Heading Towards A Green Supply Chain

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Concerns about the environment are growing more serious, especially with the appearance of new phenomena like global warming and the depletion of the ozone layer (Geyer and Jackson, 2004; Sarkis, 2001; Melnyk et al., 2002). Sustainable development is a goal that is sought by all countries in the world and as a concept; it combines ecological, economic and social goals. A sustainable human activity is therefore that which improves economic life and society with an eye on the environmental consequences that it might have. Consumers are contributing in one way or another to the deterioration of our environment. Wastes are produced when we consume goods of different sorts. Waste disposal is the way in which the environment is directly affected. Businesses, on the other hand transform resources in order to provide the consumer goods and commodities that we need in our everyday life. The way the raw materials are obtained, processed and then distributed also involves wastes that are somehow dumped into the environment, thus contributing to its degradation, jeopardizing the lives of future generations, and causing disequilibrium in the ecological system of our planet.

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It is quite possible that an ordinary person will not be aware of the way in which the supply chain contributes to the degradation of the environment. However, business and environmental specialists are well aware of the fact that businesses, and by extension all human activity which aims at changing the environment in one way or another, have costs that are assumed by the environment. Accounting for business activity in terms of benefits and costs allows us to stand on the real value of this activity and therefore enables us to manage it in a way that takes these costs and benefits into consideration and try to reduce the costs that might be incurred by the environment in this process (Qing-hua and Yi-jie, 2007). Green supply chain management is concerned with the effects that supply chain management might have on the environment and how to mitigate this impact through the management of the supply chain.

3. OBJECTIVES

This paper aims to explore and explain various studies and literatures related to green supply chain management that would enhance awareness to this new approach. The primary objective of this paper presents as follows:

Defining the conventional approach of supply chain management and its related concepts such as Value Chain.

Standing on the weaknesses on such an approach and how it contributes to the degradation of the environment.

Defining the concept of green supply chain management and its worth in a business context.

Assessing the extent to which business practices can be said to be 'Green' in their approach to business or development.

Exploring the proactive role of government in state of Kuwait toward protecting the environment and promoting companies to adopt green supply chain management.

Utilizing information that would improve government and companies awareness toward the importance of developing effective green supply chain management.

In fact, standing on such points will not only help us to understand what green supply chain management is, but also allow us to move on to the implementation of green thinking throughout the phases of the supply chain. Giving a local dimension to this issue would also certainly allow assessing the present state of business in the local and international region and also help business to develop their green approach.

4. METHOD

This paper relays on previous studies and literatures that underpin the importance of green supply chain management. By reviewing previous finding, this paper aims to explain various issues and factors that would lead to an effective supply chain management, which expected to enhance business activities in the local and international markets.

5. SUPPLY CHAIN MANAGEMENT

Supply chain management has been growing in importance the last few years, though the approach, or rather the concept, was introduced back in the early 1980s (Oliver and Webber, 1982; Seuringand Muller, 2008; Cambra and Polo, 2008; Haden, 2009). The approach of supply chain management is derived from the fact that there are dependencies between levels in channels starting from the point of origin and ending to consumption point (McCammon and Little, 1965; Hakansson and Snehota, 1995; Alderson, 1957; Stern, 1969; Delmas, 2008). The wide scope of supply chain management led to some confusion about its definition that sometimes confuse supply chain management with logistics management, which is only a part of supply chain management.

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For instance, Svensson (2002) argues that supply chain management is a business philosophy that simultaneously should address the overall multidimensional dependencies of activities, actors, and resources on an operational, tactical, and strategic level, from the point of origin to the point of consumption both in and between channels. The point of origin in supply chain management refers to suppliers or manufacturers (e.g. Carter et. al., 1995; Ambec et al, 2008), while the point of consumption refers to consumers, customers or end-users in a supply chain (e.g. Min and Mentzer, 2000; Jones and Riley, 1985). Two years ago, the American Council of Supply Chain Management Professionals was concern about such definition which truly reflects the actual picture of supply chain management. They offers the following official definition of supply chain management to solve many confuses existed in literatures;

"Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies" (Council of Supply Chain Management Professionals, 2009).

Related to the above definition a firm links to its suppliers upstream and to its distributors downstream to serve its market. The primary goal of traditional supply chain management is thus to provide maximum customer service at the lowest possible costs, thus improving company performance and customer service at a time (Ganeshan and Harrison, 1996). The most important aspect, which has been reviewed in a number of studies of supply chain, is to close the connection with competitive advantage. It is thought that a good management of supply chain activities and functions is responsible for bringing about competitive advantage, which is a very important component of business success in a global economy where competition is very tight and chances of success are very restricted (Porter, 1986; Jones and Daniel, 1987; Mason and Towill, 1997).

