protection Agency's WasteWise. Green supply chain management—also known as green supply management, GSCM, and GrSCM—is one of a number of systems that have gradually become standardized across industries.

GSCM refers to the inclusion of an environmental vision, from the inception or design of the product, through the selection and the acquisition of materials, the production, distribution, and delivery of the product to the end consumers, all the way to the end of the product's lifecycle. GSCM has various definitions, the most common of which describes a combination of activities that involve the firm and the environment. This includes a very important mechanism known as reverse logistics, which aims at minimizing waste residues. Reverse logistics is a crucial component of GSCM, tracking the product from beginning to end, establishing environmentally friendly routes such as recycling and re-using, and creating a minimum carbon impact. The goal of the system is to minimize, as much as possible, returns and the use of materials.

The supply chain, as the term indicates, refers to the chain of supplies of the extended firm, that is, all the firm and its internal and external activities, from its sales force and manufacturers or producers, to the distributors and retailers. Its vision determines that the management of supplies transcends the merely organization, considering in its scope the life of the product in all its spheres of usage. The management of supplies includes the design, implementation and management of all activities of acquisition, buying, conversion, and logistics. It includes coordinating collaboration across all stages and through time. In other words, it involves taking into consideration the movement of materials and finished products through a chain that includes providers, intermediaries, logistics (i.e., transportation and distribution), and final customers.

Furthermore, this process includes the extraction of raw materials, process and production of the goods, and all other processes that may carry a degree of impact on the environment. Therefore, in the GSCM vision, it is important to integrate environmental aspects in the supply chain in ways that minimizes environmental harm and also make firms even more competitive than before.

In the contemporary world, it is becoming a matter of urgency that supply chains become ever more efficient and environmentally friendly. Governments, consumers, and businesses increasingly demand that the firms with whom they do business engage in green practices. Acquiring green certifications and following best practices, then, is becoming a necessity for many. "Greening" supply chains with the purpose of protecting the environment usually has the added value of diminishing costs in the end, a result that undeniably contributes greatly to the bottom line of all firms. An efficient "greening" of supply chains, however, requires initially a great deal of coordination, collaboration, and commitment not only from the firms, but also from all its suppliers. Firms must "think green" throughout its daily transactions, from beginning to end, including all logistics needed to obtain the supplies required for production.

Green practices are frequently perceived as costlier than more traditional methods. Nevertheless, studies show that logistics departments or firms—those that manage the movement from beginning to end of materials and products—save in fuel and vehicle maintenance by implementing green practices, while at the same time diminishing their carbon footprint. The demand for green certifications continues to grow, especially at the global level, and this means that more companies must implement, to different extents, green practices in their supply chains and production processes.

It is hard to underestimate the importance of supply chains; these are a vital part of the production process. For a firm to be successful, its supply chain must flow efficiently and be flexible enough to adjust constantly to market dynamics, such as fluctuations in supply and demand. This requires a great deal of control by management, including a constant monitoring of performance indicators, ensuring they are always relevant and adequate to the standards and needs of the firm. These must also be adequate to the firm's supply chains, from the providers of raw material and supplies to the consumers at the end of the chain. Firms must keep an eye out not only to ensure that their providers are complying with green practices according to the firm's vision, but also that consumers will be able to dispose of the product's residues in ways that are environmentally acceptable.

Finally, another key issue for a green supply chain is that its systems be sustainable, that is, that they do not deplete environmental resources and that they are capable of being maintained in a stable and durable fashion. This is of special importance, given that the global markets are increasingly concerned with good environmental practices, but are also increasingly unstable. Global markets are more interconnected than ever before, capable of moving funds and goods at speeds never experienced before. Inevitably, this leads to disruption, displacements, and surprises, and firms must keep a careful eye on constantly changing trends and technology, while also maintaining sustainable business and environmental practices. In other words, implementing GSCM can be both an opportunity and a challenge.

Other challenges faced by GSCM is the difficulty of measuring progress accurately and quantitatively, because so much of its benefits are qualitative, that is, intangible benefits that are difficult to quantify. It is important to remember that the impact of GSCM is disseminated across a vast field, from producers of raw materials, to logistics providers, and so on, to the final consumer and beyond. All things considered, however, experts argue that despite the challenges, implementing GSCM leads to more efficiency and sustainability, as well as better quality control throughout the supply chain.

Further Insights

The concept of best practices has many definitions and, overall, it refers to using all the knowledge and technology available to the best possible result along a series of key indicators, such as efficiency, reliability, sustainability, and functionality. When speaking of best environmental best practices, then, GSCM falls well within the jurisdiction of the term. One of the main goals of GSCM within this framework, is the reduction of a firm's carbon footprint. The carbon footprint is one of the main systems for measuring the impact of humans and their practices on the environment. It measures the amount of CO₂ (carbon dioxide) released into the atmosphere by specific industry, agriculture, transportation, and other daily activities of people around the world.

