One definition of Green Supply Chain Management (GSCM) is from Samir K. Srivastava, International Journal of Management Reviews, volume 9, issue 1, pages 53-80, March 2007. His study collected and classified previous literatures relating to green supply chain management. He defined GSCM as integrating environment thinking into supply chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to the consumers, and end-of-life management of the product after its useful life.
Supply Chain Digest identified "Green Supply Chain" as the number one supply chain trend of 2007. Based on the above definition we can understand that: firstly, green supply chain works towards improving the environmental performance of its existing supply chain through the use of various environmental monitoring tools and collaboration through application of environmental technologies. Secondly, the supply chain is augmented to include reverse supply chain management that builds a closed-loop system for the products.
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Green supply chain management is not only helping to reduce the impact on the environment but also has other potential benefits. Benefits are directed towards stake holders, consumers, employees, government, society, etc. Adopting the green supply chain management is a win-win situation. When we speak of green the supply chain, one might think only about banning toxic chemical substances used in manufacturing or reducing emissions or wastes to the environment.Â However, this is much more than just a mere reducing usage and pollution and the resulting benefits are not limited to only less toxic consuming or less waste but the effects of GSCM expand to all area, both tangibly and intangibly.
There are two clear sets of benefits from making your supply chain as green as possible - benefits to the environment and benefits to business. (Practical advice for business, Business link)
There are many simple straight forward, low-cost things that every organization can do in order to make a positive difference towards the environment. Usually the focus of these efforts is on changes within the business, but supply-chain choices can have an important effect too. In simple words, what a consumer decides to buy and whom he decides to buy from can make a difference.
Converting your existing supply chain to as green as possible needn't be a resource-intensive process. Small steps - such as ensuring that suppliers are using recycled or recyclable materials wherever possible and that their packaging is minimized and sustainable - can have a significant impact if they're taken by enough businesses. Waste management and bio degradable materials can also be implemented as creates a huge difference to the environment when big organizations shift to such measures.
The benefits to the business by undertaking of environmental improvement are getting progressively clearer. In part this reflects the effects of a 'virtuous circle' - the more businesses and consumers that take environmental issues seriously, the greater the gains to be made.
Mainly there are two types of business benefit. First, there are some potential and few definite cost reductions. Environmental change often results in effort to increase resource efficiency, which in turn leads to improvements to the bottom line. For example, if you encourage your suppliers to use less packaging material this will reduce their costs and they may be prepared to charge you less.
The second benefit is related to customer preferences and enhancing your corporate image. More and more businesses and consumers are using environmental issues as a criterion in their purchasing decisions, so a distinct progress in this area can lead to increased sales and marketing activities. Customers want to see that the businesses they work with, or buy from, have considered their environmental impact all the way up the supply chain.
You can assess the greenhouse gas emissions of your products and enable customers to make more informed choices by implementing the environmental standard PAS 2050:2008. The standard allows you to calculate the carbon footprint of your products, identify areas for reducing those emissions and reassure customers that your products have been assessed against an approved standard.
How To Make A Difference?
"If companies understand the true cost of environmental factors to their bottom line, they are more likely to do something about it on their own." - Janet Ranganathan, World Resources Institute
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As the public becomes more aware of environmental issues and global warming, consumers will be asking more questions about the products they are purchasing. Companies will have to expect questions about how green their manufacturing processes and supply chain are, their carbon footprint and how they recycle. Green supply chain operates at all levels, from designing, manufacturing to storing, transporting to sales and after sales. Designing the supply chain concurrently with the product is the management's best practice.
Align green supply chain goals with business goals. This means to change and dovetail the organization's mission statement so as to cover the issue of environmental friendly and supporting activities of the organization. It can also be included in the Objectives and goals of business activities in every department and processes.
Evaluate the supply chain as a single life cycle system. Just like any product has a life cycle, similarly if we consider and analyze the supply chain it will help to achieve the optimum results and returns during its most peak phase.
Use green supply chain analysis as a catalyst for innovation. Catalyst for innovation means a reason or a check list or a basic requirement barring which further research and innovations will not be carried out. This will not only help the companies go further in their effort of innovative products but also create a market for the environmentally aware businesses and consumers. As a result in due course of time all the products in the market would be more and more environmentally friendly.
Focus on source reduction to reduce waste. As mentioned earlier, the focus should not only at the resource optimization but from there to all the way to waste management. Careful planning from the design stage to the production stage to the transportation till final sale will reduce cost as seen before as well as contribute to the environment.
Few Success Stories:
Texas Instruments: Saves $8 million each year by reducing its transit packaging budget for its semiconductor business through source reduction, recycling, and use of reusable packaging systems (20% annual savings).
PepsiCo: Saved $44 million by switching from corrugated to reusable plastic shipping containers for one liter and 20- ounce bottles, conserving 196 million pounds of corrugated material.
Commonwealth Edison: Produced $50 million in financial benefits from managing materials and equipment with a life-cycle management approach.
General Motors reduced disposal costs by $12 million by establishing a reusable container program with their suppliers.
Wal-Mart anticipates its goal of a 5 percent reduction in packaging 2013 will produce US $3.4 billion in direct saving and roughly 11 billion in savings across supply chain.
Johnson & Johnson's energy efficiency program resulted in an estimated $30 million in annualized savings over the 10 years prior to the company's 2006 sustainability report.
Nestlé: through a combination of packaging source reduction, re- use, recycling, and energy recovery saved $510 million, worldwide between 1991 and 2006.
Perhaps it can be said General Motors may have been less interested in green issues if they were making record profits, but in an attempt to further reduce costs in their supply chain, GM found that the cost reductions they identified complemented the company's commitment to the environment as a part of corporate social responsibility. (Martin Murray, Introduction to Green Supply chain, About.com guide)
However, same was not the case with the rest. Pepsi-Cola is known to be a leading player in the market with enormous corporate social responsibility. According to the AMR Supply Chain top 25 for 2010 PepsiCo ranks 6th for being overall supply chain management and environmental responsibility. Texas Instrument, Commonwealth Edison, PepsiCo and the rest turned to green supply chain management not only to assist their CSR but also they found that going green would impact positively on the profits, corporate image as well as the environment.
Now-a-days many companies are moving into green supply chain as it improves Agility, Green supply chain management help mitigate risks and speed innovations. It helps increases Adaptability; Green supply chain analysis often leads to innovative processes and continuous improvements which aid to find better ways to economically and environmentally manage supply chain. Last but not the least it also promotes Alignment, Green supply chain management involves negotiating policies with suppliers and customers, which results in better alignment of business processes and principles as seen in General Motors case.
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This concept of Green Supply Chain is a set of complex web formed by internal and external forces that have eventually aligned to incorporate environmentally friendly activities to both existing and new business operations. Current macroeconomic pressures (e.g. of increasing energy prices), more stringent governmental actions, and changing consumer demands have brought green supply chains to the forefront of media attention and operations strategy. It has gained audience with large and small organizations across cultures, regions, and industries. Still, structuring the preferred combination of approaches for different contexts and system boundaries remains the key challenge for planning and implementation of green supply chains. Continued vigilance and study of its successes and failures hold the potential for its acceptance into the mainstream business consciousness and realize the win-win scenario of improved business performance with environmental sustainability.
There is a strong association of business with environment. It's the responsibility of every business to sustain itself in an eco-friendly manner and be environmentally concerned along with making profits because the business can sustain only if the environment does.
Thus from the information assimilated in this effort it can be duly noted that indeed "There Is A Link Between Improved Environmental Performance and Financial Gains."