As indicated in the definition of American Council of Supply Chain Management Professionals, supply chain management encompasses a variety of disciplines, or in other words, a number of parties and functions that are all involved in the supply and demand management between and across companies. This definition is one of a series of definitions, which all intend to get the essence of supply chain and avoid its possible confusion with logistics as it is often the case. Since the 1990s, supply chain management acquired further importance and more impetus by means of the development of new supply chain management software like the famous enterprise resource planning system, which has ever since been used to plan the resources of different sorts of organizations. The topic of supply chain management has been acquiring a major importance as a tool for improving organizational performance through the improvement of its supply chain's flow of resources.

Among the most important works that have been carried out so far in the field of supply chain management are those of Michael E. Porter (1985) who introduced the term of "Value chain" instead of that of supply chain. Porter (1985) argues that competitive advantage stems from the 'many discrete activities' that a firm performs in 'designing', 'producing', 'marketing' and 'supporting' its product or service. Competitive advantage, as he sees is a stems from the 'discrete activities' that are managed strategically in such a way as to reduce cost and create a basis for differentiation from its competitors in the market of a given commodity or service. These activities are therefore strategically important for gaining competitive advantage. It is by doing these 'discrete' activities better and more cheaply than the competition that a firm can obtain competitive advantage. Yet, it is not sufficient to create competitive advantage through effective 'value chain' management that proposed by Porter, but what is more difficult is to sustain that competitive advantage. Porter's value chain model is shown in the following figure. The latter is considered as an important step in understanding value chain management.

Figure 1: Porter's Value Chain (1985)

In his account of the 'value chain', Porter distinguishes between 'primary activities', like inbound and outbound logistics, and 'support activities' like human resource management, technology development and procurement. All of these activities, if managed effectively and strategically might lead to create a margin. Value chain analysis helps identify a firm's core competencies and distinguish those activities that drive competitive advantage. Despite his contributions to the field of supply chain management, Porter has been criticized on many grounds. Namely, major criticisms revolved around the fact that the quantitative analysis is time consuming since it often requires recalibrating the accounting system to allocate costs to individual activities (Melnyk et. al., 2001). Porter's framework is that the Value Chain Analysis needed to analyze only the physical assets in product environments, while other researchers revised the model to accommodate intangible assets and service organizations as well (Bensoussan and Fleisher, 2002; Huang, 2009).

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Recent studies have also the traditional approach of supply chain management since it only focused on cost reduction, which is one of the most critical mistakes that firms can make (Hopkins, 2010). The concept of supply chain management has neglected various important issue such as Ethical issues such as supply chain governance, environmental issues, and social responsibilities (Carter and Jennings, 2002). Similarly, in his study, Beamon (2005) suggested that issues associated with ethical decisions in supply chain management and social responsibilities have to underpin the environmental and social impacts of corporate products and processes.

6. GREEN SUPPLY CHAIN MANAGEMENT

The importance of supply chain management outlines by various studies is come the necessity need for more integration of the supply chain to improve organizational performance, especially in the context of the global supply chain, which is of a much wider scope than the conventional supply chain model (Montabon, 2007; Holland and Light, 1999). However, the most recent concerns about the supply chain have to do with the integration of environmental concerns within the supply chain approach in order to reduce the environmental impact of certain supply chain functions and procedures (Walker et. al., 2008; Marcus, 2000). The Green supply chain management concept has emerged as a subsection of the traditional supply chain management, but with the addition of environmental concerns to the supply chain. This term is often used interchangeably with the concept of sustainable supply chain management. Green supply chain management is also known as sustainable supply chain management (Delmas, 2008; Cruz, 2009).

Sustainable chain management involves using a broader approach to supply chain management. It should emphasize economic, ecological and social aspects of business practices and theories. These three major constructs of sustainable supply chain management have been highlighted in recent research. In his study, Menzony (2004) suggested various key elements in sustainable supply chain management which are;

A strong, high-level corporate commitment to the environmental issue and the top level management enhance the initiatives of supply chain;

Cross-departmental integration including different units and areas within a company that enhance the gain value from interacting with suppliers (such as procurement, environment, manufacturing, marketing, research and development, and distribution);

considering environmental issues thought the existing supply chain management activities, design, buying, and distribution processes;

Finally, the consistent, frequent, and two-way communication with suppliers regarding environmental issues as well as performance expectations.

Yet, despite the strategic importance and appeal of green supply chain management in many business and manufacturing domains, there are still many obstacles in front of its achievement. One of the major obstacles is cost, as we will see later in this dissertation. Reviewing previous literatures reveals that the motives for adopting a green supply chain management approach to business differ from one company to another (Handfield et. al., 1997, Mahler and Kearney, 2007). Moreover, reviewing previous studies reveals that the adoption of a purely green approach to the supply chain is somewhat difficult to achieve due to cultural factors in organizations that might prevent the adoption of an environmentally friendly approach to the management of their supply chains. This is especially true in the goods sector where environmental procurement, production and logistics are still lagging behind in many countries and organizations (Walker et. al., 2008; Marcus, 2000).