Because measuring many complex interactions is often difficult and calculations can be arbitrary, another important practice in GSCM is the use of benchmarks. Benchmarks are standard gauges or guidelines used in different industries and used by firms as reference points of quality and performance. These can be numerical, such as economic, financial, and industrial indexes; or they may be more empirical, that is, based on the experiences of leading enterprises in any given field or aggregate averages of a group of operators in a field. Benchmarking helps companies focus on best practices, making continuous improvement while maintaining or striving for a competitive advantage.

Best Practices. The following is an itemized summary of what are the standardized best practices of Green Supply Chain Management:

Careful selection of products and services. Firms should use green practices when purchasing and sourcing, aiming always at reducing harmful impacts throughout the entire life-cycle of a product or service. This includes, among other practices, using recyclable materials, and avoiding materials that are hazardous or unsafe for people, and those harmful to the environment.

Green Manufacturing. Firms should implement green practices throughout the organization, which may lead to reducing material costs, increasing production efficiency, and the additional benefit of improving brand and corporate image. Such practices include all forms of waste management, such as using biodegradable and smaller or less packaging.

Green Distribution. Distribution covers from packaging to logistics, seeking to use environmentally friendly materials and more efficient use of space and handling.

Reducing Emissions. This refers to transportation, from shipping and air transportation, to terrestrial fleets. All should operate with fuel-efficient technology, optimize inventory, route and transportation mode planning and usage. For instance, an efficient and innovative system of inventory control may allow a firm to keep stock at different branches by using a carefully planned combination of rail or sea freight, rather than air freight. Such systems are already implemented at many firms nationwide and internationally.

Monitor Carbon Footprint. There are many ways in which firms and individuals can monitor their carbon footprint in order to reduce it as much as possible. Monitoring leads to finding strategies that eliminate waste and costs. Many non-profit organizations offer carbon footprint calculators online. A firm may also hire a consulting firm that may work with them to help them devise strategies that will reduce wastefulness and harmful environmental practices.

Benchmarking. Firms can compare their supply chain performance with those that already use GSCM to compare costs. If they already use GSCM strategies, they may still benchmark not only along green practices objectives, but also sales, marketing, and brand loyalty among their customers. Some studies suggest that customers develop greater loyalty to those brands they view as caring about the environment.

Reverse Logistics. Use and optimize all reverse logistics practices, by promoting re-use, recycling, and other types of reverse logistics. Another step is that of encouraging the return of products that are no longer used or functional.

Environmental Publicity. Firms can use their green practices to enhance their brands and public reputation, by publishing their green objectives, benchmarking, and performance.

Issues

As far back as 2010, a Carbon Disclosure Project (CDP) Report showed that supply chain companies were already under growing pressure to implement carbon management strategies in their companies. Some of the largest companies had already incorporated—to various extents—carbon management practices. The CDP warned that those who had not yet implemented green practices were placing themselves at risk of losing future business, as approximately 6 percent of leading corporations had committed to select only suppliers who incorporated carbon management strategies.

Change often comes slow in big corporations unless they are under a series of pressures, which include government policies, such as offering both incentives and sanctions for companies to comply with green initiatives. Nevertheless, many cargo airlines, such as United Parcel Service (UPS), upgraded their air fleets to ensure that they have the most modern and fuel-efficient vehicles available. These plans are long-term; UPS and First Group, for instance, committed to reduce their carbon emissions by 20 and 25 percent, respectively, by 2020. These companies have understood that more than a good will gesture, incorporating GSCM strategies has become a necessity for many. The changes are not limited to airlines, as zero-carbon companies have opened around the world, such as Tesco supermarkets in the United Kingdom, which has committed to becoming completely zero-carbon by 2050, from their suppliers to the materials they use for lighting and construction, to the products they sell. Other industries are also offering to go zero-carbon, from vehicle manufacturers to construction companies.

Some experts are doubtful that companies can ever go fully zero-carbon. Although companies can become more energy efficient and environmentally friendly, it is very difficult for a company to become zero-carbon. In 2012, Google reported that it had emitted 1.5 tons of carbon. The company had committed to becoming greener and invested substantially in transportation and infrastructure, as well as encouraging employees to incorporate green strategies in their daily practices. Nevertheless, not all firms have the outsize revenues of a company like Google. Although Google reported substantial savings by going green—i.e., energy savings from solar power—the initial investment may prove onerous for smaller firms.

GSCM fosters a business culture in which firms support green practices that extend beyond their own organization. For smaller firms or organizations, goals can be accomplished with the help of third parties, such as governments or non-profit organizations. The World Wildlife Fund and its Renewable Energy Certificate provide one such example. Successful applicants are allocated fixed amounts of renewable energy meant to guarantee that the power allocated comes from local and green energy sources. Through supporting the solar generation project, the organization helps companies and communities contribute to renewable energy development in Honk Kong.

