As a professional at the seat of buying things for your company, or enabling such decisions, how do you contribute to a sustainable tomorrow with your actions. You know that by 2030 there is no energy from coal, or from nuclear or even hydel dams beyond what we now have, if that does not diminish. The challenge on water is even more serious – not just for your company, but to your vendors as well.
If your company is in an industry segment that is a contributor to carbon emissions, you have a moral obligation to do what you can to mitigate carbon emissions in any way you can. Supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer demand. Supply chain not only includes the manufacturers and suppliers, but transporters, warehouses, retailers, and customers themselves. Logistics is part of supply chain. A supply chain is dynamic and involves constant flow of information, products and services, and funds between different stages. It is through these flows that a supply chain fulfils a customer order. The management of each of these flows efficiently and effectively will be a key aspect to the success or failure of your company over the next 3-5 years as the crisis on energy, water and waste, becomes more severe.
In conventional supply chains, raw materials required to manufacture products are extracted and sourced. Manufacturing process entails the conversion of raw materials into a final product. Once the raw material has been transformed it is transported to the customer. The final stage of the conventional supply chain involves the consumption of the product and packaging is thrown away. Converting the linear thinking of take stuff, make stuff and throw stuff mentality to circular thinking for people to follow a ‘cradle to cradle’ approach will enable the entire value chain to be viewed as a sustainable eco system. The green supply chain modifies conventional supply chains in two ways.
The first is an initial focus on ensuring that each stage of the supply chain is addressed as per its environmental footprint. Second modification on the conventional supply chain involves an entirely new reverse supply chain.
Green supply chain management can be defined as integrating environmental thinking into supply chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product as well as end-of-life management of the product after its useful life. Sustainability can be maximized throughout the supply chain, beginning with concept and development and then continuing through all phases of production and finally the distribution to the customer.
As an achiever, you know that you have to come to terms with this, but how this can be achieved and where do you start? For years you have been concentrating on improving supply chain visibility, refining efficiency and minimizing cost. As environmental issues and global warming issues are rising, consumers will start asking more questions about the products they are purchasing. It is already happening in the export market where Europe, Japan and American buyers ask questions on the supply chain values on water and energy used in the manufacturing process. Companies will have to expect questions about how green their manufacturing processes and supply chains are, their carbon footprint and how they have embraced the R’s – reduce, reuse, recycle, recover, restore, rehabilitate, reprocess, reclaim, recirculate, retrieve, repurpose, recoup, regenerate, reproduce, return, redesign….
If companies aspire to achieve superiority over competition, greening supply chain will definitely be a key differentiator to achieve this end goal.
Companies will be compelled to move to green supply chain thinking in the next few years in response to,
- Global warming concerns
- Companies adopting corporate social responsibility initiatives
- Eco-friendly behaviour of individuals and companies
- Increasing environmental awareness in stakeholders
- Evolving consumer and client demand
- Increasing fuel prices and depleting fossil fuel reserves
The following specific aspects are associated with green supply chain management practices from product design to shelf.
The key aspect of green designing is that it should have eco-friendly features. These aspects have to be built in at the design phase of product development. Avoiding toxic and hazardous substances, complying with DfE principles (Design for Environment), complying with DfDRR principles (Design for Disassembly, Reuse & Recycle), increasing innovation capabilities, saving energy, saving resources are some of the attributes of green design. Globally recognised green labelling such as organic, bio-degradable, compostable, energy efficient, recyclable, etc., is another aspect that should be considered at product design stage to demonstrate eco-friendliness of the product that is marketed.
This involves the selection and acquisition of products and services to minimise any negative impacts over product lifecycles associated with manufacturing, transportation, usage and recycling. In many countries, governments, industries and civil society organisations work collaboratively to purchase eco-friendly products. At present Sri Lanka does not have a Green Procurement Policy. Ministry of Environment has taken steps to develop a green procurement policy for Sri Lanka and the work is ongoing. Green procurement policy will generate benefits not only to the organisation, but also to society and the economy, whilst minimizing environmental damage. Practicing Total Cost of Ownership (TCO) approach, engage and support vendors to reduce emissions, sourcing materials through sustainable sources, guidelines for usage of less hazardous materials, buying locally are some of the green procurement initiatives which will not only look at quality, cost and delivery requirements but will build in environmental thinking into procurement.
The production processes that have green credentials will have relatively low environmental impacts, are highly efficient, and generate little waste or pollution. Green manufacturing can lead to lower raw material costs, production efficiency gains, reduced environmental and occupational safety expenses, and an improved corporate image. Companies when engaged in responsible waste management practices and resource conservation practices such as usage of renewable energy sources, minimal processing, rain water harvesting, zero waste water discharging through reuse of treated effluent for gardening and toilet flushing, etc., do have the right green credentials.
Green logistics is the key criteria for green distribution. Packaging characteristics (such as size, shape, and the materials used) have an impact on distribution and transportation. Better packaging together with rearranged loading pattern can mean a reduction in the quantity of materials used, better use of space, and less need for handling. Load and route optimisation will ensure higher per ton per km travelled. The use of low emission and highly efficient vehicles and biofuels to power vehicles will reduce the impact to the environment.
The process by which manufacturers accept previously shipped products from the point of consumption for recycling and remanufacturing where possible. To implement producer responsibility, the development of a reverse logistic is a must.
With increasing shopper awareness on environmental impact, retailers are also under pressure to implement green practices. Some companies are using solar and wind energy to power their offices and stores. Some are powering their needs with biogas derived from food waste. Some companies are asking suppliers to comply with their sustainability index, thereby committing to reduce energy consumption and pledging to go green. Some are introducin earth-friendly product corners in their stores to demonstrate commitment to environment sustainability.
Organisations can achieve significant benefits when green supply chain management practices are adopted. The benefits stem from:
- Reduced consumption of toxic chemicals
- Less waste generation in the end-to-end supply chain
- Natural resource utilization in a sustainable manner
- Lowered costs from low resource consumption
- Lower waste resulting in increased efficiency
- Product differentiation due to green products
- Good brand image as an environmentally responsible company
- Risk minimization
- Increased employee morale due to higher productivity
- Ethical supply chain which is well recognized by customers and suppliers
Although it makes business sense to make supply chains green, there are many barriers that need to be overcome if an organisation needs to embark on this journey as most producers are not viewing greening as an immediate benefit to the organisation. Organisations must initially start minimizing waste in the operation and start reaping benefits which will give the confidence to do higher order improvements which in the long run will yield greater results to the organisation. If organisations start adopting TCO approach, top management will get convinced to see the benefits of greening supply chains.
Main barriers to overcome
- Customer preference – Customers may not immediately switch to products or suppliers, simply for them going green
- Supplier’s adaptability to change – Change is a difficult proposition when the reasons are much more altruistic than product quality centric
- Implementation cost of processes – Initial investments can be high. It is a well-known fact that green buildings cost more initially than conventional.
- Absence of a concrete way to measure return on investment – Green accounting practices where environmental costs are yet to be internalized is a concept that has not yet been fully embraced at the board level.
However, with sustainability driving India’s national agenda, in keeping with international trends, green supply chain management is not an option but an imperative. Greening supply chains are gaining momentum and certainly make business sense, therefore it is important that top management not only look at profits but also follow the triple bottom line approach (Social Responsibility – People, Environmental Stewardship – Planet and Economic Viability – Profit) to enable organisations to achieve competitive advantage and demonstrate doing well by doing good for a sustainable tomorrow.