Recent studies have revealed that firms adopt sustainable supply chain management practices to strengthen brand names and differentiate their products (Melnyk et. al., 2001). Studies also reveal that achieving genuine sustainability results from making supply chains more sustainable. In all sectors, the traditional competitive differentiators have become broadly similar across many suppliers. One way in which companies can differentiate themselves, reduce costs and improve service is to consider the environmental, social as well as economic factors relating to their supply chain. Other studies suggested that the pressures arises from a number of external and internal groups or "stakeholders" is the main driver for adoption of such environmental model (Christmann and Taylor, 2001).

Previous literatures suggested that companies use green supply chain management that reducing costs is the major drive for firms to adopt sustainable supply chain management approaches to business (Handfield et. al., 1997). However, in assessing corporate sustainability practices, Mahler and Kearney (2007) and the Institute for Supply Management has investigated a diverse group of Fortune 100 corporate across several industries and reported conversely finding. The result of their study has suggested that unfortunately almost 60 percent of firms have adopted sustainable practices to strengthen brand names or differentiate their products. He identified three key characteristics for sustainable supply chain management;

Yet, nowadays there are some good examples or pioneer companies that excelled in developing their green supply chain management, which are often cited as examples of good practice in green supply chain management literature. For example, Toyota Motor Corporation, in Japan, has been renowned for environmental management system assistance to its domestic and overseas suppliers; improved eco-efficiency along the supply chain. Another example is provided by Starbucks Coffee, the United States, which has set the practice of sharing information on organic coffee growing practices, premium price and market entry, to global suppliers. Another example is provided from Asia, by Ashok Leyland (India), which provides direct technology assistance and training that focus on corrective actions at different tiers (IGES Kansai Workshop, 2007).

6. SUSTAINABLE SUPPLY CHAIN MANAGEMENT PRACTICES IN KUWAIT

Concern in environmental issues was revived after the liberation of Kuwait from Iraqi occupation, especially due to the great environmental devastation the country incurred during the invasion and subsequent liberation war. Law No. 21 of 1995 established the Environment Protection Authority. This law was amended in 1996, which put the Environment Protection Agency under the supervision of a Higher Council chaired by the First Deputy Prime Minister. The Higher Council is made up of the Minister of Health, Planning, Oil, Commerce and Industry. This means that environmental practices acquired additional potential nearly in all economic and social sectors of the country.

The primary focus on these areas means that there is a great consciousness of the importance of adopting a green supply chain management approach in the major economic activities that might be responsible for environmental damage. Firms in the state of Kuwait are aware about sustainable supply chain management and its role in the economic as well as social and environmental activities and envelopment. Many local industries and business entities have declared their engagement with this vital relation between economic activity and environmental needs with a view to future generations in mind so that these will have the right to live in a sustainable environment with plenty of resources and awareness of the necessity of an environmental approach to development.

Since Kuwait is located desert climate with extreme heat in summer and frequent drought and sand storms in the rest of the year, environmental or green approach of supply chain management is thus a necessity. To manage the supply chain with these objectives in mind there needs to be a legal and an environmental framework that should be followed. As far as the legal aspect is concerned, Kuwait put in place many laws and regulations that encourage the adoption of an environmental approach to development (United Nations Development Programme, 2006). However using purely green supply chain management by firms such as oil industries have not been fully covered and addressed. This might request a wide national dialogue including the Cabinet, the media, Parliament and civil society organizations, to address the importance of adopting green supply chain management by companies such as oil industries. Moreover, adjustments rules, regulations and penalty related to environment issues have to be clearly communicated so that companies cut or reduce their environmental population and use harmless and green supply chain.

8. CONCLUSIONS

This paper has critically reviewed recent literatures that underpin the topic of sustainable supply chain management and its importance. The paper has defined the concept of supply chain management and various but related concepts such as porter model of supply chain. Through the paper, we have to point out Porter's ideas in the field of supply chain management which are regarded as revolutionary since it link the 'value chain' with competitive advantage as he argues that sustainable competitive advantage stems from a good management of value chain activities. Limitations of Porter framework and supply chain management approach have presented. Then, the literatures presented in this paper stress on the importance of green supply chain management, which is a combination of three major components; environmental concerns, economic activity and social concerns.

The paper has presented some example companies that effectively use green sustainable chain management and provides literatures that recommend industries to develop their green supply chain management and reduce the negative effect of their activities. Despite these good practice examples, the literature presented in this study presented some challenges and difficulties that might face companies which they move to green supply chain management such as costs associated. The final part of this paper argued that in Kuwait it is necessary to ensure that companies such as oil industries to follow the environmental rules and regulations. The local institutional and legal framework has paved the way for the adoption of a clear green supply chain management approach. However little attention has been given to monitor, follow up and support companies toward the best practice.