This project falls within the framework established by the Paris Climate Change Agreement (2015), a United Nations program subscribed to by nations worldwide, meant to support the ability of countries to deal with climate change; the agreement lists a set of steps by which a company can achieve a net zero-carbon imprint throughout its sphere of influence: nurturing a sustainability mind-set in employees; encouraging low-carbon habits; ralking about management policy and carbon reduction goals; zooming in on energy-efficient investment; exploiting opportunities for refurbishment, retrofitting and renovation; reaching out to communities and stakeholders; offsetting unavoidable carbon emissions with renewable energy projects.

Finally, GSCM continues to gain terrain in the international sphere. Unreliable and inefficient supply chains generate considerable losses to the countries in which they operate. Organizations such as the World Bank stress that logistics and sustainable supply management are core elements of a country's competitiveness. The 2016 edition of the Logistics Performance Index, used as one of the most important assessments of GSCM practices, ranks 160 countries with the best practices. European countries remain consistently in the top 10 spots, with Germany at the top and the United States at 10 for that year.

Terms & Concepts:

Benchmarks: Standards used as a gauge or reference point to measure quality and performance.

Best Practices: Methods and practices that have been proven to be the best, usually resulting from a comparative process of organizational experiences.

Carbon Footprint: The amount of carbon dioxide and other greenhouse gases produced by human activity.

Green: A general term for practices and processes that are of benefit to the environment.

Logistics: Coordination of many different processes of moving or transporting materials, products, or resources from one point to another.

Reverse Logistics: The process of designing and operating logistics so that the product leaves a minimum environmental impact and incorporates best environmental practices of reusing, recycling, or remanufacturing.

Bibliography

Cazeri, G. T., Anholon, R., Quelhas, O. G., Ordoñez, R. C., & Novaski, O. (2017). Performance measurement of green supply chain management: A literature review and gaps for further research. Brazilian Journal of Operations & Production Management, 14(1), 60–72. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=123252728&site=ehost-live

Chkanikova, O. (2016). Sustainable purchasing in food retailing: Interorganizational relationship management to green product supply. Business Strategy & the Environment, 25(7), 478–494. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=119595997&site=ehost-live

Kumar, V., Holt, D., Ghobadian, A., & Garza-Reyes, J. (2015). Developing green supply chain management taxonomy-based decision support system. International Journal of Production Research, 53(21), 6372–6389. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=109474502&site=ehost-live

Liou, J. J., Tamošaitienė, J., Zavadskas, E. K., & Tzeng, G. (2016). New hybrid COPRAS-G MADM Model for improving and selecting suppliers in green supply chain management. International Journal of Production Research, 54(1), 114–134. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=112233376&site=ehost-live

Mitra, S., & Datta, P. P. (2014). Adoption of green supply chain management practices and their impact on performance: An exploratory study of Indian manufacturing firms. International Journal of Production Research, 52(7), 2085–2107. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=94773380&site=ehost-live

Muhammad Nouman, S., Muhammad Shahid, A., & Haji, R. (2017). The impact of green supply chain management practices on performance: Moderating role of institutional pressure with mediating effect of green innovation. Business, Management & Education/Verslas, Vadyba Ir Studijos, 15(1), 91–108. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=123881502&site=ehost-live

Sambrani, V. N., & Pol, N. (2016). Green supply chain management: A literature review. IUP Journal of Supply Chain Management, 13(4), 7–16. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=121086233&site=ehost-live

Shibao, F. Y., De Oliveira Neto, G. C., Da Silva, F. C., & Pompone, E. C. (2017). Corporate profile, performance and green supply chain management: A research agenda. Revista De Administração Mackenzie, 18(3), 117–146. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=124345157&site=ehost-live

Shibin, K., Gunasekaran, A., Papadopoulos, T., Dubey, R., Singh, M., & Wamba, S. (2016). Enablers and barriers of flexible green supply chain management: A total interpretive structural modeling approach. Global Journal of Flexible Systems Management, 17(2), 171–188. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=116124797&site=ehost-live

Suggested Reading

Asrawi, I., Saleh, Y., & Othman, M. (2017). Integrating drivers' differences in optimizing green supply chain management at tactical and operational levels. Computers & Industrial Engineering, 112, 122–134.

Kirilova, E. G., & Vaklieva-Bancheva, N. G. (2017). Environmentally friendly management of dairy supply chain for designing a green products' portfolio. Journal of Cleaner Production, 167, 493–504.

Ruiz-Benitez, R., López, C., & Real, J. C. (2017). Environmental benefits of lean, green and resilient supply chain management: The case of the aerospace sector. Journal of Cleaner Production, 167, 850–862. EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=125287567&site=ehost-live

Saberi, S., Cruz, J. M., Sarkis, J., & Nagurney, A. (2018). A competitive multiperiod supply chain network model with freight carriers and green technology investment option. European Journal of Operational Research, 266(3), 934-949. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=126945905&site=ehost-live

Sambrani, V. N., & Pol, N. (2016). Green supply chain management: A literature review. IUP Journal of Supply Chain Management, 13(4), 7–16. Retrieved January 10, 2018 from EBSCO Online Database Business Source Ultimate; http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=121086233&site=ehost-live